SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 1994 Commission File No. 0-15962
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)
Illinois 36-3256340
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters . 10
Item 6. Selected Financial Data . . . . . . . . . . . . 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 21
Item 8. Financial Statements and Supplementary Data . . 36
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . 100
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 100
Item 11. Executive Compensation. . . . . . . . . . . . . 103
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . 104
Item 13. Certain Relationships and Related Transactions. 105
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 105
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 109
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report.
The registrant, Carlyle Real Estate Limited Partnership-XIV (the
"Partnership"), is a limited partnership formed in late 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois to invest in improved income-producing commercial and residential
real property. On June 4, 1984, the Partnership commenced an offering to
the public of $250,000,000 (subject to increase by up to $250,000,000) in
Limited Partnership Interests (and assignee interests therein)
("Interests") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (No. 2-88687). A total of 401,048.66 Interests were
sold to the public at $1,000 per Interest. The holders of 226,632.06
Interests were admitted to the Partnership in 1984; the holders of
174,416.6 Interests were admitted to the Partnership in 1985. The offering
closed July 15, 1985. No Limited Partner has made any additional capital
contribution after such date. The Limited Partners of the Partnership
share in their portion of the benefits of ownership of the Partnership's
real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title, leasehold estates and/or through
joint venture partnership interests. The Partnership's real estate
investments are located throughout the nation and it has no real estate
investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate on or
before December 31, 2034. Accordingly, the Partnership intends to hold the
real properties it acquires for investment purposes until such time as sale
or other disposition appears to be advantageous. Unless otherwise
described, the Partnership expects to hold its properties for long-term
investment. Due to current market conditions, the Partnership is not able
to determine the holding period for its remaining properties. At sale of a
particular property, the proceeds, if any, are generally distributed or
reinvested in existing properties rather than invested in acquiring
additional properties.
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1994,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (j) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Old Orchard Shopping
Center
Skokie (Chicago),
Illinois. . . . . . 783,000 sq.ft. 4/1/84 8/30/93 fee ownership of
g.l.a. land and improvements
(through joint venture
partnerships) (c)(e)
2. Brittany Downs
Apartments
Phase I and Phase II,
Thornton (Denver),
Colorado. . . . . . 464 units 8/15/84 1% fee ownership of land and
improvements
3. Scottsdale Financial
Center I
Scottsdale,
Arizona . . . . . . 106,800 sq.ft. 9/28/84 12/17/93 fee ownership of land and
n.r.a. improvements (f)
4. Scottsdale Financial
Center II
Scottsdale,
Arizona . . . . . . 151,625 sq.ft. 9/28/84 10/1/93 fee ownership of improve-
n.r.a. ments and ground leasehold
interest in land (f)
5. 237 Park Avenue
Building
New York,
New York. . . . . . 1,140,000 sq.ft. 8/14/84 7% fee ownership of land and
n.r.a. improvements (through joint
venture partnerships) (c)
6. 1290 Avenue of the
Americas Building
New York,
New York. . . . . . 2,000,000 sq.ft. 7/27/84 15% fee ownership of land and
n.r.a. improvements (through joint
venture partnerships)
(c)(k)
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1994,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (j) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
---------------------- ---------- -------- ---------------------- ---------------------
7. 2 Broadway Building
New York,
New York. . . . . . 1,600,000 sq.ft. 8/14/84 10% fee ownership of land and
n.r.a. improvements (through joint
venture partnerships) (c)
8. 1090 Vermont Avenue
Building
Washington, D.C.. . 140,000 sq.ft. 9/26/84 2% fee ownership of land and
n.r.a. improvements (through joint
venture partnership) (c)
9. Mariners Pointe
Apartments
Stockton,
California. . . . . 220 units 10/2/84 1% fee ownership of land and
improvements (through joint
venture partnership) (c)
10. Louisiana Tower
Shreveport,
Louisiana . . . . . 349,000 sq.ft. 11/14/84 5% fee ownership of improve-
n.r.a. ments and ground leasehold
interest in land (d)
11. Marketplace at
South Street
Seaport
New York,
New York. . . . . . 263,000 sq.ft. 12/14/84 3/8/88 fee ownership of improve-
n.r.a. ment and ground leasehold
interest in land (through
joint venture partnership)
12. Gateway Tower
White Plains,
New York. . . . . . 552,000 sq.ft. 12/31/84 12/30/92 fee ownership of land and
n.r.a. improvements (through joint
venture partnership) (c)(h)
13. Piper Jaffray Tower
Minneapolis,
Minnesota . . . . . 723,755 sq.ft. 12/27/84 5% fee ownership of land and
n.r.a. improvements (through joint
venture partnerships) (c)
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1994,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (j) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
---------------------- ---------- -------- ---------------------- ---------------------
14. 900 Third Avenue
Building
New York,
New York. . . . . . 517,000 sq.ft. 12/28/84 5% fee ownership of land and
n.r.a. improvements (through joint
venture partnerships) (c)
15. Wells Fargo Center
-IBM Tower
Los Angeles,
California. . . . . 1,100,000 sq.ft. 6/28/85 10% fee ownership of land and
n.r.a. improvements (through joint
venture partnership)
(c)(k)
16. Louis Joliet Mall
Joliet, Illinois. . 305,000 sq.ft. 7/31/85 5% fee ownership of land and
g.l.a. improvements (k)
17. Turtle Creek Centre
Dallas, Texas . . . 296,378 sq.ft. 8/30/85 3/7/89 fee ownership of land and
n.r.a. improvements (through joint
venture partnership) (g)
18. Yerba Buena West
Office Building
San Francisco,
California. . . . . 267,687 sq.ft. 8/30/85 6/24/92 fee ownership of land and
n.r.a. improvements (through joint
venture partnerships)
(c)(i)
19. Wilshire Bundy
Plaza
Los Angeles,
California. . . . . 284,724 sq.ft. 11/7/85 9% fee ownership of improve-
n.r.a. ments and ground leasehold
interest in land (d)(k)<PAGE>
<FN>
-----------------------
(a) The computation of this percentage for properties held at
December 31, 1994 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b) Reference is made to Note 4 and to Note 3 to Combined Financial
Statements filed with this annual report for the current outstanding
principal balances and a description of the long-term mortgage indebtedness
secured by the Partnership's real property investments.
(c) Reference is made to Note 3 for a description of the joint venture
partnership or partnerships through which the Partnership made this real
property investment.
(d) Reference is made to Note 8(b) for a description of the leasehold
interest, under a ground lease, in the land on which this real property
investment is situated.
(e) Reference is made to Note 3(b) for a description of the sale of the
Partnership's interest in this investment property.
(f) Reference is made to Note 6(a) for a description of the disposition
of this investment property.
(g) Reference is made to Note 3(h) for a description of the disposition
of this investment property.
(h) Reference is made to Note 3(d) for a description of the disposition
of this investment property.
(i) Reference is made to Note 3(i) for a description of the disposition
of this investment property.
(j) Reference is made to Item 8 - Schedule IIIs to the Consolidated and
Combined Financial Statements filed with this annual report for further
information concerning real estate taxes and depreciation.
(k) Reference is made to Item 6 - Selected Financial Data for additional
operating and lease expiration data concerning this investment property.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned or advised by affiliates of the General Partners or properties owned
by certain of the joint venture partners) in the respective vicinities in
which they are located. Such competition is generally for the retention of
existing tenants. Additionally, the Partnership is in competition for new
tenants in markets where significant vacancies are present. Reference is
made to Item 7 below for a discussion of competitive conditions and future
renovation and capital improvement plans of the Partnership and certain of
its significant investment properties. Approximate occupancy levels for
the properties are set forth in the table in Item 2 below to which
reference is hereby made. The Partnership maintains the suitability and
competitiveness of its properties in its markets primarily on the basis of
effective rents, tenant allowances and service provided to tenants. In the
opinion of the Corporate General Partner of the Partnership, all of the
investment properties held at December 31, 1994 are adequately insured.
Although there is earthquake insurance coverage for a portion of the value
of the Partnership's investment properties, the Corporate General Partner
does not believe that such coverage for the entire replacement cost of the
investment properties is available on economic terms.
Reference is made to Item 6 and Note 8(a) and Note 4 of Notes to
Combined Financial Statements filed with this annual report for a schedule
of minimum lease payments to be received in each of the next five years,
and in the aggregate thereafter, under leases in effect at certain of the
Partnership's investment properties as of December 31, 1994.
