SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1996 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) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 8
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . 8
Item 6. Selected Financial Data. . . . . . . . . . . 9
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 17
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 24
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 53
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 53
Item 11. Executive Compensation . . . . . . . . . . . 56
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 57
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 58
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . 58
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 61
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report. Capitalized terms used herein, but
not defined, have the same meanings as used in the Notes.
The registrant, Carlyle Real Estate Limited Partnership - XI (the
"Partnership"), is a limited partnership formed in 1981 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois to invest in improved income-producing commercial and residential
real property. The Partnership sold $137,500,000 in Limited Partnership
Interests (the "Interests") to the public at $1,000 per Interest commencing
on May 8, 1981 pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration No. 2-70724). The offering closed on
May 5, 1982. No Limited Partner has made any additional capital
contribution after such date. The Limited Partners of the Partnership
share in their portion of the benefits of ownership of the Partnership's
real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title, leasehold estates and/or through
joint venture partnership interests. The Partnership's real property
investments are located throughout the nation and it has no real estate
investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate no later
than December 31, 2031. The Partnership is self-liquidating in nature. At
sale of a particular property, the net proceeds, if any, are generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. As discussed further in Item 7, the
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio as quickly as practicable and to wind up its
affairs not later than December 31, 1999 barring any unforeseen economic
developments.
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. River Hills Apartments
Arlington, Texas . 476 units 4/14/81 11/26/84 fee ownership of land
and improvements
2. Wood Forest Glen
Apartments
Houston, Texas . . 336 units 4/15/81 4/2/92 fee ownership of land
and improvements
3. Scotland Yard
Apartments-Phase I
Houston, Texas . . 332 units 4/15/81 11/1/96 fee ownership of land
and improvements (c)
4. Somerset Lake
Apartments
Indianapolis,
Indiana. . . . . . 360 units 6/1/81 11/10/88 fee ownership of land
and improvements
5. Pavillion Towers
Office Complex
Aurora, Colorado . 280,000 5/28/81 4/25/86 fee ownership of land
sq.ft. and improvements (through
n.r.a. joint venture partnership)
6. Bitter Creek
Apartments
Grand Prairie,
Texas. . . . . . . 472 units 6/1/81 6/10/92 fee ownership of land and
improvements (through
joint venture partner-
ship)
7. Mall of Memphis
Memphis, Tennessee 493,000 8/3/81 15% fee ownership of land and
sq.ft. improvements (g)(h)
8. 767 Third Avenue
Office Building
New York, New York 284,000 9/30/81 20% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(d)(g)(h)
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
9. Riverfront Office
Building
Cambridge,
Massachusetts. . . 340,000 10/22/81 7% fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
(d)(e)(g)(h)
10. Fontaine Woods
Apartments
Red Bank,
Tennessee. . . . . 262 units 12/1/81 12/31/84 fee ownership of land and
improvements (through joint
venture partnership)
11. El Dorado View
Apartments
Webster, Texas . . 244 units 7/31/81 7/23/96 fee ownership of land and
improvements (c)
12. Gatehall Plaza
Office Building
Parsippany,
New Jersey . . . . 118,000 3/11/82 10/31/91 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
13. 824 Market Street
Office Building
Wilmington,
Delaware . . . . . 195,220 6/15/82 12/12/94 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)(f)
14. Scotland Yard
Apartments-Phase II
Houston, Texas . . 346 units 6/28/82 11/1/96 fee ownership of land and
improvements (c)
15. South Point
Apartments
Houston, Texas . . 244 units 5/11/82 7/29/93 fee ownership of land and
improvements
16. Meadowcrest
Apartments
Dallas, Texas. . . 352 units 7/1/82 6/9/92 fee ownership of land and
improvements
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
17. Coast Federal
Office Building
Pasadena,
California . . . . 101,777 9/6/82 11/21/86 fee ownership of land and
sq.ft. improvements
n.r.a.
18. National City Center
Office Building
Cleveland, Ohio. . 786,400 7/27/83 4% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)(d)
19. Yerba Buena West
Office Building
San Francisco,
California . . . . 267,687 8/30/85 6/24/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
<FN>
- -----------------------
(a) The computation of this percentage for properties held at
December 31, 1996 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b) Reference is made to the Notes for the current outstanding
principal balances and a description of the long-term mortgage indebtedness
secured by the Partnership's real property investments.
(c) This property was sold in 1996. Reference is made to the Notes
for a description of the sale of such real property investment.
(d) Reference is made to the Notes for a description of the joint
venture partnership through which the Partnership has made this real
property investment.
(e) Reference is made to the Notes for a description of the leasehold
interest, under a ground lease, in the land on which this real property
investment is situated.
(f) The lender realized upon its security and took title to the
property in 1994. Reference is made to the Notes.
(g) Reference is made to Item 8 - Schedule III filed with this annual
report for further information concerning real estate taxes and
depreciation.
(h) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including, in certain areas, properties
owned by affiliates of the General Partners or properties owned by certain
of the joint venture partners) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing
tenants. Additionally, the Partnership is in competition for new tenants
in markets where significant vacancies are present. Reference is made to
Item 7 below for a discussion of competitive conditions and future
renovation and capital improvement plans of the Partnership and certain of
its significant investment properties. Approximate occupancy levels for
the properties are set forth on a quarterly basis in the table set forth in
Item 2 below to which reference is hereby made. The Partnership maintains
the suitability and competitiveness of its properties in its markets
primarily on the basis of effective rents, tenant mix, tenant allowances
and service provided to tenants. In the opinion of the Corporate General
Partner of the Partnership, all of the investment properties held at
December 31, 1996 are adequately insured.
On July 23, 1996, the Partnership sold the El Dorado View Apartments.
In addition, on November 1, 1996, the Partnership sold the Scotland Yard
Apartments, Phase I and II. Reference is made to the Notes for a further
description of these sales.
Reference is made to the Notes for a schedule of minimum lease
payments to be received in each of the next five years, and in the
aggregate thereafter, under leases in effect at the Partnership's
properties as of December 31, 1996.
The Partnership has no employees other than personnel performing on-
site duties at some of the Partnership's properties, none of whom are
officers or directors of the Corporate General Partner of the Partnership.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to
under Item 1 above to which reference is hereby made for a description of
said properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1996 and 1995 for the Partnership's investment properties owned
during 1996:
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
At At At At At At At At
Principal Business 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> <C>
1. Scotland Yard Apartments
-Phase II
Houston, Texas . . . . . Residential 93% 90% 95% 98% 94% 92% 96% N/A
2. Mall of Memphis
Memphis, Tennessee . . . Retail 82% 82% 82% 79% 78% 74% 76% 75%
3. Riverfront Office
Building
Cambridge,
Massachusetts. . . . . . Insurance/Soft- 95% 95% 99% 99% 99% 99% 80% 85%
ware Development
4. Scotland Yard Apartments
-Phase I
Houston, Texas . . . . . Residential 93% 93% 93% 96% 94% 92% 95% N/A
5. El Dorado View Apartments
Webster, Texas . . . . . Residential 94% 95% 90% 92% 92% 95% N/A N/A
6. 767 Third Ave.
Office Building
New York, New York . . . Foreign
Representation 92% 95% 95% 92% 96% 97% 95% 96%
7. National City Center
Office Building
Cleveland, Ohio. . . . . Banking 97% 97% 97% 97% 97% 97% 95% 95%
<FN>
- --------------------
Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the Partnership's interest in the property was sold and was not owned by the
Partnership at the end of the period.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal
proceedings, other than ordinary litigation incidental to the business of
the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1996 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were 14,521 record holders of the
137,420 Interests outstanding of the Partnership. There is no public
market for Interests and it is not anticipated that a public market for
Interests will develop. Upon request, the Corporate General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any economic aspects of the transaction, will be
subject to negotiation by the investor. There are certain conditions and
restrictions on the transfer of Interests, including, among other things,
the requirement that the substitution of a transferee of Interests as a
Limited Partner of the Partnership be subject to the written consent of the
Corporate General Partner, which may be granted or withheld in its sole and
absolute discretion. The rights of a transferee of Interests who does not
become a substituted Limited Partner will be limited to the rights to
receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Corporate General Partner
has been received by the Corporate General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such succeeding
calendar quarter. Profits or losses from operations of the Partnership for
a calendar year in which a transfer occurs will be allocated between the
transferor and the transferee based upon the number of quarterly periods in
which each was recognized as the holder of Interests, without regard to the
results of Partnership's operations during particular quarterly periods and
without regard to whether cash distributions were made to the transferor or
transferee. Profits or losses arising from the sale or other disposition
of Partnership properties will be allocated to the recognized holder of the
Interests as of the last day of the quarter in which the Partnership
recognized such profits or losses. Cash distributions to a holder of
Interests arising from the sale or other disposition of Partnership
properties will be distributed to the recognized holder of the Interests as
of the last day of the quarterly period with respect to which distribution
is made.
Reference is made to Item 6 below for a discussion of cash distribu-
tions made to the Limited Partners. The mortgage loan secured by the
Riverfront Office Building restricts the use by Riverfront Office Park
Joint Venture of the cash flow from that property as more fully discussed
in the Notes.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 33,059,440 35,760,756 36,744,939 37,574,501 40,441,060
============ ============ ============ ============ ============
Operating earnings
(loss) . . . . . . . . . $(15,659,376) (7,053,174) (12,674,872) (11,510,063) (6,856,914)
Partnership's share of
operations of uncon-
solidated ventures . . . 80,895 67,570 (125,370) (136,092) (762,164)
Venture partners' share
of ventures' operations. 1,475,361 2,794,709 3,968,903 3,679,780 2,339,587
------------ ------------ ------------ ------------ ------------
Net operating earnings
(loss) . . . . . . . . . (14,103,120) (4,190,895) (8,831,339) (7,966,375) (5,279,491)
Gain on sale or disposi-
tion of investment
properties, net of
venture partner's share. 13,480,719 -- 4,693,546 1,433,916 8,790,767
Extraordinary items . . . 1,180,286 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss). $ 557,885 (4,190,895) (4,137,793) (6,532,459) 3,511,276
============ ============ ============ ============ ============
Net earnings (loss) per
limited partnership
interest (b):
Net operating earnings
(loss). . . . . . . . $ (98.52) (29.27) (61.68) (55.62) (36.86)
Gain on sale or dis-
position of investment
properties, net of
venture partner's
share . . . . . . . . 97.12 -- 33.80 10.32 63.29
Extraordinary items. . 8.50 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss). $ 7.10 (29.27) (27.88) (45.30) 26.43
============ ============ ============ ============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992 - CONTINUED
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
Total assets. . . . . . . $127,569,676 154,431,514 151,349,909 169,411,131 170,266,483
Long-term debt. . . . . . $130,058,240 128,508,546 108,263,135 106,140,597 104,843,567
Cash distributions
per Interest (c) . . . . $ -- -- -- -- --
============ ============ ============ ============ ============
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of each
period.
(c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (loss) from the Partnership in
each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the
cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore
represented a return of capital.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1996
<CAPTION>
Property
- --------
Mall of Memphis a) The gross leasable area ("GLA") occupancy rate and average base rent per
square foot as of December 31 (excluding percentage rent) for each of the
last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1992 . . . . . 79% 14.63
1993 . . . . . 85% 14.09
1994 . . . . . 85% 14.31
1995 . . . . . 79% 14.02
1996 . . . . . 75% 15.52
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dillards 130,266 $563,070 9/2012 --
(Department Store)
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth as of December 31, 1996 certain information with
respect to the expiration of leases for the next ten years at the Mall of Memphis:
Annualized Percent of
Number of Approx. Total Base Rent Total 1996
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases Expiring
------------ -------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997 13 29,000 501,749 8.9%
1998 10 18,000 323,280 5.7%
1999 10 12,000 344,676 6.1%
2000 8 18,000 476,578 8.5%
2001 15 59,000 791,368 14.0%
2002 10 17,000 437,703 7.8%
2003 10 23,000 572,557 10.2%
2004 3 14,000 328,779 5.8%
2005 4 18,000 340,140 6.0%
2006 6 26,000 555,922 9.9%
</TABLE>
<TABLE>
<CAPTION>
Property
- --------
767 Third Avenue
Office Building a) The Net Rental Area ("NRA") occupancy rate and average base rent per square foot
as of December 31 for each of the last five years were as follows:
NRA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1992 . . . . . 67% 45.64
1993 . . . . . 83% 38.32
1994 . . . . . 89% 37.55
1995 . . . . . 92% 39.09
1996 . . . . . 96% 36.12
<FN>
(1) Average base rent per square foot is based on NRA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
None - No single tenant
represents more than 10%
of the gross leasable
area of the property.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth as of December 31, 1996 certain
information with respect to the expiration of leases for the
next ten years at the 767 Third Avenue Office Building:
Annualized Percent of
Number of Approx. Total Base Rent Total 1996
Year Ending Expiring NRA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997 17 32,000 980,532 9.9%
1998 10 58,000 2,060,006 20.7%
1999 6 18,000 691,455 7.0%
2000 7 32,000 1,021,602 10.3%
2001 5 25,000 973,324 9.8%
2002 7 35,000 1,400,513 14.1%
2003 2 10,000 345,042 3.5%
2004 1 3,000 89,088 0.9%
2005 3 10,000 366,900 3.7%
2006 6 19,000 658,619 6.6%
<FN>
</TABLE>
<TABLE>
<CAPTION>
Property
- --------
Riverfront
Office Building a) The gross leasable area ("GLA") occupy rate and average base rent per
square foot as of December 31 (excluding percentage rent) for each of the
last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1992 . . . . . 67% 33.11
1993 . . . . . 85% 19.05
1994 . . . . . 95% 17.83
1995 . . . . . 99% 18.11
1996 . . . . . 85% 20.03
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Icube 35,488 815,761 11/01 NA
Mathsoft, Inc. 34,562 518,430 10/99 NA
Blue Cross &
Blue Shield 87,994 1,855,486 07/97 NA
Pegasystems 34,864 679,848 03/99 NA
Clam Association 35,186 559,868 02/98 NA
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth as of December 31, 1996 certain
information with respect to the expiration of leases for
the next ten years at the Riverfront Office Building:
Annualized Percent of
Number of Approx. Total Base Rent Total 1996
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997 4 104,000 2,277,855 39.2%
1998 2 46,000 786,863 13.5%
1999 2 69,000 1,198,278 20.6%
2000 2 23,000 490,473 8.4%
2001 6 46,000 926,217 15.9%
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item
1, the Partnership had approximately $121,936,000 (after deducting selling
expenses and other offering costs) with which to make investments in
income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments and to satisfy working capital requirements. Portions of the
proceeds were utilized to acquire the properties described in Item 1 above.
During 1996, some of the Limited Partners in the Partnership received
from an unaffiliated third party unsolicited tender offers to purchase up
to 6,637 Interests in the Partnership at between $25 and $35 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. As of the date of this report, the Partnership is aware
that 3,060.34 Interests have been purchased by such unaffiliated third
parties either pursuant to such tender offers or through negotiated
purchases. In addition, the Partnership has recently received requests
from another unaffiliated third party for the list of Holders of Interests.
It is possible that other offers for Interests may be made by unaffiliated
third parties in the future, although 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.
At December 31, 1996, the Partnership and its consolidated ventures
had cash and cash equivalents of approximately $3,697,000. Such funds are
available for working capital requirements including the Partnership's
portion of the anticipated net cash flow deficits at the Mall of Memphis
and 767 Third Avenue office building and its share of potential leasing
costs at the Mall of Memphis, 767 Third Avenue office building and National
City Center Office Building. The Partnership and its consolidated ventures
have currently budgeted in 1997 approximately $5,368,000 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 1997 is currently budgeted to be approximately $2,538,000.
Actual amounts expended in 1997 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 an equity 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 future short-term and long-term liquidity and
distributions to partners are expected to be through the sale of the
Partnership's investment properties. In such regard, reference is made to
the Partnership's property specific discussions below and also the
Partnership's disclosure of certain property lease expirations in Item 6.
The Partnership does not consider the mortgage notes receivable arising
from the previous sale of the Pavillion Towers investment property to be a
source of future liquidity as collection of any additional past due or
future payments on the Partnership's notes is considered unlikely.
Reference is made to the Notes. The Partnership's and its Ventures'
mortgage obligations are separate non-recourse loans secured individually
by the investment properties and are not obligations of the entire
investment portfolio, and the Partnership and its Ventures are not
personally liable for the payment of the mortgage indebtedness.
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 the Notes.
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, unanticipated 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.
767 Third Avenue Office Building
Occupancy at the property is 96% at December 31, 1996. During 1997,
expiration of tenant leases will be approximately 11%. There is no
assurance that the expiring tenants can be retained. 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.
Vacancy rates in Midtown Manhattan (the sub-market for this property)
remain high and the increased competition for tenants has resulted in
reduced effective rental rates. The adverse market conditions and the
negative impact of the reduced effective rental rates are expected to
impact a number of tenants and continue through 1998.
The 767 Third Avenue Venture has a loan which matures in May 1998 and
bears interest at 10%. The venture is currently discussing obtaining
replacement financing to extend the term of the loan as well as reduce the
interest rate. In conjunction with such discussions, the Partnership is
having preliminary discussions with the venture partner regarding a sale of
the Partnership's interest to the venture partner. There can be no
assurance that any refinancing or sale will be finalized. Accordingly, the
property has been considered held for sale or disposition as of December
31, 1996, and therefore, will no longer be subject to continued
depreciation.
Riverfront Office Building
Keystone Investors, occupying approximately 20% of Riverfront's net
rentable area, vacated upon its scheduled lease expiration in September
1996. As of the date of this report, the venture has tenant commitments
and anticipates occupancy of all of this space by July 1997. In addition,
Blue Cross Blue Shield, occupying approximately 88,000 square feet, had
notified the venture that it would be vacating the premises upon its lease
expiration, originally set for March 1998. As a result, the venture
entered into a termination agreement with Blue Cross Blue Shield whereby
the tenant would vacate certain spaces by certain dates before its lease
expiration date for a set payment. This agreement allows the venture to
maximize the cash flow of the property. Although the venture will incur
substantial lease-up costs as a result of the Keystone and Blue Cross Blue
Shield lease expirations, the venture anticipates that it can fulfill
future debt service requirements of the restructured loan. However, if
future operating shortfalls are greater than expected and funding of
deficits becomes necessary, the venture would seek additional debt service
relief from the lender. If the venture was unable to obtain relief from
the lender it would likely decide not to commit any additional amounts to
the property. This would likely result in the Partnership no longer having
an ownership interest in the property, and would result in a gain for
financial reporting and Federal income tax purposes with no corresponding
distributable proceeds.
The loan secured by the building and improvements was restructured in
1995 and requires that net cash flow after debt service and capital be paid
into an escrow account controlled by the lender to be used for future
operating shortfalls, principal payments and costs associated with
additional leasing as approved by the lender. The agreement further
prohibits the venture owning the property from distributing excess cash
flow after full funding of the escrow accounts. Such excess funds are to
be retained for operating shortfalls, principal payments and costs
associated with additional leasing as approved by the lender prior to
withdrawing escrow deposits. Accordingly, the Partnership does not
consider the Riverfront investment property to be a significant source of
short or long-term liquidity.
In addition, as a condition of the loan restructure discussed above,
the ground lease was amended to provide for the deferral of any and all
ground lease payments from February 1993 until the earlier of any future
mortgage loan prepayment date (resulting from a sale or refinancing of the
property) or December 31, 2007. The ground lessor is a general partner of
the venture partner. At December 31, 1996, the total amount of deferred
and accrued ground lease expense is approximately $684,000.
The property has been considered held for sale or disposition as of
December 31, 1996, and therefore, will no longer be subject to continued
depreciation.
Mall of Memphis
Occupancy of the property is 75% at December 31, 1996. The Mall of
Memphis trade area population consists primarily of lower to moderate
income residents, and the income level has been decreasing over the last
several years. The mall has also suffered from a number of store closings
many prior to lease expiration primarily as a result of tenants filing for
bankruptcy and liquidation. In addition, the property has been subjected
to increased competition for shoppers and tenants from strip centers and
big box users. Although certain tenants continue to perform well, overall
tenant sales at the property have gradually declined over the last several
years. Due to recent poor sales performances, many tenants are electing
not to renew their leases or are renewing at lower rates. Several other
tenants whose leases are not due to expire in the near term have approached
the Partnership seeking rent relief. The Partnership has granted rent
relief to certain tenants that could demonstrate that without a reduction
in their rent, they would no longer be able to remain in business at the
mall. As a result of these market and property conditions, the property's
cash flow declined in 1996 and may continue to decline.
In response, the Partnership is exploring measures to increase
occupancy and the cash flow of the property. Any decision to commit
additional funds to this investment property for any purpose will be based
on, among other things, the likelihood of the return of such additional
investment plus a reasonable profit thereon. In addition, the Partnership
is contemplating approaching the lender regarding a loan modification.
In August 1995, the Partnership purchased the venture partner's 36.94%
interest in Mall of Memphis and concurrently admitted the General Partner
of the Partnership to the venture with a .1% interest. Accordingly, the
Partnership has accounted for its investment in Mall of Memphis as wholly-
owned as of August 1995. The purchase price was approximately $5,500,000,
of which $500,000 (plus certain closing costs) was paid in cash at closing
with the balance represented by a $5,000,000 promissory note. Pursuant to
the terms of the note payable to the former venture partner, the
Partnership guaranteed a portion of the debt service payments payable on
June 1, 1996 and June 1, 1997 in the amount of $300,000 for each payment.
Due to the increase in vacancies discussed above and other property
operating considerations, the Partnership did not make the June 1996
guaranteed payment until December 1996.
Scotland Yard - Phase I and II Apartments
On November 1, 1996, the Partnership sold the Scotland Yard Apartments
Phase I and II for $23,200,000 (before selling costs). Reference is made
to the Notes for a further description of such sale.
El Dorado View Apartments
On July 23, 1996, the Partnership sold the El Dorado View Apartments
for $6,600,000 (before selling costs). Reference is made to the Notes for
a further description of such sale.
Yerba Buena Office Building
In June 1992, title to the Yerba Buena Office Building in San
Francisco, California was transferred to the lender by the joint venture (a
partnership comprised of the Partnership, two other limited partnerships
sponsored by the Partnership's Corporate General Partner and four
unaffiliated limited partners). In return for a smooth transaction of
title and management of the property, the joint venture was able to
negotiate the right to share in future sales or refinancing proceeds, if
any, above certain specified levels. In addition, the joint venture has a
right of first opportunity to purchase the property during the time frame
of June 1995 through May 1998 should the lender wish to market the property
for sale. The joint venture has recently learned that the lender has sold
the property without having given the joint venture its right of first
opportunity to purchase it. The joint venture is analyzing its legal
remedies for the lender's breach of its obligation. There are no
assurances that the joint venture would recover any amounts in the event it
should pursue its legal remedies.
