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, 1994 Commission file number 0-12433
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(Exact name of registrant as specified in its charter)
Illinois 36-3149589
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . .
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,231,193 2,789,530
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,930,899 6,865,532
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768,795 1,085,701
Loan commitment fee (note 3(d)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,163,524 1,163,524
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,113 154,073
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580,067 605,734
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,742,591 12,664,094
------------ ------------
Investment properties, at cost:
Land and leasehold interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,021,695 18,021,695
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,563,251 235,978,139
------------ ------------
254,584,946 253,999,834
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,738,784 82,546,206
------------ ------------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . . . . . 169,846,162 171,453,628
------------ ------------
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,231,195 5,527,843
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,175,604 5,114,243
Venture partners' deficits in ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,678,249 14,876,348
------------ ------------
$207,673,801 209,636,156
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1994 1993
------------ ------------
Current liabilities:
Current portion of long-term debt (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 6,521,389 6,489,518
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,996,178 2,326,663
Amounts due to affiliates (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,557,507 3,596,654
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,858,698 3,364,920
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282,043 2,764,835
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,215,815 18,542,590
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,609 85,391
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,009,600 2,062,011
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,711,538 194,712,434
------------ ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,078,562 215,402,426
Venture partners' equity in ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,706 445,474
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,435,167) (8,373,178)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (564,211) (564,211)
------------ ------------
(8,998,378) (8,936,389)
------------ ------------
Limited partners (160,005 interests):
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,003,683 141,003,683
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(119,718,956) (118,231,222)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,047,816) (20,047,816)
------------ ------------
1,236,911 2,724,645
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . . . . . . . . . . . . . . . . . . . (7,761,467) (6,211,744)
------------ ------------
Commitments and contingencies (notes 2, 3 and 4)
$207,673,801 209,636,156
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$10,899,418 13,479,990
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,675 77,165
----------- -----------
10,958,093 13,557,155
----------- -----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,012,478 6,038,523
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,192,578 2,352,852
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,635,922 5,461,626
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,510 148,251
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,745 318,207
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,386 99,749
---------- -----------
13,328,619 14,419,208
----------- -----------
Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,370,526) (862,053)
Venture partners' share of ventures' operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,803 536,346
----------- -----------
Net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,549,723) (325,707)
Gain on disposition of investment property (note 3(b)) . . . . . . . . . . . . . . . . . . . . . . . . -- 1,520,737
----------- -----------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(1,549,723) 1,195,030
=========== ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
1994 1993
----------- -----------
Net earnings (loss) per limited partnership interest:
Net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ (9.30) (1.95)
Net gain on disposition of investment property. . . . . . . . . . . . . . . . . . . . . . . -- 9.41
----------- -----------
$ (9.30) 7.46
=========== ===========
Cash distributions per limited partnership interest . . . . . . . . . . . . . . . . . . . . . .$ -- --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(1,549,723) 1,195,030
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,192,578 2,352,852
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,745 318,207
Amortization of discount on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,976 365,241
Venture partners' share of ventures' operations. . . . . . . . . . . . . . . . . . . . . . . . . . (820,803) (536,346)
Gain on disposition of investment property (note 3(b)) . . . . . . . . . . . . . . . . . . . . . . -- (1,520,737)
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,906 175,312
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,960 140,736
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,667 (17,652)
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,361) (81,029)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (330,485) (223,585)
Amounts due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,147) (120,407)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493,778 353,200
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (482,792) (628,125)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,218 (24,896)
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,411) (44,638)
----------- -----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . 542,106 1,703,163
----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments . . . . . . . . . . . . . . . . . . . 934,633 574,117
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (585,112) (878,621)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,097) (25,886)
----------- -----------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . . . 339,424 (330,390)
----------- -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
1994 1993
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (403,449) (420,495)
Proceeds of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,448 --
Venture partners' contributions to venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,634 --
Distributions to venture partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (133,500) (152,019)
------------ -----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (439,867) (572,514)
------------ -----------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . .$ 441,663 800,259
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5,117,724 5,320,082
============ ===========
Non-cash investing and financing activities:
Balance due on accelerated wrap-around mortgage note payable canceled. . . . . . . . . . . . . . .$ -- 12,239,900
Reduction of land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2,170,000)
Reduction of buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (14,045,964)
Reduction of accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,454,885
Reduction of accrued interest payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 41,916
------------ -----------
Non-cash gain recognized on disposition of investment property . . . . . . . . . . . . . . .$ -- 1,520,737
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1993 which are
included in the Partnership's 1993 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts
of the Partnership and its ventures Carlyle Seattle Associates ("Carlyle
Seattle"), Carlyle Seattle's venture, Wright-Carlyle Seattle ("First
Interstate"), Carrara Place Limited ("Carrara"), Carlyle Carrollton Associates
("Carlyle Carrollton"), Carlyle Carrollton's venture, Country Square, Ltd.
("Country Square") (note 3(b)), and Carlyle/National City Associates
("Carlyle/National City"). The effect of all transactions between the
Partnership and the ventures has been eliminated.
The Partnership 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 present the Partnership's accounts in
accordance with generally accepted accounting principles ("GAAP") and to
consolidate the accounts of the ventures as described above. Such adjustments
are not recorded on the records of the Partnership. The net effect of these
items is summarized as follows for the three months ended March 31:
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net earnings (loss). . . . $(1,549,723) (3,143,513) 1,195,030 3,648,068
Net earnings (loss) per
limited partnership
interest. . . . . . . . . $ (9.30) (18.29) 7.46 22.85
=========== ========== ========= =========
</TABLE>
The net earnings (loss) per limited partnership interest ("Interest") is
based upon the limited partnership interests outstanding at the end of each
period (160,005). Deficit capital balances will result, throughout the
duration of the Partnership, in net gain for financial reporting and income
tax purposes.
Certain amounts in the 1993 financial statements have been reclassified
to conform with the 1994 presentation.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies cash 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. In addition, the Partnership records amounts held in U.S.
government obligations and certificates of deposit at cost, which approximates
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
market. Therefore, 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 (none held at March 31, 1994 and December 31, 1993) as cash
equivalents with any remaining amounts (generally with original maturities of
one year or less) reflected as short-term investments being held to maturity.