The Partnership has approximately 34 full-time and 27 part-time
personnel performing on-site duties at certain of the Partnership's
properties, none of whom are officers or directors of the Corporate General
Partner of the Partnership.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns directly or through joint venture partnerships
the properties or interests in the properties referred to under Item 1
above to which reference is hereby made for a description of said
properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1994 and 1993 for the Partnership's investment properties owned
during 1994:
<TABLE>
<CAPTION>
1993 1994
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Wilshire Bundy
Plaza
Los Angeles,
California. . . . . . . . Financial Ser-
vices/Advertising 91% 89% 89% 87% 87% 87% 80% 80%
2. Brittany Downs
Apartments
Phase I and Phase II
Thornton (Denver),
Colorado. . . . . . . . . Apartments 97% 97% 98% 95% 96% 96% 96% 95%
3. Mariners Pointe
Apartments
Stockton, California. . . Apartments 88% 93% 93% 90% 84% 86% 96% 91%
4. 237 Park Avenue
Building
New York, New York. . . . Advertising/
Insurance/Paper/
Real Estate
Investment 99% 99% 99% 98% 98% 98% 98% 98%
5. 1290 Avenue of the
Americas Building
New York, New York. . . . Financial Services 97% 95% 95% 98% 90% 91% 91% 94%
6. 2 Broadway Building
New York, New York. . . . Financial Services 59% 59% 29% 30% 30% 19% 19% 18%
7. 1090 Vermont Avenue
Building
Washington, D.C.. . . . . Trade Associations 99% 99% 99% 99% 99% 99% 99% 99%
1993 1994
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
8. Louisiana Tower
Shreveport, Louisiana . . Natural Gas/
Banking 90% 90% 90% 90% 83% 86% 88% 88%
9. Piper Jaffray Tower
Minneapolis,
Minnesota . . . . . . . . Legal Services/
Advertising/
Financial Services 97% 98% 98% 98% 99% 99% 98% 98%
10. 900 Third Avenue
Building
New York, New York. . . . Legal Services/
Detective Agency/
Insurance 91% 94% 94% 95% 94% 94% 94% 94%
11. Wells Fargo Center
-IBM Tower
Los Angeles,
California. . . . . . . . Business Infor-
mation Systems 98% 98% 98% 98% 97% 97% 97% 96%
12. Louis Joliet Mall
Joliet, Illinois. . . . . Retail 89% 86% 85% 82% 75% 72% 76% 79%
<FN>
--------------------
Reference is made to Item 6, Item 7, Note 8 and Note 4 of Notes to
Combined Financial Statements for further information regarding property
occupancy, competitive conditions and tenant leases at the Partnership's
investment properties.
</TABLE>
ITEM 3. LEGAL PROCEEDING
Reference is made to Note 3(f) for a discussion of certain litigation
involving the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1994 and 1993.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1994, there were 38,859 record holders of Interests
of the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Corporate General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any economic
aspects of the transaction, will be subject to negotiation by the investor.
There are certain conditions and restrictions on the transfer of Interests,
including, among other things, the requirement that the substitution of a
transferee of Interests as a Limited Partner of the Partnership be subject
to the written consent of the Corporate General Partner. The rights of a
transferee of Interests who does not become a substituted Limited Partner
will be limited to the rights to receive his share of profits or losses and
cash distributions from the Partnership, and such transferee will not be
entitled to vote such Interests. No transfer will be effective until the
first day of the next succeeding calendar quarter after the requisite
transfer form satisfactory to the Corporate General Partner has been
received by the Corporate General Partner. The transferee consequently
will not be entitled to receive any cash distributions or any allocable
share of profits or losses for tax purposes until such next succeeding
calendar quarter. Profits or losses from operations of the Partnership for
a calendar year in which a transfer occurs will be allocated between the
transferor and the transferee based upon the number of quarterly periods in
which each was recognized as the holder of the Interests, without regard to
the results of the Partnership's operations during particular quarterly
periods and without regard to whether cash distributions were made to the
transferor or transferee. Profits or losses arising from the sale or other
disposition of Partnership properties will be allocated to the recognized
holder of the Interests as of the last day of the quarter in which the
Partnership recognized such profits or losses. Cash distributions to a
holder of Interests arising from the sale or other disposition of
Partnership properties will be distributed to the recognized holder of the
Interests as of the last day of the quarterly period with respect to which
such distribution is made.
Reference is made to Note 5 for a discussion of the provisions of the
Partnership Agreement relating to cash distributions. Reference is made to
Item 6 below for a discussion of cash distributions made to the Investors.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1994, 1993, 1992, 1991 AND 1990
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1994 1993 1992 1991 1990
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . $ 23,597,310 25,596,437 26,852,635 26,614,275 30,853,451
============ =========== =========== =========== ===========
Operating loss . . . . . . $ (8,019,023) (12,471,986) (22,560,142) (12,030,996) (22,263,374)
Partnership's share of
loss from operations
of unconsolidated
ventures. . . . . . . . . (16,851,858) (60,283,861) (22,495,785) (32,932,440) (28,795,270)
Venture partners' share
of ventures' operations . -- 22,472 70,706 72,816 54,343
------------ ----------- ----------- ----------- -----------
Net operating loss . . . . (24,870,881) (72,733,375) (44,985,221) (44,890,620) (51,004,301)
Gain on sale of
unconsolidated
venture or on sale
or disposition of
investment properties . . 1,702,082 26,281,496 8,783,892 -- --
Extraordinary item . . . . (3,000,000) -- -- -- --
------------ ----------- ----------- ----------- -----------
Net loss . . . . . . . . . $(26,168,799) (46,451,879) (36,201,329) (44,890,620) (51,004,301)
============ =========== =========== =========== ===========
Net earnings (loss) per
Interest (b):
Net operating loss. . . $ (59.53) (177.06) (107.68) (107.45) (122.09)
Gain on sale of uncon-
solidated ventures or
on sale or disposition
of investment
properties . . . . . . 4.20 64.88 21.68 -- --
Extraordinary item. . . (7.18) -- -- -- --
------------ ----------- ----------- ----------- -----------
Net loss . . . . . . . . . $ (62.51) (112.18) (86.00) (107.45) (122.09)
============ =========== =========== =========== ===========
Total assets . . . . . . . $147,075,454 149,516,685 191,806,563 211,584,255 218,813,064
Long-term debt . . . . . . $ 25,794,970 98,747,743 116,309,718 108,899,903 106,308,500
Cash distributions
per Interest (c) . . . . $ -- -- -- 6.50 14.00
============ =========== =========== =========== =========== <PAGE>
<FN>
-------------
(a) The above selected financial data should be read in conjunction
with the consolidated financial statements and the related notes appearing
elsewhere in this annual report.
(b) The net loss per Interest is based upon the number of Interests
outstanding at the end of the period.
(c) Cash distributions to the Limited Partners since the inception of
the Partnership have represented a return of capital for financial
reporting purposes. Each Partner's taxable income (or loss) from the
Partnership in each year is equal to his allocable share of the taxable
income (loss) of the Partnership, without regard to the cash generated or
distributed by the Partnership.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1994
<CAPTION>
Property
--------
Wilshire Bundy
Plaza a) The GLA occupancy rate and average base rent per square foot as of December 31
for each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C>
1990 . . . . . . 99% 23.71
1991 . . . . . . 95% 23.62
1992 . . . . . . 91% 24.24
1993 . . . . . . 87% 23.80
1994 . . . . . . 80% 23.59
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Dunn & Bradstreet (1) 60,476 $1,491,993 3/1995 N/A
Software, Inc.
(Financial Services
Corporation)
Bozell, Jacobs, Kenyon
& Eckhardt 51,097 1,226,563 5/1996 N/A
(Advertising Agency)
<FN>
(1) During the third quarter of 1993, Dunn & Bradstreet vacated approximately 35,000
square feet of its space. The tenant continues to pay rent on this space pursuant to its lease obligation.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Wilshire Bundy Plaza:
Annualized Percent of
Number of Approx. Total Base Rent Total 1994
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995 8 74,581 1,806,221 30.6%
1996 7 69,610 1,696,956 28.7%
1997 6 35,209 972,960 16.5%
1998 6 13,891 253,536 4.3%
1999 9 59,041 1,353,522 22.9%
2000 4 30,344 860,304 14.6%
2001 -- -- -- --
2002 -- -- -- --
2003 -- -- -- --
2004 2 9,306 201,720 3.4%
<FN>
(1) Excludes leases that expire in 1995 for which renewal leases or leases with
replacement tenants have been executed as of March 27, 1995.
</TABLE>
<TABLE>
<CAPTION>
Property
--------
1290 Avenue
of the Americas
Office Building a) The GLA occupancy rate and average base rent per square foot as of December 31 for
each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C>
1990 . . . . . . 97% 36.11
1991 . . . . . . 97% 36.25
1992 . . . . . . 97% 36.94
1993 . . . . . . 98% 35.78
1994 . . . . . . 94% 36.93
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
None - No single tenant represents more than 10% of the gross leasable area of the
property.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the 1290 Avenue of the Americas:
Annualized Percent of
Number of Approx. Total Base Rent Total 1994
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995 113 368,016 14,288,064 21%
1996 10 207,283 4,873,060 7%
1997 6 100,250 3,545,310 5%
1998 17 332,992 15,554,607 22%
1999 8 78,538 2,843,196 4%
2000 3 5,940 118,800 --
2001 1 96,700 4,158,100 6%
2002 14 223,896 9,491,154 14%
2003 6 45,153 2,011,830 3%
2004 9 103,381 5,811,346 8%
<FN>
(1) Excludes leases that expire in 1995 for which renewal leases or leases with replacement
tenants have been executed as of March 27, 1995.