General
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partner(s) in an investment might become unable
or unwilling to fulfill its (their) financial or other obligations, or that
such joint venture partner(s) may have economic or business interests or
goals that are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. The Partnership has also sought or may seek additional loan
modifications where appropriate. By conserving working capital, the
Partnership will be in a better position to meet the future needs of its
properties since outside sources of capital may be limited given the
portfolio's current debt levels. Due to these factors, the Partnership has
held certain of its investment properties longer than originally
anticipated in an effort to maximize the return to the Limited Partners.
Although the Partnership expects to distribute sale proceeds from the
disposition of certain of the Partnership's remaining assets, the Limited
Partners are expected to receive significantly less than their full
original investment from all sources. However, after reviewing the
remaining properties and the marketplace in which they operate, the General
Partners of the Partnership expect to be able to conduct an orderly
liquidation of the remaining investment portfolio as quickly as
practicable. In such regard, the Partnership has classified during 1996
certain of its investment properties as held for sale or disposition, as
discussed above. Therefore, the affairs of the Partnership are expected to
be wound up no later than December 31, 1999 (sooner if the properties are
sold in the nearer term), barring unforeseen economic developments.
RESULTS OF OPERATIONS
Various fluctuations in the consolidated financial statements at and
for the year ended December 31, 1996, as compared to December 31, 1995 are
primarily due to the sale of three apartment complexes, El Dorado View on
July 23, 1996 and Scotland Yard - Phase I and II on November 1, 1996.
The decrease in rents and other receivables at December 31, 1996 as
compared to December 31, 1995 was primarily due to the timing of receipts
of rental income at certain of the Partnership's investment properties.
The increase in escrow deposits and restricted funds at December 31,
1996 as compared to December 31, 1995 is primarily due to the terms of the
Riverfront loan modification agreement which requires the partnership to
escrow cash flow after debt service to fund future operating short-falls,
principal payments and costs associated with additional leasing as approved
by the lender.
The decreases in mortgage notes receivable and deferred gain on sale
of investment property at December 31, 1996 as compared to December 31,
1995 are due to a $200,000 collection in 1996 of a portion of the past due
amounts on notes receivable related to the 1986 sale of Pavillion Towers.
The properties held for sale or disposition at December 31, 1996
represents the reclassification of the net book value of the Partnership's
investment properties, excluding Mall of Memphis, from land and leasehold
interests, buildings and improvements and the related accumulated
depreciation.
The decrease in venture partner's deficit in venture at December 31,
1996 as compared to December 31, 1995 is due to the $8,500,000 provision
for unrealizable venture partner's deficit recorded in 1996 relating to the
Riverfront office building.
The increase in accounts payable at December 31, 1996 as compared to
December 31, 1995 is primarily due to the timing of the payment of certain
costs associated with additional leasing at the Riverfront office building.
The decrease in rental income for the year ended December 31, 1996 as
compared to the year ended December 31, 1995 is primarily due to: 1) the
sales of Scotland Yard I & II apartments and El Dorado View apartments on
November 1, 1996 and July 23, 1996, respectively; 2) the receipt in 1995 of
approximately $672,000 as consideration for the early termination of a
tenant's lease at 767 Third Avenue; 3) a lower average occupancy rate at
Riverfront office building primarily as a result of the scheduled
expiration in September 1996 of a lease for a tenant which occupied
approximately 20% of the building and 4) reduced occupancy in 1996 at the
Mall of Memphis. The decrease in rental income for the year ended December
31, 1995 as compared to the year ended December 31, 1994 was primarily due
to the lender realizing upon its security in the 824 market Street office
building in December 1994, partially offset by increased average occupancy
at Riverfront and 767 Third Avenue office buildings in 1995.
The increase in interest income for the year ended December 31, 1995
as compared to the year ended December 31, 1994 is primarily due to an
increase in the average balance of U.S. Government obligations during 1995.
The decreases in mortgage and other interest expense as well as
property operating expenses for the year ended December 31, 1996 as
compared to the year ended December 31, 1995 are primarily due to the sales
of Scotland Yard I & II apartments and El Dorado View apartments in 1996.
Contributing to the decrease in mortgage and other interest expense were
lower mortgage interest at Riverfront office building, as a result of the
restructured loan, and lower contingent interest expense at the Mall of
Memphis, as a result of lower rental income. The decrease in mortgage and
other interest expense was partially offset by additional interest on the
$5,000,000 promissory note secured by the Partnership's additional interest
in the Mall of Memphis, purchased in August 1995. The decrease in mortgage
and other interest expense for the year ended December 31, 1995 as compared
to the year ended December 31, 1994 is primarily due to the lender
realizing upon its security in the 824 Market Street office building in
December 1994 as well as the reduction of interest associated with the non-
recourse mortgage loan secured by the Riverfront office building as a
result of the 1995 loan restructuring.
The decrease in depreciation expense for the year ended December 31,
1996 as compared to the year ended December 31, 1995 is primarily due to
the Scotland Yard I & II apartments (sold November 1, 1996) and El Dorado
View apartments (sold July 23, 1996) being classified as of April 1, 1996
as held for sale and, therefore, were not subject to continued
depreciation. The decrease in depreciation expense for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 is
primarily due to the lender realizing upon its security in the 824 Market
Street office building during 1994, partially offset by depreciation
expense related to the Partnership's purchase of the venture partner's
interest in the Mall of Memphis in August 1995.
The decrease in amortization of deferred expenses for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 as well
as the increase for the year ended December 31, 1995 as compared to the
year ended December 31, 1994 is primarily due to the write off of deferred
mortgage expenses in 1995 as a result of the 1995 loan restructuring at
Riverfront office building. In addition, the increase for the year ended
December 31, 1995 was impacted by an increase in amortization related to
capitalized leasing costs, primarily at 767 Third Avenue Office Building.
The increase in general and administrative expenses for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 is
primarily due to an increase in reimbursable costs to affiliates of the
General Partners in 1995 and the recognition of certain additional prior
year reimbursable costs to such affiliates.
The decrease in venture partner's share of venture operations for the
year ended December 31, 1996 as compared to the year ended December 31,
1995 is primarily due to the termination as of January 1, 1996 of the
allocation of any additional venture losses to the venture partner as a
result of the uncertainty of the Partnership recovering the deficit capital
account from further operations and ultimate sale of the Riverfront office
building. Such uncertainty was also the cause of the provision for
uncollectible venture partner deficit for 1996.
The gain on sale or disposition of investment properties for the year
ended December 31, 1996 is due to the sale of El Dorado View apartments on
July 23, 1996, the Scotland Yard I & II apartments on November 1, 1996 and
$200,000 of deferred gain recognition as a result of the receipt in April
1996 of a portion of the past due amounts on the notes receivable related
to the 1986 sale of Pavillion Towers, discussed above. The gain from sale
or disposition of investment properties for the year ended December 31,
1994 resulted from the lender realizing upon its security in the 824 Market
Street office building.
The extraordinary gain on forgiveness of indebtedness for the year
ended December 31, 1996 was due to the forgiveness of a portion of the
deferred accrued interest associated with the mortgage loans secured by
Scotland Yard I & II apartments as a result of sale of the properties.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the property remains substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investment contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Partners' Capital Accounts (Deficit),
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
Schedule
--------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI:
We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XI (a limited partnership) and consolidated
ventures as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Carlyle Real Estate Limited Partnership - XI and consolidated ventures at
December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 21, 1997
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 3,697,163 3,928,706
Rents and other receivables (net of allowance for doubtful accounts
of $1,495,915 and $1,524,496 at December 31, 1996 and 1995,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . 628,039 1,126,899
Escrow deposits and restricted funds. . . . . . . . . . . . . . . . 3,678,237 2,110,717
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 1,167,702 1,184,253
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . 9,171,141 8,350,575
------------ ------------
Mortgage notes receivable (net of reserve for uncollectibility
of $327,774 and $527,774 at December 31, 1996 and 1995,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,867,695 2,067,695
Investment properties, at cost - Schedule III:
Land and leasehold interests. . . . . . . . . . . . . . . . . . . 4,845,861 17,654,091
Buildings and improvements. . . . . . . . . . . . . . . . . . . . 60,783,454 191,845,064
------------ ------------
65,629,315 209,499,155
Less accumulated depreciation . . . . . . . . . . . . . . . . . . 23,002,534 81,997,627
------------ ------------
Total properties held for investment,
net of accumulated depreciation . . . . . . . . . . . . . 42,626,781 127,501,528
Properties held for sale or disposition . . . . . . . . . . . . . 66,102,154 --
------------ ------------
Total investment properties . . . . . . . . . . . . . . . . 108,728,935 127,501,528
------------ ------------
Investment in unconsolidated venture, at equity . . . . . . . . . . . 628,276 547,381
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 3,802,233 4,147,934
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 2,965,832 2,910,837
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . 405,564 8,905,564
------------ ------------
$127,569,676 154,431,514
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 517,413 28,216,001
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 3,005,313 1,559,456
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . 612,197 675,234
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 1,883,331 2,270,877
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 713,459 1,511,605
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . 6,731,713 34,233,173
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 215,186 222,353
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 130,058,240 128,508,546
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,749 231,178
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 137,205,888 163,195,250
Deferred gain on sale of investment properties. . . . . . . . . . . . 1,867,695 2,067,695
Venture partner's subordinated equity in venture. . . . . . . . . . . 2,600,108 3,830,469
Partners' capital accounts (deficit):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . (12,895,787) (12,478,272)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (1,116,446) (1,116,446)
------------ ------------
(14,011,233) (13,593,718)
------------ ------------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . 121,935,233 121,935,233
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . (76,960,040) (77,935,440)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (45,067,975) (45,067,975)
------------ ------------
(92,782) (1,068,182)
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . (14,104,015) (14,661,900)
------------ ------------
$127,569,676 154,431,514
============ ============
<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 OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $32,775,314 35,420,992 36,560,773
Interest income . . . . . . . . . . . . . . . . . 284,126 339,764 184,166
----------- ----------- -----------
33,059,440 35,760,756 36,744,939
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 15,013,553 16,573,287 19,589,577
Depreciation. . . . . . . . . . . . . . . . . . . 6,110,344 6,561,402 8,518,226
Property operating expenses . . . . . . . . . . . 17,400,478 17,758,087 19,755,404
Professional services . . . . . . . . . . . . . . 289,023 272,963 282,379
Amortization of deferred expenses . . . . . . . . 1,057,233 1,273,972 1,043,910
General and administrative. . . . . . . . . . . . 348,185 374,219 230,315
Provision for unrealizable venture
partner deficit . . . . . . . . . . . . . . . . 8,500,000 -- --
----------- ----------- -----------
48,718,816 42,813,930 49,419,811
----------- ----------- -----------
Operating earnings (loss) . . . . . . . . (15,659,376) (7,053,174) (12,674,872)
Partnership's share of operations of
unconsolidated venture. . . . . . . . . . . . . . 80,895 67,570 (125,370)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . . 1,475,361 2,794,709 3,968,903
----------- ----------- -----------
Net operating earnings (loss) . . . . . . (14,103,120) (4,190,895) (8,831,339)
Gain from sale or disposition of investment
properties, net of venture partner's
share of gain (loss) of ($1,004,351) in 1994. . . 13,480,719 -- 4,693,546
----------- ----------- -----------
Net earnings (loss) before
extraordinary item. . . . . . . . . . . (622,401) (4,190,895) (4,137,793)
Extraordinary gain on forgiveness
of indebtedness . . . . . . . . . . . . . . . . . 1,180,286 -- --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $ 557,885 (4,190,895) (4,137,793)
=========== =========== ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1996 1995 1994
------------ ------------ ------------
Net earnings (loss) per limited partnership
interest:
Net operating earnings (loss) . . . . $ (98.52) (29.27) (61.68)
Gain from sale or disposition of
investment properties, net of
venture partner's share . . . . . . 97.12 -- 33.80
Extraordinary gain on forgiveness
of indebtedness . . . . . . . . . . 8.50 -- --
----------- ----------- -----------
$ 7.10 (29.27) (27.88)
=========== =========== ===========
<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 PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ---------------------- ----------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit)
December 31,
1993 . . . . $1,000 (12,004,318) (1,116,446) (13,119,764)121,935,233 (70,080,706)(45,067,975) 6,786,552
Net earnings
(loss) . . . -- (306,318) -- (306,318) -- (3,831,475) -- (3,831,475)
----- ----------- ------------ ------------ ----------- ----------------------- -----------
Balance
(deficit)
December 31,
1994 . . . . 1,000 (12,310,636) (1,116,446) (13,426,082)121,935,233 (73,912,181)(45,067,975) 2,955,077
Net earnings
(loss) . . . -- (167,636) -- (167,636) -- (4,023,259) -- (4,023,259)
----- ----------- ------------ ------------ ----------- ----------------------- -----------
Balance
(deficit)
December 31,
1995 . . . . 1,000 (12,478,272) (1,116,446) (13,593,718)121,935,233 (77,935,440)(45,067,975) (1,068,182)
Net earnings
(loss) . . . -- (417,515) -- (417,515) -- 975,400 -- 975,400
----- ----------- ------------ ------------ ----------- ----------------------- -----------
Balance
(deficit)
December 31,
1996 . . . . $1,000 (12,895,787) (1,116,446) (14,011,233)121,935,233 (76,960,040)(45,067,975) (92,782)
====== =========== ============ ============ =========== ======================= ===========
<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
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $ 557,885 (4,190,895) (4,137,793)
Items not requiring (providing) cash
or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . 6,110,344 6,561,402 8,518,226
Amortization of deferred expenses . . . . . . 1,057,233 1,273,972 1,043,910
Long-term debt - deferred accrued
interest. . . . . . . . . . . . . . . . . . 2,389,325 633,264 2,544,737
Provision for unrealizable venture
partner deficit . . . . . . . . . . . . . . 8,500,000 -- --
Partnership's share of operations of
unconsolidated ventures . . . . . . . . . . (80,895) (67,570) 125,370
Venture partners' share of ventures'
operations and gain (loss) on sale. . . . . (1,475,361) (2,794,709) (4,973,254)
Total (gain) loss on sale or disposition of
investment properties . . . . . . . . . . . (13,480,719) -- (3,689,195)
Extraordinary gain on forgiveness of
indebtedness. . . . . . . . . . . . . . . . (1,180,286) -- --
Changes in:
Rents and other receivables . . . . . . . . . . 486,921 210,272 840,195
Escrow deposits and restricted funds . . . . . (1,567,520) (879,223) 278,908
Prepaid expenses. . . . . . . . . . . . . . . . 16,551 114,728 159,359
Accrued rents receivable. . . . . . . . . . . . (54,995) 609,926 (412,238)
Accounts payable. . . . . . . . . . . . . . . . 978,918 69,019 (100,585)
Unearned rents. . . . . . . . . . . . . . . . . (63,037) 35,125 (94,413)
Accrued interest. . . . . . . . . . . . . . . . (387,546) 2,534,421 3,686,021
Accrued real estate taxes . . . . . . . . . . . (798,146) 35,801 (28,607)
Tenant security deposits. . . . . . . . . . . . (699) 77,132 (39,712)
Deferred revenue. . . . . . . . . . . . . . . . (30,429) 231,178 --
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 977,544 4,453,843 3,720,929
----------- ----------- -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments. . . . . . . . . . . . . -- 1,392,755 895,510
Additions to investment properties. . . . . . . . (2,571,651) (2,396,331) (4,338,481)
Partnership's contributions to unconsolidated
venture . . . . . . . . . . . . . . . . . . . . -- -- (159,708)
Payment of deferred expenses. . . . . . . . . . . (773,585) (658,174) (525,619)
Cash paid for venture partner's interest. . . . . -- (544,473) --
Cash proceeds from sale of investment properties,
net of selling expenses . . . . . . . . . . . . 2,158,501 -- --
Collection of notes receivable. . . . . . . . . . 200,000 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . (986,735) (2,206,223) (4,128,298)
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . (467,352) (422,172) (381,403)
Venture partners' contributions to ventures . . . 245,000 251,500 579,019
Distributions to venture partners . . . . . . . . -- (251,030) --
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (222,352) (421,702) 197,616
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . (231,543) 1,825,918 (209,753)
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 3,928,706 2,102,788 2,312,541
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $ 3,697,163 3,928,706 2,102,788
=========== =========== ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $15,401,099 13,405,602 13,358,819
=========== =========== ===========
Non-cash investing and financing activities:
Sale of investment properties:
Total sale proceeds, net of selling expenses. $29,049,082 -- --
Principal balance and deferred accrued
interest due on mortgage payable. . . . . . (26,890,581) -- --
----------- ----------- -----------
Cash proceeds from sales of investment
properties, net of selling expenses . . $ 2,158,501 -- --
=========== =========== ===========
Purchase of venture partner's interest:
Addition to basis in investment property. . . $ -- 9,402,453 --
Note payable. . . . . . . . . . . . . . . . . -- (5,000,000) --
Increase in venture partner's deficit
in venture. . . . . . . . . . . . . . . . . -- (3,857,980) --
----------- ----------- -----------
Cash paid for venture partner's
interest in venture . . . . . . . . . . $ -- 544,473 --
=========== =========== ===========
Accrued interest added to balance
of long-term debt pursuant to
loan modification . . . . . . . . . . . $ -- 8,530,153 --
=========== =========== ===========
Balance due on mortgage note payable retired . $ -- -- 13,514,864
Reduction of land. . . . . . . . . . . . . . . -- -- (1,905,000)
Reduction of buildings and improvements. . . . -- -- (16,801,424)
Reduction of accumulated depreciation. . . . . -- -- 5,599,445
Reduction of deferred expenses . . . . . . . . -- -- (555,967)
Reduction of accrued interest payable. . . . . -- -- 4,131,910
Reduction of other assets and liabilities. . . -- -- (294,633)
----------- ----------- -----------
Non-cash gain recognized on
disposition of investment property . . $ -- -- 3,689,195
=========== =========== ===========
<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
DECEMBER 31, 1996, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate. The
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio and wind up its affairs not later than
December 31, 1999.
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated ventures Mall of Memphis
Associates ("Mall of Memphis") (until purchase of the venture partner's
interest in 1995), 767 Third Avenue Associates ("767 Third Avenue"),
Riverfront Office Park Joint Venture ("Riverfront") and Excelsior
Associates, LP ("824 Market Street") (property transferred to lender in
December 1994) in which the Partnership has certain preferential claims and
rights, as discussed below. The effect of all transactions between the
Partnership and the consolidated ventures has been eliminated. The equity
method of accounting has been applied in the accompanying consolidated
financial statements with respect to the Partnership's interest 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 as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------- ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ ---------- -
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $127,569,676 26,114,376 154,431,514 26,282,722
Partners' capital accounts
(deficit):
General partners. . . . . . . . (14,011,233) (12,054,121) (13,593,718) (12,245,230)
Limited partners. . . . . . . . (92,782) (8,162,305) (1,068,182) (21,932,672)
Net earnings (loss):
General partners. . . . . . . . (417,515) 191,109 (167,636) (98,993)
Limited partners. . . . . . . . 975,400 13,770,364 (4,023,259) (2,375,828)
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . 7.10 100.21 (29.27) (17.29)
============ =========== =========== ============
</TABLE>
The net earnings (loss) per limited partnership 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 Federal income tax
purposes.
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.
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
($3,045,929 at December 31, 1996 and $553,117 at December 31, 1995) as cash
equivalents, which includes investments in an institutional mutual fund
which holds U.S. Government obligations, with any remaining amounts
(generally with original maturities of one year or less) reflected as
short-term investments being held to maturity.
Deferred expenses consist primarily of leasing and financing fees
incurred in connection with the acquisition and operation of the
properties. Deferred leasing fees are amortized using the straight-line
method over the terms stipulated in the related agreements. Deferred
financing fees are amortized over the related commitment periods.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due, the Partnership accrues
rental income over the full period of occupancy on a straight-line basis.
Certain reclassifications have been made to the 1995 and 1994
consolidated financial statements to conform with the 1996 presentation.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments" (as amended),
requires certain entities to disclose the SFAS 107 value of all financial
assets and liabilities for which it is practicable to estimate. Value is
defined in the Statement as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. The Partnership believes the carrying amount
of its financial instruments classified as current assets and liabilities
(excluding current portion of long-term debt) approximates SFAS 107 value
due to the relatively short maturity of these instruments. There is no
quoted market value available for any of the Partnership's other
instruments. The remaining debt, with a carrying balance of $130,575,653,
has been calculated to have a SFAS 107 value of $122,619,763 by discounting
the scheduled loan payments to maturity. Due to restrictions on
transferability and prepayment and the inability to obtain comparable
financing due to previously modified debt terms or other property specific
competitive conditions, the Partnership would be unable to refinance these
properties to obtain such calculated debt amounts reported. The
Partnership has no other significant financial instruments.
No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
The Partnership acquired, either directly or through joint ventures,
ten apartment complexes, eight office buildings, and an enclosed shopping
mall. During 1984, the Partnership sold its Arlington, Texas and its Red
Bank, Tennessee apartment complexes. During 1986, the Partnership sold its
interest in Am-Car Real Estate Partnership-I joint venture ("AM-CAR"),
which had ownership interests in the Pavillion Towers office complex
located in Aurora, Colorado and the Coast Federal Office Building located
in Pasadena, California. During 1988, the Partnership (through Somerset
Lake Associates) sold its Indianapolis, Indiana apartment complex. During
1991, the Partnership disposed of its interest in the Gatehall Plaza office
building located in Parsippany, New Jersey. During 1992, the Partnership
sold its interest in the Wood Forest Glen Apartments, the Meadowcrest
Apartments and the Bitter Creek Apartments. In addition, during 1992, the
lender realized upon its security and took title to the Yerba Buena West
Office Building. During 1993, the Partnership sold its interest in the
South Point Apartments. During 1994, the lender realized upon its security
and took title to the 824 Market Street Office Building. During 1996, the
Partnership sold its interest in the Scotland Yard Phase I and II
Apartments, and the El Dorado View Apartments. All of the properties owned
at December 31, 1996 were operating. The cost of the investment properties
represents the total cost to the Partnership or its ventures plus
miscellaneous acquisition costs.
Depreciation on the operating properties has been provided over
estimated useful lives of the various components as follows:
YEARS
-----
Building and improvements --
straight-line. . . . . . . . 30
Personal property --
straight-line. . . . . . . . 5
==
All investment properties are pledged as security for the long-term
debt, for which there is generally no recourse to the Partnership. The
Partnership continues to make payments on its existing mortgage
indebtedness related to its remaining investment properties.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" was issued in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
to be held for investment whenever their carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the property's carrying value and the
property's estimated fair value. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term or the Partnership has concluded that it may dispose of the property
by no longer funding operating deficits or debt service requirements of the
property thus allowing the lender to realize upon its security. In
accordance with SFAS 121, any properties identified as "held for sale or
disposition" are no longer depreciated. Adjustments for impairment loss
for such properties (subsequent to the date of adoption of SFAS 121) are
made in each period as necessary to report these properties at the lower of
carrying value or fair value less costs to sell. In certain situations,
such estimated fair value could be less than the existing non-recourse debt
which is secured by the property. There can be no assurance that any
estimated fair value of these properties would ultimately be obtained by
the Partnership in any future sale or disposition transaction.
