SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
March 31, 2000 Commission file number 0-10494
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(Exact name of registrant as specified in its charter)
Illinois 36-3102608
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
------
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
Current assets:
Cash and cash equivalents. . . . . . . . $ 5,588,170 5,589,641
Rents and other receivables. . . . . . . 27,640 25,788
----------- -----------
Total assets . . . . . . . . . . $ 5,615,810 5,615,429
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 71,860 22,554
----------- -----------
Total liabilities. . . . . . . . . 71,860 22,554
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . 1,000 1,000
Cumulative net earnings (losses) . . . (13,001,873) (12,999,916)
Cumulative cash distributions. . . . . (1,123,608) (1,123,608)
----------- -----------
(14,124,481) (14,122,524)
----------- -----------
Limited partners:
Capital contributions,
net of offering costs. . . . . . . . 121,935,233 121,935,233
Cumulative net earnings (losses) . . . (35,212,177) (35,165,209)
Cumulative cash distributions. . . . . (67,054,625) (67,054,625)
----------- -----------
19,668,431 19,715,399
----------- -----------
Total partners' capital
accounts (deficits). . . . . . . 5,543,950 5,592,875
----------- -----------
$ 5,615,810 5,615,429
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Income:
Rental income. . . . . . . . . . . . . $ -- 4,435,437
Interest income. . . . . . . . . . . . 76,018 84,347
----------- ----------
76,018 4,519,784
----------- ----------
Expenses:
Mortgage and other interest. . . . . . -- 2,313,352
Property operating expenses. . . . . . -- 2,209,985
Professional services. . . . . . . . . 44,905 135,931
Amortization of deferred expenses. . . -- 107,635
General and administrative . . . . . . 80,037 82,912
----------- ----------
124,942 4,849,815
----------- ----------
(48,924) (330,031)
Venture partner's share of
ventures' operations . . . . . . . . . -- 48,540
----------- ----------
Net earnings (loss). . . . . . . $ (48,924) (281,491)
=========== ==========
Net earnings (loss) per limited
partnership Interest. . . . . . . . . . $ (.34) (1.97)
=========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . $ -- --
=========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . $ (48,924) (281,491)
Items not requiring (providing) cash
or cash equivalents:
Amortization of deferred expenses. . -- 107,635
Long-term debt - deferred
accrued interest . . . . . . . . . -- 561,737
Venture partner's share of
venture's operations . . . . . . . -- (48,540)
Changes in:
Rents and other receivables. . . . . (1,852) (207,149)
Escrow deposits and
restricted funds . . . . . . . . . -- (676,205)
Prepaid expenses . . . . . . . . . . -- 117,356
Accrued rents receivable . . . . . . -- 39,215
Accounts payable . . . . . . . . . . 49,305 124,478
Unearned rents . . . . . . . . . . . -- 283,003
Accrued interest . . . . . . . . . . -- 93,585
Accrued real estate taxes. . . . . . -- 110,099
Tenant security deposits . . . . . . -- (7,775)
Deferred revenue . . . . . . . . . . -- (9,624)
------------ -----------
Net cash provided by (used in)
operating activities . . . . . (1,471) 206,324
------------ -----------
Cash flows from investing activities:
Additions to investment properties . . -- (42,363)
------------ -----------
Net cash provided by (used in)
investing activities . . . . . -- (42,363)
------------ -----------
Net increase (decrease) in
cash and cash equivalents. . . (1,471) 163,961
Cash and cash equivalents,
beginning of year. . . . . . . 5,589,641 3,240,125
------------ -----------
Cash and cash equivalents,
end of period. . . . . . . . . $ 5,588,170 3,404,086
============ ===========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and
other interest . . . . . . . . . . . $ -- 1,658,030
============ ===========
Non-cash investing and financing
activities . . . . . . . . . . . . . $ -- --
============ ===========
See accompanying notes to consolidated financial statements.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1999, which
are included in the Partnership's 1999 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Partnership adopted 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" as required in the first
quarter of 1996. 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. The Partnership and its consolidated ventures had
previously committed to plans to sell or dispose of all their remaining
investment properties. Accordingly, all consolidated properties had been
classified as held for sale or disposition in the accompanying consolidated
financial statements as of the respective date of such plan's adoption.