</TABLE>
<TABLE>
<CAPTION>
Property
--------
Wells Fargo
Center a) The GLA occupancy rate and average base rent per square foot as of December 31, for
each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C>
1990 . . . . . . 100% 31.22
1991 . . . . . . 96% 31.84
1992 . . . . . . 98% 29.11
1993 . . . . . . 98% 30.66
1994 . . . . . . 96% 32.46
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
International Business 305,934 $21,596,668 12/1998 N/A
Machines Corporation (1)
(1)
Los Angeles Unified
School District (1) 273,559 $ 1,188,128 3/2002 N/A
(1)
(1) In March 1995, the Venture entered into a seven year direct lease with the Los
Angeles Unified School District ("LAUSD") for a portion of the space formerly occupied by International Business
Machines Corporation ("IBM"). In addition, IBM will reimburse the Venture for any shortfalls between amounts
collected under the LAUSD lease and amounts due under the IBM lease through December 1998. Base rent per annum
for LAUSD represents amounts due for 1995 from the effective date of its lease, March 1, 1995. Base rent per
annum for IBM includes reimbursement of shortfalls for 1995.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Wells Fargo Center:
Annualized Percent of
Number of Approx. Total Base Rent Total 1994
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995 4 28,888 $ 446,320 1.3%
1996 9 88,372 2,319,765 6.8%
1997 5 26,191 935,018 2.7%
1998 25 301,480 11,209,026 32.7%
1999 2 24,327 150,298 0.4%
2000 -- -- -- --
2001 5 53,787 1,341,985 3.9%
2002 6 351,491 10,400,619 30.3%
2003 7 67,700 1,890,861 5.5%
2004 -- -- -- --
<FN>
(1) Excludes leases that expire in 1995 for which renewal leases or leases with
replacement tenants have been executed as of March 27, 1995.
</TABLE>
<TABLE>
<CAPTION>
Property
--------
Louis Joliet
Mall
a) The GLA occupancy rate and average base rent per square foot as of December 31, for
each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C>
1990 . . . . . . 92% 11.67
1991 . . . . . . 92% 12.01
1992 . . . . . . 91% 12.41
1993 . . . . . . 82% 13.56
1994 . . . . . . 79% 13.53
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
None - No single tenant represents more than 10%
of the gross leasable area of the property.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Louis Joliet Mall:
Annualized Percent of
Number of Approx. Total Base Rent Total 1994
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1995 9 19,315 285,852 9%
1996 13 19,793 379,812 12%
1997 8 14,721 264,984 8%
1998 7 31,158 328,212 10%
1999 11 18,018 401,016 12%
2000 5 11,249 150,828 5%
2001 5 17,073 195,528 6%
2002 5 9,505 245,964 8%
2003 10 50,140 457,224 14%
2004 9 23,561 526,212 16%
<FN>
(1) Excludes leases that expire in 1995 for which renewal leases or leases with replacement
tenants have been executed as of March 27, 1995.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On June 4, 1984, the Partnership commenced an offering of $250,000,000
(subject to increase by up to $250,000,000) pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. All Interests
were subscribed and issued between June 4, 1984 and July 15, 1985 pursuant
to the public offering from which the Partnership received gross proceeds
of $401,053,660.
After deducting selling expenses and other offering costs, the
Partnership had approximately $351,747,000 with which to make investments
in income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments and for working capital. A portion of such proceeds was
utilized to acquire the properties described in Item 1 above.
At December 31, 1994, the Partnership and its consolidated ventures
had cash and cash equivalents of approximately $18,419,000. Such funds and
short-term investments of approximately $2,129,000 are available for
distributions to partners and working capital requirements including the
Partnership's potential funding obligations for cash operating deficits
currently being incurred at the Mariner's Pointe Apartments and Louis
Joliet Mall. In February 1995, the Partnership distributed $8,020,647 to
the Limited Partners ($20 per limited partnership interest) and $81,017 to
the General Partners out of proceeds from the sale or refinancing of
certain investment properties. Reference is made to Notes 3(b), 3(j),
4(b)(i) and 11(a). The Partnership and its consolidated venture have
currently budgeted in 1995 approximately $2,587,627 for tenant improvements
and other capital expenditures. The Partnership's share of such items and
its share of such similar items for its unconsolidated ventures in 1995 is
currently budgeted to be approximately $5,236,497. Actual amounts expended
in 1995 may vary depending on a number of factors including actual leasing
activity, results of property operations, liquidity considerations and
other market conditions over the course of the year. The source of capital
for such items and for both short-term and long-term future liquidity and
distributions to partners is dependent upon net cash generated by the
Partnership's investment properties and the sale or refinancing of such
investments. However, due to the property specific discussions below, the
Partnership considers only Louis Joliet Mall, 1090 Vermont Avenue and 900
Third Avenue to be significant sources of future long-term operational cash
generated. In such regard, reference is made to the Partnership's property
specific discussions below and also to the Partnership's disclosure of
certain property lease expirations in Item 6. Due to the above situations
and the property specific concerns discussed below, the Partnership had
suspended operating distributions beginning with the fourth quarter 1991
distribution payable in February 1992.
As of December 31, 1994, the current portion of the long-term
indebtedness of the Partnership and its consolidated ventures was
approximately $94,881,000, including the entire indebtedness encumbering
Louisiana Tower, Brittany Downs Apartments - Phase II, Wilshire Bundy
Plaza, the Partnership's interest in the Wells Fargo South Tower office
building, and the second mortgage on Louis Joliet Mall. Reference is made
to Notes 4(a) and 4(b).
Gateway Tower
On December 30, 1992, the underlying lender realized on its security
and took title to the property. The Partnership recognized a gain for
financial reporting and Federal income tax purposes during 1992 of
$7,130,438 and $14,604,506, respectively, with no corresponding
distributable proceeds.
During 1990, the joint venture partner ceased making required capital
contributions to the joint venture to fund guaranteed payments to the
Partnership for debt service payments to the underlying lender. The joint
venture partner's funding obligation was secured by a guarantee from an
affiliated entity of the joint venture partner. After careful review of
the joint venture partner and its affiliate's financial condition, the
Partnership determined that they did not have the ability to satisfy any of
their financial obligations under the joint venture agreement. Therefore,
the Partnership decided to forego any further attempts to recover amounts
due from them as a result of their defaults.
Piper Jaffray Tower
The Minneapolis office market remains competitive due to the
significant amount of new office building developments, which has caused
effective rental rates achieved at Piper Jaffray Tower to be below
expectations. During the fourth quarter of 1993, the joint venture
finalized a lease amendment with Popham, Haik, Schnobrich & Kaufman, Ltd.
(104,843 square feet). The amendment provides for the extension of the
lease term from February 1, 1997 to January 31, 2003 in exchange for a rent
reduction effective February 1, 1994. In addition, the tenant will lease
an additional 10,670 square feet effective August 1, 1995. The rental rate
on the expansion space approximates market which is significantly lower
than the reduced rental rate on the tenant's current occupied space.
During the second quarter of 1994, Piper Jaffray, Inc. (275,758 square
feet) agreed to expand its leased space by 3,362 square feet in July 1995
and 19,851 square feet in December 1995. Such space is currently leased to
tenants whose leases expire just prior to the effective dates for Piper's
expansions. The expansion space lease expiration date will be coterminous
with Piper's existing lease expiration date of March 2000 and the net
effective rental rate approximates market.
Pursuant to the modification of the mortgage loan made in August 1992,
to the extent the investment property generates cash flow after leasing and
capital costs, and 25% of the ground rent, such amount will be paid to the
lender as a reduction of the principal balance of the mortgage loan. The
excess cash flow generated by the property in 1992 totalled $923,362 and
was remitted to the lender in September 1993. During 1993, the excess cash
flow generated under this agreement was $1,390,910 and was remitted to the
lender in May 1994. During 1994, the excess cash flow generated under this
agreement was $353,251 which is expected to be remitted to the lender
during the second quarter of 1995. The mortgage note provides for the
lender to earn a minimum internal rate of return which increases over the
term of the note. Accordingly, for financial reporting purposes, interest
expense has been accrued at a rate of 13.59% per annum which is the
estimated minimum internal rate of return per annum assuming the note is
held to maturity. On a monthly basis, the venture deposits the property
management fee into an escrow account to be used for future leasing costs
to the extent cash flow is not sufficient to cover such items. To date, no
escrow funds have been required to be used for leasing costs. The manager
of the property (which was an affiliate of the Corporate General Partner
through November 1994 (see Note 6(b)) has agreed to defer receipt of its
management fee until a later date. As of December 31, 1994, the manager
has deferred approximately $2,398,000 of management fees ($2,357,000 of
which represents fees deferred by the former affiliated manager). In order
for the Partnership to share in future net sale or refinancing proceeds,
there must be a significant improvement in current market and property
operating conditions resulting in a significant increase in value of the
property. Reference is made to Note 3(e) for further discussion of this
investment property.