Under the prior accounting policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's carrying value. The amount of any such impairment loss
recognized by the Partnership was limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 is determined
without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a
net gain (comprised of gain on extinguishment of debt and gain or loss on
sale or disposition of property) for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
In addition, upon the disposition of an impaired property, the
Partnership will generally recognize more gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's prior
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
implementation of this accounting statement could significantly impact the
Partnership's reported earnings, there would be no impact on cash flows.
Further, any such impairment loss is not recognized for Federal income tax
purposes.
The net results of operations for consolidated properties classified
as held for sale or disposition as of December 31, 1996 or sold or disposed
of during the past three years were $14,775,311, $6,640,231 and
$13,806,479, respectively, for the years ended December 31, 1996, 1995 and
1994. In addition, the accompanying consolidated financial statements
include $80,894, $67,570 and $33,808, respectively, of the Partnership's
share of total property operations of $589,373, $492,296, and $246,315 of
National City Center which is held for sale or disposition as of December
31, 1996.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1996 is a party to three operating
joint venture agreements. Pursuant to such venture agreements, the
Partnership made initial capital contributions of approximately $34,284,000
before legal and other acquisition costs and its share of operating
deficits as discussed below. In general, the Partnership's joint 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.
The Partnership has acquired, through the above ventures, three office
buildings. The venture properties have been financed under various long-
term debt arrangements as described in the notes.
In general, operating profits and losses are shared in the same ratio
as net cash receipts; however, if there are no net cash receipts, profits
or losses are allocated to the partners based upon their respective
economic interests.
There are certain risks associated with the Partnership's investments
made through joint 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
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
INVESTMENT PROPERTIES
NATIONAL CITY CENTER
In July 1983, the Partnership acquired, through Carlyle/National City
(a joint venture with Carlyle-XII), an interest in an 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 net cash
investment in the property was $3,341,583 after distributions resulting
from the increase in the first mortgage loan.
Carlyle/National City reached an agreement with the current mortgage
lender to refinance the existing mortgage effective April 28, 1994. The
loan will be amortized over 22 years with a balloon payment due on April
10, 2001. Carlyle/National City paid a refundable loan commitment fee of
$1,163,524 in 1993 in conjunction with the refinancing. The fee was
applied to accrued interest and the prepayment penalty of $580,586 based on
the outstanding mortgage balance at the time of refinancing, with the
balance of $238,215 refunded to Carlyle/National City in 1994. In
addition, the lender required an escrow account of $612,000 to be
established at the inception of the refinancing for certain specific future
tenant improvement costs at the property. The escrowed funds are to be
released to the venture upon lender approval of such costs. The lender
also required an escrow of the tenant improvement costs related to the
extension of the Baker & Hostetler lease. The Venture was required to
escrow approximately $313,000 per year in 1994 through 1996 and to escrow
approximately $229,000 per year in 1997 and 1998. As of December 31, 1996,
approximately $92,000 has been received from the tenant improvement escrow.
Additionally, in January 1997 approximately $820,000 was received from the
tenant improvement escrow. As the Partnership has committed to a plan to
sell the property, the property has been classified as held for sale or
disposition as of December 31, 1996, and therefore, will no longer be
subject to continued depreciation.
767 THIRD AVENUE OFFICE BUILDING
Occupancy at the property is 96% at December 31, 1996. During 1997,
expiration of tenant leases will be approximately 11%. There is no
assurance that the expiring tenants can be retained. 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.
The 767 Third Avenue Venture has a loan which matures in May 1998 and
bears interest at 10%. The venture is currently discussing obtaining
replacement financing to extend the term of the loan as well as reduce the
interest rate. In conjunction with such discussions, the Partnership is
having preliminary discussions with the venture partner regarding a sale of
the Partnership's interest to the venture partner. There can be no
assurance that any refinancing or sale will be finalized.
As the Partnership has committed to a plan to sell the property, the
property has been classified as held for sale or disposition as of December
31, 1996, and therefore, will no longer be subject to continued
depreciation.
824 MARKET STREET OFFICE BUILDING
Competition had risen significantly for the 824 Market Street Venture
primarily due to new office building development in the area and the
contraction of tenants in the financial services industry, resulting in
lower effective rental rates. In order to reduce debt service payments,
the venture negotiated with the first mortgage lender for a possible
modification to the mortgage note. Such negotiations were unsuccessful and
the first mortgage lender realized upon its security in 1994. As a result
of the disposition of the property, the Partnership recognized a gain in
1994 for financial reporting purposes and Federal income tax purposes of
$3,689,195 and $6,805,134, respectively, with no corresponding
distributable proceeds.
RIVERFRONT OFFICE BUILDING
The property had been operating at a deficit while the lender under
the four existing mortgage notes had accepted payments of partial debt
service. In order to reduce debt service payments, the joint venture
initiated discussions with the lender to negotiate modifications to the
mortgage notes. Effective November 1995, the joint venture entered into a
Loan Repayment Agreement with the existing lender. The terms of the
agreement generally provide for a loan restructure that retroactively
reduces the interest rate payable on the loans and adjusts the terms of the
loans from their present maturity. The loans (which previously accrued
interest at rates ranging from 10% to 14% per annum) accrue interest at 6%
per annum for the period January 1, 1993 through December 31, 1997.
Thereafter, the interest rate per annum shall be the greater of the rate
derived using the "Coverage Formula" (as defined) or 7% from January 1,
1998 to December 31, 1999; 8.25% from January 1, 2000 to December 31, 2002;
and 9% from January 1, 2003 to December 31, 2007. In addition, as
participating interest and taking into account the annual interest payable
as set forth above, the lender is entitled to earn a minimum internal rate
of return ranging from 9% to 10.5% per annum calculated over the
restructured loan term and a Residual Amount (as defined) upon repayment.
For financial reporting purposes, the principal amount of the loan and
accrued interest as of the effective date of the restructuring have been
classified as long-term debt. In addition, notwithstanding the payments
specified above, interest accrues at the effective rate of approximately
9.7% based upon the future cash payments specified by the terms of the
Repayment Agreement. This additional accrued interest is classified as
long-term debt.
The loan restructure also requires that net cash flow after debt
service and capital be paid into an escrow account controlled by the lender
to be used for future operating shortfalls, principal payments and costs
associated with additional leasing as approved by the lender. The
agreement further prohibits distributions of excess cash flow after full
funding of the escrow accounts. Such excess funds are to be retained and
utilized prior to withdrawing escrow deposits for operating shortfalls,
principal payments and costs associated with additional leasing as approved
by the lender.
In addition, the property operates under a ground lease and the joint
venture has not made the scheduled ground lease payments since February
1993. The ground lessor is a general partner of the venture partner. At
December 31, 1996, the total amount of ground lease payments in arrears is
approximately $684,000. In this regard, as a condition of the loan
restructure discussed above, the ground lease was amended to provide for
the deferral of any and all ground lease payments since February 1993 until
the earlier of any future mortgage loan prepayment date (resulting from a
sale or refinancing of the property) or December 31, 2007. Pursuant to
this amendment, such unpaid ground rent accrues at the lesser of (a)
interest at the amended loan terms or (b) 14% after repayment of the loan
(net of any management fees received by the lessor). However, the loan
restructure also provides that if, during calendar year 1997, projections
of gross rental revenue approved by the lender during the year are not less
than $9 million per year for each of the next five calendar years, annual
payments of ground rent would resume, but at a reduced amount (as defined).
As a result of the adoption of SFAS 121, the Partnership recorded a
provision for unrealizable venture partner deficit of $8,500,000 as a
result of the uncertainty of the Partnership recovering the deficit capital
account from future operations and ultimate sale of the property. Such
provision was recorded in 1996 to reduce the venture partner's deficit
capital account to its then estimated recoverable amount. In addition, no
additional venture losses have been allocated to the venture partner for
1996. Riverfront is not considered a source of future liquidity to the
Partnership. As the Partnership has committed to a plan to sell or dispose
of the property, the property has been classified as held for sale or
disposition as of December 31, 1996, and therefore, will no longer be
subject to continued depreciation.
MALL OF MEMPHIS
In March 1993, the venture finalized, in the form of a third mortgage
loan from the lender for its other mortgage loans, additional financing of
$7,600,000 for ten years at a rate of 10% per annum. The Partnership's
share of the funding in 1993 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.
In August 1995, the Partnership purchased the venture partner's 36.94%
interest in Mall of Memphis and concurrently admitted the General Partner
of the Partnership to the venture with a .1% interest. Accordingly, the
Partnership has accounted for its investment in Mall of Memphis as wholly-
owned as of August 1995. The purchase price was approximately $5,500,000,
of which $500,000 (plus certain closing costs) was paid in cash at closing
with the balance represented by a $5,000,000 promissory note. The purchase
price exceeded the venture partner's capital account balance for financial
reporting purposes by $9,402,453. This difference was accounted for as
additional basis in the investment property for financial reporting
purposes. Correspondingly, the venture partner's deficit in ventures was
reduced by $3,857,980. Interest accrues on the unpaid balance of the
promissory note at a rate of 8.0% per annum from the acquisition date and
is payable June 1 of each year solely to the extent of 36.94% of the
venture's annual cash flow (as defined) for the preceding calendar year,
with any unpaid interest also accruing interest at 8.0% per annum. The note
is non-recourse and is secured only by the purchased venture partner's
interest. However, the Partnership has guaranteed the venture partner
(seller), on a recourse basis, that the interest payment to be paid on June
1, 1996 shall be no less than $300,000 and that the interest payment to be
paid on June 1, 1997 shall be no less than $600,000 less the amount
actually paid by the Partnership on June 1, 1996. Due to the increase in
vacancies and other property operating considerations, the Partnership did
not make the June 1996 guaranteed payment until December 1996. Any amounts
required to be paid in excess of the interest accrued to date is applied to
the outstanding principal balance of the note. The promissory note
requires repayment of principal and all accrued interest at maturity
(subject to reduction under certain circumstances related to the property's
market value) which is the earlier of August 2002 (lender has two five-year
options to extend) or upon sale of the property. The venture partner has a
right of first opportunity (as defined) to purchase the property.
In May 1994, an affiliate of the General Partners had assumed management
of the property. Such affiliate had agreed at such time to pay the former
manager (an affiliate of the venture partner) an annual fee of $50,000 as
compensation for the assumption of the management contract. In conjunction
with the August 1995 transfer of the venture partner's interest, the
venture partner's rights to this annual management contract assumption fee
were assigned to the Partnership and settled for $250,000 by such affiliate
(subject to ratable refund by the Partnership should the management
agreement be terminated prior to January 1, 2001).
SCOTLAND YARD - PHASE I AND II APARTMENTS AND
EL DORADO VIEW APARTMENTS
In December 1990, the Partnership obtained replacement mortgage loans
from an institutional lender to retire the existing long-term mortgage
notes secured by the Scotland Yard - Phase I and II and El Dorado View
apartment complexes. The loans provided for payment of contingent interest
equal to 35% of the amount by which gross receipts attributable to a
calendar year (all as defined) exceed a base amount. For the fiscal years
ended 1996, 1995 and 1994, contingent interest was approximately $230,000,
$282,000 and $257,000, respectively. In the event that these properties
were sold 90 days or earlier before the maturity date of the loan, the
lender was 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 calendar years
preceding the sale (all as defined). The lender was also entitled to
additional contingent interest if such prepayment penalty, as calculated
above, was less than certain internal rates of return (13.25%-14.00%) as
defined in the note. The Partnership recorded an accrual for such
additional contingent interest of $4,239,104 as deferred accrued interest
included in the balance of such debt in the accompanying consolidated
financial statements at December 31, 1995. The lender had the right (with
120 days prior notification) to call the remaining loans (at par) at any
time after January 1, 1996.
Due to the rights of the lender as described above, the Partnership
had classified the loans, including accrued additional contingent interest,
(with an outstanding balance of $27,749,104) as current liabilities in the
accompanying consolidated balance sheet at December 31, 1995. In addition,
the properties were classified as held for sale as of April 1, 1996, and
therefore, have not been subject to continued depreciation.
On November 1, 1996, the Partnership sold the Scotland Yard Apartments
Phase I and II located in Houston, Texas for $23,200,000 (before closing
costs and prorations). A major portion of the sale proceeds was utilized
to retire the mortgage loans totaling $18,815,000. The Partnership
received approximately $3,787,000 in connection with the sale after all
fees and closing costs. Of this amount, the lender received an additional
amount of approximately $2,329,000 as participation in the sale proceeds,
as required by the mortgage note, as discussed above. Therefore, the
Partnership received a net amount of cash of approximately $1,458,000. As
a result of the sale, the Partnership recognized a gain of $10,582,373 and
an extraordinary gain of $1,180,286, due to the retirement of deferred
accrued interest related to the mortgage note, for financial reporting
purposes. In addition, the Partnership recognized a gain of $17,772,687
for Federal income tax purposes in 1996.
On July 23, 1996, the Partnership sold the El Dorado View apartment
complex located in Houston, Texas for $6,600,000 (before closing costs and
prorations). The property was sold together with another apartment
property which was owned by a partnership sponsored by an affiliate of the
Corporate General Partner. A major portion of the sale proceeds was
utilized to retire the related underlying mortgage principal of $4,695,000.
The Partnership received approximately $1,752,000 in connection with the
sale after all fees and closing costs. Of this amount, the lender received
an additional amount of approximately $1,051,000 as participation in the
sale proceeds as required by the mortgage note, as discussed above.
Therefore, the Partnership received a net amount of cash of approximately
$701,000. As a result of the sale, the Partnership recognized a $2,698,346
gain for financial reporting and recognized a gain of $5,438,130 for
Federal income tax purposes in 1996.
PAVILLION TOWERS, AURORA, COLORADO
During April 1986, the Partnership sold its interest in Am-Car Real
Estate Partnership-I ("Am-Car") (which owned 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 were 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 the 1993 or 1994 scheduled interest payments of
$60,000 each on the $3,000,000 note. The Partnership received a $200,000
settlement in 1996 with one of the makers of the $3,000,000 note. The
other maker of this note remains obligated for the balance. Although these
notes are secured by personal guarantees from principals of the venture
partner, collection of all past due and future amounts from these notes are
considered unlikely; however, the Partnership is evaluating all of its
legal options. Due to the uncertainty of collection of all past due and
future amounts from these notes, a $527,774 reserve was established at
December 31, 1993, which was reduced to $327,774 in 1996 as a result of the
$200,000 receipt, to reduce the 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. Accordingly, $200,000 of gain was recognized in 1996 and no
profit was recognized in 1995 or 1994.
YERBA BUENA OFFICE BUILDING
In June 1992, title to the Yerba Buena Office Building in San
Francisco, California was transferred to the lender by the joint venture (a
partnership comprised of the Partnership, two other limited partnerships
sponsored by the Partnership's Corporate General Partner and four
unaffiliated limited partners). In return for a smooth transaction of
title and management of the property, the joint venture was able to
negotiate the right to share in future sales or refinancing proceeds, if
any, above certain specified levels. In addition, the joint venture has a
right of first opportunity to purchase the property during the time frame
of June 1995 through May 1998 should the lender wish to market the property
for sale. The joint venture has recently learned that the lender has sold
the property without having given the joint venture its right of first
opportunity to purchase it. The joint venture is analyzing its legal
remedies for the lender's breach of its obligation. There are no
assurances that the joint venture would recover any amounts in the event it
should pursue its legal remedies.
<TABLE>
LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996 and 1995:
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
9-1/2% mortgage note; secured by the Scotland Yard - Phase I
apartment complex in Houston, Texas; payable in monthly
installments of interest only until January 1, 1999
(callable commencing January 1, 1996) when the remaining
balance, including participation interest, is payable
(retired upon sale in 1996) . . . . . . . . . . . . . . . . . . . . $ -- 10,800,673
10% first mortgage note; secured by the Mall of Memphis
shopping center in Memphis, Tennessee; payable in monthly
installments of principal and interest of $279,823 through
January 1, 2018; additional interest payable equal to 20%
of certain rents in excess of a specified level (approximately
$27,000, $138,000 and $86,000 for 1996, 1995 and 1994,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,465,209 29,855,127
14-1/2% second mortgage note; secured by the Mall of Memphis
shopping center in Memphis, Tennessee; payable in monthly
installments of principal and interest of $41,958 through
January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,306,066 3,328,389
10% third mortgage note; secured by the Mall of Memphis
shopping center in Memphis, Tennessee; payable in monthly
installments of principal and interest of $66,696 through
April 1, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,422,141 7,477,252
10% mortgage note; secured by the 767 Third Avenue
office building in New York, New York; payable in monthly
installments of interest only until May 12, 1999 when the
remaining principal balance of $37,986,531 is payable;
additional interest equal to 5% of certain rents in
excess of a specified level is payable (no additional
interest was due for 1996, 1995 and 1994) . . . . . . . . . . . . . 37,986,531 37,986,531
Promissory note payable to venture partner; unsecured;
related to 767 Third Avenue; bearing interest
at a rate equal to the prime rate (approximately
8.25% and 8.5% on December 31, 1996 and December 31,
1995, respectively) plus 2% payable in monthly
installments of interest only until May 1998
when the remaining balance is payable . . . . . . . . . . . . . . . 2,500,000 2,500,000
1996 1995
----------- -----------
First mortgage note payable (effective January 1, 1994)
secured by the Riverfront office building in Cambridge,
Massachusetts; payable in monthly installments of interest
only at rates ranging from 6% to 9% until December 31, 2007,
or prepayment date, when the remaining balance, including the
Minimum Return and Residual Amount (as defined), is payable;
interest accrued at an effective rate of approximately
9.7% commencing November 1995 . . . . . . . . . . . . . . . . . . . 44,895,706 42,828,144
9-1/2% mortgage note; secured by the El Dorado View
apartment complex in Webster, Texas; payable in monthly
installments of interest only until January 1, 1999
(callable commencing January 1, 1996) when the
remaining balance, including participation interest,
is payable (retired upon sale in 1996). . . . . . . . . . . . . . . -- 5,424,309
9-1/2% mortgage note; secured by the Scotland Yard - Phase II
apartment complex in Houston, Texas; payable in monthly
installments of interest only until January 1, 1999
(callable commencing January 1, 1996) when the remaining
balance, including participation interest, is payable
(retired upon sale in 1996) . . . . . . . . . . . . . . . . . . . . -- 11,524,122
8% promissory payable secured by the Partnership's purchased
interest in the Mall of Memphis Associates; payable annually
to the extent of Net Cash Flow (as defined); subject to certain
minimum payments in 1996 and 1997;
due August 8, 2002 (Lender has two five-year options to
extend at the lesser of the outstanding balance of the
loan or the Lenders Market Share (as defined)). . . . . . . . . . . 5,000,000 5,000,000
------------ -----------
Total debt. . . . . . . . . . . . . . . . . . . . . . . . . 130,575,653 156,724,547
Less current portion of long-term debt. . . . . . . . . . . 517,413 28,216,001
------------ -----------
Total long-term debt. . . . . . . . . . . . . . . . . . . . $130,058,240 128,508,546
============ ===========
</TABLE>
Five year maturities of long-term debt are as follows:
1997. . . . . . . . . . $ 517,413
1998. . . . . . . . . . 3,072,891
1999. . . . . . . . . . 38,620,910
2000. . . . . . . . . . 702,538
2001. . . . . . . . . . 778,102
===========
Long-Term Debt Modifications - General
The Partnership has received mortgage note modifications on certain
properties. Upon expiration of such modifications or scheduled maturity of
the loans, 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.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or other
disposition of investment properties are allocated first to the General
Partners in an amount equal to the greater of the amount distributable to
the General Partners from the proceeds of any such sale (as described
below) or 1% of the profits from the sale. Losses from the sale or other
disposition of investment properties will be allocated 1% to the General
Partners. The remaining sale profits and losses will be allocated to the
Limited Partners.
The Partnership Agreement also generally provides that notwithstanding
any allocation contained in the Agreement, if at any time profits are
realized by the Partnership, any current or anticipated event which would
cause the deficit balance in absolute amount in the capital account of the
General Partners to be greater than their share of the Partnership's
indebtedness (as defined) after such event, then the allocation of profits
to the General Partners shall be increased to the extent necessary to cause
the deficit balance in the capital account of the General Partners to be no
less than their respective shares of the Partnership's indebtedness after
such event. In general, the effect of this provision is to allow the
deferral of the recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu-
tions except under certain limited circumstances upon dissolution and
termination of the Partnership. Distributions of "net cash receipts" of
the Partnership are allocated 90% to the Limited Partners and 10% to the
General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).
The Partnership Agreement provides that the Limited Partners shall
receive 99% and the General Partners shall receive 1% of the sale or
refinancing proceeds of a real property (net after expenses and retained
working capital) until the Limited Partners (i) have received cash
distributions of sale or refinancing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership,
and (ii) have received cumulative cash distributions from the Partnership's
operations which when combined with sale or refinancing proceeds previously
distributed, equal to a 6% annual return on the Limited Partners' average
capital investment for each year (their initial capital investment as
reduced by sale or refinancing proceeds previously distributed) commencing
with the first fiscal quarter of 1983. After such distributions, the
General Partners shall receive (to the extent not previously received)
proceeds up to 3% of the aggregate sales price of properties previously
sold by the Partnership with any remaining proceeds allocated 85% to the
Limited Partners and 15% General Partners. The Limited Partners are not
expected to receive cash distributions of sale or refinancing proceeds in
an amount equal to their initial capital investment. Therefore, no sale
proceeds would currently be distributable to the General Partners pursuant
to the distribution levels described above.
Allocations among the partners in the accompanying accrual basis
consolidated financial statements have been made in accordance with the
provisions of the Partnership Agreement and the venture agreements. The
allocation percentages may differ from year to year based on future events.
Differences may therefore result between allocations among the partners on
the GAAP basis and the tax basis. Such differences would have no
significant effect on total assets, total partners' capital or net loss.
MANAGEMENT AGREEMENTS
In May 1994, an affiliate of the General Partners assumed property
management and leasing services at the Mall of Memphis from an affiliate of
the venture partner. Leasing commissions at the Mall of Memphis are
calculated at a rate, which approximates market, based on the terms of the
related lease.
LEASES - AS PROPERTY LESSOR
At December 31, 1996, the Partnership's and its consolidated ventures'
principal assets are two office buildings and one enclosed shopping mall.