(2) VENTURE AGREEMENTS
(a) General
The Partnership currently is a party to four operating joint venture
agreements. In general, the joint venture partners, who are either the
sellers (or their affiliates) of the property investments being acquired,
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 a cumulative preferred interest in net cash receipts
(as defined) from two of the Partnership's venture properties - Carrara Place
Office Building and First Interstate Center. Such preferential interest
relates to a negotiated rate of return on contributions made by the
Partnership. After the Partnership receives its preferential return, the
venture partner is generally entitled to a non-cumulative return on its
interest in the venture; additional net cash receipts are generally shared in
a ratio relating to the various ownership interests of the Partnership and its
venture partners. One of the ventures' properties produced net cash receipts
during the three months ended March 31, 1994 and 1993. In general, operating
profits and losses are shared in the same ratio as net cash receipts. If
there are no net cash receipts, substantially all profits or losses are
allocated in accordance with the partners' respective economic interests. The
Partnership generally has preferred positions (related to the Partnership's
cash investment in the ventures) with respect to distribution of sale or
refinancing proceeds from the ventures.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the Partnership's
venture partners in an investment might become unable or unwilling to fulfill
their financial or other obligations, or that such venture partners may have
economic or business interests or goals that are inconsistent with those of
the Partnership.
(b) Carrara
The Carrara joint venture agreement provides that operating profits and
losses of the venture are allocated 50% to the venture and 50% to the venture
partner. Gain arising from the sale or other disposition of the property
would be allocated to the venture partner or partners then having a deficit
balance in its or their respective capital accounts in accordance with the
terms of the venture agreement. Any additional gain would be allocated in
accordance with the distribution of sales proceeds. The lease for Carrara
Place Office Building's major tenant, which represented 46% of the building's
leasable area and provided for rental payments that were significantly greater
than current market rental rates, expired in December 1992 and the tenant
vacated. The Carrara venture initiated discussions with the mortgage lender
regarding a modification to the mortgage loan.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Concurrent with the modification of the mortgage loan in September of
1993 (see note 3(c)), the Carrara venture has been reorganized such that the
Partnership became the sole general partner of the venture, with its venture
partner becoming a limited partner of the venture. In addition, the property
manager (an affiliate of the unaffiliated venture partner) was replaced
effective September 1993. Based upon an analysis of current and anticipated
market conditions, the Partnership has decided not to commit additional funds
to the Carrara Place Office Building. There must be a significant improvement
in market and property conditions in order for the value of the property to be
greater than the mortgage pay off amount at any point in time, including
accrued interest. Therefore, it is unlikely that any significant proceeds
would be received by the Partnership from a sale of the property or that the
mortgage loan could be refinanced when it becomes due.
(3) LONG-TERM DEBT
(a) General
All investment properties are pledged as security for long-term debt
which matures at various dates commencing October, 1994. In addition, as
described below, the Partnership has received mortgage note modifications on
certain properties which expire on various dates commencing January 1, 1998.
Upon expiration of such modifications or at loan maturity, should the
Partnership not seek or be unable to secure new or additional modifications or
extensions to the loans, based upon current and anticipated future market
conditions, the Partnership may not commit any significant additional amounts
to these properties. Such decisions would be made on a property-by-property
basis.
(b) Country Square Apartments
The Partnership modified the $5,800,000 second mortgage note secured by
the Country Square apartment complex in Carrollton, Texas effective June 1,
1989. The pay rate was raised from 4% per annum to 5% per annum (payable in
monthly installments of interest only) through December 1, 1992. Interest
accrued and was deferred at a rate of 11% per annum from June 1, 1989 through
December 31, 1990 and 12% per annum from January 1, 1991 through December 31,
1992; payable each April 30 to the extent of any annual cash flow (as defined)
or upon the earlier of subsequent sale of the property or the January 1, 1993
maturity of the note. The lender notified the Partnership that it would not
modify the existing terms of the second mortgage. The Partnership was unable
to secure new or additional modifications or extensions to the loan. On
February 2, 1993, the second mortgage lender concluded proceedings to realize
upon its security and took title to the property. As a result, the
Partnership recognized a gain for financial reporting purposes of $1,520,737
and a gain for Federal income tax purposes of $5,633,431 in 1993 with no
corresponding distributable proceeds.
(c) Carrara
The lease for Carrara Place Office Building's major tenant, which
represented 46% of the building's leasable area and provided for rental
payments that were significantly greater than current market rental rates,
expired in December 1992 and the tenant vacated. The Carrara venture
initiated discussions with the mortgage lender regarding a modification to the
mortgage loan. Beginning January 1, 1993, the venture ceased making the
scheduled debt service payments on the long-term mortgage note. The note was
subsequently modified effective January 1, 1993. Under the modification, the
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
maturity date has been extended from June 30, 1994 until January 1, 1998.
Interest continues to accrue at 9.875% from January 1, 1993 until maturity.
Effective January 1, 1993, the net cash flow of the property (after the
required minimum interest payments of $8,333 monthly or $100,000 annually),
subject to certain reserves including a $350,000 operating reserve to fund
deficits, will be paid to the lender and applied toward the payment of accrued
and unpaid interest, current interest and principal balance of the loan,
respectively. Any capital costs, including re-leasing costs, are to be funded
by the lender, (subject to their approval) and will be added to the principal
balance of the loan. Approximately $237,000 has been funded by the lender as
of March 31, 1994.
In conjunction with the modification, the venture has agreed to transfer
title to the lender if the venture fails to pay the loan in full on the
earlier of the extended maturity date or an acceleration of the loan as a
result of the occurrence of an event of default (as defined). This would
result in the Partnership no longer having an ownership interest in the
property. Such a decision would result in a gain for financial reporting and
Federal income tax purposes with no corresponding distributable proceeds.
(d) National City Center Office Building
In January 1994, the debt service payments under the existing mortgage
for the National City Center Office Building increased from 9-5/8% to 11-7/8%
until the maturity of the loan in December 1995. The Partnership reached an
agreement in principle with the current mortgage lender to refinance the
existing mortgage which would be effective February 1, 1994, with an interest
rate of 8.5%. The loan would be amortized over 22 years with a balloon
payment due in seven years. The Partnership paid a refundable loan commitment
fee of $1,164,000 in 1993 in conjunction with the proposed refinancing. The
Partnership also expects to pay a prepayment penalty of approximately
$600,000, based on the outstanding mortgage balance at the time of
refinancing. In addition, the lender would require an escrow account of
approximately $610,000 to be established at the inception of the refinancing
which would be supplemented from time to time for scheduled future tenant
improvements costs at the property. In May 1994 (effective April 28, 1994),
the Partnership refinanced the mortgage (see note 6).