Wells Fargo Center
The Wells Fargo Center operates in the downtown Los Angeles office
market, which has become extremely competitive over the last several years
with the addition of several new buildings that has resulted in a high
vacancy rate of approximately 25% in the marketplace. In 1992, two major
law firm tenants occupying approximately 11% of the building's space
approached the joint venture indicating that they were experiencing
financial difficulties and desired to give back a portion of their leased
space in lieu of ceasing business altogether. The joint venture reached
agreements which resulted in a reduction of the space leased by each of
these tenants. Also, a major tenant, IBM, leasing approximately 58% of the
tenant space in the Wells Fargo Building, is sub-leasing a portion of its
space which is scheduled to expire in December 1998. In addition, the
joint venture has entered into a seven year direct lease with the Los
Angeles United School District ("LAUSD") for approximately one-half of
IBM's space beginning March 1, 1995. Under the terms of an agreement
reached with IBM, the joint venture will be reimbursed by IBM for all
shortfalls between amounts due under the IBM lease and the LAUSD lease. In
early 1995, two major law firm tenants occupying approximately 5% of the
building's space notified the joint venture of their intentions to disband
each of these respective firms. The joint venture has been negotiating
separate termination agreements with these tenants which provide for a
combination of lump sum payments to be received by the joint venture upon
execution of the termination agreements, as well as additional monthly
payments to be received over a ten month period from one of these tenants.
The Partnership expects that the competitive market conditions and the
continued recession in Southern California will have an adverse affect on
the building through lower effective rental rates achieved on releasing of
existing space which expires or is given back over the next several years.
In addition, new leases will likely require expenditures for lease
commissions and tenant improvements prior to occupancy. This anticipated
decline in rental rates, the anticipated increase in re-leasing time and
the costs upon releasing will result in a decrease in cash flow from
operations over the near term. The Partnership's share of distributions
from the joint venture for 1992 and 1993 were insufficient to cover the
debt service on the promissory note secured by the Partnership's interest
in the joint venture. Such shortfall was due to rental concessions granted
to facilitate leasing of space taken back in 1992 from the two tenants
noted above and the expansion of one of the other major tenants in the
building. The property produced cash flow and distributed approximately
$1,963,000 to the Partnership in 1994.
The mortgage note secured by the property, as well as the promissory
note secured by the Partnership's interest in the joint venture matured
December 1, 1994. The Partnership and the joint venture have been in
discussions with the respective lenders regarding an extension of the
mortgage note and the promissory note. The Partnership and the joint
venture have reached an agreement with the lender of the mortgage note
whereby the lender will refrain from exercising its rights and remedies
under the loan documents through April 1, 1995 while the Partnership and
the venture continue to negotiate an extension or refinancing of the note
with the lender. The venture continues to make interest payments to the
lender under the original terms of the mortgage note and is required to
escrow all available cash flow. The Partnership has ceased making debt
service payments on the promissory note and an extension or refinancing
with the lender is likely to be dependent on the results of negotiations
with the lender of the mortgage note. There is no assurance that the joint
venture or the Partnership will be able to refinance these notes. In the
absence of an extension or refinancing of the notes, the Partnership may
decide not to commit any significant additional amounts to the property.
This would likely result in the Partnership no longer having an ownership
interest in the property, and would result in a gain for financial
reporting and for Federal income tax purposes with no corresponding
distributable proceeds. The promissory note secured by the Partnership's
interest in the joint venture has been classified at December 31, 1994 and
1993 as a current liability in the accompanying consolidated financial
statements. In view of, among other things, current and anticipated market
and leasing conditions affecting the property, including uncertainty
regarding the amount of space, if any, which IBM will renew when its lease
expires in December 1998 (on the space remaining after the direct leased
space to LAUSD), the South Tower Venture, as a matter of prudent accounting
practice, recorded a provision for value impairment of $67,479,871 (of
which $10,017,591 has been allocated to the Partnership and was reflected
in the Partnership's share of operations of unconsolidated ventures). Such
provision, made as of August 31, 1993, was recorded to reduce the net
carrying value of the Wells Fargo Center to the then outstanding balance of
the related non-recourse debt. The property did not sustain any
significant damage as a result of the January 1994 earthquake in southern
California. Reference is made to Notes 1, 3(c)(iii) and 4(b)(vii).
Brittany Downs Apartments - Phase I and II
In June 1993, the Partnership refinanced the Brittany Downs Apartments
Phase I $7,090,000 mortgage loan resulting in a reduction of the effective
interest rate on the loan from 8.0% per annum to 6.2% per annum.
Brittany Downs Apartments Phase II did not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership has been paying a reduced amount of debt service since November
1990. The Partnership has been placed in default for failure to pay the
required debt service. Accordingly, the balances of the Phase II first
mortgage note, the second mortgage note, and related accrued interest have
been classified as current liabilities in the accompanying consolidated
financial statements. Based on the notice of default, the total amount of
interest in arrears on the existing mortgage notes for Brittany Downs
Apartment Phase II in the principal amount of $8,645,310 as of December 31,
1994, equals $1,455,200.
On January 10, 1995, the Partnership sold the Brittany Downs
Apartments Phase I and II to an unaffiliated third party. The sale price
was $18,380,000 (before selling costs and prorations), of which $2,390,974
was received in cash at closing and $14,340,000 represented the purchaser's
assumption of the underlying debt (net of a payoff discount granted by the
underlying lender for Brittany Downs Apartments Phase II). The sale will
result in a gain of approximately $6,900,000 and $9,000,000 for financial
reporting and Federal income tax reporting purposes in 1995, respectively.
In addition, as a result of the payoff discount granted by the underlying
lender for Brittany Downs Apartments Phase II, the Partnership will
recognize an additional gain on forgiveness of indebtedness of
approximately $2,000,000 and $270,000 for financial reporting and Federal
income tax reporting purposes in 1995, respectively.
JMB/NYC
At the 2 Broadway building, occupancy decreased to 18% during 1994,
down from 30% in the previous year due to Bear Stearns Co. vacating its
space in April 1994 upon the expiration of its lease. Kidder Peabody & Co.
(71,994 square feet or approximately 4.5% of the building's leasable space)
whose lease was to expire June 30, 1994, extended their lease to June 30,
1996. The Downtown Manhattan office leasing market remains depressed due
to the significant supply of, and the relatively weak demand for, tenant
space. In addition to the competition for tenants in the Downtown
Manhattan market from other buildings in the area, there is ever increasing
competition from less expensive alternatives to Manhattan, such as
locations in New Jersey and Brooklyn, which are also experiencing high
vacancy levels. Rental rates in the Downtown market continue to be at
depressed levels and this can be expected to continue while the large
amount of vacant space is gradually absorbed. Little, if any, new
construction is planned for Downtown over the next few years. It is
expected that 2 Broadway will continue to be adversely affected by a high
vacancy rate and the low effective rental rates achieved upon releasing of
space under existing leases which expire over the next few years. In
addition, the property is in need of a major renovation in order to compete
in the office leasing market. However, there are currently no plans for a
renovation because of the potential sale of the property discussed below
and because the effective rents that could be obtained under current office
market conditions likely are not sufficient to justify the costs of the
renovation. As more fully discussed below, the Olympia & York affiliates
have informed JMB/NYC that they have received a contract for the sale of
the 2 Broadway Building.
Occupancy at 1290 Avenue of the Americas decreased to 94% during 1994,
down from 98% in 1993 primarily due to the move-out of various tenants upon
lease expiration including AC Nielsen Company (59,347 square feet or
approximately 3% of the building's leasable space) and New York Telephone
(34,114 square feet or approximately 2% of the building's leasable space),
partially offset by a new lease with Alex Brown (78,000 square feet or
approximately 4% of the building's leasable space) which was executed
during the third quarter of 1994. The lease has an eighteen year term. It
is expected that the property will continue to be adversely affected by low
effective rental rates achieved upon releasing of space under existing
leases which expire over the next few years and may be adversely affected
by an increased vacancy rate over the next few years. Although
approximately 21% of the building's space under tenant leases will expire
by the end of 1995, negotiations are currently being conducted with a
number of prospective tenants in the financial services industry to lease a
significant portion of the current and anticipated vacant space. There can
be no assurances that such negotiations will be successful. During the
fourth quarter of 1994, the Joint Venture negotiated an amendment with a
tenant, Deutsche Bank Financial Products Corporation, under which the
tenant will surrender space on the 12th and 13th floors (137,568 square
feet or approximately 7% of the building's leasable space) on or before
June 30, 1996. The original lease (as amended) was to terminate on
December 31, 2003. The amendment also added space on the 8th and 9th
floors (44,360 square feet or approximately 2% of the building's leasable
space) which will expire on or before December 31, 1997. In consideration
for this amendment, the tenant paid an early termination fee of $29,000,000
to the Joint Venture that owns 1290 Avenue of the Americas on December 1,
1994. John Blair & Co. (which had leased 253,193 square feet or
approximately 13% of the building's leasable space) filed for Chapter 11
bankruptcy protection in 1993. Because much of the John Blair space had
been subleased, the Joint Venture had been collecting approximately 70% of
the monthly rent due from John Blair from the subtenants. Due to the
uncertainty regarding the collection of the balance of the monthly rents
from John Blair, a provision for doubtful accounts related to rents and
other receivables and accrued rents receivable aggregating $7,659,366 was
recorded at December 31, 1993 related to this tenant. During the second
quarter of 1994, a settlement was reached whereby the Joint Venture
received a $7,000,000 lease termination fee which included settlement of
past due amounts. In conjunction with the settlement, effective July 1,
1994, John Blair was released from all future lease obligations and the
Joint Venture now has direct leases with the original John Blair
subtenants. Such subtenants occupy 228,398 square feet or approximately
11% of the building's leasable space.