The results of operations, net of venture partner's share, for the three
months ended March 31, 1999 for these properties were ($16,197).
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 March 31, 2000 and for the three months ended
March 31, 2000 and 1999 were as follows:
Unpaid at
March 31,
2000 1999 2000
------- ------ ----------
Property management and leasing fees . . $ -- 41,256 --
Insurance commissions. . . . . . . . . . 726 -- 726
Reimbursement (at cost) for out-
of-pocket salary and salary-related
expenses and other costs for the Partner-
ship and its investment properties. . . 5,310 18,011 2,276
------ ------ ------
$6,036 59,267 3,002
====== ====== ======
<PAGE>
RIVERFRONT OFFICE BUILDING
On June 10, 1999, the Partnership, through the Riverfront Office Park
joint venture, sold its interest in the Riverfront Office Building and the
ground lease of the underlying land. For its interest in the property, the
Partnership received a payment of $9,300,000 (before costs of sale) and
release of its liability for the mortgage debt secured by the property,
which had an outstanding balance of approximately $49,800,000 (of which the
Partnership's share is approximately $24,900,000) at closing. In addition,
for its interest in the property, the unaffiliated venture partner in the
venture (or the partners in such unaffiliated venture partner) received a
payment of approximately $455,000 and an approximate 9.6% interest in the
newly formed joint venture. The joint venture is not affiliated with the
Partnership or its General Partners, and the amount paid for the
Partnership's interest in the property was determined by arm's-length
negotiations.
The joint venture had been marketing the property for sale and, in
this regard, the Partnership and the unaffiliated venture partner reached
an agreement to contribute their respective interests in the property
(including their interests as lessees under the ground lease) to a newly
formed joint venture, whose affiliate held the mortgage loan secured by the
property. As a result of this transaction, the Partnership recognized a
gain of $31,141,464 for financial reporting purposes and $23,145,103 for
Federal income tax purposes in 1999. In addition, in connection with the
transfer of the Partnership's interest and as is customary in such
transactions, the venture agreed to certain representations and warranties
with a stipulated survival period which expires June 10, 2000. Although it
is not expected, the Partnership may ultimately have some liability under
such representations and warranties which cannot exceed the cash payment
received by the Partnership for its interest in the property.
The property was classified as held for sale or disposition as of
December 31, 1996 and therefore has not been subject to continued
depreciation from such date for financial reporting purposes.
MALL OF MEMPHIS
As discussed more fully below, in May 1999, the Partnership
transferred title to the land, building and improvements, and other assets
and liabilities related to the property in consideration of a discharge of
the mortgage loan.
Occupancy at the property was 67% at the date of the transfer. The
mall had experienced a number of store closings, many prior to lease
expiration, primarily as a result of tenants filing for bankruptcy and
liquidating. In addition, the property had been subjected to increased
competition for shoppers and tenants from strip centers and large discount
stores in its market area. Although certain tenants continued to perform
well, overall tenant sales at the property continued to decline. Due to
poor sales performances, many tenants were electing not to renew their
leases or were renewing at lower rates. Several other tenants whose leases
were not due to expire in the near term had approached the Partnership
seeking rent relief. The Partnership had 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 had been
decreasing and was expected to decline further in the future.
The Partnership initiated discussions with the underlying lender
regarding a loan modification and, in connection with these discussions,
advanced approximately $604,000 to cover the property's required debt
service payments through December 31, 1997. However, the lender was
unwilling to grant an acceptable loan modification to cover future
operating deficits. The Partnership therefore decided not to commit any
<PAGE>
additional amounts to the property and, effective January 1, 1998,
suspended the payment of required debt service on its first, second and
third mortgage notes secured by the property. The lender agreed to allow
the Partnership to recoup its 1997 advance from 1998 operating cash flow.