(e) Other
Effective December 27, 1990, the Partnership obtained replacement loans
from an institutional lender to retire in full satisfaction, at an aggregated
discount, the previously modified existing long-term mortgage notes secured by
the Sierra Pines Apartments and the Crossings Apartments. The new lender
required the establishment of escrow accounts, of approximately $253,000 and
$291,000, to be used toward the purchase of capital items at the Sierra Pines
Apartments and the Crossings Apartments, respectively. In 1993, the
Partnership sold its interest in the Sierra Pines Apartments and The Crossing
Apartments (see note 4(b)). As of the date of sale approximately $62,000 and
$6,000 were used for such purposes for the respective properties. The new
mortgage loans, which were cross-collateralized, required interest only
payments at 9.5% plus contingent interest (as defined) until January 1, 1999,
when the remaining balance was scheduled to be payable. In 1993, $176,334 was
paid for 1992 contingent interest for the properties. $107,945 was paid in
1993 for 1993 contingent interest for both properties through the date of
sale. In the event that these properties were sold before the maturity date
of the loan, the lender was to receive additional interest of 6% of the
mortgage principal and, in general, the higher of 65% of the sale proceeds (as
defined) or ten times the highest contingent interest (as defined) amount in
any of the three full fiscal years preceding the sale.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) SALE OF INVESTMENT PROPERTIES
(a) San Mateo Fashion Island
On December 31, 1986, the Partnership sold its right, title and interest
in the land, leasehold interest and related improvements of the San Mateo
Fashion Island shopping center for $44,202,559 and recognized profit in full
of $9,528,813. The sale price consisted of $950,000 in cash at closing, the
assumption of the existing mortgage note having an unpaid principal balance of
$39,302,559 (for financial reporting purposes the principal balance was
$28,895,264) and an additional promissory note in the amount of $3,950,000
($950,000 paid in March 1988) secured by a subordinated deed of trust on the
property. In addition to the sale price, the Partnership received $7,600,000
from the venture partner during 1986 under the terms of the venture agreement.
During the first quarter of 1992, the Partnership was advised by the
buyer (in which the Corporate General Partner has an interest) that it had
initiated discussions directly with the first mortgage lender regarding a
modification to the first mortgage note. The buyer is currently making
reduced payments to the first mortgage lender and has discontinued making
payments to the Partnership as of March 1992. Due to uncertainty regarding
the value of the underlying collateral, the Partnership reserved for the
entire outstanding principal balance and accrued interest ($3,720,000) on the
note receivable as of December 31, 1993 and 1992 in the accompanying
consolidated financial statements. In addition, the entire outstanding
principal balance and accrued interest was written off for Federal income tax
purposes in 1992.
(b) Sierra Pines and Crossing Apartments
On July 29, 1993, the Partnership sold the land, buildings, related
improvements and personal property of the Sierra Pines and Crossing Apartments
located in Houston, Texas. The sale prices of the land, buildings, related
improvements and personal property for Sierra Pines and Crossing Apartments
were $4,880,000 and $9,535,000, respectively. A portion of the cash proceeds
was utilized to retire the first mortgage notes with outstanding balances of
$4,380,000 and $7,600,000, respectively, secured by the properties. The
Partnership paid additional interest of $1,230,923 in the aggregate in
connection with the retirement of the mortgage notes. The Partnership
received in connection with these sales, after additional interest and normal
costs of sale, a net amount of cash of approximately $950,000 (including
$288,000 in advisory fees) in the aggregate. As a result of these sales, the
Partnership recognized gains in 1993 for financial reporting purposes of
$44,030 and $2,526,916, respectively, and recognized a gain for Federal income
tax purposes of $1,510,727 and $6,164,118, respectively.
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partner-
ship to the General Partners and their affiliates as of March 31, 1994 and for
the three months ended March 31, 1994 and 1993 are as follows:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
Unpaid at
1994 1993 March 31, 1994
-------- -------- ---------------
Property management and
leasing fees. . . . . . . . . $196,309 302,909 3,524,173
Insurance commissions. . . . . 47 6,627 --
Management fees to Corporate
General Partner . . . . . . . -- -- 33,334
Reimbursement (at cost) for
out-of-pocket expenses. . . . 1,304 5,807 --
-------- ------- ---------
$197,660 315,343 3,557,507
======== ======= =========
The General Partners and their affiliates had deferred through June 30,
1988 payment of certain property management and leasing fees of which
$3,524,173 remains unpaid as of March 31, 1994. In addition, the Partnership
deferred the General Partners' cash distribution and management fee of $19,666
and $33,334, respectively, for the third and fourth quarters of 1991. These
amounts (approximately $22 per Interest) and amounts currently payable do not
bear interest and are expected to be paid in future periods.
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates relating to the
administration of the Partnership and operation of Partnership properties. In
1993, such costs aggregated $40,427, all of which are unpaid at March 31,
1994. For the three months ended March 31, 1994, such costs aggregated
$26,320, all of which were paid by March 31, 1994.
Effective January 1, 1994, certain officers and directors of the Managing
General Partner acquired interests in a company which, among other things, has
provided and continues to provide certain property management services to
certain of the properties owned by the Partnership. Such acquisition had no
effect on the fees payable by the Partnership under any existing agreements
with such company. The fees earned by such company from the Partnership for
the three months ended March 31, 1994 were $7,800.
(6) SUBSEQUENT EVENT
In 1993, the Partnership reached an agreement in principle with the
current mortgage lender to refinance the existing mortgage loan (see note
3(d)). On May 2, 1994, the Partnership refinanced the National City Center
Office Building loan effective April 28, 1994, with an interest rate of 8.5%.
The loan will be amortized over 22 years with a balloon payment due on April
10, 2001. The Partnership paid a prepayment penalty of $581,000 based upon
the outstanding loan balance at the time of refinancing. In addition, the
lender required an escrow account of $612,000 to be established at the time of
refinancing which will be supplemented from time to time for scheduled future
tenant improvements at the property. The $1,164,000 refundable loan
commitment fee paid by the Partnership in 1993 was applied to accrued interest
and the prepayment penalty, with the balance of $238,000 refunded to the
Partnership.
(7) 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, 1994
and for the three months ended March 31, 1994 and 1993.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are Notes to Consolidated Financial Statements
contained in this report.
At March 31, 1994, the Partnership and its consolidated ventures had cash
and cash equivalents of approximately $3,230,000. Such funds and short-term
investments of approximately $5,930,000 are available for capital
improvements, distributions to partners and for working capital requirements,
including capital improvements and leasing costs currently being incurred at
the National City Center Office Building. Certain of the Partnership's
investment properties currently operate in overbuilt markets which are
characterized by lower occupancies and/or reduced rent levels. The
Partnership has taken steps to preserve its working capital by deciding to
suspend distributions to the Limited and General Partners effective as of the
first quarter of 1992. The Partnership had also deferred cash distributions
and partnership management fees, payable to the Corporate General Partner,
related to the third and fourth quarters of 1991. In addition, as of March
31, 1994, the General Partners and their affiliates have deferred payment of
certain property management and leasing fees of approximately $3,524,000
(approximately $22 per Interest) as more fully described in Note 5. These
amounts do not bear interest and are expected to be paid in future periods.