Occupancy at 237 Park Avenue remained at 98%. It is expected that the
property will be adversely affected by the low effective rental rates
achieved upon releasing of space under existing leases which expire over
the next few years and may be adversely affected by an increased vacancy
rate over the next few years.
In October 1994, JMB/NYC entered into an agreement (the "Agreement")
with the affiliates (the "Olympia & York affiliates") of Olympia & York
Developments, Ltd. ("O&Y") who are the venture partners in the Joint
Ventures to resolve certain disputes which are more fully discussed below.
Certain provisions of the Agreement are immediately effective and,
therefore, binding upon the partners, while others become effective upon
either certain conditions being met or upon execution and delivery of final
documentation. In general, the parties have agreed to: (i) amend the
Three Joint Ventures' agreements to eliminate any funding obligation by
JMB/NYC for any purpose in return for JMB/NYC relinquishing its rights to
approve almost all property management, leasing, sale (certain rights to
control a sale were retained by JMB/NYC through March 31, 2001) or
refinancing decisions and the establishment of a new preferential
distribution level payable to the Olympia & York affiliates from all future
sources of cash, (ii) sell the 2 Broadway Building, and (iii) restructure
the first mortgage loan on the terms discussed below. A more detailed
discussion of each of these items is contained below and in Note 2. As
part of the Agreements, in order to facilitate the restructuring, JMB/NYC
and the Olympia & York affiliates have agreed to file for each of the Three
Joint Ventures a pre-arranged bankruptcy plan for reorganization under
Chapter 11 of the Bankruptcy Code. Such filings are expected to occur in
1995. The reorganization plan is expected to incorporate the proposed
transactions contained in the Agreement. During the bankruptcy
proceedings, there exists a possibility that one or more of the proposed
transactions could be challenged by certain creditors resulting in the
elimination or changes to all or portions of the Agreement by the
bankruptcy court. Consequently, there are no assurances that the
transactions contemplated in the Agreement will be finalized. If the
transactions contemplated in the Agreement are finalized, there would
nevertheless need to be a significant improvement in current market and
property operating conditions resulting in a significant increase in the
value of the 237 Park Avenue and 1290 Avenue of the Americas properties
before JMB/NYC would receive any share of future net proceeds from
operations, sale or refinancing. As a further consequence of the
effectiveness of the reorganization plan, the restructuring of the Three
Joint Ventures' agreements would include JMB/NYC converting from a general
partner to a limited partner and the elimination of any funding obligation
by JMB/NYC for any purpose. Consequently, JMB/NYC would recognize, for
financial reporting purposes, a gain to the extent of the then current
deficit investment balance (which amount was $187,775,761 as of December
31, 1994). No significant net Federal income tax gain or any distributable
proceeds would result from the consummation of the reorganization plan.
JMB/NYC has had a dispute with the unaffiliated venture partners who
are affiliates (hereinafter sometimes referred to as the "Olympia & York
affiliates") of Olympia and York Developments, Ltd. (hereinafter sometimes
referred to as "O & Y") over the calculation of the effective interest rate
with reference to the first mortgage loan, which covers all three
properties, for the purpose of determining JMB/NYC's deficit funding
obligation, as described more fully in Note 3(c) of Notes to Financial
Statements. During the quarter ended March 31, 1993, an agreement was
reached between JMB/NYC and the Olympia & York affiliates (the "1993
Agreement") which rescinded the default notices previously received by
JMB/NYC and eliminated the operating deficit funding obligation of JMB/NYC
for the period January 1, 1992 through June 30, 1993. Pursuant to the 1993
Agreement, during this period, JMB/NYC recorded interest expense at 1-3/4%
over the short-term U.S. Treasury obligation rate (subject to a minimum
rate of 7% per annum), which is the interest rate on the underlying first
mortgage loan. Under the terms of the 1993 Agreement, during this period,
the amount of capital contributions that the Olympia & York affiliates and
JMB/NYC would have been required to make to the Three Joint Ventures, if
the first mortgage loan bore interest at a rate of 12-3/4% per annum (the
Olympia & York affiliates' interpretation), became a priority distribution
level to the Olympia & York affiliates from the Three Joint Ventures'
annual cash flow or net sale or refinancing proceeds. The 1993 Agreement
also entitles the Olympia & York affiliates to a 7% per annum return on
such unpaid priority distribution level. During this period, the excess
available operating cash flow after the payment of the priority
distribution level discussed above from any of the Three Joint Ventures was
advanced in the form of loans to pay operating deficits and/or unpaid
priority distribution level amounts of any of the other Three Joint
Ventures. Such loans bear a market rate of interest, have a final maturity
of ten years from the date when made and are repayable only out of first
available annual cash flow or net sale or refinancing proceeds. The 1993
Agreement also provides that, except as specifically agreed otherwise, the
parties each reserve all rights and claims with respect to each of the
Three Joint Ventures and each of the partners thereof, including, without
limitation, the interpretation of or rights under each of the joint venture
partnership agreements for the Three Joint Ventures. The term of the 1993
Agreement expired on June 30, 1993. Therefore, effective July 1, 1993,
JMB/NYC is recording interest expense at 1-3/4% over the short-term U.S.
Treasury obligation rate plus any excess operating cash flow after capital
costs of each of the Three Joint Ventures, such sum not to be less than a
7% nor exceed a 12-3/4% per annum interest rate. The Olympia & York
affiliates continued to dispute this calculation and for the period
commencing July 1, 1993 contend that a 12-3/4% per annum fixed rate
applies. The Agreement with the Olympia & York affiliates, when effective,
would resolve the funding obligation dispute.
O & Y and certain of its affiliates have been involved in bankruptcy
proceedings in the United States and Canada and similar proceedings in
England. The Olympia & York affiliates have not been directly involved in
these proceedings. In addition, a reorganization of the management of the
company's United States operations has been completed, and affiliates of
O & Y are in the process of renegotiating or restructuring a number of
loans affecting various properties in the United States in which they have
an interest. The Partnership is unable to assess and cannot presently
determine to what extent these events may adversely affect the willingness
and ability of the Olympia & York affiliates either to meet their own
obligations to the Three Joint Ventures and JMB/NYC or to finalize the
transactions contemplated by the Agreement.
All of the office buildings serve as collateral for the first mortgage
loan. The lender has asserted various defaults under the loan. On June
30, 1994, the Olympia & York affiliates, on behalf of the Three Joint
Ventures, signed a non-binding letter of intent with representatives of the
lender (consisting of a steering committee of holders of notes evidencing
the mortgage loan) to restructure certain terms of the existing mortgage
loan. The Agreement with the Olympia & York affiliates, when effective,
would provide for acceptance by JMB/NYC of this proposed restructuring.
The restructuring, as proposed, would change the interest rate on the notes
from a floating rate equal to 1.75% over the rate on three-month U.S.
treasury bills to a fixed rate of 9% per annum with periodic payments of
interest only at a pay rate of 7% per annum. Unpaid interest will accrue
at 9% per annum and unless previously paid out of excess property cash flow
will be payable at maturity. There is no assurance that a restructuring of
the loan will be obtained under these or any other terms. In previous
negotiations, the Olympia & York affiliates reached an agreement with the
first mortgage lender whereby effective January 1, 1993, the Olympia & York
affiliates are limited to taking distributions of $250,000 on a monthly
basis from the Three Joint Ventures reserving the remaining excess cash
flow in a separate interest-bearing account to be used exclusively to meet
the obligations of the Three Joint Ventures as approved by the lender.
Interest on the first mortgage loan is currently calculated based upon a
variable rate related to the short-term U.S. Treasury obligation rate,
subject to a minimum rate on the loan of 7% per annum. In the absence of
the contemplated restructuring, an increase in the short-term U.S. Treasury
obligation rate could result in increased interest payable on the first
mortgage loan by the Three Joint Ventures.