The Partnership has determined that all leases relating to these properties
are properly classified as operating leases; therefore, rental income is
reported when earned and the cost of each of the properties, excluding the
cost of land, is depreciated over their estimated useful lives. Leases
with office building and shopping center tenants range in term from one to
twenty-four years and provide for fixed minimum rent and partial
reimbursement of operating costs. In addition, leases with shopping center
tenants provide for additional rent based upon percentages of tenant sales
volumes. With respect to the Partnership's shopping center investment, a
substantial portion of the ability of retail tenants to honor their leases
is dependent upon the retail economic sector.
Cost of the leased assets net of accumulated depreciation are
summarized as follows at December 31, 1996:
Shopping mall:
Cost . . . . . . . . . . . . . $ 65,629,315
Accumulated depreciation . . . 23,002,534
------------
42,626,781
------------
Office buildings:
Cost . . . . . . . . . . . . . 118,969,702
Accumulated depreciation . . . 52,867,548
------------
66,102,154
------------
Total. . . . . . . . . . . . . . $108,728,935
============
Minimum lease payments, including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
commercial operating lease agreements, are as follows:
1997 . . . . . . . . . . . . . . $18,159,155
1998 . . . . . . . . . . . . . . 14,837,455
1999 . . . . . . . . . . . . . . 12,636,599
2000 . . . . . . . . . . . . . . 10,671,095
2001 . . . . . . . . . . . . . . 8,896,600
Thereafter . . . . . . . . . . . 29,891,664
-----------
Total. . . . . . . . . . . . . . $95,092,568
===========
Additional contingent rent (based on sales by property tenants)
included in consolidated rental income was as follows for the years ended
December 31, 1996, 1995 and 1994:
1994 . . . . . . . . . . . . . . $277,151
1995 . . . . . . . . . . . . . . 354,677
1996 . . . . . . . . . . . . . . 300,141
========
LEASES - AS PROPERTY LESSEE
The following lease agreement has been determined to be an operating
lease.
The Riverfront venture owns a net leasehold interest which expires in
2061 (subject to a 19-year extension) in the land underlying the Cambridge,
Massachusetts office building. The lease provides for annual rent equal to
the greater of 2% of gross income from the property or a minimum amount
(which increases on a fixed schedule from $132,700 at inception,to $298,575
for the years 2007 through 2080). The joint venture has not made the
scheduled ground lease payments since February 1993. At December 31, 1996,
the total amount of deferred and accrued ground lease expense is
approximately $684,000. Reference is made to the Riverfront venture
agreement discussed above regarding the waiver of any and all scheduled
ground rent payments due under the lease since February 1993 in conjunction
with a loan restructure with the mortgage lender.
Future minimum rental commitments under this lease are as follows:
1997. . . . . . . . . . $ 212,230
1998. . . . . . . . . . 212,230
1999. . . . . . . . . . 212,230
2000. . . . . . . . . . 212,230
2001. . . . . . . . . . 212,230
Thereafter. . . . . . . 17,682,275
-----------
Total . . . . . . . . . $18,743,425
===========
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of and for the years ended December 31, 1996, 1995 and
1994 are as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- ------------
Property management
and leasing fees . . . . $289,483 344,158 381,810 --
Insurance commissions . . 27,639 34,756 32,821 --
Reimbursement (at cost)
for accounting
services . . . . . . . . 9,141 115,562 110,687 1,021
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 24,234 27,279 8,230 5,659
Reimbursement (at cost)
for legal services . . . 5,451 3,130 4,920 1,438
Reimbursement (at cost)
for out-of-pocket
salary and salary-
related to the on-site
and other costs for
the Partnership and
its investment
properties . . . . . . . -- 77,031 58,118 --
-------- ------- ------- -----
$355,948 601,916 596,586 8,118
======== ======= ======= =====
The Corporate General Partner has deferred payment of partnership
management fees of $11,936. In addition, distributions to the General
Partners of the first quarter 1991 net cash flow of the Partnership
aggregating $7,161 have been deferred. The General Partners and their
affiliates have also deferred payment of the Partnership's share of
property management and leasing fees of approximately $171,000 for the
Partnership's unconsolidated venture, which is not included in the
consolidated financial statements. These amounts do not bear interest and
may be paid in future periods.
<TABLE> SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) AT CLOSE OF PERIOD (B)
--------------------------- COSTS ----------------------------------------
LAND AND BUILDINGS CAPITALIZED LAND AND BUILDINGS
LEASEHOLD AND SUBSEQUENT TO LEASEHOLD AND
ENCUMBRANCE INTEREST IMPROVEMENTS ACQUISITION INTEREST IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
BUILDINGS:
New York,
New York
(767 Third
Avenue)(D). .$40,486,531 10,252,897 59,515,887 9,911,989 10,252,898 69,427,875 79,680,773
Cambridge,
Massachu-
setts (D) . . 44,895,706 (C) 27,114,515 12,174,414 (C) 39,288,929 39,288,929
SHOPPING
MALL:
Memphis,
Tennessee . . 45,193,416 3,608,935 39,870,758 22,149,622 4,845,861 60,783,454 65,629,315
------------ ---------- ----------- ---------- ---------- ----------- -----------
Total . . .$130,575,653 13,861,832 126,501,160 44,236,025 15,098,759 169,500,258 184,599,017
============ ========== =========== ========== ========== =========== ===========
</TABLE>
<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1996
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
New York, New York
(767 Third Avenue)
(D) . . . . . . . . . . $35,702,289 1981 9/30/81 5-30 years 2,021,004
Cambridge, Massachusetts
(D) . . . . . . . . . . 17,165,259 1983 10/22/81 5-30 years 1,183,626
SHOPPING MALL:
Memphis,
Tennessee (D) . . . . . 23,002,534 1981 8/3/81 5-30 years 1,604,006
----------- ---------
Total . . . . . . . . $75,870,082 4,808,636
=========== =========
<FN>
- ------------------
(A) The initial cost to the Partnership represents the original purchase price of the properties, including
amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1996 for Federal income tax purposes was
approximately $163,931,000.
(C) Property operated under ground lease; see the Notes.
(D) Properties owned and operated by joint ventures; see the Notes.
</TABLE>
<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(E) Reconciliation of real estate owned:
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $209,499,155 197,649,247 212,017,190
Additions during period. . . . . . . . . . . . . 3,038,590 11,849,908 4,338,481
Reductions during period . . . . . . . . . . . . (27,938,728) -- (18,706,424)
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $184,599,017 209,499,155 197,649,247
============ ============ ============
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $ 81,997,627 75,428,110 72,509,329
Depreciation expense . . . . . . . . . . . . . . 6,110,344 6,569,517 8,518,226
Reductions during period . . . . . . . . . . . . (12,237,889) -- (5,599,445)
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $ 75,870,082 81,997,627 75,428,110
============ ============ ============
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during
fiscal years 1996 and 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding stock of which is owned, directly or indirectly, by certain of
its officers, directors, members of their families, and their affiliates.
JMB has responsibility for all aspects of the Partnership's operations,
subject to the requirement that sales of real property must be approved by
the Associate General Partner of the Partnership, ABPP Associates, L.P.
(formerly known as Realty Associates-XI, L.P.). ABPP Associates, L.P., an
Illinois limited partnership with JMB as its sole general partner shall be
directed by a majority in interest of its limited partners (who are
generally officers, directors and affiliates of JMB or its affiliates) as
to whether to provide its approval of any sale of real property (or any
interest therein) of the Partnership.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of each
director and executive and certain other officers of the Corporate General
Partner are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
and General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 7, 1997. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1997. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the Corporate General Partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-
XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"),
Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real
Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited
Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-
XVII ("Carlyle-XVII), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-
III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle
Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II
("Carlyle Income Plus-II"), and the managing general partner of JMB Income
Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB
Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income
Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X
("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB
Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties,
Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing officers and directors are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB
Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II
("Arvida-II")) and Income Growth Managers, Inc. (the Corporate General
Partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG"). Most of such
directors and officers are also partners of certain partnerships which are
associate general partners in the following real estate limited
partnerships: Carlyle-VII, Carlyle-IX, Carlyle-XII, Carlyle-XIII, Carlyle-
XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII,
JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage
Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income
Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.
("USC, Inc."), an affiliate of JMB that is a real estate investment trust
in the business of owning, managing and developing shopping centers. He is
a Certified Public Accountant.
Neil G. Bluhm (age 59) is an individual general partner of JMB Income-
IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August,
1970. Mr. Bluhm is a director of USC, Inc. He is a member of the Bar of
the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 58) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 55) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 50) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is a director of USC, Inc. Mr. Schreiber is
President of Schreiber Investments, Inc., a company which is engaged in the
real estate investment business. He is also a senior advisor and partner
of Blackstone Real Estate Partners, an affiliate of the Blackstone Group,
L.P. Since 1994, Mr. Schreiber has also served as a Trustee of Amli
Residential Property Trust, a publicly-traded real estate investment trust
that invests in multi-family properties. He is also a director of USC,
Inc., as well as a director for a number of investment companies advised or
managed by T. Rowe Price Associates and its affiliates. He holds a Masters
degree in Business Administration from Harvard University Graduate School
of Business.
H. Rigel Barber (age 47) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 49) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 44) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 48) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 61) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Limited Partners, and a
share of profits or losses. Reference is also made to the Notes for a
description of such transactions, distributions and allocations. In 1996,
1995 and 1994, no cash distributions were paid to the General Partners. In
1991, the General Partners deferred distributions of $7,161 and management
fees of $11,936.
Urban Retail Properties, Co., an affiliate of the Corporate General
Partner, provided property management and leasing services at the Mall of
Memphis during 1996. In 1996, such affiliate earned and received property
management and leasing fees amounting to $289,483. As set forth in the
Prospectus of the Partnership, the Corporate General Partner must negotiate
such agreements on terms no less favorable to the Partnership than those
customarily charged for similar services in the relevant geographical area
(but in no event at rates greater than 5% of the gross income from a
property), and such agreements must be terminable by either party thereto,
without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1996
aggregating $27,639 in connection with the provision of insurance coverage
for certain of the real property investments of the Partnership. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The Corporate General Partner of the Partnership and their affiliates
may be reimbursed for their salaries, salary-related and direct expenses
relating to the administration of the Partnership and the acquisition and
operation of the Partnership's real property investments. In 1996, the
Corporate General Partner of the Partnership was due reimbursement for such
expenses in the amount of $38,826. Cumulative amounts unpaid at December
31, 1996 were $8,118.
The Partnership is permitted to engage in various transactions
involving affiliates of the Corporate General Partner of the Partnership.
The relationship of the Corporate General Partner to its affiliates is set
forth above in Item 10.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Interests of the
Partnership.
(b) The Corporate General Partner, its officers and directors and the Associate General Partner own the following
Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 85 Interests directly Less than 1%
Limited Partnership
Interests Corporate General 85 Interests directly Less than 1%
Partner, its
officers and
directors and
the Associate
General Partner
as a group
<FN>
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire beneficial ownership
of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There exists no arrangements, known to the Partnership, the operation of which may at a subsequent date result in a
change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed
with this annual report).
(2) Exhibits.
3-A.*The Prospectus of the Partnership dated May 8, 1981, as
supplemented on July 27, 1981, October 9, 1981, November 5, 1981, December
10, 1981, February 19, 1982 and April 23, 1982, as filed with the
Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated
herein by reference to Exhibit 3-A to the Partnership's Form 10-K Report
for December 31, 1994 filed on March 27, 1995.
3-B.*Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which agreement is hereby
incorporated by reference to Exhibit 3-B to the Partnership's Form 10-K
Report for December 31, 1994 filed on March 27, 1995.
4-A. Long-term debt modification relating to the 767 Third
Avenue Office Building in New York, New York is hereby incorporated by
reference to Exhibit 4-A to the Partnership's Report on Form 10-K (File No.
0-10494) for December 31, 1994 dated on March 27, 1995.
4-B. Mortgage loan documents secured by 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.
4-C. First through third mortgage loan documents secured by
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.
4-D.*Fourth mortgage loan document secured by the Riverfront
Office Building in Cambridge, Massachusetts is hereby incorporated by
reference to Exhibit 4-D to the Partnership's Report on Form 10-K for
December 31, 1994 dated on March 27, 1995.
4-E. Deed of trust note document dated March 31, 1993
secured by the Mall of Memphis in Memphis, Tennessee is hereby incorporated
by reference to Exhibit 4-E to the Partnership's Report on Form 10-K for
December 31, 1994 dated on March 27, 1995.
4-F. Loan repayment agreement related to the first through
fourth mortgage loan documents secured by the Riverfront Office Building in
Cambridge Massachusetts, is filed herewith.
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.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 hereby
incorporated by reference to the Partnership's report for June 30, 1994 on
Form 10-Q (File No. 0-10494) dated August 12, 1994.
10-E.Acquisition documents relating to the purchase by the
Partnership of the venture partner's interest in the Mall of Memphis in
Memphis, Tennessee, incorporated by reference to the Partnership's report
for September 30, 1995 on Form 10-Q (File No. 0-10494) dated November 9,
1995.
10-F.Purchase Agreement dated July 23, 1996 related to the
sale of El Dorado View Apartments in Houston, Texas, by and between Carlyle
Real Estate Limited Partnership - XI and Meridian Capital Corporation, is
hereby incorporated by reference to the Partnership's report for September
30, 1996 on Form 10-Q (File No. 0-10494) dated November 8, 1996.
10-G.Purchase Agreement dated November 1, 1996 related to
the sale of Scotland Yard Apartments - Phase I and II in Houston, Texas, by
and between Carlyle Real Estate Limited Partnership-XI and FCS Realty, LLC,
is filed herewith.
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule
_____________
* Previously filed in Exhibits 3-A, 3-B and 4-D to the
Partnership's Report on Form 10-K for December 31, 1992 of the Securities
Exchange Act of 1934 (File No. 0-10494) filed on March 19, 1993.
(b) No Reports on Form 8K have been filed since the beginning of the
last quarter covered by this report.
No annual report or proxy material for the fiscal year 1996 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership 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
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 21, 1997
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 21, 1997
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 21, 1997
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 21, 1997
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 21, 1997
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 21, 1997
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 21, 1997
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 21, 1997
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3-A. The Prospectus of the
Partnership dated May 8,
1981 Yes
3-B. Amended and Restated Agreement of
Limited Partnership Yes
4-A. Mortgage loan documents secured
by the 767 Third Avenue
Office Building Yes
4-B. Mortgage loan documents secured
by the Mall of Memphis Yes
4-C. First through third mortgage
loan documents secured by the
Riverfront Office Building Yes
4-D. Fourth mortgage loan document
secured by the Riverfront
Office Building Yes
4-E. Deed of trust note dated
March 31, 1993 secured by the
Mall of Memphis Yes
4-F. Loan Repayment Agreement
secured by the Riverfront
Office Building No
10-A. Acquisition documents related
to the 767 Third Avenue
Office Building Yes
10-B. Acquisition documents related
to the Mall of Memphis Yes
10-C. Acquisition documents related
to the Riverfront Office Building Yes
10-D. Amended and Restated Promissory
Note, between Carlyle/National
City Center Office Building Yes
10-E. Acquisition documents relating
to the purchase by the Partnership
of the venture partner's interest
in the Mall of Memphis Yes
10-F. Purchase Agreement related to
the Sale of the El Dorado View
Apartments Yes
10-G. Purchase Agreement related to
the sale of the Scotland Yard
Apartments - Phase I and II No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 4-F
- -----------
LOAN REPAYMENT AGREEMENT
------------------------
This Loan Repayment Agreement ("Agreement") is made this 9th
day of November, 1995 by and between RIVERFRONT OFFICE PARK JOINT
VENTURE, a Massachusetts general partnership ("Maker"), with a
mailing address at c/o Darvel Realty Trust, One Main Street,
Cambridge, Massachusetts 02142 ("ROPJV") and TEACHERS INSURANCE
AND ANNUITY ASSOCIATION OF AMERICA, a New York corporation,
having a mailing address at 730 Third Avenue, New York, New York
10017 ("TIAA").
W I T N E S S E T H:
-------------------
WHEREAS, ROPJV is the Maker of Mortgage Note No. 1 dated
August 4, 1983 in the original principal amount of $25,300,000.00
("Note No. 1") with a principal balance on January 1, 1993 of
$24,788,526.00 and on March 1, 1993 of $24,771,715.06, Mortgage
Note No. 2 dated August 4, 1983 in the original principal amount
of $1,200,000.00 ("Note No. 2") with a principal balance on
January 1, 1993 of $1,168,436.67 and on March 1, 1993 of
$1,167,387.83, Mortgage Note No. 3 dated December 19, 1984 in the
original principal amount of $2,700,000.00 ("Note No. 3") with a
principal balance on January 1, 1993 of $2,616,796.40 and on
March 1, 1993 of $2,614,101.49 and Mortgage Note No. 4 dated
August 28, 1990 in the original stated principal amount of
$5,800,000.00 (of which only $5,734,000.00 was advanced) ("Note
No. 4") with a principal balance on January 1, 1993 and on
- 1 -
March 1, 1993 of $5,734,000.00 (hereinafter Note No. 1, Note
No. 2, Note No. 3 and Note No. 4 are collectively called
"Notes"), each payable to the order of TIAA and (a) secured by a
Security Agreement and Mortgage Deed dated August 4, 1983 from
ROPJV to TIAA recorded with the Middlesex County South Registry
of Deeds in Book 15156, Page 568 and filed with the Middlesex
South Registry District of the Land Court as Document No. 645106
with Certificate of Title No. 136418 with the Middlesex South
Registry District of the Land Court in Book 812, Page 68 as
supplemented by a First Supplement to Security Agreement and
Mortgage Deed dated December 5, 1984, recorded with the said
Registry of Deeds in Book 15927, Page 403 and filed with the said
Registry District of the Land Court as Document No. 673276 and by
a Second Supplement to Security Agreement and Mortgage Deed dated
August 28, 1990, recorded with said Registry of Deeds in
Book 20736, Page 547 and filed as Document No. 828398 with said
Registry District of the Land Court (hereinafter said Security
Agreement and Mortgage Deed as so supplemented is called
"Mortgage") constituting a first mortgage lien upon certain real
property located in the City of Cambridge, Country of Middlesex,
Commonwealth Of Massachusetts as therein more particularly
described (hereinafter called "Mortgaged Premises") and (b) by an
Assignment of Lessor's Interest in lease(s) from ROPHV to TIAA
dated August 4, 1983 duly recorded with the said Registry of
Deeds in Book 15156, Page 592 and filed with the said Registry
District of the Land Court as Document No. 645107 (hereinafter
called "Assignment"),
- 2 -
WHEREAS, ROPJV is unable to perform its financial
obligations under the Notes, Mortgage and Assignment and ROPJV
desires to restructure its debt to TIAA so as to increase the
total of the presently outstanding principal balances of the
Notes by the amount of accrued and unpaid interest for the year
1993, compounded monthly at the rate of six (6%) per cent per
annum which accrued and unpaid interest so compounded in the
amount of $1,753,452.24 is reconstituted as principal (the total
of the principal balances of the Notes and said reconstituted
interest outstanding from time to time and all amounts payable
with respect thereto are hereinafter referred to as "Loan"), to
modify the maturity date thereof, the interest payable thereunder
and certain other terms relating to the repayment of the debt as
more fully set forth herein and TIAA is willing to restructure
the Loan in accordance with the provisions hereinafter set forth,
WHEREAS, ROPJV is the tenant under a certain Ground Lease
dated September 23, 1981 with the Trustees of Darvel Realty Trust
as Ground Lessor and ROPJV as ground Lessee as amended by
Amendment dated August 4, 1983, and by Amendment No. 2 to Ground
Lease dated as of November 9, 1995 (hereinafter said Ground Lease
as so amended is referred to as "Ground Lease") which Ground
Lease is the subject of a certain Subordination and Waiver of
Rent Agreement dated August 4, 1983, recorded with said Registry
of Deeds in Book 15157, Page 26 and filed with said Registry
District of the Land Court as document No. 645109 and noted on
Certificate of Title No. 136418, and
- 3 -
WHEREAS, ROPJV and TIAA for their mutual benefit are
desirous that the Loan be repaid in accordance with the terms and
provisions of this Agreement.
NOW THEREFORE, in consideration of the Mortgaged Premises
and of TEN ($10.00) DOLLARS and other good and valuable
consideration paid by the parties hereto each to the other, the
receipt and sufficiency of which is hereby acknowledged, ROPJV
and TIAA for their mutual benefit agree as follows:
(A) ROPJV for value received, promises to pay to TIAA or
order, at 730 Third Avenue, New York, New York 10017 or at such
other place as the holder of the ROPJV Notes may designate in
writing the total amount of THIRTY-FOUR MILLION TWO HUNDRED
EIGHTY-SEVEN THOUSAND TWO HUNDRED FOUR and 38/100
($34,287,204.38) DOLLARS comprised of the total of the presently
outstanding principal balance of Note No. 1 in the amount of
$24,771,715.06, the presently outstanding principal balance of
Note No. 2 in the amount of $1,167,387.83, the presently
outstanding principal balance of Note No. 3 in the amount of
$ 2,614,101.49, and the presently outstanding principal balance of
Note No. 4 in the amount of $5,734,000.00.
(B) ROPJV, for the value received, promises to pay TIAA or
order, at 730 Third Avenue, New York, New York 10017 or such
other place as the holder of the ROPJV Notes and this Agreement
may, designate in writing the amount of $1,753,452.24 which
represents accrued and unpaid interest for 1993 compounded
monthly at the rate of six (6%) per cent per annum in the amount
of $1,753,452.24 is hereby constituted as principal.
- 4 -
(C) ROPJV and TIAA agree that the amount of $36,040,656.62
being a total of the balances of the Notes in the amount of
$34,287,204.38 and the reconstituted interest in the amount of
$1,753,452.24 shall be repaid as a single consolidated amount in
accordance with the terms and provisions of this Agreement. Any
references hereinafter made to principal or original principal
balance(s) from and after the date of this Agreement shall mean
said $36,040,656.62 and any portions thereof remaining
outstanding from time to time and said principal and all amounts
payable with respect thereto are sometimes referred to as Loan.