The Partnership and its consolidated ventures have currently budgeted for
1994 approximately $3,555,000 for tenant improvements and other capital
expenditures. The Partnership's share of such items in 1994 is currently
budgeted to be approximately $3,029,000. Included in this amount is the roof
and parking lot at the Permian Mall which are currently in need of repair. To
fund the Permian Mall improvements, the Partnership intends to initiate
discussions with the mortgage lender regarding a modification to the loan.
There can be no assurance that a loan modification can be obtained. Actual
amounts expended in 1994 may vary depending on a number of factors including
actual leasing activity, results of operations, liquidity considerations and
other market conditions over the course of the year. The source of capital
for such items and for both short-term and long-term future liquidity and
distributions is expected to be through net cash generated by the
Partnership's investment properties and through the sale of such investments.
In addition, the Partnerships does not consider the remaining mortgage note
receivable (related to San Mateo Fashion Island) to be a source of future
liquidity. Reference is made to Note 4(a). The Partnership's and its
Ventures' mortgage obligations are all non-recourse. Therefore, the
Partnership and its Ventures are not obligated to pay mortgage indebtedness
unless the related property produces sufficient net cash flow from operations
or sale.
The mortgage on Stonybrook Apartments II matures October 1, 1994
(Stonybrook Apartments I is not subject to a mortgage loan) with an
outstanding balance of approximately $5,633,000 at March 31, 1994. The
Partnership is holding discussions with the mortgage lender regarding various
strategies for the property including retirement and/or refinancing of the
debt, or possible sale of the property. If the Partnership is unable to
implement any such strategies, based upon current market conditions, the
Partnership would likely not commit any significant additional amounts to the
property. This would result in the Partnership no longer having an ownership
interest in the property. Such a decision could result in a gain for
financial reporting and Federal income tax purposes in 1994 with no
corresponding distributable proceeds.
The lease for Carrara Place Office Building's major tenant, which
represented 46% of the building's leasable area and provided for rental
payments that were significantly greater than current market rental rates,
expired in December 1992. The Denver, Colorado region has been adversely
affected by increased competition for tenants as a result of overbuilding in
the area. As a result of the current market rental rates, the cash flow
generated by the property would have been significantly less than the payments
required under the original mortgage note even if the space was re-leased.
Further, re-leasing the space requires significant re-leasing costs.
Additionally, the lease for a tenant occupying approximately 17% of the
building's leasable area was scheduled to expire in June 1994. The venture
has reached an agreement with the tenant to extend their lease for an
additional five years. The Carrara venture initiated discussions with the
mortgage lender regarding a modification to the mortgage loan and in September
1993 reached an agreement to modify the loan retroactive to January 1, 1993.
Under the modification, the maturity date is extended from June 30, 1994 until
January 1, 1998. Interest continues to accrue at 9.875% from January 1, 1993
until January 1, 1998. Effective January 1, 1993, the net cash flow of the
property, subject to certain reserves, will be paid to the lender and applied
toward the payment of accrued and unpaid interest, current interest and
principal balance of the loan, respectively. Any capital costs, including re-
leasing costs, are to be funded by the lender, subject to their approval, and
such costs added to the principal balance of the loan. Approximately $237,300
has been funded by the lender as of March 31, 1994.
Concurrent with the modification, the Carrara venture was reorganized
such that the Partnership became the sole general partner of the venture, with
its venture partner becoming a limited partner of the venture. In addition,
the property manager (an affiliate of the unaffiliated venture partner) was
replaced effective September 1993. Based upon an analysis of current and
anticipated market conditions, the Partnership has decided not to commit
additional funds to the Carrara Place Office Building. There must be a
significant improvement in market and property conditions in order for the
value of the property to be greater than the mortgage payoff amount at any
point in time, including accrued interest. Therefore, it is unlikely that any
significant proceeds would be received by the Partnership in the event the
property were sold or refinanced.
In conjunction with the modification, the Carrara venture has agreed to
transfer title to the lender if the venture fails to pay the loan in full on
the earlier of the extended maturity date or an acceleration of the loan as a
result of the occurrence of an event of default (as defined). This would
result in the Partnership no longer having an ownership interest in the
property. Such a decision would result in a gain for financial reporting and
Federal income tax purposes with no corresponding distributable proceeds.
Regarding the First Interstate Center, although new construction in the
Seattle office market has virtually ceased, the overall office market remains
very competitive due to a significant amount of vacancy and sublease space on
the market. In May 1989, an initiative was passed in Seattle to limit future
development of downtown office space. Over time, this initiative (which is
effective for ten years) may have a favorable impact on the Seattle office
market. Although the occupancy (97% at March 31, 1994) at First Interstate
Center has not been adversely affected to date by the competitive office
market, effective rental rates have decreased as a result. Due to the
competitive market conditions and the significant amounts of expiring square
footage over the next several years, the property will reserve a portion of
its cash flow in order to cover the re-leasing costs required. The
Partnership and its affiliated venture partner (Carlyle Real Estate Limited
Partnership-X, an affiliated partnership sponsored by the Corporate General
Partner of the Partnership) has reached an agreement in principle to sell
their interest in Carlyle Seattle to the unaffiliated venture partner.
Carlyle Seattle owns an interest, through an unaffiliated joint venture
partner, in the First Interstate Center. There can be no assurance that such
sale will occur. In addition, the first mortgage loan secured by the property
is scheduled to mature in December 1995. The venture anticipates approaching
the mortgage lender regarding an extension or modification of the existing
mortgage loan. There can be no assurance that any such extension or
modification will be obtained.
At the National City Center Office Building located in Cleveland, Ohio, a
major tenant (Baker & Hostetler) extended its lease term to 2001, but reduced
its space leased by approximately 18,000 square feet as of January 1993. The
extended lease requires tenant improvement costs of approximately $92,000 per
year through the expiration of the lease with an additional amount to be paid
in 1996 of approximately $730,000. These tenant improvement costs will result
in the property incurring a slight deficit for 1994. The Partnership received
a lease termination fee of approximately $1,100,000 from another tenant (KPMG
Peat Marwick) for vacating approximately 19,700 square feet (which was
subsequently leased to National City Bank). In January 1994, the debt service
payments under the existing mortgage increased from 9-5/8% to 11-7/8% until
the maturity of the loan in December 1995. The Partnership reached an
agreement in principle with the current mortgage lender to refinance the
existing mortgage. On May 2, 1994, the Partnership refinanced the existing
mortgage effective April 28, 1994, with an interest rate of 8.5%. The loan
will be amortized over 22 years with a balloon payment due on April 20, 2001.