The Olympia & York affiliates have informed JMB/NYC that they have
received a contract for the sale of 2 Broadway for a net purchase price of
$15 million. The first mortgage lender has preliminarily agreed, in the
loan restructuring proposal discussed above, to the sale of the building
according to the terms of the 2 Broadway sales contract. A sale pursuant
to the contract received by the Olympia & York affiliates would be subject
to, among other things, the final approval of the first mortgage lender as
well as JMB/NYC, whose approval is incorporated into the Agreement.
Furthermore, in the event of the filing of a pre-arranged bankruptcy plan
for reorganization, such sale would be subject to the approval of the
bankruptcy court as part of the plan of reorganization of the Joint Venture
that owns the building. In anticipation of this sale and in accordance
with the Agreement, the unpaid first mortgage indebtedness previously
allocated to 2 Broadway has been reallocated to 237 Park Avenue and 1290
Avenue of the Americas. While there can be no assurance that a sale would
occur pursuant to such contract or any other contract, if this contract
were to be accepted by or consented to by all required parties and the sale
completed pursuant thereto, JMB/NYC would no longer have an ownership
interest in the 2 Broadway Joint Ventures. A provision for value
impairment was recorded at December 31, 1993 for financial reporting
purposes for $192,627,560, net of the non-recourse portion of the purchase
notes given to the Olympia & York affiliates as part of the consideration
for JMB/NYC's acquisition of its interests in the Three Joint Ventures,
including accrued interest related to the 2 Broadway Joint Venture
interests that are payable by JMB/NYC to the Olympia & York affiliates in
the amount of $46,646,810. The provision for value impairment was
allocated $136,534,366 and $56,093,194 to the Olympia & York affiliates and
JMB/NYC, respectively. Such provision was allocated to the partners to
reflect their respective ownership percentages before the effect of the
non-recourse purchase notes including accrued interest.
Should a restructuring of the joint venture partnership agreements
providing for the elimination of JMB/NYC's funding obligations in
accordance with the Agreement not be finalized, JMB/NYC may decide not to
commit any additional amounts to the Three Joint Ventures. In addition,
under these circumstances, it is possible that JMB/NYC may determine to
litigate these issues with the Olympia & York affiliates. A decision not
to commit any additional funds or an adverse litigation result could, under
certain circumstances, result in the loss of the interest in the related
Joint Ventures. The loss of an interest in a particular Joint Venture
could, under certain circumstances, permit an acceleration of the maturity
of the related purchase note (each purchase note is secured by JMB/NYC's
interest in the related Joint venture). Under certain circumstances, the
failure to repay a purchase note could constitute a default under, and
permit an immediate acceleration of, the maturity of the purchase notes for
the other Joint Ventures. In such event, JMB/NYC may decide not to repay,
or may not have sufficient funds to repay, any of the purchase notes and
accrued interest thereon. This could result in JMB/NYC no longer having an
interest in any of the related Joint Ventures, which would result in
substantial net gain for financial reporting and Federal income tax
purposes to JMB/NYC (and through JMB/NYC and the Partnership, to the
Limited Partners) with no distributable proceeds.
1090 Vermont Avenue Building
During 1994, occupancy at this building decreased to 95%, down from
99% in 1993 primarily due to Metro Photo (4,000 square feet or
approximately 3% of the buildings leasable space) vacating its space in
December 1994. Through 1993, the Partnership and joint venture partners
had contributed a total of $4,076,000 ($2,038,000 by the Partnership) to
the joint venture to cover releasing costs and costs of a lobby renovation.
The Partnership and joint venture partner had agreed that the contributions
made to the joint venture would be repaid along with a return thereon out
of first available proceeds from property operations, sale or refinancing.
During the fourth quarter of 1993, the joint venture finalized a
refinancing of the existing mortgage loan with a new ten year loan in the
amount of $17,750,000 (as more fully discussed in Note 3(j)). The
refinancing resulted in net proceeds of approximately $2,259,000 for the
joint venture. Of such proceeds, $1,785,560 (of which the Partnership's
share was $889,064) was distributed to the venture partners in December
1993 as a partial return of the additional capital contributed. As a
result of the reduced interest payments under the new loan, the property
produced cash flow for the joint venture in 1994. Consequently, the
Partnership and joint venture partners received distributions totaling
approximately $ 1 million in 1994 (the Partnership's share was $500,000).
Such distributions represent a partial return of the additional capital
contributed.
Old Orchard Shopping Center
On September 2, 1993, effective August 30, 1993, Orchard Associates,
in which the Partnership and an affiliated partnership sponsored by the
Corporate General Partner each had a 50% interest, sold its interest in the
Old Orchard Shopping Center (reference is made to note 3(b)).
Scottsdale Financial Centers I and II
On October 1, 1993, the RTC sold the mortgage note underlying
Scottsdale Financial Center II and the Partnership simultaneously
transferred title to the purchaser of the note. On December 17, 1993, the
Partnership relinquished its ownership interest in Scottsdale Financial
Center I in a similar transaction.
As a result of the transfers of title discussed above, the Partnership
recognized a gain of $18,382,769 and $7,920,092 in 1993 for financial
reporting and Federal income tax purposes, respectively, without any
corresponding distributable proceeds.
Yerba Buena West Office Building
In June 1992, the joint venture, based upon analysis of the then
current market condition, transferred title to the property to the lender
in return for an opportunity to share in future sale or refinancing
proceeds above certain specified levels.
In order for the joint venture to share in future sale or refinancing
proceeds, however, there must be a significant improvement in current
market and property operating conditions resulting in a significant
increase in value of the property. In addition, through June 1998, the
joint venture has a right of first opportunity to purchase the property if
the lender chooses to sell. An affiliate of the Partnership's Corporate
General Partner had been managing and leasing the property for the lender.
In December 1994, the affiliate was replaced as manager and leasing agent
for the property. As a result of the transfer of title to the lender as
discussed above, the Partnership no longer has an ownership interest in the
property and recognized a gain of $1,653,454 and $1,117,418 in 1992 for
financial reporting and Federal income tax purposes, respectively, with no
corresponding distributable proceeds. (Reference is made to Note 3(i)).
Wilshire Bundy Plaza
Occupancy at the Wilshire Bundy Plaza decreased to 80% during 1994,
down from 87% in the previous year, primarily due to Dun & Bradstreet
(60,500 square feet or approximately 21% of the buildings leasable space
scheduled to expire March 1995) vacating approximately 35,000 square feet
of its space during 1994. Dun & Bradstreet has continued to pay rent on
this space in accordance with its lease. From 1995 through 1996,
approximately 59% of the building's square feet under tenant leases
expires. Included in such expirations are Dun & Bradstreet and Bozell,
Jacobs, Kenyan & Eckhardt (51,000 square feet or approximately 18% of the
building's leasable space) who have informed the Partnership that they will
not be renewing their leases which expire in March 1995 and May 1996,
respectively. In addition, several tenants have approached the Partnership
seeking space and/or rent reductions. The Partnership is working with its
existing tenants and aggressively seeking replacement tenants for current
and future vacant space. The west Los Angeles office market (the
competitive market for the building) is extremely competitive with a
current vacancy rate of approximately 15%. While office building
development in this market is virtually at a standstill, the Partnership
does not expect a significant improvement in the competitive market
conditions for several years.
The Wilshire Bundy Plaza incurred minimal damage as a result of the
earthquake in southern California on January 17, 1994. On February 22,
1995, the City Council of the City of Los Angeles passed an ordinance
relating to the repair of welded steel moment frame buildings in an area of
the city that includes Wilshire Bundy Plaza. While a complete
determination of the requirements to comply with the ordinance is not as
yet completed, it is currently estimated that the cost of such repairs,
which have been reflected as an extraordinary item in the accompanying
Consolidated Financial Statements, will be approximately $3 million ( none
of which has been budgeted).
In 1995, and for several years beyond, the property will not generate
enough cash flow to pay for the costs associated with releasing the space
under leases which expire, the capital costs associated with the seismic
repair, and the required debt service payments. Consequently, the
Partnership has commenced discussions with the existing lender for a
possible debt modification on its mortgage loan which matures April 1996 in
order to reduce its debt service and cover its releasing costs and
earthquake repair costs (discussed above) over the next several years. In
this regard, the Partnership has suspended debt service payments commencing
with the December 1, 1994 payment in the amount of $415,922. Accordingly,
the principal balance of the property's underlying mortgage loan
($41,292,105) has been classified as a current liability in the
accompanying consolidated financial statements as of December 31, 1994. If
the Partnership is unsuccessful in obtaining such modification, it may
decide not to commit additional amounts to the property, which could result
in a disposition of the property and a recognition of gain for financial
reporting and Federal income tax purposes with no distributable proceeds.