(D) ROPJV agrees to pay the Loan in lawful money of the
United States of America with interest thereon in accordance with
the terms and provisions of this Agreement and in furtherance
thereof ROPJV (herein called "Maker") and TIAA (hereinafter
together with all subsequent holders of the Notes called
"Holder") agree as follows:
1. Wherever the term Note hereinafter appears it shall
mean the Notes and this Agreement collectively; wherever the term
Mortgage hereinafter appears, it shall mean the Mortgage as
amended by the Third Supplement To Security Agreement and
Mortgage Deed of even date and delivery herewith by and between
ROPJV and TIAA, duly recorded with the said Registry of Deeds and
filed with the said Registry District of the Land Court; wherever
the term Assignment hereinafter appears, it shall mean the
Assignment as amended by the First Amendment to Assignment of
Lessor's Interest in Lease(s) of even date and delivery herewith
by and between ROPJV and TIAA duly recorded with the said
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Registry of Deeds and filed with the said Registry District of
the Land Court; whatever the term Escrow Agreement hereinafter
appears, it shall mean the Escrow Agreement of even date and
delivery herewith, by and between ROPJV, Keller Company, Inc.,
and TIAA; and wherever the term Loan Documents hereinafter
appears, it shall mean the Note, Mortgage, Assignment, Escrow
Agreement, the First Amendment to Subordination and Waiver of
Rent Agreement between the holder and Darvel Realty Trust of even
date and delivery herewith (hereinafter called "Rent Waiver
Agreement"), and any other document delivered to TIAA in
connection with the Loan. Wherever the term Mortgaged Premises
is hereinafter used it shall mean the mortgaged premises
described in the Mortgage.
2. The Maker covenants, agrees and confirms that the total
of the outstanding principal balances of the Notes on March 1,
1993 was $34,287,204.38 and the reconstituted principal balances
of the Note as of January 1, 1994 and on the date hereof is
$36,040,656.62 and all said amounts are owed by the Maker to the
Holder without offset, counterclaim or other defense, that the
Maker is the owner of the leasehold estate and every other part
of the Mortgaged Premises, that the Maker shall perform all the
terms and covenants of the Maker in the Mortgage, Assignment and
Escrow Agreement and that there are no offsets, counterclaims or
other defenses to the obligations of Maker under this Agreement,
the Notes, Mortgage, Assignment, Escrow Agreement or any other of
the Loan Documents and that all of the provisions of the Loan
Documents are in full force and effect.
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3. Notwithstanding any inconsistent provisions in the
Notes, the payment terms of Note No. 1, Note No. 2, Note No. 3 and
Note No. 4 are amended and restated as hereinafter set forth in
this Agreement and the principal of the Loan in the amount of
$36,040,656.62 and interest thereon is to be paid as follows:
3.1 Commencing on the first day of January, 1994.
Fixed Interest (as defined below) shall accrue on the principal
balances outstanding hereunder from time to time and said Fixed
Interest shall be paid by the Maker in arrears on the first day
of each month commencing on February 1, 1994 and on the first day
of each month thereafter through and including December 1, 2007.
3.2 The then outstanding principal balance, any
accrued unpaid Fixed Interest, the Minimum Return (as defined
below), the Prepayment/Maturity Amount (as defined below) and any
other amounts payable under the Note, if not sooner paid, shall
be payable on the Maturity Date (as defined below).
3.3 For purposes hereof, the following definitions
shall apply:
(a) APPRAISAL. "Appraisal" means the written report
of an Appraiser which values the Mortgaged Premises at the amount
which a ready and willing buyer would pay to a ready and willing
seller (with neither being compelled to buy or sell) under then
current market conditions to buy the Mortgaged Premises as if it
were free and clear of all liens and debts and, if the Appraisal
is submitted in connection with the payment of the Loan on a
Prepayment Date or on the Maturity Date but not otherwise,
benefitted by the agreement that Basic Rent shall not accrue and
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need not be paid under the Ground Lease until November 30, 2026
(except as otherwise provided in the Rent Waiver Agreement) and
not subject to any diminution of value as a result or a Spill of
Hazardous Waste or Materials as such terms are defined in the
Mortgage.
(b) APPRAISED VALUE. "Appraised Value" means the fair
market value of the Mortgaged Premises obtained by an Appraisal.
(c) APPRAISER. "Appraiser" means an independent
M.A.I. appraiser licensed and having at least ten (10) years of
experience appraising commercial real estate similar to the
Mortgaged Premises in the Boston and Cambridge areas.
(d) APPROVED BUDGET. "Approved Budget" means the
budget for the Mortgaged Premises for a calendar year submitted
by the Maker to the Holder ninety (90) days prior to the
commencement of said calendar year and approved by the Holder
pursuant to the Mortgage in which Approved Budget the Maker and
the Holder agree to the estimated amount of the Cash Flow, Net
Operation Income, Gross Receipts and Operating Expenses of the
Mortgaged Premises for the subject calendar year. No change in
the original Approved Budget for a calendar year made during said
calendar year by agreement of the Maker and the Holder shall
affect or change the Coverage Interest Rate then payable or the
prior agreed estimated Cash Flow amount used to determine the
Coverage Interest Rate then payable.
(e) CASH FLOW. "Cash Flow" means Net Operating Income
less Capital Expenditures, Tenant Improvement Costs, Leasing
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Inducement Amounts and Leasing Commission as those terms are
defined in the Escrow Agreement.
(f) COVERAGE INTEREST RATE. The "Coverage Interest
Rate" shall be that rate of interest per annum which would be
paid by the payment to the Holder in twelve (12) equal monthly
installments during each calendar year commencing in 1998 of the
amount obtained by dividing the estimated Cash Flow set forth in
the original Approved Budget for said calendar year by 1.2,
provided, however, that the Coverage Interest Rate in a calendar
year shall not exceed that rate which would cause the Holder to
have received on a interest payment date a yield having an
Internal Rate of Return of eighteen and one-half (18-1/2%) per cent
per annum, assuming the payment on each interest payment date
during said year of the outstanding principal balance of the Loan
and taking into consideration all previous payments of Fixed
Interest.
(g) DISCOUNTED VALUE. "Discounted Value" means the
amount of a payment under the Note received after January 1, 1993
discounted at a particular rate from date of actual receipt
thereof by the Holder to January 1, 1993.
(h) FIXED INTEREST. "Fixed Interest" means, prior to
January 1, 1998, the amount of interest computed at the Minimum
Fixed Interest Rate and, after December 31, 1997, the greater of
the amount of interest computed at the Minimum Fixed Interest
Rate or the amount of interest computed at the Coverage Interest
Rate.
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(i) GROSS RECEIPTS. "Gross Receipts" means the
aggregate of all the money and the fair-market value of all property
and any other rent, issues, income of whatsoever type and nature
derived from the Mortgage Premises for a calendar year and shall
include all fixed, minimum and guarantee rents, overage rents,
percentage or participation rents, and all rentals and receipts
from written or oral leases, licenses and concessions received
from the Mortgage Premises including all amounts received
pursuant to escalation provisions contained in any and all
occupancy leases (including all contributions by occupancy
tenants or others for real estate taxes, property insurance
expenses and operating expenses), all rent insurance proceeds and
cancellation premiums, and any and all other payments, credits or
offsets received in the nature of rent or additional rent,
parking fees, storage income, deposits or prepayments of rent in
the nature of security which are forfeited by lessees making such
deposits or prepayments, and any and all income and revenue of a
nonrental nature but excluding insurance and condemnation
proceeds to the extent used for repair or restoration and applied
in accordance with the Mortgage and excluding any construction
management fees to the extent paid under any management agreement
previously approved in writing by the Holder, and including
interest and other investment income such as paid on the Reserve
Escrow Account and the Working Capital Escrow Account.
(j) INTERNAL RATE OF RETURN. "Internal Rate of
Return" means that the percentage rate which when applied as of any
date results in the total of the Discounted Value of all payments
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made under the Note (which are in accordance with the terms of the
Note to be used to determine such rate) discounted monthly at
such percentage rate equalling the total of the original
principal balances on January 1, 1993. For the purposes of the
foregoing computation, (i) all advances made pursuant to the Note
shall be considered made on January 1, 1993, except that the
amount of 1,753,452.24 of the accrued and unpaid interest
compounded monthly at six (6%) per cent per annum reconstituted
as principal in accordance with the terms of this Agreement shall
be consideration an advance made on January 1, 1994, and (ii) all
payments made on account of the Note shall be considered made at
such times after January 1, 1993 as such payments were actually
received by Holder.
(k) MATURITY DATE. The "Maturity Date: means
December 31, 2007.
(l) MINIMUM FIXED INTEREST RATE. The "Minimum Fixed
Interest Rate" shall be (i) six (6%) per cent per annum during
the period from and including January 1, 1994 through and
including December 31, 1997, (ii) seven (7%) per cent per annum
during the period from and including January 1, 1998 through and
including December 31, 1999, (iii) eight and one-quarter (8 1/4%)
per cent per annum during the period from and including
January 1, 2000 through and including December 31, 2002, and (iv)
nine (9%) per cent per annum during the period from and including
January 1, 2003 through and including December 31, 2007.
(m) MINIMUM IRR RATE. "Minimum IRR Rate" means an
Internal Rate of Return compounded monthly of not less than nine
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(9%) per cent per annum if the Prepayment Date occurs during each
of the calendar years 1995 through 1997, ten (10%) per cent per
annum if the Prepayment Date occurs during each of the calendar
years 1998 through 2002 or ten and one-half (10 1/2%) per cent per
annum if the Prepayment Date occurs during each of the calendar
years 2003 through 2007 and on the Maturity Date.
(n) MINIMUM RETURN. "Minimum Return" means the amount
which, when paid to the Holder and added to prior payments of
principal and Fixed Interest made by the Maker under the Note,
will cause the Holder to have received on a Prepayment Date or
the Maturity Date a yield having an Internal Rate of Return equal
to the Minimum IRR Rate effective on such Prepayment Date or the
Maturity Date. The Residual Amount payable on a Prepayment Date
or on the Maturity Date shall not be used in calculating the
Minimum Return.
(o) NET OPERATING INCOME. "Net Operating Income"
means Gross Receipts less Operating Expenses.
(p) OPERATING EXPENSES. "Operating Expenses" means
amounts paid by Maker in a calendar year in the ordinary course
of the maintenance, operation and use of the Mortgaged Premises
in accordance with the amounts set forth in the line item
categories in the Approved Budget, including (i) payroll, fringe
benefits and statutory payroll taxes, (ii) charges for
electricity, gas, telephone, water, sewer, garbage, laundry,
extermination, elevator, alarm system for common areas and
security guard services and other utilities required under tenant
leases or by statute, (iii) charges for fuel and reasonable
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inventory purchased, (iv) sales, business and real estate taxes
and assessments, (v) premiums for insurance, (vi) costs of
replacements (excluding Tenant Improvement Costs and Capital
Expenditures, as defined in the Escrow Agreement), repairs,
maintenance and supplies, (vii) charges for promotion and
advertising, (viii) management fees of up to three and one-half
(3 1/2%) of Gross Receipts from the Mortgaged Premises (inclusive of
all off-site overhead charges) plus reimbursement for reasonable
and customary direct on-site expenses of the manager, but only to
the extent included in the Approved Budget for any fiscal year,
(ix) charges for audited financial statements delivered to Holder
pursuant to the Mortgage, (x) reasonable legal fees and expenses
incurred in connection with (A) the drafting of new leases and
lease amendments, (B) actions to collect rents owing and (C) tax
abatement proceedings, and (xi) ground rent to the extent payable
in accordance with the provisions of the Rent Waiver Agreement.
The following shall not be deemed to be Operating Expenses: (1)
payments of principal and interest on any indebtedness, including
the Note, (2) refunds to tenants of security deposits, (3)
payment for Capital Expenditures, Tenant Improvements Costs,
Leasing Inducement Amounts and Leasing Commissions as those terms
are defined in the Escrow Agreement, unless previously consented
to in writing by Holder, (4) depreciation or other non-cash
items, (5) prepaid expenses which are not customarily prepaid in
the ordinary course of business, (6) management fees payable in
excess of those approved in subparagraph (viii), above, (7)
general overhead expenses in connection with the operation of the
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Mortgaged Premises, (8) costs of Appraisals (except as they
relate to bona-fide tax abatement proceedings), (9) any escrow or
reserve funds established by Holder in connection with the
Mortgaged Premises (including, without limitation, the Reserve
Escrow Account and the Working Capital Reserve Account, (10)
audit fees described in paragraph 67(c) of the Mortgage, and (11)
ground rent, except to the extent said rent is permitted to be
paid under the Rent Waiver Agreement.
(q) PREPAYMENT/MATURITY AMOUNT. "Prepayment/Maturity
Amount" means the sum of the Minimum Return and the Residual
Amount (as defined in paragraph 4.1 hereof).
(r) PREPAYMENT DATE. "Prepayment Date" means the date
of payment of all amounts due hereunder prior to the Maturity
Date, whether by voluntary prepayment or other wise and, in the
event of a foreclosure, the Prepayment Date shall be the date of
the foreclosure sale, whether the Holder (or a third party)
successfully bids in the Mortgaged Premises at such sale.
(s) RESERVE ESCROW ACCOUNT. "Reserve Escrow Account"
means the separate segregated account for the exclusive use and
benefit of Mortgaged Premises established pursuant to the Escrow
Agreement as the Reserve Escrow Account.
(t) WORKING CAPITAL RESERVE ACCOUNT. "Working Capital
Reserve Account" means the separate segregated account for the
exclusive use and benefit of the Mortgaged Premises established
pursuant to the Escrow Agreement as the Working Capital Reserve
Account.
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(u) YIELD ACHIEVEMENT VALUE. "Yield Achievement
Value" means that the Appraised Value of the Mortgaged Premises
is an amount which, assuming prepayment of the Loan, would result
in the sums being payable to the Holder on said assumed
Prepayment Date under the Note resulting in a yield to the Holder
having at lease an Internal Rate of Return at the Minimum IRR
Rate.
3.4 All the Net Operating Income remaining after the
payment to the Holder of Fixed Interest computed at the Minimum
Fixed Interest Rate or Coverage Interest Rate, as the case may
be, shall be paid by Maker to the Escrow Agent to be held and
disbursed by the Escrow Agent pursuant to the terms and
provisions of the Escrow Agreement.
3.5 Commencing in the calendar year 1997 and
thereafter during the term of the Loan, in the event that the
amount in the Reserve Escrow Account exceeds the greater of
$1,500,000.00 or such higher sum which is estimated as needed for
the Mortgaged Premises in the Holder's reasonable opinion based
on current financial projections (such greater sum being
hereinafter called "Reserve Requirement") the Maker shall pay
directly to the Holder all Net Income in excess of
Fixed Interest payments made under the Note which payments shall
be applied to reduce the principal balance of the Loan without
penalty or premium and which payments to the Holder shall
continue so long as the Reserve Escrow Account amount exceeds the
amount of the Reserve Requirement. Whatever the balance of the
Reserve Escrow Account exceeds the Reserve Requirement, the
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Holder may require any excess over the Reserve Requirement to be
paid by the Escrow Agent to the Holder to reduce the principal
balance of the Loan (without penalty or premium).
3.6 If the Maker delivers to the Holder evidence
satisfactory to the Holder in Holder's sole and absolute discretion
that the Mortgaged Premises on a particular date have a Yield
Achievement Value on such date, then thereafter the payment by
the Maker each month of any Net Operating Income remaining after
the payments of the Fixed Interest at the Minimum Fixed Interest Rate
or Coverage Interest Rate, as the case may be, either under
paragraph 3.4 to the Escrow Agent or under paragraph 3.5 to the
Holder directly shall be suspended and such amounts shall be
retained by the Maker, but only so long as in Holder's sole
opinion the Mortgaged Premises have a Yield Achievement Value.
3.7 If the Maker believes the Mortgaged Premises have
a Yield Achievement Value and desires that the payments under
paragraph 3.4 and paragraph 3.5 be suspended, the Maker may cause
to be delivered to the Holder an Appraisal of the Mortgaged
Premises at any time with a written notice to the holder that it
appears to the Maker that the Mortgaged Premises have attained a
Yield Achievement Value and the Maker desires that the monthly
payments under paragraph 3.4 and paragraph 3.5 be suspended.
Thereafter so long as the payments under paragraph 3.4 or
paragraph 3.5 are suspended, the Maker shall cause to be
delivered to the Holder on October 1 of each calendar year an
Appraisal of the Mortgaged Premises (except that such Appraisal
may be so-called less formal "desk appraisal" in each calendar
- 16 -
year except the years 1997, 1999, 2002 and 2007, provided said
"desk appraisal" is in all respects satisfactory to the Holder in
Holder's sole and absolute discretion). In addition, the Holder
may obtain at Maker's expense out of Gross Receipts (with the
cost so paid to be added to the Approved Budget) an Appraisal of
the Mortgaged Premises whenever the Holder desires to ascertain
whether the Mortgaged Premises continue to have a Yield
Achievement Value.
3.8 In the event that, subsequent to the suspension of
payments, the Mortgaged Premises at any time thereafter no longer
have a Yield Achievement Value then payments to the Escrow Agent
as described in paragraphs 3.4 and 3.5 shall immediately commence
again to be made by the Maker either to the Escrow Agent or to
the Holder as the case may be.
3.9 All amounts of Net Operating Income in excess of
Fixed Interest not paid under the provision of paragraph 3.4 to
the Escrow Agent or under paragraph 3.5 to the Holder ("Excess
NOI") shall be used by the Maker for the payment of Operating
Expenses, Shortfalls, Tenant Improvement Costs, Capital
Expenditures, Leasing Commissions or Lease Inducement Amounts all
as defined in the Escrow Agreement before drawing amounts for the
payment of such items from the Escrow Accounts as defined in the
Escrow Agreement. It is the intention of the Maker and the
Holder that the Excess NOI be available for use for the Mortgaged
Premises and the Maker agrees that no distribution (as a
Dividend, return of capital or the like) of Excess NOI shall be
made by the Maker.
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4. The Maker may pay the principal indebtedness in full
only, but not in part together with all unpaid Fixed Interest and
the Prepayment/Maturity Amount on any installment due date, upon
giving the Holder of the Note one hundred twenty (120) days prior
written notice of its intention to so prepay. In addition to the
Fixed Interest, Maker hereby promises, covenants and agrees to
pay to Holder on the Prepayment Date or on the Maturity Date the
Prepayment/Maturity Amount which shall mean an amount equal to
the sum of the Minimum Return, if any, and the Residual Amount
(as defined below); provided, however, the amount of the
Prepayment/Maturity Amount which shall exceed that amount which
would cause the Holder on the Prepayment Date or on the Maturity
Date to have received a yield at an Internal Rate of Return on
the total principal balances of the Notes on January 1, 1993
increased by the amount of $1,753,452.24 advanced as of
January 1, 1994 and thereafter outstanding from time to time in
excess of twenty-four (24%) per cent, compounded monthly.
4.1 RESIDUAL AMOUNT. For the purposes
hereof, "Residual Amount" shall mean an amount equal to fifty
percent (50%) of the sum of (i) the amount by which the sum of
the amounts held in the Reserve Escrow Account and the Working
Capital Reserve Account on the Prepayment Date or on the Maturity
Date exceeds any portion thereof used to pay the Minimum Return
and (ii) the greater of (A) the sale proceeds from the actual
sale of the Mortgaged Premises, after deducting only (and then
only to the extent such sums are actually paid to Holder or, in
the case of commissions and closing costs, to a non-affiliated
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third party entitled thereto) the then outstanding principal
balance of the Note, the then unpaid Fixed Interest on the Note,
the Minimum Return, if any, and any third-party brokerage
commissions paid by Maker in connection with such sale and other
customary closing costs paid by Maker, but only to the extent all
such commissions and all such closing costs do not exceed three
percent (3%) of such sale proceeds, or (B) the Appraised Value
(less three percent (3%) for a closing cost adjustment and) after
deducting only (and then only to the extent such sums are
actually paid to Holder) the then outstanding principal balance
of the Note, the then unpaid Fixed Interest on the Note, and the
Minimum Return, if any. The greater of the amount determined in
(ii) (A) or (ii) (B) of the immediately preceding sentence is
hereinafter called "Capital Proceeds".
4.2 In order to determine the Residual Amount to be
paid to Holder or to determine that no Residual Amount is payable
hereunder, the Maker shall forward the following document to the
Holder, either simultaneously with the sending of the notice of
intention to prepay prior to one hundred twenty (120) days of the
Prepayment Date is hereinabove provided, or within one hundred
twenty (120) days of the Maturity Date, and as a condition
precedent to such notice being deemed to be effective, or within
thirty (30) days of acceleration of maturity after default: (a)
an Appraisal of the Mortgaged Premises prepared by an Appraiser;
(b) if the Mortgaged Premises are being sold to a third party
simultaneously with such payment, the contract of sale, real
estate brokerage agreement (if deduction for a brokerage
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commission is being claimed), and a statement of all estimated
closing costs, with supporting data, for which deductions are
being claimed; and if the sale is not for a one hundred (100%)
per cent interest in the Mortgaged Premises, then the sales price
set forth in the contract of sale shall be projected as if 100%
of the Mortgaged Premises were being sold and such projection
shall be used for determining the amount due the Holder
hereunder; additionally, the sales price for the purpose of
determining the amount due the Holder hereunder shall include the
amount of all cash payments, deferred payments, debts assumed
(other than the debt evidenced by the Note which may not be
assumed) and the value of all assets, securities, interest and
other consideration received or receivable in connection with
such sale; (c) a current rent roll of the Mortgaged Premises,
supporting leases not previously furnished to the Holder, and a
certified statement of income and expenses for the twelve month
period immediately preceding the date of such notice setting
forth all the information necessary to do an Appraisal of the
Mortgaged Premises; a statement of all other estimated closing
costs, with supporting data, for which deductions are
anticipated; and (d) a true and correct statement from the Maker
calculating all amounts due the Holder hereunder. A statement of
final closing costs, with supporting data, shall be furnished at
the time of payment of the Prepayment/Maturity Amount.
4.3 The Maker shall promptly furnish the Holder with
all additional information that Holder may reasonably request.
If the Holder does not agree with any of the conclusions,
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calculations, computations, valuations or other information
supplied the Holder, the Holder shall notify the Maker in writing
within ninety (90) days of Maker's submissions. If such
disagreement is over whether or not the sale is a bona fide arms
length transaction limited to the Mortgaged Premises and
reflecting full value, or the amount of the Appraised Value of
the Mortgaged Premises, the Holder shall furnish the Maker an
Appraisal in conformity to the standards imposed on the Maker
with respect to an appraisal. If the two Appraisals differ by
ten (10%) per cent or less the Appraised Value of the Mortgaged
Premises for the purposes of the Note shall be the average
valuation of the two Appraisals. If the difference is greater
than ten (10%) per cent, either party shall have the right to
require that a third independent Appraiser, mutually satisfactory
to both the Maker or the Holder, be selected to appraise the
Mortgaged Premises. Such third Appraiser shall render his report
within thirty (30) days of appointment, which report must not set
a valuation lower than the lowest valuation of the Appraisals
previously submitted nor higher than the highest valuation of the
appraisals previously submitted. The valuations set forth in all
three Appraisals shall be aggregated and the Appraised Value of
the Mortgaged Premises shall be deemed to be the average of all
such appraisals. Each party shall pay its own Appraiser, and the
parties shall each pay one-half of the cost of any third
Appraiser. If the Maker does not in the time required supply an
Appraisal from an Appraiser meeting the qualifications in item
(a) of the immediate preceding paragraph, then the Holder may
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obtain such an Appraisal and the Maker agrees than any such
Appraisal obtained by and satisfactory to the Holder shall be the
Appraisal used in determining the amounts due the Holder
hereunder. If the privilege to prepay is not exercised, the then
outstanding principal balance together with any unpaid Fixed
Interest accrued thereon and together with the Minimum Return and
the Prepayment/Maturity Amount shall be paid on the Maturity
Date.