During 1998, the Partnership recouped its 1997 advance and began remitting
cash flow payments to the lender. The Partnership entered into
negotiations with the lender and an unaffiliated third party regarding the
sale of the property to the unaffiliated third party. In May 1999, the
Partnership transferred title to the land, building and improvements, and
other assets and liabilities related to the property in consideration of a
discharge of the mortgage loan, resulting in the Partnership no longer
having an ownership interest in the property. The Partnership has no
future liability for any representations, warranties or covenants to the
purchaser as a result of the disposal of this property. The Partnership
was released from its environmental indemnity agreement as a result of this
transaction, and was, therefore, able to withdraw approximately $1,000,000
from an escrow account primarily established to secure a portion of its
potential obligation under the environmental indemnity. As a result, the
Partnership recognized an extraordinary gain on forgiveness of debt of
$11,347,490 and an extraordinary loss due to the write-off of the deferred
mortgage fees of $498,896 for financial reporting purposes. The gain
includes the effect of an impairment loss recognized by the Partnership in
1997 of approximately $13,143,000. The Partnership recognized a gain of
$11,381,305 for Federal income tax purposes with no corresponding
distributable proceeds in 1999.
Pursuant to the terms of a note payable by the Partnership to the
former venture partner, the Partnership guaranteed a portion of the debt
service payment payable on June 1, 1996 and June 1, 1997 each in the amount
of $300,000 on a recourse basis. The Partnership made the June 1, 1996 and
June 1, 1997 guaranteed debt service payments in December 1997 and December
1998, respectively. The remaining note payable was secured only by the
venture partner's former partnership interest in the joint venture and was
non-recourse to the Partnership. As a result of the Partnership
transferring title to the property owned by the joint venture in May 1999,
as discussed above, the Partnership is not obligated to pay the outstanding
principal and interest and recognized an extraordinary gain of $5,973,072
for financial reporting purposes and a gain of $5,909,072 for Federal
income tax purposes with no corresponding distributable proceeds in 1999.
YERBA BUENA OFFICE BUILDING
Due to the default of the joint venture that owned the Yerba Buena
Office Building (a partnership comprised of the Partnership, two other
partnerships sponsored by the Partnership's Corporate General Partner, and
four unaffiliated limited partners) in the payment of required debt
service, the former lender to such joint venture realized on its security
by taking title to the property in June 1992. In return for a smooth
transition of title and management of the property (relative to which the
existing property manager that was affiliated with the Partnership's
Corporate General Partner agreed to continue to manage the property), the
joint venture was able to negotiate, among other things, a right of first
opportunity to purchase the property during the time frame from June 1995
through May 1998 should the lender wish to market the property for sale.
The lender sold the property in 1996. However, the joint venture was not
given an opportunity to purchase the property on the same terms for which
it was sold. As previously reported, the joint venture filed a lawsuit
against the lender for breach of its obligations. In June 1998, the court
<PAGE>
granted the lender's motion for summary judgment and dismissed the lawsuit.
The joint venture appealed the dismissal. During the second quarter of
1999, the joint venture reached an agreement in principle with the lender
to settle the lawsuit. In February 2000, the settlement was finalized and
the former lender paid $1,400,000 to the joint venture in resolution of the
above mentioned disputes. Simultaneously, the joint venture paid to its
limited partners $27,000 in settlement of any of their potential claims
related to the matter. The Partnership's share of the settlement proceeds
and cash held at the venture is approximately $800,000. The Partnership
expects to receive such amount in the second quarter of 2000.
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of March 31,
2000 and for the three months ended March 31, 2000 and 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning certain of the
Partnership's investments.
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.
In 1999, unaffiliated third parties made unsolicited tender offers to
some of the Holders of Interests. These offers sought to purchase up to
3.0% of the Interests in the Partnership at between $35 and $40 per
Interest. The Special Committee recommended against acceptance of these
offers on the basis that, among other things, the offer prices were
inadequate. These offers have expired.
As of the date of this report, the Partnership is aware that 5.03% of
the Interests have been purchased by unaffiliated third parties either
pursuant to such tender offers or through negotiated purchases. 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.
At March 31, 2000, the Partnership had cash and cash equivalents of
approximately $5,588,170. Such funds are available for potential
liabilities, if any, related to the representations and warranties made
upon the sale of the Partnership's interest in Riverfront Office Building,
working capital requirements and distribution to the Partners. The
Partnership currently has adequate cash and cash equivalents to maintain
the operations of the Partnership.