900 Third Avenue Building
During the year, occupancy of this building decreased to 94%, down
from 95% in the previous year. The midtown Manhattan market remains
competitive. Approximately 53,000 square feet (approximately 10% of the
buildings leasable square footage) of leased space expires in 1995 and
1996. The property's operating cash flow will be adversely affected by
lower rental rates achieved and leasing costs incurred upon releasing this
space and may be adversely affected by increased vacancy during the
releasing period. During the fourth quarter, JMB/900 Third Avenue
Associates, on behalf of the property joint venture, successfully completed
an extension of its mortgage loan, which was scheduled to mature on
December 1, 1994. The loan has been extended to December 1, 2001 with
monthly payments of principal and interest based on an interest rate of
9.375% per annum and a 30 year principal amortization schedule. The
previous interest rate was 13% per annum. In addition, net cash flow after
debt service and capital will be paid into an escrow account controlled by
the lender to be used by the property joint venture for releasing costs
associated with leases which expire in 1999 and 2000 (approximately 240,000
square feet of space). The remaining proceeds in this escrow (including
interest earned thereon), if any, will be released to the property joint
venture once 90% of such leased space has been renewed or released.
Louis Joliet Mall
Occupancy of this mall decreased to 79% (excluding the effect of the
move-out of General Cinema, Inc., as discussed below) during 1994 from 82%
in the previous year. During the fourth quarter of 1994, General Cinema,
Inc. (14,587 square feet or approximately 5% of the mall space) ceased its
operations within the mall. The Partnership and the tenant are currently
seeking a new operator to run the theaters at the mall. The tenant
continues to pay rent in accordance with its lease (which expires December
31, 1998) and as of the date of this report, all amounts due from the
tenant under the lease have been received. During the third quarter of
1993, Al Baskin Co. (19,960 square feet or approximately 7% of the mall
space) informed the Partnership that even though its lease does not contain
provisions allowing it to terminate its lease, it believed it had the right
and intended to terminate its lease effective December 31, 1993 (as opposed
to the original lease expiration of December 31, 2003). In response,
during the third quarter of 1993, the Partnership filed an anticipatory
breach lawsuit against the tenant in order to prevent the tenant from
vacating its space and cease paying rent to the Partnership. Subsequently,
the Partnership and tenant entered into a temporary agreement under which
the tenant continues to operate its store and pay rent. As of the date of
this report, all amounts due from the tenant under the lease have been
received. The Partnership believes the tenant's position is without merit
and intends to enforce the original terms of the lease.
A mall enhancement program for the center was substantially completed
in November 1994 at a cost of approximately $2,500,000 ($2,200,000 paid as
of December 31, 1994). The enhancement program included new flooring,
signage and mall entranceways. Costs were funded from the property's
operating cash flow and the Partnership's working capital reserve.
The second mortgage loan matures on September 1, 1995. In this
regard, the Partnership is currently seeking replacement financing.
Accordingly, the principal balance of the property's second mortgage loan
($10,000,000) and related deferred interest ($2,155,305) has been
classified as a current liability in the accompanying consolidated
financial statements as of December 31, 1994. There can be no assurance
that the Partnership will be able to refinance the second mortgage loan
upon its maturity.
Louisiana Tower
Occupancy at Louisiana Tower decreased to 88% during 1994, from 90% in
the prior year. The property operated at a small deficit in 1994 as a
result of the 1990 debt modification as more fully discussed in Note 4(b).
The existing modification period expired and the loan (with an outstanding
principal balance of $22,122,701 at December 31, 1994) matured in January
1995. The Partnership has decided that it will not commit any significant
amounts of capital to this property due to the fact that the recovery of
such amounts would be unlikely. Consequently, commencing in June 1994, the
Partnership ceased making the required debt service payments to the lender
and commenced discussions with it to provide further modifications to the
loan in order to eliminate a deficit funding obligation. The lender
informed the Partnership that it is unwilling to provide further
modifications to the loan. The lender is currently pursuing a course of
significantly reducing its holdings in commercial real estate loans. The
lender can achieve this through a sale of the loan or through obtaining
title to the underlying real estate and subsequently selling it. The
lender has informed the Partnership that it will pursue the latter method
for divesting itself of this real estate investment. Under either
scenario, however, the lender would receive significantly less than the
full amount of its loan due to the depressed value of the property. The
lender began foreclosure proceedings in October 1994. A receiver has been
appointed for the property and a third party manager has been appointed to
manage the property on the receiver's behalf. Title to the property is
expected to transfer to the lender in early 1995. This property represents
approximately 5% of the Partnership's original cash investment in real
properties. The Partnership will recognize a gain for Federal income tax
and financial reporting purposes in early 1995 in connection with this
proposed transaction with no distributable proceeds.
Mariners Pointe Apartments
Occupancy at the Mariners Pointe Apartments increased slightly to 91%
during 1994, up from 90% in the prior year. The property operated at a
deficit in 1994 as a result of the costs associated with the loan extension
discussed below. During the third quarter of 1994, the Partnership
obtained a two year extension of the existing $6,500,000 mortgage loan
which matured on October 1, 1994. Under terms of the loan extension, the
loan bears interest at 2.75% above the floating weekly tax exempt rate.
The weekly tax exempt interest rate at December 31, 1994 was 4.41% per
annum resulting in an interest rate of 7.16% per annum on that date. Prior
to the extension, the loan bore interest of 10.875% per annum.
During 1994, the Partnership began marketing the property for sale.
However, in accordance with the loan extension obtained during the third
quarter of 1994, discussed below, the Partnership is prohibited from
selling the property for a six month period. Consequently, the Partnership
ceased its marketing effort and will consider marketing the property for
sale again in mid 1995 after the six month period expires.
In 1992 and 1993, the property operated at a small deficit as the
result of certain capital improvements. Under the terms of the joint
venture agreement, the joint venture partner was obligated to contribute
22.3% of such deficits. The Partnership had made a request for capital
from the joint venture partner for its share of the 1992 deficit. The
joint venture partner's obligation to make the capital contribution is
secured by its interest in the joint venture as well as personal guarantees
by certain of its principals. The joint venture partner has not made the
required contribution, however, the Partnership is currently negotiating
with the joint venture partner to obtain their interest in the joint
venture and receive certain amounts in satisfaction of their funding
obligation. There can be no assurance that the Partnership will collect
any or all of the amounts due from the joint venture partner in
satisfaction of their funding obligation or that the Partnership will sell
the property.
General
To the extent that additional payments related to certain properties
are required or if properties do not produce adequate amounts of cash to
meet their needs, the Partnership may utilize the working capital which it
maintains and/or pursue outside financing sources. However, based upon
current market conditions, the Partnership may decide not to, or may not be
able to, commit additional funds to certain of its investment properties.
This would result in the Partnership no longer having an ownership interest
in such property, and generally would result in taxable income to the
Partnership with no corresponding distributable proceeds. The
Partnership's and the ventures' mortgage obligations are all non-recourse.
Therefore, the Partnership and its ventures are not personally obligated to
pay mortgage indebtedness.
There are certain risks and uncertainties 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.
Though the economy has recently shown signs of improvement and
financing is generally becoming more available for certain types of high-
quality properties in healthy markets, real estate lenders are typically
requiring a lower loan-to-value ratio for mortgage financing than in the
past. This has made it difficult for owners to refinance real estate
assets at their current debt levels unless the value of the underlying
property has appreciated significantly. As a consequence, and due to the
weakness of some of the local real estate markets in which the
Partnership's properties operate, the Partnership is taking steps to
preserve its working capital. The Partnership continues to carefully
analyze all expenditures and defer certain capital projects when
appropriate and has sought or is seeking loan modifications where
appropriate. In addition, the Partnership suspended its distributions from
operations, effective with the distribution for the fourth quarter of 1991,
to improve its cash reserve. By maintaining adequate working capital, the
Partnership will be in a better position to meet future needs of its
properties since external sources of capital are very limited.
Due to the issues discussed above, it is likely that the Partnership
will hold certain of its investment properties longer than originally
anticipated in order to maximize the return of their investment to the
Limited Partners. Also, in light of the current severely depressed real
estate markets, it 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 receive substantially less than half of their
original investment. In addition, in connection with sales or other
dispositions (including transfers to lenders) of properties (or interests
therein) owned by the Partnership or its joint ventures, the Limited
Partners may be allocated substantial gain for Federal income tax purposes.
RESULTS OF OPERATIONS
At December 31, 1994, 1993 and 1992, the Partnership owned twelve,
twelve and fifteen investment properties, respectively, all of which were
operating.
The aggregate increase in the balance of cash and cash equivalents and
short-term investments at December 31, 1994 as compared to December 31,
1993 is primarily due to the investment of cash on hand in U.S. Government
securities and receipt of operating distributions in 1994 from South Tower
($2,114,000) and 1090 Vermont Avenue ($500,000), and the Partnership's
share of sale proceeds relating to Old Orchard ($1,702,000) (Note 3(b)).
This increase is partially offset by the Partnership's funding of operating
deficits at Mariners Pointe Apartments and Louisiana Tower, refinancing
costs at Mariner's Pointe Apartments and 900 Third Avenue, and mall
enhancement costs paid at Louis Joliet Mall ($2,200,000).