4.4 Notwithstanding the foregoing, the Holder may,
after acceleration of payment of the principal balance after
default, immediately commence all foreclosure activities and
process the same to sale without waiting for the submission of an
Appraisal from the Maker and without obtaining an Appraisal for
its own benefit, unless it so chooses. In such event the Holder
shall obtain the Prepayment/Maturity Amount from the proceeds of
a foreclosure sale.
4.5 Notwithstanding anything herein to the contrary,
Holder's Appraised Value shall in all events be used for purposes
of calculating the Residual Amount if the Residual Amount is
payable as a result of acceleration of maturity after default.
4.6 In the event that the Capital Proceeds are such
that when determined in accordance with the provisions of the
Note, they are insufficient to fully pay the Minimum Return, all
sums in the Reserve Escrow Account and the Working Capital
Reserve Account shall be applied towards payment of the Minimum
Return.
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5. In addition to the foregoing, if the Maker shall fail
to make any payment of principal or Fixed Interest or the
Prepayment/Maturity Amount, including any Minimum Return,
Prepayment/Maturity Amount and all other payments due on the
Maturity Date, a late charge by way of damages shall be
immediately due and payable. The Maker recognizes that any
default by the Maker in making the payments when due herein and
in the Mortgage securing payment hereof will result in the Holder
incurring additional expense in servicing the loan, in loss to
Holder of the use of the money due and in frustration to Holder
in meeting its loan commitments. The maker agrees that, if for
any reason the Maker fails to pay the amounts due under the note
or under the Mortgage when due, the holder shall be entitled to
damages for the detriment caused thereby, but that it is
extremely difficult and impractical to ascertain the extent of
such damages. The Maker therefore agrees that a sum equal to
five ($.05) cents for one each ($1.00) dollar of each payment
which becomes delinquent is a reasonable estimate of the said
damages to the Holder, which sum the Maker agrees to pay on
demand.
6. That upon default by the Maker and following the
acceleration of maturity as provided herein, a tender of payment
of the amount necessary to satisfy the entire indebtedness
evidenced hereby, made at any time prior to foreclosure sale
(including sale under any power of sale hereunder) by the Maker,
its successors assigns, or by anyone on behalf of the Maker,
its successors or assigns, shall be deemed to be a voluntary
-23-
prepayment hereunder and such prepayment will therefore include
the Prepayment/Maturity Amount required under the payment terms
recited above.
7. Maker hereby further specifically acknowledges and
agrees that (a) the Prepayment/Maturity Amount is reasonable in
amount, (b) the Prepayment/Maturity Amount shall be paid without
prejudice to the right of Holder to collect any other amounts
provided to be paid hereunder or under the Mortgage or any other
document evidencing or securing the Loan evidenced hereby, and
(c) the Holder shall be entitled to bid all or a portion of the
Prepayment/Maturity Amount, at any foreclosure sale under the
Mortgage. Maker hereby acknowledges and agrees that Holder would
not lend to Maker the Loan evidenced by the Note without Maker's
agreement to pay Holder the Prepayment/Maturity Amount, upon the
satisfaction of all or any portion of the principal indebtedness
evidenced hereby on a Prepayment Date or on the Maturity Date or
following the acceleration of the Maturity Date hereof by reason
of a default hereunder, including, without limitation, a default
arising from the conveyance of any right, title or interest in
the Mortgaged Premises encumbered by the Mortgage in violation of
the Mortgage.
8. All agreements between the Maker and the Holder hereof
are hereby expressly limited so that in no event shall the amount
paid or agreed to be paid to the Holder hereof as interest
(whether Fixed Interest, Prepayment/Maturity Amount or otherwise)
hereunder exceed the highest lawful rate now permissible under
applicable usury laws. If the Holder of the Note would, but for
-24-
the operation of this paragraph, ever receive as interest an
amount which would exceed the highest lawful rate which Holder
could lawfully receive as interest, such amount which would be
excessive interest shall be applied to the reduction of the
unpaid principal balance due hereunder and not to the payment of
interest; all payments made thereafter shall be appropriately
applied to interest and principal to give effect to the highest
lawful rate which Holder could lawfully receive as interest and
after such application, any excess shall be immediately refunded
to the Maker. This provision shall control every other provision
of all agreements between the Maker and the Holder hereof.
9. If during the term of the Note the maximum rate of
interest, if any, now permitted by law for this transaction to be
lawfully charged should be increased, then for so long as such
increase is in effect, the applicable maximum rate permitted to
be charged as referred to in the paragraph immediately preceding
shall be deemed to be such increased rate. If such maximum rate
of interest, if any, now permitted by law to be lawfully charged
for this transaction should be deleted so that there would be no
such maximum rate, then for purposes of this Loan, there shall
thereafter be no maximum rate limiting the amount that can be
charged.
10. Notwithstanding any provisions in the Note or in the
Mortgage securing the Note to the contrary, Holder hereof
covenants and agrees with Maker that in the event the Holder
shall, at any time, take action to enforce the collection of the
indebtedness evidenced by the Note and secured by the Mortgage or
-25-
otherwise arising hereunder, it shall first proceed to foreclose
the Mortgage (including foreclosure pursuant to the exercise of
any power of sale in the Mortgage provided) instead of
instituting suit upon the Note and if, as a result of such
foreclosure and the sale of the property described herein, a
lesser sum is realized therefrom than the amount then due and
owing hereunder, the Holder hereof shall never institute any
action, suit, claim or demand in law or in equity against the
maker for or on account of such deficiency; provided, however,
that nothing in this paragraph contained will in any way affect
or impair the lien of the Mortgage securing the Note or any
liability for any intentional misrepresentation or intentionally
erroneous warranty of title made therein by Maker, all of which
will remain in full force and inure to the benefit of Holder
hereof and to any insurer of title of the real estate encumbered
by said Mortgage. Neither the negative capital account of any
partner of Maker nor any obligation of any partner of Maker to
restore a negative capital account or to contribute capital to
Maker shall at any time be deemed to be an asset of Maker, and
Holder shall have any right to collect, enforce or proceed
against or with respect to any such negative capital account or
obligations; provided, however, that Holder and its successors
and assigns shall have the right to collect, enforce, or proceed
against or with respect to any such negative capital account or
partner's obligation to restore or contribute in order to recover
any sums due to Holder in connection with the misapplication of
rents under the Assignment. Notwithstanding the foregoing, no
-26-
General Partner of Carlyle Real Estate Limited Partnership-XI, or
any partner thereof, or any officer, director, shareholder,
principal, trustee or advisor of Carlyle Real Estate Limited
Partnership-XI or of any partner thereof or of Darvel Realty
Trust shall have any liability under this Note, the Mortgage, the
Assignment, the Escrow Agreement or any other of the Loan
Documents.
11. The name Darvel Realty Trust is the designation of the
trustees under a Declaration of Trust dated July 24, 1970, and
recorded with the Middlesex South District Registry of Deeds on
July 24, 1970 in Book 11865 at Page 580, as amended. By
acceptance of the Note, Holder hereby agrees, notwithstanding
anything contained in the Note or the Mortgage or any other
document securing the Note to the contrary, in accordance with
such Declaration of Trust, to look solely to the property of
Darvel Realty Trust for the enforcement of any claims against
Darvel Realty Trust and that no trustee, officer, agent or
shareholder of Darvel Realty Trust shall be personally liable for
obligations of Darvel Realty Trust hereunder and the respective
properties of such individuals shall not be subject to claims of
Holder in respect of any liability to Holder of Darvel Realty
Trust hereunder.
12. The Maker and endorses hereof and all other who may
become liable for all or any part of the obligation of the Note
agree hereby to be jointly and severally bound and jointly and
severally waive and renounce any and all homestead and exemption
rights and the benefit of all valuation and appraisement
-27-
privileges as against this debt or any renewal or extension
thereof, waive, demand, protest, notice of nonpayment and any and
all lack of diligence or delays in collection or enforcement
hereof waive the right to plead any and all statutes of
limitation as a defense to any demand on the Note or under the
Mortgage and expressly consent to any extension of time, release
of any party liable for this obligation, release of any of the
security of the Note, acceptance of other security therefor, or
any other indulgence or forbearance whatsoever. Any such
extension, release, indulgence or forbearance may be made without
in any way affecting the personal liability of any party.
13. If default be made in the payment of any installment of
principal and/or Fixed Interest or any other sums when due under
the Note, which default shall continue for five (5) days without
notice, or if a default be made in the performance of any of the
other terms, covenants, conditions or warranties contained in the
Note or any of the terms, covenants, conditions or warranties
contained in the Mortgage or in the Assignment or in the Escrow
Agreement or in any other Loan Document which continues
uncorrected for fifteen (15) days, unless maker has commenced to
cure same within said fifteen (15) day period and thereafter
continues to diligently prosecute the cure thereof, then, at the
option of the Holder of the Note, the entire principal sum
evidenced hereby and secured by said Mortgage, together with
interest accrued thereon and all other sums then outstanding
under the Note, including without limitation unpaid Fixed
Interest and Prepayment/Maturity Amount, or the Mortgage, or
-28-
the Assignment, without notice, shall immediately become due and
payable. Failure to exercise this option shall not constitute a
waiver of the right to exercise the same in the event of any
subsequent default.
14. In the event the Maker fails to pay the entire unpaid
principal balance together with all accrued unpaid interest
including accrued Fixed Interest and the Prepayment/Maturity
Amount and other charges, if any, upon the Maturity Date, or upon
the earlier acceleration thereof, such outstanding principal
balance together with any accrued but unpaid interest including
Fixed Interest and the Prepayment/Maturity Amount and other
charges, if any, shall bear interest commencing on the date of
such default and continuing for so long as such default
continues, at the rate of twenty (20%) per cent per annum (the
"Default Rate"), but not to exceed the maximum legal rate
allowable, such interest to be compounded annually.
15. If any suit or action is instituted or an attorney is
employed to collect the Note or the Loan or any part thereof, the
Maker promises and agrees to pay all costs of collection
including reasonable attorney's fees.
16. During the existence of any default or deficiency under
the terms of the Note or under the terms of any instrument
executed or to be executed as security for the payment hereof,
the Holder is expressly authorized to apply all payments made on
the Note to the payment of such part of any delinquency as it may
elect.
-29-
17. The remedies of the Holder hereof, as provided herein
or in the Mortgage or any other instrument securing the Note,
shall be cumulative and concurrent, and may be pursued
singularly, successively or together, at the sole discretion of
the Holder hereof, and may be exercised as often as occasion
therefor shall arise. No act of omission or commission of the
Holder, including specifically any failure to exercise any right,
remedy or recourse, shall be deemed to be a waiver or release of
the same, such waiver or release to be effected only through a
written document executed by the Holder and then only to the
extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing,
as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
18. Maker understands that in making this Loan, Holder is
relying to a material extent upon the business expertise and net
worth of Maker and upon the continuing interest which Maker has
in the Mortgaged Premises. Accordingly, in the event Maker
shall, directly or indirectly, voluntarily or involuntarily, (i)
sell, assign, transfer or dispose of all or any part of its
interest in the Mortgaged Premises, or (ii) further encumber, or
suffer to exist, any lien, other than the lien of the Mortgage
securing the Note against all or any part of, or any interest in
the Mortgaged Premises, or in the event the composition of the
Maker is changed (including without limitation, the transfer of
any beneficial interest in Maker or portion of such interest or
the change in control or composition of any beneficiary of Maker
-30-
except for a transfer of less than five (5%) per cent over the
term of the loan of limited partnership interest among limited
partners of constituent partners of Maker or a transfer of a
limited partnership interest as a consequence of the death of a
limited partner) then, the Holder may at any time thereafter, at
its option, declare the unpaid principal of the Note and all
accrued Fixed Interest and the Prepayment/Maturity Amount thereon
immediately due and payable. The transfer of an ownership
interest except as set forth above in the Maker shall be deemed a
sale of the Mortgaged Premises for the purposes of this
paragraph. Notwithstanding the foregoing, Maker shall have the
right to sell, assign, transfer or dispose of the Mortgaged
Premises to a purchaser, assignee or transferee who (i) has a net
worth in excess $25,000,000.00 and (ii) in the reasonable
determination of Holder, has a favorable reputation and is
experienced in the operation, management and ownership of real
estate similar to the mortgaged Premises.
Notwithstanding anything in this paragraph 18 to the
contrary, limited partnership interests in Carlyle Real Estate
Limited Partnership-XI ("Carlyle") which are presently owned by
an entity (which may include a corporation, partnership or
trust), that is neither JMB Realty Corporation ("JMB"), nor a JMB
Affiliate (as hereinafter defined), nor directly or indirectly
controlled or under common control with JMB or a JMB Affiliate,
may be sold, transferred or assigned without Holder's consent,
and, further, the partnership interest of Carlyle in the Maker
held directly or indirectly by JMB or by a JMB Affiliate may be
-31-
sold, transferred or assigned without Holder's consent to any
existing general partner of Riverfront Office Park Associates,
the Massachusetts limited partnership which together with Carlyle
are the general partners of the Maker. A "JMB Affiliate" means
(a) any entity (which may include a corporation, partnership or
trust) that is managed or directed on the basis of ownership of
economic interest and whose controlling ownership interests are
held by (i) JMB, (ii) persons or entities who are shareholders of
JMB ("JMB Shareholders") or (iii) a primary, secondary or
tertiary subsidiary of JMB or JMB Shareholders ("JMB
Subsidiary"); (B) any general or limited partnership having as
its managing general partner or partners (i) JMB, (ii) JMB
Shareholders, or (iii) JMB Subsidiary; (c) any real estate
investment trust, foundation, common fund or investor account for
which JMB, JMB Shareholders or JMB Subsidiary acts as the
investment manager or advisor; (d) any publicly-traded real
estate investment trust sponsored by, or in which of the time of
offering, more than ten (10%) per cent of the shares or units are
owned by, JMB, JMB Shareholders or JMB Subsidiary.
19. Whenever used, the singular number shall include the
plural, the plural the singular, the word "Mortgagor" shall mean
"Mortgagor and/or any subsequent owner or owners of the Mortgaged
Premises or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any subsequent Holder of the
Mortgage," and the words "Maker" and "Holder" shall include their
respective successors and assigns. The Note is to be construed
according to the laws of the Commonwealth of Massachusetts.
-32-
20. The Maker hereby irrevocably and unconditionally (a)
submits to personal jurisdiction in the Commonwealth of
Massachusetts over any suit, action or proceeding arising out of
or relating to the Loan Documents, and (b) waives any and all
personal rights under the laws of any state (i) to the right, if
any, to trial by jury, (ii) to object to jurisdiction within the
Commonwealth of Massachusetts or venue in any particular forum
within the Commonwealth of Massachusetts, and (iii) to the right,
if any, to claim or recover any special, exemplary, punitive or
consequential damages or any damages other than actual damages.
The Maker agrees that, in addition to any methods of service of
process provided for under applicable law, all services or process
in any such suit, action or proceeding may be made by certified
or registered mail, return receipt requested, directed to the
Maker at the address set forth above, and service so made shall
be complete five (5) days after the same shall be so mailed.
Nothing contained herein, however, shall prevent the Holder from
bringing any suit, action or proceeding or exercising any rights
against any security and against Maker, and against any property
of Maker, in any other state. Initiating such suit, action or
proceeding or taking such action in any state shall in no event
constitute a waiver of the agreement contained herein that the
laws of the Commonwealth of Massachusetts shall govern the rights
and obligations of the Maker and the Holder hereunder or the
submission herein made by the Maker to personal jurisdiction
within the Commonwealth of Massachusetts.
-33-
EXECUTED as a sealed instrument as of the day and year first
above written.
WITNESS: RIVERFRONT OFFICE PARK JOINT
VENTURE, a Massachusetts general
partnership
By: RIVERFRONT OFFICE PARK
ASSOCIATES, a Massachusetts
limited partnership and a
general partner of Riverfront
Office Park Joint Venture
By: Darvel Realty Trust, a
Massachusetts Business
Trust and General Partner
Of Riverfront Office Park
Associates
By:
Michael P. Sullivan,
Vice President and a
Trustee of Darvel Realty
Trust
By: Macomber-Riverfront
Associates, a
Massachusetts limited
partnership and General
Partner of Riverfront
Office Park Associates
By
Byron Gilchrest,
Managing General Partner
By: Cod-Riverfront
Associates, a
Massachusetts partnership
and General Partner of
Riverfront Office Park
Associates
By
Lawrence A. Bianchi,
General Partner
and
-34-
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XI, an Illinois
limited partnership and a
general partner of Riverfront
Office Park Joint Venture
By: JMB Realty Corporation, a
Delaware Corporation,
Corporate General Partner
of Carlyle Real Estate
Limited Partnership-XI
By
Vice President
-35-
EXHIBIT 10-G
- ------------
PURCHASE AGREEMENT
--------------------
(Scotland Yard Apartments - Phases I and II; Houston, Texas)
THIS AGREEMENT is made and entered into as of the __________ day of
July, 1996, by and between CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XI, an
Illinois limited partnership (hereinafter called "SELLER"), and FSC REALTY,
LLC, a California limited liability company (hereinafter called "BUYER").
R E C I T A L S
---------------
A. Seller is the owner of that certain real property located at
2250 and 2550 Holly Hill, in the City of Houston, County of Harris, State
of Texas, consisting primarily of an apartment complex (the "APARTMENT
COMPLEX") sometimes known as "Scotland Yard Apartments".
B. Buyer desires to purchase such Apartment Complex on the terms
and conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. PURCHASE AND SALE; CERTAIN DEFINITIONS.
A. PURCHASE AND SALE. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the "Property" (as hereinafter defined).
B. CERTAIN DEFINITIONS.
(1) "AFFILIATE" means a Person who, directly, or indirectly
through one or more intermediaries, owns or controls, is owned or
controlled by or is under common control or ownership with the Person in
question. For purposes of this definition "own" or "ownership" means
ownership by one Person of ten percent (10%) or more of the voting stock of
the controlled Person, in the case of a corporation, or, in the case of
Persons other than corporations, entitlement of the controlling Person,
directly or indirectly, to receive ten percent (10%) or more dividends,
profits or similar economic benefit from the controlled Person; and
"control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of the controlled
Person.
(2) "BUSINESS DAY" means a day that is not a Saturday, a
Sunday, a legal holiday or a day on which banks are required or permitted
by law or other governmental action to close in Dallas, Texas.
(3) "BOOKS AND RECORDS" shall mean all books and records
maintained by or for the benefit of Seller solely in connection with the
operation of the Project, together with all building plans, specifications
and drawings, third party engineering, soils and geological reports, and
third party environmental reports and other third party documents prepared
in connection with the construction of the Project which are within the
possession or control of Seller.
(4) "IMPROVEMENTS" means all buildings, structures, and other
improvements owned by Seller, including such fixtures as shall constitute
real property, located on the Land including, but not limited to, the
office buildings, parking lots and all other amenities owned by Seller,
together with Seller's interest in all machinery, fixtures and equipment
used solely in the operation of such buildings and improvements, and/or
affixed to or located upon the Land, along with all accessions and
additions thereto.
(5) "LAND" means the tracts or parcels of real property more
particularly described on EXHIBIT "A" attached hereto and made a part
hereof for all purposes, together with all and singular all right, title
and interest of Seller, reversionary or otherwise, in and to all easements
in or upon the Land and all other rights and appurtenances belonging or in
anywise pertaining thereto, if any, including any right, title, and
interest of Seller in and to any land lying in the bed of any street, road
or access way, right-of-way, alley, opened or proposed, in front of, at a
side of or adjoining the Land to the centerline thereof.
(6) "MISCELLANEOUS ASSETS" shall mean all contract rights,
leases, concessions, assignable warranties, and other items of intangible
personal property owned by Seller and solely relating to the ownership or
operation of the Project, including, but not limited to all right, title
and interest of Seller in and to (i) the "Service Contracts" (as
hereinafter defined), (ii) the Permits, (iii) assignable utility and
similar deposits, (iv) prepaid license and permit fees, (v) the Warranties
and (vi) the Books and Records.
(7) "PERMITS" means all of Seller's right, title, and
interest in all licenses and permits solely used or solely relating to the
ownership or operation of the Project in accordance with its current use.
(8) "PERSON" means an individual, partnership, joint venture,
corporation, limited liability company, joint stock company, trust
(including a business trust), unincorporated association or other entity,
or a government or any political subdivision or agency thereof.
(9) "PERSONAL PROPERTY" means those items of tangible
personal property, fixtures, furnishings, equipment, machinery, apparatus,
and other articles of depreciable personal property now owned or leased by
Seller and located on the Land and the Improvements which are listed on
Exhibit "B" hereto and made a part hereof.
(10) "PROPERTY" means the Land, the Personal Property, the
Miscellaneous Assets and the Improvements.
(11) "WARRANTIES" means all third party warranties and
guaranties relating to the Project, or any part thereof, or to the Personal
Property or Improvements, or construction thereof.
2. PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for
the Property shall be the sum of $23,200,000.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to
Seller by Buyer as follows:
A. ESCROW DEPOSITS. Within one (1) business day after the date on
which Escrow Holder shall have received originals of this Agreement
executed by both Seller and Buyer, Buyer shall deliver, an amount equal to
$100,000 (the INITIAL ESCROW DEPOSIT") to Near North National Title
Corporation, at its offices at 222 North LaSalle, Chicago, Illinois 60601,
Attention: Mr. Chuck Vachout (which company, in its capacity as escrow
holder hereunder, is called "ESCROW HOLDER"). In addition, if Buyer shall
deliver the "Approval Notice" (as hereinafter defined), then concurrently
therewith, Buyer shall deliver an additional deposit in the amount of
$132,000 (the ADDITIONAL ESCROW DEPOSIT") to Escrow Holder. Each deposit
to be made hereunder shall be made by Buyer delivering the appropriate
amounts thereof to Escrow Holder by wire transfer of immediately available
federal funds or by check evidencing good funds. As used herein, the term
"ESCROW DEPOSIT" means the Initial Escrow Deposit and the Additional Escrow
Deposit, from and after the date the same is deposited with Escrow Holder,
together with all interest earned on the foregoing deposits. The Escrow
Deposit shall be held by Escrow Holder as a deposit against the Purchase
Price in accordance with the terms and provisions of this Agreement. At
all times in which the Escrow Deposit is being held by the Escrow Holder,
the Escrow Deposit shall be invested by Escrow Holder in the following
investments ("APPROVED INVESTMENTS"): (i) United States Treasury
obligations, (ii) United States Treasury-backed repurchase agreements
issued by a major national money center banking institution reasonably
acceptable to Seller, or (iii) such other manner as may be reasonably
agreed to by Seller and Buyer. The Escrow Deposit shall be disposed of by
Escrow Holder only as provided in this Agreement.