Although the Partnership distributed, in August 1999, proceeds from
the sale of its interest in the Riverfront Office Building of $7,557,550
($55 per Interest) to the Holders of Interests, the Holders of Interests
are expected to receive significantly less than their full original
investment from all sources. No further distributions are anticipated to
be made until the final liquidation of the Partnership.
The Partnership intends to file real estate tax appeals on behalf of
the Mall of Memphis property for the tax years 1990 through 1997. There
can be no assurance that the Partnership will be successful in appealing
the assessed values or that any significant funds will be available for
distribution to the partners after issuing refunds, if any, to tenants at
the mall and payment of expenses associated with the appeal.
As previously reported in the Notes, the joint venture that owned the
Yerba Buena Office Building filed a lawsuit against the former lender to
such joint venture for breach of its obligations. In June 1998, the court
granted the lender's motion for summary judgement and dismissed the
lawsuit. The joint venture appealed the dismissal. During the second
quarter of 1999, the joint venture reached an agreement in principle with
the lender to settle the lawsuit. In February 2000, the settlement was
finalized and the former lender paid $1,400,000 to the joint venture in
resolution of the above mentioned disputes. Simultaneously, the joint
venture paid its unaffiliated former venture partners $27,000 in settlement
of any of their potential claims related to the matter. The Partnership's
share of such amounts net of certain legal fees is approximately $800,000.
The Partnership expects to receive its share of such amounts from the joint
venture in 2000.
<PAGE>
The Partnership currently expects to conduct an orderly liquidation as
quickly as practicable upon expiration of the representations and
warranties to the purchaser that were required in connection with the sale
of the Partnership's interest in the Riverfront Office Building.
Consequently, the Partnership currently expects to wind up its affairs in
2000. However, the final liquidation may be delayed subject to the
Partnership's ability to resolve the real estate tax appeal discussed
above.
RESULTS OF OPERATIONS
Significant fluctuations between periods in the accompanying
consolidated financial statements are primarily the result of the
disposition of the Mall of Memphis in May 1999 and the sale of the
Partnership's interest in the Riverfront Office Building in June 1999.
Reference is made to the Notes in the accompanying consolidated financial
statements for discussions of the sale and disposition.
The increase in accounts payable at March 31, 2000 as compared to
December 31, 1999 is primarily due to the timing of payments for certain
expenses of the Partnership.
<PAGE>
PART IIOTHER INFORMATION
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
Response:
(a) 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 Report for December
31, 1992 on Form 10-K (File No. 0-10494) filed on March 19, 1993.
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 Report for
December 31, 1992 on Form 10-K (File No. 0-10494) filed on March 19, 1993.
10-A. Agreement for Deed in Lieu of Foreclosure and Exhibits
thereto, by and between Mall of Memphis Associates and the American Mall of
Memphis, LLC dated May 14, 1999 are hereby incorporated herein by reference
to the Partnership's report for May 14, 1999, on Form 8-K (File No. 0-
10494) dated June 1, 1999.
10-B. Letter Agreement to the Deed in Lieu of Foreclosure and
Exhibits thereto dated May 24, 1999, related to the Mall of Memphis is
hereby incorporated herein by reference to the Partnership's report for May
14, 1999, on Form 8-K (File No. 0-10494) dated June 1, 1999.
10-C. Contribution agreement by and between Riverfront Office
Park Joint Venture and BRT/Riverfront LLC dated June 10, 1999 is hereby
incorporated herein by reference to the Partnership's report for June 10,
1999, on Form 8-K (File No. 0-10494) dated June 24, 1999.
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 12, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,588,170
<SECURITIES> 0
<RECEIVABLES> 27,640
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,615,810
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,615,810
<CURRENT-LIABILITIES> 71,859
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,543,950
<TOTAL-LIABILITY-AND-EQUITY> 5,615,810
<SALES> 0
<TOTAL-REVENUES> 76,018
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 124,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (48,924)
<INCOME-TAX> 0
<INCOME-CONTINUING> (48,924)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,924)
<EPS-BASIC> (.34)
<EPS-DILUTED> (.34)
</TABLE>