The Partnership paid a prepayment penalty of approximately $581,000 based upon
the outstanding loan balance at the time of refinancing. In addition, the
lender required an escrow account of approximately $612,000 to be established
at the time of the refinancing which will be supplemented from time to time
for scheduled future tenant improvements at the property. The $1,164,000
refundable loan commitment fee paid by the Partnership in 1993 was applied to
accrued interest and the prepayment penalty, with the balance of $238,000
refunded to the Partnership (see note 6). Real estate taxes payable in 1994
are expected to increase due to a 25% reduction of a real estate tax abatement
that was received when the property was purchased. The remaining 25%
abatement expires in 1998 for taxes payable in 1999.
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.
In response to the weakness of the economy and the general security of
credit in the real estate industry financing in particular, the Partnership is
taking steps to preserve its working capital. Therefore, the Partnership is
carefully scrutinizing the appropriateness of any discretionary expenditures,
particularly in relation to the amount of working capital it has available.
By conserving working capital, the Partnership will be in a better position to
meet future needs of its properties without having to rely on external
financing sources.
Due to the factors discussed above and the general lack of buyers of real
estate today, it is likely that the Partnership may hold some of its
investment properties longer than originally anticipated in order to maximize
the return to the Limited Partners. Also, in light of the current severely
depressed real estate markets, it currently appears that the Partnership's
goal of capital appreciation will not be achieved. Although the Partnership
expects to distribute from sale proceeds some portion of the Limited Partners'
original capital, without a dramatic improvement in market conditions the
Limited Partners will not receive a full return of their original investment.
RESULTS OF OPERATIONS
The decrease in rents and other receivables as of March 31, 1994 as
compared to December 31, 1993 is primarily due to the collection in 1994 of
rents related to 1993 at the First Interstate Center.
The increase in buildings and improvements as of March 31, 1994 as
compared to December 31, 1993 is primarily due to parking garage renovation
and tenant improvements (totaling $200,000) at the National City Center Office
Building along with tenant improvements ($380,000) at the First Interstate
Center.
The increase in accrued interest as of March 31, 1994 as compared to
December 31, 1993 reflects the cumulative unpaid interest attributable to the
Carrara Office Building loan. Reference is made to Note 2(c).
The decrease in accrued real estate taxes as of March 31, 1994 as
compared to December 31, 1993 is primarily due to the timing of certain real
estate tax payments.
The decrease in rental income, depreciation expense and property
operating expenses for the three months ended March 31, 1994 compared to the
three months ended March 31, 1993 is primarily due to the second mortgage
lender's realization upon its security represented by the Country Square
Apartments (see Note 3(b)) and the sale of the Sierra Pines and Crossing
Apartments in July 1993 (see Note 4(b)). In addition, rental income decreased
due to a $1,100,000 termination fee received in January 1993 at the National
City Center Office Building.
The increase in venture partners' share of ventures' operations for the
three months ended March 31, 1994 as compared to the three months ended March
31, 1993 and the corresponding increase in venture partners' deficits in
venture as of March 31, 1994 as compared to December 31, 1993, is primarily
due to decreased rental income at the Carrara Place Office Building primarily
due to decreased occupancy.
The gain on disposition of investment property for the three months ended
March 31, 1993 is due to the second mortgage lender's realization upon its
security represented by the Country Square Apartments in February 1993 as
described above.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment properties.
<CAPTION>
1993 1994
------------------------------- --------------------------
At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30
---- ---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1. Carrara Place Office Building
Englewood, Colorado . . . . . . . . . . . . . . . . . . . 44% 43% 43% 43% 49%
2. The Crossing Apartments
Houston, Texas. . . . . . . . . . . . . . . . . . . . . . 93% 94% N/A N/A N/A
3. Stonybrook Apartments I & II
Tucson, Arizona. . . . . . . . . . . . . . . . . . . . . 93% 86% 97% 96% 96%
4. Permian Mall
Odessa, Texas . . . . . . . . . . . . . . . . . . . . . . 91% 90% 90% 90% 91%
5. First Interstate Center
Seattle, Washington . . . . . . . . . . . . . . . . . . . 96% 96% 97% 97% 97%
6. Sierra Pines Apartments
Houston, Texas. . . . . . . . . . . . . . . . . . . . . . 92% 92% N/A N/A N/A
7. National City Center Office Building
Cleveland, Ohio. . . . . . . . . . . . . . . . . . . . . 96% 94% 96% 96% 94%
<FN>
- - ------------
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
* Reference is made to Note 2(b) of Notes to Consolidated Financial Statements.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
4-A. Mortgage loan agreement between Wright-Carlyle Seattle and The
Prudential Insurance Company dated October 16, 1985, relating to the First
Interstate Center is hereby incorporated herein by reference to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433)
dated March 19, 1993.
4-B. Mortgage loan agreement between Carlyle/National City
Associates and New York Life Insurance Company dated November 15, 1983,
relating to the National City Center Office Building is hereby incorporated
herein by reference to the Partnership's report for December 31, 1992 on Form
10-K (File No. 0-12433) dated March 19, 1993.
4-C. Agreement of Modification of Note, Deed of trust and Other Loan
Documents, dated September 23, 1993 between the Partnership and The Travelers
Insurance Company relating to the Carrara Place Office Building is hereby
incorporated herein by reference to the Partnership's report for December 31,
1993 on Form 10-K (File No. 0-12344) dated March 25, 1994.
4-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 filed herewith.
10-A. Acquisition documents including the venture agreement relating
to the purchase by the Partnership of an interest in the First Interstate
Center in Seattle, Washington are hereby incorporated by reference to the
Partnership's prospectus on Form S-11 (File No. 2-76443), dated June 21, 1982.
10-B. Acquisition documents including the venture agreement relating
to the purchase by the Partnership of an interest in the National City Center
Office Building in Cleveland, Ohio are hereby incorporated by reference to the
Partnership's report on Form 8-K (File No. 2-76443), dated August 8, 1983.