B. CLOSING PAYMENT. The Purchase Price, as adjusted by the
application of the Escrow Deposit and by the prorations and credits
specified herein, shall be paid in cash on the "Closing Date" (as
hereinafter defined) by Federal Reserve wire transfer of immediately
available funds to the account of Escrow Holder for disbursements to
Seller, at its direction (the amount to be paid under this subparagraph B
being herein called the "CLOSING PAYMENT").
4. CONDITIONS PRECEDENT
A. TITLE MATTERS.
(1) TITLE REPORT. Seller has delivered to Buyer a copies of
Title Commitment Numbers 513659 and 513660, effective as of December 1,
1995, and issued on December 8, 1995 (collectively, the "PRELIMINARY TITLE
REPORT") covering the Property from First American Title Insurance Company
(which company, in its capacity as title insurer hereunder, is herein
called the "TITLE COMPANY"). In addition, Seller has delivered a survey of
the Property last revised February 12, 1996, prepared by Weiser Engineering
Company ("SURVEY"). Seller is the process of having the Preliminary Title
Report updated and reissued in Buyer's name and the Survey recertified to
Buyer (and, upon receipt, Seller will promptly forward the same to Buyer).
If Buyer shall fail to deliver written notice ("TITLE OBJECTION NOTICE")
specifying any title or survey matters disapproved by Seller on or before
the end of the later to occur of (i) the Due Diligence Period and (ii) the
date which is three (3) days after the date on which Buyer shall be in
receipt of the updated Preliminary Title Report and updated Survey, Buyer
shall be deemed to have approved the exceptions to title shown on the
Preliminary Title Report and the matters disclosed on the Survey. If Buyer
shall timely deliver a Title Objection Notice hereunder, Seller shall have
three (3) business days after receipt thereof to notify Buyer as to each
disapproved matter set forth in such notice either that (i) Seller elects
not to cause such disapproved matter to be removed as of the Closing Date
(or otherwise take any action with respect thereto), or (ii) Seller intends
to use commercially reasonable efforts to either (a) cause such disapproved
matter to be removed on the Closing Date, or (b) obtain a title endorsement
(if available) insuring over such disapproved matter; provided, however,
except as hereinafter set forth, Seller shall have no liability if for any
reason such exceptions are not removed or insured over as of the Closing
Date. Failure to deliver any written notification by Seller of its
election within such period shall be deemed to be an election not to cause
any such disapproved matters to be removed. If Seller elects not to cause
any or all such disapproved matters to be removed or insured over as
aforesaid, Buyer shall have until the expiration of the "Due Diligence
Period" (as hereinafter defined) to notify Seller in writing either that
(x) Buyer revokes its disapproval and will proceed with the purchase of the
Property without any reduction in the Purchase Price and will take subject
to such matters, or (y) Buyer terminates this Agreement. Failure to
deliver any written notification by Buyer of its election within such
period shall be deemed to be an election to terminate this Agreement.
Notwithstanding anything to the contrary contained in this Agreement,
Seller shall be obligated to remove (or cause the Title Company to
affirmatively insure over): (i) any mortgages or deeds of trust covering
the Property which secure any financing obtained by Seller, (ii) any
mechanic's or materialmen's liens against the Property as a result of work
done by or on behalf of Seller, and (iii) tax or judgment liens against
Seller. Approval by Buyer of any additional exceptions to title or survey
matter disclosed after the end of the Due Diligence Period (other than
those which Seller is obligated to cure or insure over as herein provided)
shall be a condition precedent to Buyer's obligation to purchase the
Property. Unless Buyer gives written notice that it approves any such
additional exceptions (other than those which Seller is obligated to cure
or insure over as herein provided) to title or survey matters, stating the
exceptions so approved, on or before the sooner to occur of ten (10)
business days after receipt of written notice thereof or the Closing Date,
Buyer shall be deemed to have disapproved said exceptions. If, for any
reason, on or before the Closing Date Seller does not cause such additional
exceptions (other than those which Seller is obligated to cure or insure
over as herein provided) to title or survey matters which Buyer timely
disapproves (including those matters which Seller has elected to use
commercially reasonable efforts to remove or insure over as set forth
herein) to be removed at no cost or expense to Buyer (Seller having the
right but not the obligation to do so), the obligation of Seller to sell,
and Buyer to buy, the Property as herein provided shall terminate (and
Seller and Buyer shall have no further obligations in connection herewith).
Buyer shall have the option to waive the condition precedent set forth in
this paragraph 4A(1) by notice to Seller. In the event of such waiver,
such condition shall be deemed satisfied.
(2) EXCEPTIONS TO TITLE. Buyer shall be obligated to accept title
to the Property, subject to the following exceptions to title:
(a) Real estate taxes and assessments for the current and
subsequent years "not yet due and payable and subsequent assessments for
prior years based on changes in usage or ownership";
(b) The printed exceptions which appear in the standard form
owner's policy of title insurance issued by Title Company with the standard
exception as to restrictive covenants endorsed "none of record" except as
shown thereon and approved by Buyer as a standard exception as to
unrecorded easements, visible and apparent easements, public or private
roads, or other matters which would be disclosed by an inspection of the
Project deleted, with the standard exception as to mechanics',
materialmen's, or similar liens or other matters relating to the completion
of construction and payment of bills with respect thereto deleted, and with
the standard exception as to areas, boundaries, discrepancies,
encroachments, and other matters which would be disclosed by a survey of
the Project modified to read "shortages in area"; and
(c) Such exceptions to title as may be approved by Buyer pursuant
to the provisions of subparagraph A(1) above.
Conclusive evidence of the availability of such title shall be the
willingness of Title Company to issue to Buyer on the Closing Date a
standard Texas form owner's title insurance policy ("OWNER'S POLICY"), in
the face amount of the Purchase Price, which policy shall show (i) title to
the Property to be vested of record in Buyer, and (ii) the above exceptions
to be the only exceptions to title.
B. DUE DILIGENCE REVIEWS. Buyer shall have until 5:00 p.m.
(Central time) on July 23, 1996 (the "DUE DILIGENCE PERIOD") within which
to perform and complete all of Buyer's due diligence examinations, reviews
and inspections of all matters pertaining to the purchase of the Property,
including all leases, service contracts, survey and title matters, and all
physical, environmental and compliance matters and conditions respecting
the Property. During the Due Diligence Period, Seller shall provide Buyer
with reasonable access to the Property upon reasonable advance notice.
Seller has delivered or made available (or shall hereafter deliver or make
available) to Buyer, to the extent in Seller's possession or control, such
leases, service contracts and other contracts, permits, licenses and
certificates of occupancy, third party environmental reports, plans and
specifications, warranties and guaranties, and such other documents as
Buyer shall reasonably request and as Seller shall reasonably agree to
deliver, all upon reasonable advance notice. Buyer shall promptly
commence, and shall diligently and in good faith pursue, its due diligence
review hereunder. Buyer shall at all times conduct its due diligence
review, inspections and examinations in a manner so as to not cause damage,
loss, cost or expense to Seller or the Property and so as to not materially
interfere with or disturb any tenant at the Property, and Buyer will
indemnify, defend, and hold Seller and the Property harmless from and
against any such damage, loss, cost or expense (the foregoing obligation
surviving any termination of this Agreement). Without limitation on the
foregoing, in no event shall Buyer contact any tenant of the Property
without Seller's express written consent. Any contact by Buyer with any
governmental authority having jurisdiction over the Property shall be
subject to prior notice to Seller by Buyer and such reasonable restrictions
respecting the same as may be requested by Seller. Seller shall have the
right, at its option, to cause a representative of Seller to be present at
all inspections, reviews and examinations conducted hereunder. If the
transactions hereunder shall fail to close, Buyer shall promptly deliver to
Seller copies of any written reports relating to the Property prepared for
or on behalf of Buyer by any third party and shall return all documents and
other materials furnished by Seller hereunder. Buyer shall keep all
information or data received or discovered in connection with any of the
inspections, reviews or examinations strictly confidential in accordance
with the terms of a separate confidentiality agreement dated June 6, 1996.
If, on or before the expiration of the Due Diligence Period, based upon
such review, examination or inspection, Buyer shall determine that it
intends to proceed with the acquisition of the Property, then Buyer shall
promptly notify Seller and Escrow Holder of such determination in writing
(such notice being herein called the "APPROVAL NOTICE"), and concurrently
therewith deliver the Additional Escrow Deposit to Escrow Holder as
provided in paragraph 3A of this Agreement, and thereafter, Buyer shall
have no further right to terminate this Agreement pursuant to this
paragraph 4B. If, however, on or before the expiration of the Due
Diligence Period, based upon such review, examination or inspection, Buyer
shall determine in its sole and absolute discretion that it no longer
intends to acquire the Property, then Buyer shall promptly notify Seller of
such determination in writing (such notice being herein called the
"TERMINATION NOTICE"), whereupon the Escrow Deposit shall be returned to
Buyer and this Agreement, and the obligations of the parties hereunder,
shall terminate. In the event that Buyer shall fail to have delivered the
Approval Notice to Seller (and deposit the Additional Escrow Deposit with
Escrow Holder) on or before the expiration of the Due Diligence Period,
Buyer shall be deemed to have elected not to proceed with the acquisition
of the Property whereupon the Escrow Deposit shall be returned to Buyer and
this Agreement, and the obligations of the parties hereunder, shall
terminate.
C. PERFORMANCE BY SELLER; NO MATERIAL ADVERSE CHANGE. The
performance and observance, in all material respects, by Seller of all
covenants and agreements of this Agreement to be performed or observed by
Seller prior to or on the Closing Date shall be a condition precedent to
Buyer's obligation to purchase the Property. In addition, in the event
that the "Seller Closing Certificate" (as hereinafter defined) shall
disclose any changes in any material adverse respect in the representations
and warranties of Seller contained in paragraph 7A below which are not
otherwise permitted or contemplated by the terms of this Agreement, then
Buyer shall have the right to terminate this Agreement.
D. PERFORMANCE BY BUYER; NO MATERIAL ADVERSE CHANGE. The
performance and observance, in all material respects, by Buyer of all
covenants and agreements of this Agreement to be performed or observed by
it prior to or on the Closing Date shall be a condition precedent to
Seller's obligation to sell the Property. In addition, in the event that
the "Buyer Closing Certificate" (as hereinafter defined) shall disclose any
changes in any material adverse respect in the representations and
warranties of Buyer contained in paragraph 7B below which are not permitted
or contemplated by the terms of this Agreement, then Seller shall have the
right to terminate this Agreement. Seller shall have the option to waive
the condition precedent set forth in this paragraph 4D by written notice to
Buyer. In the event of such waiver, such condition shall be deemed
satisfied.
E. EXISTING LOAN. The Property is currently encumbered by deeds
of trust dated December 22, 1990 in the original amounts of $9,515,000 an
$9,300,000 respectively securing certain loans (the "EXISTING LOANS") to
Seller made by Teachers Insurance and Annuity Association of America
("EXISTING LENDER"). Upon receipt of the Approval Notice (and the deposit
of the Additional Escrow Deposit as herein provided), Seller will seek to
obtain the consent of Existing Lender to a payoff of the Existing Loans for
an amount which is acceptable to Seller in its sole and absolute
discretion. It shall be a condition to Seller's obligations hereunder
that, on or before August 6, 1996 (the EXISTING LENDER APPROVAL PERIOD"),
Existing Lender agree to a payoff amount for the Existing Loans which is
acceptable to Seller as aforesaid (it being understood and agreed that the
obligations of Buyer hereunder are conditioned upon the Property being free
and clear of the Existing Loans as of the Closing Date). Seller shall
promptly commence negotiations with Existing Lender regarding such Existing
Loan payoff. If Seller is able to obtain an acceptable payoff arrangement
with Existing Lender within the Existing Lender Approval Period, Seller
shall give prompt written notice ("EXISTING LENDER APPROVAL NOTICE") to
Buyer. If for any reason Seller is unable to obtain the agreement of
Existing Lender to a payoff of the Existing Loans in amounts acceptable to
Seller in its sole discretion, then this Agreement, and the obligations of
the parties hereunder, shall terminate, and the Earnest Deposit immediately
returned to Buyer by Escrow Holder.
F. NEW FINANCING. It shall be a condition precedent to Buyer's
obligation to purchase the Property hereunder that Buyer shall have
received, within the period (the COMMITMENT PERIOD") commencing on the date
Buyer receives the Existing Lender Approval Notice and ending on the date
which is thirty (30) days thereafter, a written commitment (the "LOAN
COMMITMENT") for a loan (the "NEW LOAN") from a financial institution
reasonably satisfactory to Buyer, in an amount of $17,400,000 and otherwise
on terms reasonably acceptable to Buyer. Buyer shall promptly commence and
diligently pursue its obtaining of the Loan Commitment, and shall keep
Seller reasonably informed of Buyer's progress in connection therewith.
Upon Buyer's receipt, acceptance and approval of the Loan Commitment, Buyer
shall immediately notify Seller and Escrow Holder in writing (the "NEW LOAN
APPROVAL NOTICE") of such receipt (and shall include with such notice a
copy of the Loan Commitment), whereupon the condition precedent to Buyer's
obligation to purchase the Property under this paragraph 4F shall be deemed
satisfied. Prior to the expiration of the Commitment Period, Buyer shall
notify Seller and Escrow Holder in writing if Buyer is unable to obtain the
Loan Commitment. If Buyer fails to deliver to Seller the New Loan Approval
Notice prior to the expiration of the Commitment Period, this Agreement,
and the obligations of the parties hereunder, shall terminate and the
Escrow Deposit shall be returned to Buyer. Buyer shall pay all costs and
expenses of obtaining the New Loan, including, but not limited to, any
application fees, appraisal fees, physical inspection fees or costs, and
title insurance premiums or costs.
5. CLOSING PROCEDURE. The sale and purchase herein provided shall
be consummated on the Closing Date through mutually agreeable escrow
arrangements as hereinafter contemplated. As used herein, "CLOSING DATE"
means the date which is twenty (20) days after Buyer's delivery of the New
Loan Approval Notice, or such earlier date as may be agreed upon by Buyer
and Seller.
A. ESCROW. On or before the Closing Date, the parties shall
deliver to Title Company the following: (1) by Seller, a duly executed and
acknowledged original special warranty deed ("DEED") in the form of Exhibit
"C" attached hereto and made a part hereof, and (2) by Buyer, the Closing
Payment in immediately available federal funds. In addition, Seller shall
deposit the "Seller Deliveries" and Buyer shall deposit the "Buyer
Deliveries" (as such terms are hereinafter defined) with the Title Company.
Such deliveries shall be made pursuant to escrow instructions ("ESCROW
INSTRUCTIONS") to be executed among Buyer, Seller and Title Company in form
reasonably acceptable to such parties in order to effectuate the intent
hereof. The conditions to the closing of such escrow shall include the
Title Company's receipt of the Deed, the Seller Deliveries, the Buyer
Deliveries, the Closing Payment and a notice from each of Buyer and Seller
authorizing Title Company to close the transactions as contemplated herein
(each of Buyer and Seller being obligated to deliver such authorization
notice at the Closing Conference as soon as it is reasonably satisfied that
the other party is in a position to deliver the items to be delivered by
such other party under subparagraph B below).
B. DELIVERY TO PARTIES. Upon the satisfaction of the conditions
set forth in the Escrow Instructions, then (x) the Deed shall be delivered
to Buyer by Title Company's depositing the same for recordation, (y) the
Closing Payment (and the Deposit) shall be delivered by Title Company to
Seller and (z) the following items shall be delivered through escrow:
(1) SELLER DELIVERIES. Seller shall execute and deliver to Buyer
the following ("SELLER DELIVERIES"):
(a) an assignment and assumption of tenant leases ("LEASE
ASSIGNMENT AND ASSUMPTION") in the form of Exhibit "D" attached hereto and
made a part hereof;
(b) an assignment and assumption of service contracts and operating
agreements ("CONTRACT ASSIGNMENT AND ASSUMPTION") in the form of
Exhibit "E", attached hereto;
(c) a bill of sale and assignment ("BILL OF SALE") conveying the
Personal Property and Miscellaneous Assets in the form of Exhibit "F"
attached hereto and made a part hereof;
(d) a certificate of Seller ("SELLER CLOSING CERTIFICATE") updating
the representations and warranties contained in paragraph 7A hereof to the
Closing Date (and including an updated certified rent roll) and noting any
changes thereto;
(e) notices ("TENANT NOTICES") to the tenants under the tenant
leases in form reasonably satisfactory to Seller and Buyer that Buyer is
the new owner of the Property and has been assigned the refundable security
deposits;
(f) a certificate regarding the "non-foreign" status of Seller;
(g) evidence reasonably satisfactory to Buyer and Title Company
respecting the due organization of Seller and the due authorization and
execution of this Agreement and the documents required to be delivered
hereunder;
(h) such additional documents as may be reasonably required by
Buyer and Title Company in order to consummate the transactions hereunder
(provided the same do not materially increase the costs to, or liability or
obligations of, Seller in a manner not otherwise provided for herein); and
(i) any building permits, certificates of occupancy, keys and plans
and specifications respecting the Property (to the extent the same are in
Seller's possession).
(2) Buyer Deliveries. Buyer shall execute and deliver to Seller
the following ("BUYER DELIVERIES"):
(a) counterparts of the Lease Assignment and Assumption;
(b) counterparts of the Contract Assignment and Assumption;
(c) a notice to Deposit Agent to release the Deposit to Seller as
partial payment of the Purchase Price;
(d) a certificate of Buyer ("BUYER CLOSING CERTIFICATE") updating
the representations and warranties contained in paragraph 7B hereof to the
Closing Date and noting any changes thereto;
(e) the Tenant Notices;
(f) evidence reasonably satisfactory to Seller and Title Company
respecting the due organization of Buyer and the due authorization and
execution of this Agreement and the documents required to be delivered
hereunder; and
(g) such additional documents as may be reasonably required by
Seller and Title Company in or to consummate the transactions hereunder
(provided the same do not materially increase the costs to, or liability or
obligations of, Buyer in a manner not otherwise provided for herein).
C. CLOSING COSTS. Seller shall pay (i) the title insurance
premium for the Owner's Policy at a rate not in excess of standard issue
rates and only to the extent attributable to standard Texas owner's
coverage (Buyer being obligated to pay any costs associated with any
extended or special coverage or endorsements), and (ii) the costs to obtain
the Survey. Buyer shall pay the recording fees attributable to the Deed
and all fees, costs or expenses in connection with Buyer's due diligence
reviews hereunder. Seller and Buyer shall each pay one-half of the escrow
fees of Escrow Holder. Seller and Buyer shall pay their respective shares
of prorations as hereinafter provided.
D. PRORATIONS.
(1) ITEMS TO BE PRORATED. The following shall be prorated between
Seller and Buyer as of the Closing Date:
(a) All real estate taxes and assessments on the Property for the
current year. In no event shall Seller be charged with or be responsible
for any increase in the taxes on the Property resulting from any
improvements made after the Closing Date. In the event that any
assessments with respect to the Property are payable in installments, than
the installment for the current period shall be prorated (with Buyer
assuming the obligation to pay any installments due after the Closing
Date).
(b) All fixed and additional rentals under the leases, refundable
security deposits and other tenant charges. Seller shall deliver or
provide a credit in an amount equal to all prepaid rentals for periods
after the Closing Date and all refundable security deposits (to the extent
the foregoing have been deposited with Seller and have not been applied or
forfeited prior to the Closing Date) to Buyer on the Closing Date. Rents
which are delinquent as of the Closing Date shall not be prorated on the
Closing Date. Buyer shall include such delinquencies in its normal billing
and shall use reasonable efforts to collect same after the Closing Date
(but Buyer shall not be required to litigate or declare a default in any
lease). To the extent Buyer receives rents on or after the Closing Date,
such payments shall be applied first toward then current rent owed to Buyer
in connection with the applicable lease for which such payments are
received, and any excess monies received shall be applied toward the
payment of any delinquent rents, with Seller's share thereof being promptly
delivered to Seller. Buyer may not waive any delinquent rents nor modify a
lease so as to reduce or otherwise affect amounts owed thereunder for any
period in which Seller is entitled to receive a share of charges or amounts
without first obtaining Seller's written consent. Buyer shall reasonably
cooperate with Seller in any collection efforts hereunder (but shall not be
require to litigate or declare a default in any lease). Seller hereby
reserves the right to pursue any remedy against any tenant owing delinquent
rents and any other amounts to Seller; provided, however, Seller agrees not
to pursue, without Buyer's prior written approval, any such remedy with
respect to any tenant while such tenant remains in occupancy. With respect
to delinquent rents and any other amounts or other rights of any kind
respecting tenants who are no longer tenants of the Property as of the
Closing Date, Seller shall retain all rights relating thereto.
(c) All operating expenses.
(2) CALCULATION. The prorations and payments shall be made on the
basis of a written statement submitted to Buyer and Seller by Escrow Holder
prior to the Close of Escrow and approved by Buyer and Seller. In the
event any prorations or apportionments made under this subparagraph D shall
prove to be incorrect for any reason, then any party shall be entitled to
an adjustment to correct the same. Any item which cannot be finally
prorated because of the unavailability of information shall be tentatively
prorated on the basis of the best data then available and reprorated when
the information is available.
6. CONDEMNATION OR DESTRUCTION OF PROPERTY. In the event that,
after the date hereof but prior to the Closing Date, either any portion of
the Property is taken pursuant to eminent domain proceedings or any of the
improvements on the Property are damaged or destroyed by any casualty,
Seller shall have no obligation to repair or replace any such damage or
destruction. Seller shall, upon consummation of the transaction herein
provided, assign to Buyer all claims of Seller respecting any condemnation
or casualty insurance coverage, as applicable, and all condemnation
proceeds or proceeds from any such casualty insurance received by Seller on
account of any casualty (the damage from which shall not have been repaired
by Seller prior to the Closing Date), as applicable. In connection with
any assignment of insurance proceeds, Seller shall also pay any applicable
deductible under Seller's insurance (provided, however, Seller shall not be
obligated to pay more than $100,000 in connection therewith). In the event
the condemnation award or the cost of repair of damage to the Property on
account of a casualty, as applicable, shall exceed $100,000 (or if such
casualty is uninsured and Seller does not elect to credit Buyer with the
reasonable cost to repair the same, Seller having the right but not the
obligation to elect to provide such credit), Buyer may, at its option,
terminate this Agreement by notice to Seller, given on or before the
Closing Date.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
A. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
(1) GENERAL DISCLAIMER. Except as specifically set forth in
paragraph 7A(3) below or in the Deed, the sale of the Property hereunder is
and will be made on an "as is" basis, without representations and
warranties of any kind or nature, express, implied or otherwise, including,
but not limited to, any representation or warranty concerning title to the
Property, the physical condition of the Property (including, but not
limited to, the condition of the soil or the Improvements), the
environmental condition of the Property (including, but not limited to, the
presence or absence of hazardous substances on or respecting the Property),
the compliance of the Property with applicable laws and regulations
(including, but not limited to, zoning and building codes or the status of
development or use rights respecting the Property), the financial condition
of the Property or any other representation or warranty respecting an
income, expenses, charges, liens or encumbrances, rights or claims on,
affecting or pertaining to the Property or any part thereof. Buyer
acknowledges that, during the Due Diligence Period, Buyer will examine,
review and inspect all matters which in Buyer's judgment bear upon the
Property and its value and suitability for Buyer's purposes. Except as to
matters specifically set forth in paragraph 7A(3) below or in the Deed,
Buyer will acquire the Property solely on the basis of its own physical and
financial examinations, reviews and inspections and the title insurance
protection afforded by the Owner's Policy.
(2) DTPA WAIVER. Buyer hereby acknowledges that, to the extent
applicable, Buyer has waived and relinquished all provisions of the Texas
Deceptive Trade Practices-Consumer Protection Act (Chapter 17, Subchapter
E, of the Texas Business and Commerce Code) in connection with the sales
transaction contemplated by this Agreement. Buyer represents and warrants
to the Seller that: (a) Buyer is not in a significantly disparate
bargaining position; (b) Buyer is represented by legal counsel in
connection with the sale contemplated by this Agreement; and (c) Buyer is
knowledgeable and experienced in the purchase, operation, ownership,
refurbishing and sale of apartment properties, and is fully able to
evaluate the merits and risks of this transaction.
(3) LIMITED REPRESENTATIONS AND WARRANTIES OF SELLER. Subject to
the provisions of paragraph 7A(1) above, Seller hereby represents and
warrants that, except as set forth in Exhibit "G" attached hereto and made
a part hereof, Seller has no present actual knowledge that any of the
following statements is untrue (and, for this purpose, Seller's knowledge
shall mean the knowledge of Julie Walner).
(a) RENT ROLL. Attached as Exhibit "H" and made a part hereof is a
true, complete and accurate list, as of the date thereof, of all tenant
leases respecting the Property, and Seller has not received any written
notice of a material default under any of such tenant leases that remains
uncured.
(b) LITIGATION; BANKRUPTCY. There is no pending action,
litigation, condemnation or other proceeding against the Property or
against Seller with respect to the Property nor are there any pending
bankruptcy or insolvency proceedings against Seller.
(c) COMPLIANCE. Seller has received no written notice from any
governmental authority having jurisdiction over the Property to the effect
that the Property is not in compliance with applicable laws and ordinances.
(d) SERVICE AGREEMENTS. Other than those which are cancelable on
30 days' notice, Seller has not entered into any service agreements or
contracts ("SERVICE AGREEMENTS") or other agreements (other than as set
forth in this Agreement) relating to the Property which will be in force on
the Closing Date, except as described in Exhibit "I" attached hereto, and
Seller has not received any written notice of any material default
thereunder that remains uncured.
(e) ENVIRONMENTAL MATTERS. Seller has received no written notice
of the existence, deposit, storage, removal, burial or discharge of any
"Hazardous Material" at, upon, under or within the Property, in an amount
which would, as of the date hereof, give rise to an "Environmental
Compliance Cost". The term "HAZARDOUS MATERIAL" shall mean (i) asbestos
and any chemicals, flammable substances or explosives, any radioactive
materials (including radon), any hazardous wastes or substances which have,
as of the date hereof, been determined by any applicable Federal, State or
local government law to be hazardous or toxic by the U.S. Environmental
Protection Agency, the U.S. Department of Transportation, and/or any
instrumentality now or hereafter authorized to regulate materials and
substances in the environment which has jurisdiction over the Property
("ENVIRONMENTAL AGENCY"), and (ii) any oil, petroleum or petroleum derived
substance, any drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, which
materials listed under items (i) and (ii) above cause the Property (or any
part thereof) to be in material violation of any applicable environmental
laws or the regulations of any Environmental Agency; provided, however,
that the term "Hazardous Material" shall not include motor oil and gasoline
contained in or discharged from vehicles not used primarily for the
transport of motor oil or gasoline. The term "ENVIRONMENTAL COMPLIANCE
COST" means any reasonable out-of-pocket cost, fee or expense incurred
directly to satisfy any requirement imposed by an Environmental Agency to
bring the Property into compliance with applicable Federal, State and local
laws and regulations directly relating to the existence on the Property of
any Hazardous Material.
(f) DUE AUTHORITY. This Agreement and all agreements, instruments
and documents herein provided to be executed or to be caused to be executed
by Seller are and on the Closing Date will be duly authorized, executed and
delivered by and are binding upon Seller. Seller is a limited partnership,
duly organized and validly existing under the laws of the State of
Illinois, and is duly authorized and qualified to do all things required of
it under this Agreement. Seller has the capacity and authority to enter
into this Agreement and consummate the transactions herein provided.
B. REPRESENTATIONS AND WARRANTIES OF BUYER. This Agreement and
all agreements, instruments and documents herein provided to be executed or
to be caused to be executed by Buyer are and on the Closing Date will be
duly authorized, executed and delivered by and are binding upon Buyer.
Buyer is a limited liability company, duly organized and validly existing
and in good standing under the laws of the State of California, and is duly
authorized and qualified to do all things required of it under this
Agreement. Buyer has the capacity and authority to enter into this
Agreement and consummate the transactions herein provided.
C. SURVIVAL. Any cause of action of a party for a breach of the
foregoing representations and warranties shall survive for a one year
period commencing on the Closing Date, at which time such representations
and warranties (and any cause of action resulting from a breach thereof not
then in litigation) shall terminate. Notwithstanding the foregoing, if
Buyer shall have actual knowledge as of the Closing Date that any of the
representations or warranties of Seller contained herein are false or
inaccurate or that Seller is in breach or default of any of its obligations
under this Agreement, and Buyer nonetheless closes the transactions
hereunder and acquires the Property, then Seller shall have no liability or
obligation respecting such false or inaccurate representations or
warranties or other breach or default (and any cause of action resulting
therefrom shall terminate upon such closing hereunder).
D. INTERIM COVENANTS OF SELLER. Until the Closing Date or the
sooner termination of this Agreement:
(1) Seller shall maintain the Property in the same manner as prior
hereto pursuant to its normal course of business (such maintenance
obligations not including extraordinary capital expenditures or
expenditures not incurred in such normal course of business), subject to
reasonable wear and tear and further subject to destruction by casualty or
other events beyond the control of Seller.
(2) Seller shall not enter into any additional service contracts or
other similar agreements without the prior consent of Buyer, except those
deemed reasonably necessary by Seller which are cancelable on 30 days'
notice.
(3) Seller shall continue to offer the Property for lease (for
terms not in excess of one year) in the same manner as prior hereto
pursuant to its normal course of business and, upon request, shall keep
Buyer reasonably informed as to the status of leasing prior to the Closing
Date. After the expiration of the Due Diligence Period (unless Buyer shall
have theretofore delivered a Termination Notice hereunder), Seller shall
not enter into any new leases or material modifications of existing leases
thereafter without the consent of Buyer (which consent will not be
unreasonably withheld or materially delayed).
8. INDEMNIFICATION.
A. BY BUYER. Buyer shall hold harmless, indemnify and defend
Seller from and against: (1) any and all third party claims for Buyer's
torts or breaches of contract related to the Property and occurring on or
after the Closing Date, (2) any and all loss, damage or third party claims
in any way arising from Buyer's inspections or examinations of the Property
prior to the Closing Date; and (3) all costs and expenses, including
reasonable attorney's fees, incurred by Seller as a result of the
foregoing.
B. BY SELLER. Seller shall hold harmless, indemnify and defend
Buyer from and against: (1) any and all third party claims for Seller's
torts or breaches of contract related to the Property and occurring prior
to the Closing Date; and (2) all costs and expenses, including reasonable
attorney's fees, incurred by the Buyer as a result of such claims. The
foregoing indemnity shall not cover any matters relating to title or
marketability of the Property (Buyer relying on the coverage provided by
the Owner's Policy and the special warranty of title contained in the Deed
as to such matters).
C. GENERALLY. Each indemnification under this Agreement shall be
subject to the following provisions: The indemnitee shall notify
indemnitor of any such claim against indemnitee within 30 days after it has
notice of such claim, but failure to notify indemnitor shall in no case
prejudice the rights of indemnitee under this Agreement unless indemnitor
shall be prejudiced by such failure and then only to the extent of such
prejudice. Should indemnitor fail to discharge or undertake to defend
indemnitee against such liability within 10 days after the indemnitee gives
the indemnitor written notice of the same, then indemnitee may settle such
liability, and indemnitor's liability to indemnitee shall be conclusively
established by such settlement, the amount of such liability to include
both the settlement consideration and the reasonable costs and expenses,
including attorneys' fees, incurred by indemnitee in effecting such
settlement.
9. DISPOSITION OF DEPOSITS. IF THE TRANSACTION HEREIN PROVIDED
SHALL NOT BE CLOSED BY REASON OF SELLER'S DEFAULT UNDER THIS AGREEMENT OR
THE FAILURE OF SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH 4
HEREOF OR THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6
HEREOF, AND BUYER SHALL NOT HAVE DEFAULTED UNDER THIS AGREEMENT, THEN THE
ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND NEITHER PARTY SHALL HAVE ANY
FURTHER OBLIGATION OR LIABILITY TO THE OTHER; PROVIDED, HOWEVER, IF THE
TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE SOLELY BY REASON OF SELLER'S
DEFAULT, AND BUYER SHALL HAVE FULLY PERFORMED ITS OBLIGATIONS HEREUNDER AND
SHALL BE READY, WILLING AND ABLE TO CLOSE, THEN BUYER SHALL BE ENTITLED TO
SPECIFICALLY ENFORCE THIS AGREEMENT (BUT NO OTHER ACTION, FOR DAMAGES OR
OTHERWISE, SHALL LIE). IN THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL
NOT CLOSE FOR ANY REASON OTHER THAN THE FAILURE OF SATISFACTION OF THE
CONDITIONS DESCRIBED IN PARAGRAPH 4 HEREOF OR THE TERMINATION OF THIS
AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6 HEREOF OR THE DEFAULT OF SELLER,
THEN THE ESCROW DEPOSIT SHALL BE DELIVERED TO SELLER AS FULL COMPENSATION
AND LIQUIDATED DAMAGES UNDER AND IN CONNECTION WITH THIS AGREEMENT. IN THE
EVENT THE TRANSACTION HEREIN PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL
BE APPLIED AS A PARTIAL PAYMENT OF THE PURCHASE PRICE. IN CONNECTION WITH
THE FOREGOING, THE PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSE IN
CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE
PROPERTY WILL BE REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY
DIFFICULT AND IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER
CAUSED BY THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE
CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE
AMOUNT OF COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH
OR DEFAULT. IN THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED
ON ACCOUNT OF BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT
SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON
OF SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 10I HEREOF.
-------------------- --------------------
SELLER'S INITIALS BUYER'S INITIALS
10. MISCELLANEOUS.
A. BROKERS.
(1) Except as provided in subparagraph (2) below, Seller represents
and warrants to Buyer, and Buyer represents and warrants to Seller, that no
broker or finder has been engaged by it, respectively, in connection with
any of the transactions contemplated by this Agreement or to its knowledge
is in any way connected with any of such transactions. In the event of a
claim for broker's or finder's fee or commissions in connection herewith,
then Seller shall indemnify and defend Buyer from the same if it shall be
based upon any statement or agreement alleged to have been made by Seller,
and Buyer shall indemnify and defend Seller from the same if it shall be
based upon any statement or agreement alleged to have been made by Buyer.
The indemnification obligations under this paragraph 10 A(1) shall survive
the closing of the transactions hereunder or the earlier termination of
this Agreement.
(2) In addition, if and only if the sale contemplated herein
closes, Seller agrees to pay a brokerage commission to Richard Ellis, LLC
("BROKER") pursuant to a separate written agreement.
(3 ) In accordance with the terms of the Real Estate License Act of
the State of Texas, Buyer hereby acknowledges that Broker has advised Buyer
that Buyer should have an abstract covering the Land and the Property
examined by an attorney of Buyer's own selection or that Buyer should be
furnished with or obtain a policy of title insurance.
B. LIMITATION OF LIABILITY.
(1) Notwithstanding anything to the contrary contained
herein, if the closing of the transactions hereunder shall have occurred
(and Buyer shall not have waived, relinquished or released any applicable
rights in further limitation), the aggregate liability of Seller arising
pursuant to or in connection with the representations, warranties,
indemnifications, covenants or other obligations (whether express or
implied) of Seller under this Agreement (or any document executed or
delivered in connection herewith) shall not exceed $500,000. Without
limitation on the foregoing, in no event shall Seller have any liability
for damages hereunder other than for actual damages (and in no event shall
Seller have any liability for consequential or contingent damages or the
like) and, in the case of Hazardous Materials, any liability of Seller
shall be further limited to Environmental Compliance Costs.
(2) No constituent partner in or agent of Seller, nor any
advisor, trustee, director, officer, employee, beneficiary, shareholder,
participant, representative or agent of any corporation or trust that is or
becomes a constituent partner in Seller (including, but not limited to, JMB
Realty Corporation) shall have any personal liability, directly or
indirectly, under or in connection with this Agreement or any agreement
made or entered into under or pursuant to the provisions of this Agreement,
or any amendment or amendments to any of the foregoing made at any time or
times, heretofore or hereafter, and Buyer and its successors and assigns
and, without limitation, all other persons and entities, shall look solely
to Seller's assets for the payment of any claim or for any performance, and
Buyer, on behalf of itself and its successors and assigns, hereby waives
any and all such personal liability. Notwithstanding anything to the
contrary contained in this Agreement, neither the negative capital account
of any constituent partner in Seller (or in any other constituent partner
of Seller), nor any obligation of any constituent partner in Seller (or in
any other constituent partner of Seller) to restore a negative capital
account or to contribute capital to Seller (or to any other constituent
partner of Seller), shall at any time be deemed to be the property or an
asset of Seller or any such other constituent partner (and neither Buyer
nor any of its successors or assigns shall have any right to collect,
enforce or proceed against or with respect to any such negative capital
account of partner's obligation to restore or contribute).
C. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes
all prior agreements between the parties hereto respecting such matters.
This Agreement may not be modified or amended except by written agreement
signed by both parties.
D. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
E. INTERPRETATION. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed
and the usual rule of construction, to the effect that any ambiguities
herein should be resolved against the drafting party, shall not be employed
in the interpretation of this Agreement or any amendments, modifications or
exhibits hereto or thereto.
F. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas.
G. SUCCESSORS AND ASSIGNS. Buyer may not assign or transfer its
rights or obligations under this Agreement without the prior written
consent of Seller (in which event such transferee shall assume in writing
all of the transferor's obligations hereunder, but such transferor shall
not be released from its obligations hereunder); provided, however, Buyer
may assign its interest in this Agreement an Affiliate of Buyer. No
consent given by Seller to any transfer or assignment of Buyer's rights or
obligations hereunder shall be construed as a consent to any other transfer
or assignment of Buyer's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or
enforceable. Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
H. NOTICES. Whenever this Agreement requires or permits any
consent, approval, notice, request or demand from one party to the other
(collectively, "NOTICE"), such Notice must be in writing to be effective
and shall be effective on the date of actual receipt of such Notice by the
addressee. The following shall be prima facia evidence of actual receipt
of Notice by the addressee: (a) if mailed, by a United States certified
mail return receipt, signed by the addressee or the addressee's agent or
representative, (b) if by telegram, by a telegram receipt signed by the
addressee or the addressee's agent or representative, (c) if hand delivered
(including delivery by an overnight or other delivery service), by a
delivery receipt signed by the addressee or the addressee's agent or
representative, or (d) if sent by facsimile transmission, with confirmation
of receipt at the facsimile number to which it was sent. Each party's
initial address for delivery of any Notice is designated below, but any
party from time to time may designate a different address for delivery of
any Notice by delivering to the other party Notice of such different
address; provided, however, neither party may designate an address for
delivery or Notice not located with the United States. Each party hereto
covenants and agrees to mail copies of any Notice to the parties designated
to receive copies of any Notice below, but failure of the addressee of any
copy to actually receive such copy shall not render the Notice ineffective.
TO BUYER:
FSC Realty, LLC
9777 Wilshire Boulevard, Suite 710
Beverly Hills, California 90212
Attention: Mr. Stanley R. Fimberg
WITH COPY TO:
Akin, Gump, Strauss, Hauer & Feld
4100 First City Center
1700 Pacific Avenue
Dallas, Texas 75201-4618
Attention: Lawrence J. Brannian, Esq.
TO SELLER:
900 North Michigan Avenue
19th Floor
Chicago, Illinois 60611
Attention: Ms. Julie Walner
WITH COPIES TO:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
AND TO:
Richard Ellis, LLC
Three First National Plaza
Chicago, Illinois 60602
Attention: Mr. Jeffrey M. Bramson
I. LEGAL COSTS. The parties hereto agree that they shall pay
directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either Buyer or Seller brings any
suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency or other authority before which such suit or proceeding is
commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
J. NONREFUNDABLE CONSIDERATION. Contemporaneously with the
execution and delivery of this Agreement, Buyer has delivered to Seller and
Seller hereby acknowledges the receipt of cash in the amount of $100.00
("INDEPENDENT CONTRACT CONSIDERATION"), which amount the parties bargained
for and agreed to as consideration for Buyer's right to inspect and
purchase the Property pursuant to this Agreement and for Seller's
execution, delivery and performance of this Agreement. The Independent
Contract Consideration is in addition to and independent of any other
consideration or payment provided in this Agreement, is nonrefundable, and
it is fully earned and shall be retained by Seller notwithstanding any
other provision of this Agreement.
K. RIGHT TO POSSESSION. It shall be a condition to Buyer's
obligation to purchase the Property that, concurrently with the closing of
the transactions hereunder, that Buyer shall have possession of the
Property in the manner contemplated in this Agreement.
L. ADDITIONAL ACTS. In addition to the acts and deeds recited
herein and contemplated to be performed, executed, and/or delivered by
Seller or Buyer, Seller and Buyer hereby agree to perform, execute, and/or
deliver or cause to be performed, executed, and/or delivered at the closing
of the transactions herein contemplated or thereafter, all such further
acts, deeds and assurances as Buyer or Seller, as the case may be, may
reasonably require (i) evidence and vest in the Buyer the ownership of, and
title to, the Property, and (ii) consummate the transactions contemplated
hereunder, all in the manner contemplated herein; provided, however, the
same do not materially increase the costs to, or liability or obligations
of, a party in a manner not otherwise provided for herein.
M. CONDITIONS. All covenants, warranties and obligations of a
party contained in this Agreement are deemed to be conditions to the other
party's obligations herein. All conditions to a party's obligations,
whether specifically stated in this Agreement or pursuant to the preceding
sentence, and all rights of such party herein are imposed solely and
exclusively for the benefit of such party and its assigns and any or all of
such conditions or rights may be waived in whole or in part by such party
at any time in such party's sole discretion.
N. SEVERABILITY. If any provision in this Agreement is invalid,
illegal, or unenforceable, such provision shall be construed as narrowly as
possible to allow Buyer and Seller to be afforded the benefits and
protection of this Agreement. Such provision shall be severable from the
rest of this Agreement and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby,
and shall continue in full force and effect.
O. COUNTERPARTS. Two or more duplicate originals of the written
instrument containing this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XI,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
Corporate General Partner
By: ________________________________
Name: _________________________
Title: _________________________
"Seller"
FSC REALTY, LLC,
a California limited liability company
By: _____________________________________
Name: ______________________________
Title: ______________________________
"Buyer"
ESCROW HOLDER'S ACKNOWLEDGEMENT
-------------------------------
The undersigned hereby executes this Agreement to evidence its
agreement to act as Escrow Holder in accordance with the terms of this
Agreement.
Date: ________________NEAR NORTH NATIONAL TITLE CORPORATION,
a ______________________________________
By: ___________________________________
Name: _____________________________
Title: ____________________________
"Escrow Holder"
EXHIBIT LIST
------------
"A" - Property Description
"B" - Personal Property
"C" - Deed
"D" - Lease Assignment and Assumption
"E" - Contract Assignment and Assumption
"F" - Bill of Sale
"G" - Exceptions to Seller's Representations
and Warranties
"H" - Rent Roll
"I" - Service Agreements
EXHIBIT "A"
Property Description
EXHIBIT "B"
Personal Property
EXHIBIT "C"
Deed
Forms to be agreed upon during Due Diligence Period
EXHIBIT "D"
Lease Assignment and Assumption
Forms to be agreed upon during Due Diligence Period
EXHIBIT "E"
Contract Assignment and Assumption
Forms to be agreed upon during Due Diligence Period
EXHIBIT "F"
Bill of Sale
Forms to be agreed upon during Due Diligence Period
EXHIBIT "G"
Exceptions to Seller's Representations and Warranties
None
EXHIBIT "H"
Rent Roll
EXHIBIT "I"
Service Agreements
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a partner of 767 Third Avenue Associates, a general
partnership which holds title to the 767 Third Avenue Building in New York
City, New York. The developer of the property is a partner in the joint
venture. The Partnership is a partner of Riverfront Office Park Joint
Venture, a general partnership which holds title to the Riverfront Office
Building in Cambridge, Massachusetts. The developer of the property was a
partner in the joint venture.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XI, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1996, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XI, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1996, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,697,163
<SECURITIES> 0
<RECEIVABLES> 5,473,978
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,171,141
<PP&E> 65,629,315
<DEPRECIATION> 23,002,534
<TOTAL-ASSETS> 127,569,676
<CURRENT-LIABILITIES> 6,731,713
<BONDS> 130,058,240
<COMMON> 0
0
0
<OTHER-SE> (14,104,015)
<TOTAL-LIABILITY-AND-EQUITY>127,569,676
<SALES> 32,775,314
<TOTAL-REVENUES> 33,059,440
<CGS> 0
<TOTAL-COSTS> 24,568,055
<OTHER-EXPENSES> 637,208
<LOSS-PROVISION> 8,500,000
<INTEREST-EXPENSE> 15,013,553
<INCOME-PRETAX> (15,659,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,103,120)
<DISCONTINUED> 13,480,719
<EXTRAORDINARY> 1,180,286
<CHANGES> 0
<NET-INCOME> 557,885
<EPS-PRIMARY> 7.10
<EPS-DILUTED> 7.10
</TABLE>