10-C. Bargain and Sale Deed relating to the Partnership's disposition
of the Timberline Apartments in Denver, Colorado, dated July 25, 1990 is
hereby incorporated herein by reference to the Partnership's report for
December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
10-D. Sale documents and exhibits thereto relating to the
Partnership's sale of the Meadows Southwest Apartments in Houston, Texas are
hereby incorporated herein by reference to the Partnership's report on Form 8-
K (File No. 0-12433), dated January 11, 1991 by reference.
10-E. Non-Merger Quit Claim Deeds relating to the Partnership's
disposition of the Summerfield/Oakridge Apartments in Aurora, Colorado, dated
January 7, 1991 are hereby incorporated herein by reference to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433)
dated March 19, 1993.
10-F. Sale documents and exhibits thereto relating to the
Partnership's sale of the Sierra Pines and Crossing Apartments in Houston,
Texas are hereby incorporated herein by reference to the Partnership's report
on Form 8-K (File No. 0-12433), dated August 30, 1993.
10-G. Substitute Trustee's Deed relating to the Partnership's
disposition of the Country Square Apartments in Carrollton, Texas dated
February 2, 1993 is hereby incorporated by reference to the Partnership's
report on Form 8-K (File No. 0-12433), dated March 17, 1993.
(b) No report on Form 8-K was filed since the beginning of the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 11, 1994
AMENDED AND RESTATED PROMISSORY NOTE
$58,058,582.21 __________, __________
April __, 1994
FOR VALUE RECEIVED, CARLYLE/NATIONAL CITY ASSOCIATES, an Illinois
general partnership comprised of Carlyle Real Estate Limited
Partnership-XI, an Illinois limited partnership ("Carlyle XI"), and
Carlyle Real Estate Limited Partnership-XII, an Illinois limited
partnership ("Carlyle XII"), having an office at c/o JMB Realty
Corporation, 900 North Michigan Avenue, Chicago, Illinois 60611-1575
("Maker"), promises to pay to the order of NEW YORK LIFE INSURANCE
COMPANY, a New York mutual life insurance company having its principal
office at 51 Madison Avenue, New York, New York 10010 ("Holder"), at
its principal office in New York City, New York, or at such other place
as may be designated in writing by Holder, the principal sum of Fifty
Eight Million Fifty Eight Thousand Five Hundred Eighty Two and 21/100
Dollars ($58,058,582.21) (the "Principal Indebtedness"), in lawful
money of the United States of America, together with interest thereon
at the rate of eight and one-half percent (8.50%) per annum, payable
in monthly installments of principal and interest in the sum of Four
Hundred Eighty Six Thousand Seven Hundred Sixty Seven Dollars
($486,767.00), commencing on the tenth (10th) day of the month next
following the date hereof, and payable on the tenth day (10th) of each
and every month thereafter for seven (7) years, with the last
installment being due and payable on April 10, 2001 (the "Maturity
Date"), at which time the entire unpaid balance together with accrued
and unpaid interest shall be due and payable. Such monthly installments
shall be applied first to the payment of interest and the balance to
the reduction of principal. The first payment of principal and interest
shall be adjusted to provide for interest from the date hereof until
the date of the first payment.
This Note is secured by, among other things, (i) an Ohio Open
End Mortgage and Security Agreement, dated April 14, 1978, as amended
by an Amendment to Mortgage, dated as of November 18, 1980, as modified
by a Modification of Ohio Open End Mortgage and Security Agreement,
dated November 15, 1983, as further modified by a Second Modification
of Ohio Open End Mortgage and Security Agreement, dated the date hereof,
made by Maker to Holder (as so modified and amended, the "Mortgage")
encumbering certain premises situated in the City of Cleveland, County
of Cuyahoga, State of Ohio and known as the National City Center and
the improvements thereon, along with other property more particularly
described in the Mortgage (collectively the "Secured Property"), and
(ii) an Amended and Restated Assignment of Rents, Income, Profits and
Cash Collateral, dated the date hereof, from Maker to Holder. Each
of the documents mentioned in this paragraph and all other documents
either evidencing or further securing the Principal Indebtedness are
collectively referred to herein as the "Loan Documents," and the terms
and provisions of the Loan Documents are hereby fully incorporated
into this Note by this reference. Reference is made to the Loan
Documents for a description of the security for the payment of the
indebtedness evidenced hereby and the rights and obligations of the
Maker and the Holder in respect of such security, but neither such
reference nor any provision of or any action taken in respect of any
Loan Document shall impair Maker's absolute and unconditional obligation
for the payment of the indebtedness evidenced hereby in accordance
with the terms of this Note.
From and after the earlier to occur of (i) an Event of Default
(as defined in the Mortgage) or (ii) maturity of this Note, either
according to its terms or as the result of a declaration of maturity
made by Holder in accordance with the terms hereof, the entire principal
balance remaining unpaid hereunder shall automatically bear an annual
interest rate (in place of the rate hereinabove specified) equal to
thirteen and one-half percent (13.50%) per annum (the "Increased Rate")
unless applicable law requires a lesser such rate, in which event the
maximum rate permitted by law may be charged by Holder.
No privilege is reserved to prepay the Principal Indebtedness
prior to May 10, 1995 (the "Closed Period"). Beginning on May 10,
1995, privilege is reserved by Maker to prepay the entire outstanding
principal balance together with accrued and unpaid interest thereon
to the date of payment on such date or any subsequent monthly
installment date upon not less than ninety (90) days' prior written
notice to Holder of Maker's intention to make such prepayment, provided
there is paid, in addition to interest accrued to the date of such
prepayment, a prepayment charge which shall be equal to the greater
of (a) one percent (1%) of the principal balance prepaid, or (b) the
amount computed by multiplying the principal balance prepaid by the
percentage arrived at by multiplying (i) the difference between 8.50%
and the yield-to-maturity percentage for the U.S. Treasury Note closest
in maturity to the then remaining term of the loan evidenced hereby
as reported in The Wall Street Journal (or, if The Wall Street Journal
is no longer published, some other daily financial publication of
national circulation as selected by Holder) on the fifth (5th) business
day preceding the date of prepayment, by (ii) the quotient (rounded
to the nearest one-hundredth) arrived at by dividing the number of
days from and including the date of prepayment, to the Maturity Date
by 365. Notwithstanding the foregoing, but provided that such
outstanding principal amount shall not be due and payable as a result
of any of the events described in the following paragraph, Maker may
prepay the entire outstanding principal balance together with accrued
interest thereon to the date of payment without a prepayment charge
at any time during the sixty (60) day period immediately preceding
the Maturity Date upon not less than ninety (90) days' prior written
notice to Holder of Maker's intention to make such prepayment.
In the event the outstanding principal balance hereof shall become
due and payable as a result of (a) an Event of Default causing
acceleration under this Note or the Loan Documents, which Event of
Default shall, for purposes of assessing the prepayment charges provided
for herein, be conclusively deemed to be a willful default for purposes
of avoiding the prepayment charges to which Holder is entitled; (b)
the exercise by Maker of any right of redemption or other action to
prevent a foreclosure of the Secured Property; or (c) an acceleration
by Holder as a result of the sale or further encumbrance of the Secured
Property in violation of the applicable provisions of the Mortgage;
then, in such event, Maker shall pay the prepayment charge which would
otherwise be applicable hereunder; or if at that time there is no such
privilege of prepayment (e.g., during the Closed Period), then, to
the extent permitted by law, such prepayment charge shall be calculated
in the same manner as specified above.
Upon breach of any promise made or condition set forth in this
Note or in any of the other Loan Documents, including, without
limitation, a failure to make any payment of any installment of interest
and/or principal as and when the same becomes due and payable (whether
by extension, acceleration, or otherwise), or upon the occurrence of
any other Event of Default, then and in any such event, Holder may,
at its option, declare this Note and the entire outstanding Principal
Indebtedness to be immediately due and payable and collectible then
or thereafter as Holder may elect, regardless of the stated Maturity
Date.
Should the Principal Indebtedness or any part thereof be collected
at law or in equity, or in bankruptcy, receivership, or any other
court proceeding (whether at the trial or appellate level), or should
this Note be placed in the hands of attorneys for collection upon
default, Maker agrees to pay, in addition to the principal, prepayment
charge, interest and any other outstanding amounts due and payable
hereon, and if and to the extent provided by law, all costs of
collecting or attempting to collect this Note and enforcing Holder's
remedies under the Loan Documents, including reasonable attorneys'
fees and expenses, and the same shall constitute additional indebtedness
secured by the Loan Documents.
Maker recognizes that any default in the payment of any installment
of principal and/or interest due hereunder on the date the same is
due will result in loss and additional expense to Holder in servicing
the Principal Indebtedness, handling such delinquent payments and
meeting its other financial obligations, and that the extent of such
loss and additional expenses is extremely difficult and impractical
to ascertain. Maker therefore agrees that in the event any installment
of principal and/or interest due hereunder is not paid on the date
the same is due and payable, without regard to any grace periods, a
late charge of four percent (4%) of the overdue installment of principal
and/or interest shall be paid by Maker and that such amount is a
reasonable estimate of such loss and expense and may be charged by
Holder, at its option, for the purpose of defraying such loss and
expense, unless applicable law requires a lesser such charge, in which
event the maximum rate permitted by such law may be charged by Holder
for said purposes.
The failure of Holder to exercise the option for acceleration
of maturity, foreclosure or any other remedies provided herein or in
the Loan Documents following any default as aforesaid or to exercise
any other option granted to it hereunder, under the Mortgage or under
any of the other Loan Documents, in any one or more instances, or the
acceptance by Holder of partial payments or partial performance, shall
not constitute a waiver of any such default, but such option shall
remain continuously in force. Acceleration of maturity, once claimed
hereunder by Holder, may at its option be rescinded by written
acknowledgement to such effect, but the tender and acceptance of partial
payment or partial performance alone shall not in any way affect or
rescind such acceleration of maturity.
Maker hereby covenants and agrees that, together with and in
addition to the monthly payments of principal and/or interest payable
under the terms of this Note, Maker will deposit with Holder of this
Note or its agent, as directed by Holder, until this Note is fully
paid, installments of insurance premiums and Impositions (as defined
and required in the Mortgage). Amounts held hereunder shall not be
deemed to be trust funds, but may be commingled with the general funds
of Holder, and no interest shall be payable to Maker on such amounts.
It is the intention of Maker and Holder to conform strictly to
the usury laws now or hereafter in force in the State of Ohio, and
any interest payable under this Note, the Mortgage, the other Loan
Documents, and/or any of the other documents or instruments executed
by Maker in connection with the loan made or to be made hereunder shall
be subject to reduction to the amount not in excess of the maximum
non-usurious amount allowed under the usury laws of the State of Ohio
as now or hereafter construed by the courts having jurisdiction over
such matters. If the aggregate of all interest (whether designated
as interest, service charges, points or otherwise) contracted for,
chargeable or receivable under this Note, the Mortgage and any other
Loan Document should exceed the maximum legal rate, it shall be deemed
a mistake and such excess shall be canceled automatically and, if
theretofore paid, shall at the option of Holder either be rebated to
Maker or credited on the outstanding principal amount of this Note,
or, if the Note has been repaid, such excess shall be rebated to Maker.
In the event the Maturity Date is accelerated by reason of any provision
of this Note or by reason of an election by Holder resulting from an
Event of Default under the Loan Documents, voluntary prepayment by
Maker, or otherwise, then earned interest may never include more than
the maximum amount permitted by law, computed from the dates of each
advance of loan proceeds hereunder until payment, and any interest
in excess of the maximum amount permitted by law shall be canceled
automatically and, if theretofore paid, shall at the option of Holder
either be rebated to Maker or credited on the outstanding principal
amount of this Note or, if the Note has been repaid, the excess shall
be rebated to the Maker. This provision shall control every other
provision of all agreements between Maker and Holder.
Maker hereby waives presentment, protest, notice of protest, notice
of dishonor and diligence in collection, and any and all other notices
and matters of a like nature, except for those expressly required by
the Mortgage or this Note. Maker consents to any extension of time
(whether one or more) of payment hereof, release of all or any part
of the security for the payment of this obligation or release of any
person or entity liable for payment of this Note. Any such extension
or release may be made without notice to any such party and without
discharging said party's liability hereunder.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
Maker agrees hereby to waive and renounce any and all homestead
exemption rights against any or all of the debt evidenced hereby or
any renewal or extension thereof.
No failure or delay on the part of Holder in exercising any right,
power or privilege under this Note and no course of dealing between
Maker and Holder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies
which Holder would otherwise have at law or equity. No notice to or
demand on Maker in any case shall entitle Maker to any other or further
notice or demand in similar or other circumstances or constitute a
waiver of the right of Holder to any other or further action in any
circumstances without notice or demand.
Whenever in this Note one of the parties hereto is named or
referred to, the heirs, legal representatives, successors and assigns
of such party shall be included and all covenants and agreements
contained in this Note by or on behalf of Maker or by or on behalf
of Holder shall bind and inure to the benefit of such party's heirs,
legal representatives, successors and assigns, whether so expressed
or not.
If Maker consists of two (2) or more persons, entities, or persons
and entities, the obligations of each such person and entity comprising
Maker shall be joint and several.
The unenforceability or invalidity of any provision or provisions
of this Note as to any persons or entities or circumstances shall not
render that provision or those provisions unenforceable or invalid
as to any other persons or entities or circumstances, and all provisions
hereof, in all other respects, shall remain valid and enforceable.
Maker acknowledges that the ownership (and the continuation
thereof) of the Secured Property by Maker is of a material nature to
the loan and the making of the loan evidenced by this Note. Therefore,
Maker agrees that in the event of any transfer of all or any part of
the Secured Property or of any interest of a general partner of Maker
that is prohibited by the terms of the Mortgage or any other Loan
Document, howsoever evidenced or occasioned, then, at the option of
Holder, the entire outstanding Principal Indebtedness along with all
accrued interest thereon shall immediately become due and payable.
This Note amends and restates in its entirety, and represents
the unpaid principal balance of the indebtedness evidenced by, the
Prior Note (as hereinafter defined). As used in this Note, the term
"Prior Note" shall mean that certain Promissory Note dated April 14,
1978 made by National City Center Joint Venture (predecessor in interest
to Maker) and payable to the order of National City Bank in the original
principal amount of $50,000,000.00, said Promissory Note having been
assigned to and endorsed in favor of Holder, as subsequently amended
and restated in connection with the advance of additional sums by Holder
to Maker by that certain Mortgage Note, dated November 15, 1983, made
by Maker and payable to the order of Holder in the original principal
sum of $64,258,243.00. All of the liens and security interests created
by the Mortgage and the Assignment of Lessor's Interest in Leases as
described in the Prior Note hereby are renewed, amended and extended
to secure payment of the indebtedness evidenced by this Note. The
execution and delivery of this Note and the Loan Documents is not
intended to and shall not be construed (i) to deem to have repaid or
otherwise discharged any amount of principal of or interest on the
Prior Note, (ii) to effect a novation of or otherwise release the
obligations of Maker under or extinguish the debt evidenced by the
Prior Note, or (iii) to release, cancel, terminate or otherwise impair
the status or priority of all or any part of any lien or security
interest granted to Holder as collateral security for the obligations
of Maker under or in connection with the Prior Note.
In the event of any default by Maker under this Note, the Mortgage
or any other Loan Document, Holder shall have all rights reserved in
this Note, the Mortgage and every other Loan Document and shall have
full recourse to the Secured Property and to the other collateral given
by Maker to secure this Note, provided, however, that any judgment
obtained by Holder in any proceeding to enforce such rights shall be
enforced only against the Secured Property and such other collateral.
Notwithstanding the foregoing, Holder shall not in any way be prohibited
from naming Maker or any of its successors or assigns or any person
holding under or through them as parties to any actions, suits or other
proceedings initiated by Holder to enforce such rights or to foreclose
its mortgage lien or otherwise realize upon any other lien or security
interest created in any other collateral given to secure the payment
of this Note. In addition, the foregoing restriction shall not apply
to, and Maker shall be personally liable for, any losses, damages,
costs and expenses incurred by Holder as a result of (i) any material
misrepresentation (A) by Maker or any person or entity constituting
Maker to induce Holder to advance the principal amount evidenced hereby
or (B) contained in any Loan Document, (ii) fraud committed by Maker
or any person or entity constituting Maker, (iii) application of any
insurance proceeds, condemnation awards, trust funds, or Rents (as
defined in the Mortgage) in a manner which is not in accordance with
the provisions of the Mortgage, (iv) breach of any representation or
warranty contained in subsections 2.03B or C of the Mortgage, (v)
default with respect to any covenant contained in subsection 1.05F
of the Mortgage, (vi) any default with respect to Maker's obligations
to pay Impositions pursuant to Section 1.02 of the Mortgage or to pay
insurance premiums pursuant to Section 1.03 of the Mortgage (provided,
however, that this clause (vi) shall not apply to make such obligations
recourse as to Maker in the event that Maker's default in the payment
of such sums shall result directly from the unavailability of rents,
income or profits from the Secured Property, so long as Maker shall
comply with the requirements set forth in the Mortgage, including
without limitation those contained at Section 1.08E, pertaining to
the use and application of rents, income and profits from the Secured
Property), or (vii) any liability or obligation of Maker pursuant to
the Environmental Indemnity Agreement dated the date hereof from Maker
to Holder.
Notwithstanding the foregoing or any provision to the contrary
in any other Loan Document, no present or future constituent partner
in or agent of Carlyle XI or Carlyle XII, nor any shareholder, partner,
officer, director, employee, trustee, beneficiary or agent of any
corporation, partnership or trust that is or becomes a constituent
partner in Carlyle XI or Carlyle XII, shall be personally liable,
directly or indirectly, under or in connection with any Loan Document,
or any instrument or certificate securing or otherwise executed in
connection with any Loan Document, or any amendments or modifications
to any of the foregoing made at any time or times, heretofore or
hereafter, and Holder hereby waives any such personal liability. For
the purposes of the Loan Documents and such instruments and
certificates, and any such amendments or modifications, neither the
negative capital account of any constituent partner in Carlyle XI or
Carlyle XII nor any obligation of any such partner to restore a negative
capital account or to contribute capital to Carlyle XI or Carlyle XII
or to any other constituent partner therein shall at any time be deemed
to be the property or asset of Carlyle XI, Carlyle XII or any such
other constituent partner, and Holder shall have no right to collect,
enforce or proceed against or with respect to any such negative capital
account or partner's obligation to restore or contribute.
Whenever used, the words "Maker" and "Holder" shall be deemed
to include the respective heirs, successors, assigns and legal
representatives of Maker and Holder.
This Note is to be construed and enforced according to and governed
by the laws of the State of Ohio.
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note on the date first
above written.
"MAKER"
CARLYLE/NATIONAL CITY ASSOCIATES,
an Illinois general partnership
By: Carlyle Real Estate Limited
Partnership-XI, an Illinois
limited partnership, General
Partner
By: JMB Realty Corporation,
a Delaware corporation,
Corporate General Partner
By: ____________________
Name:_______________
Title:______________
Attest: ________________
Name:___________
Title:__________
And: Carlyle Real Estate Limited
Partnership-XII, an Illinois
limited partnership, General
Partner
By: JMB Realty Corporation,
a Delaware corporation,
Corporate General Partner
By: ___________________
Name:______________
Title:_____________
Attest: _______________
Name:__________
Title:_________