The decrease in restricted funds at December 31, 1994 as compared to
December 31, 1993 is primarily due to the $1,482,930 remittance on March
31, 1994 to the lender of the net annual cash flow (as defined) generated
by the Louisiana Tower as debt service pursuant to the agreement signed
November 1990 as more fully discussed in Note 4(b).<PAGE>
The decrease in escrow deposits at December 31, 1994 as compared to
December 31, 1993 is due primarily to the Partnership suspending the
payment into escrow reserves for property taxes in June 1994 at Louisiana
Tower in conjunction with its suspension of debt service payments as more
fully discussed in Note 4(b).
The increase in buildings and improvements as of December 31, 1994 as
compared to December 31, 1993 is primarily due to (i) mall enhancement
program at Louis Joliet Mall ($2,200,000), (ii) tenant improvement costs
incurred in 1994 relating to 1993 leasing activity at Wilshire Bundy
($360,000) and (iii) tenant improvement costs at Louisiana Tower
($647,000).
The increase in deferred expenses as of December 31, 1994 as compared
to December 31, 1993 is due primarily to the capitalization of
approximately $360,000 of costs relating to the extension of the Mariner's
Pointe Mortgage loan during 1994 (Note 4(b)).
The increase in the current portion of long-term debt and the
corresponding decrease in long-term debt, and the related increase in
accrued interest at December 31, 1994 as compared to December 31, 1993 is
primarily due to the reclassification of (i) the debt (with a principal
balance of $22,122,701 and deferred interest of $5,826,026 at December 31,
1994) secured by the Louisiana Tower which matured in January, 1995, (ii)
the debt (with a principal balance of $41,292,105 at December 31, 1994)
secured by the Wilshire Bundy Plaza for which the Partnership has suspended
debt service as of December 31, 1994, and (iii) the second mortgage secured
by the Louis Joliet Mall (with a principal balance of $10,000,000 and
deferred interest of $2,155,305 at December 31, 1994) which matures in
September 1995 partially offset by (iv) the reclassification of debt
secured by Mariner's Pointe Apartments (with a principal balance of
$6,500,000 at December 31, 1994) which was extended during September 1994
(Note 4(b)).
The increase in accounts payable as of December 31, 1994 as compared
to December 31, 1993 is primarily due to the accrual of $3,000,000
(reflected as an extraordinary item on the accompanying Consolidated
Financial Statements) for structural repair costs in 1994 at the Wilshire
Bundy Plaza based on preliminary estimates of damage resulting from the
earthquake in southern California in January 1994 (as more fully discussed
in Note 2(b)).
The increase in due to affiliates at December 31, 1994 as compared to
December 31, 1993 is due primarily to interest accruing on the
Partnership's obligation to fund, on demand, $2,400,000 to Carlyle
Managers, Inc. and Carlyle Investors, Inc. ($1,200,000 for each), for
additional paid-in capital (as more fully discussed in Note 3(c)) and
reimbursement owed for certain unpaid out-of-pocket expenses of the
Corporate General Partner.
The decrease in unearned rents at December 31, 1994 as compared to
December 31, 1993 is primarily due to the timing of the collection of
rental payments at the Partnership's investment properties.
The increase in tenant security deposits is due primarily to leasing
activity at the Wilshire Bundy Plaza.
The decrease in rental income for the twelve months ended December 31,
1994 as compared to the twelve months ended December 31, 1993 is primarily
due to the disposition of the Scottsdale Financial Centers I and II during
1993 partially offset by higher effective rental rates achieved in 1994 at
the Brittany Downs Apartments Phases I and II. The decrease in rental
income for the twelve months ended December 31, 1993 as compared to the
twelve months ended December 31, 1992 is primarily due to the disposition
of the Scottsdale Financial Centers I and II during 1993, lower occupancy
at the Wilshire Bundy Plaza, Louis Joliet Mall and Louisiana Tower during
1993, offset partially by higher effective rental rates achieved at the
Brittany Downs Apartments Phase I and II during 1993 and the collection of
tenant settlements and lease termination fees at Wilshire Bundy Plaza in
1993.
Interest income increased for the twelve months ended December 31,
1994 as compared to the twelve months ended December 31, 1993 primarily due
to an increase in the average balance of U.S. Government obligations in
1994 resulting from the receipt and retention of proceeds relating to the
sale of the Old Orchard Shopping Center (Note 3(b)) and the refinancing of
1090 Vermont Avenue (Note 3(j)) during the third and fourth quarter of
1993, respectively, and the receipt in 1994 of operating distributions from
South Tower and 1090 Vermont Avenue and the Partnership's share of
additional sale proceeds relating to Old Orchard. Interest income
decreased for the twelve months ended December 31, 1993 as compared to the
twelve months ended December 31, 1992 primarily due to a decrease in the
average balance of U.S. Government obligations in 1993 due to contributions
by the Partnership of its proportionate share for the releasing costs at
1090 Vermont during the first quarter of 1993 and the Partnership's funding
of its share of capital costs at Old Orchard in 1993.
The decrease in mortgage interest for the twelve months ended December
31, 1994 as compared to the twelve months ended December 31, 1993 is
primarily due to the disposition of the Scottsdale Financial Centers I and
II during 1993. The decrease in mortgage and other interest for the twelve
months ended December 31, 1993 as compared to the twelve months ended
December 31, 1992 is primarily due to the recording of additional interest
expense in 1992, per the judgement entered in February 1992, for a certain
period (June 1990 to December 1991) of the dispute involving the Scottsdale
Financial Centers I and II which were disposed of in 1993, partially offset
by the accrual of additional interest expense in 1993 relating to the
default on the debt underlying the Brittany Downs Apartments - Phase II.
The decrease in depreciation for the twelve months ended December 31,
1994 as compared to the twelve months ended December 31, 1993 is primarily
due to the disposition of the Scottsdale Financial Centers I and II during
1993. Depreciation decreased for the twelve months ended December 31, 1993
as compared to the twelve months ended December 31, 1992 primarily due to
the Partnership recording a $9,548,085 provision for value impairment at
Wilshire Bundy Plaza at June 30, 1992 which reduced the net carrying value
of the property.
The decrease in property operating expenses for the twelve months
ended December 31, 1994 as compared to the twelve months ended December 31,
1993 and for the twelve months ended December 31, 1993 as compared to the
twelve months ended December 31, 1992 is primarily due to the disposition
of the Scottsdale Financial Centers I and II during the fourth quarter of
1993.
Amortization of deferred expenses increased for the twelve months
ended December 31, 1994 as compared to the twelve months ended December 31,
1993 and for the twelve months ended December 31, 1993 as compared to the
twelve months ended December 31, 1992 primarily due to an increase in
leasing activity at certain of the Partnership's investment properties and
the amortization of the related lease commissions.
The decrease in the Partnership's share of loss from unconsolidated
ventures for the twelve months ended December 31, 1994 as compared to the
twelve months ended December 31, 1993 and the related increase for the
twelve months ended December 31, 1993 as compared to the twelve months
ended December 31, 1992 is due primarily to, (i) a $67,479,870 provision
for value impairment recorded in 1993 for Wells Fargo-IBM Tower due to the
uncertainty of the venture's ability to recover its net carrying value,
(ii) a $192,627,560 provision for value impairment recorded in 1993 for 2
Broadway due to the potential sale of the property at a sales price
significantly below its net carrying value (iii) an $11,946,285 provision
for doubtful accounts recorded by JMB/NYC in 1993 due to the uncertainty of
collectibility of amounts due from the Olympia & York affiliates to the
Three Joint Ventures, (iv) an $11,551,048 provision for doubtful accounts
recorded by JMB/NYC in 1993 due to the uncertainty of collectibility of
amounts due from tenants at the Three Joint Venture's real estate
investment properties, and (v) increased aggregate interest accrued with
reference to the Three Joint Ventures' mortgage loan commencing July 1,
1993 as a result of the expiration of the agreement with the Olympia & York
affiliates. Reference is made to Note 3.
The decrease in the venture partner's share of venture's operations
for the twelve months ended December 31, 1994 as compared to the twelve
months ended December 31, 1993 and for the twelve months ended December 31,
1993 as compared to the twelve months ended December 31, 1992 is due to the
suspension of profit and loss allocations to the venture partner of
Mariners Pointe during the third quarter of 1993 due to default on its
obligations to fund its share of the 1992 deficits at the Mariners Pointe
Apartments and the Partnership's ongoing negotiations to obtain the venture
partner's interest in the joint venture.
Reference is made to Note 1 regarding provisions for value impairment
of $51,423,084 in 1992 for 1290 Avenue of the Americas. In accordance with
the terms of the respective venture agreements, all of such provision has
been allocated to the unaffiliated venture partners.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
To the extent that inflation in future periods does have an adverse
impact on property operating expenses, the increased expenses may be offset
by amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, the effect on operating earnings
generally will depend upon the extent to which the properties are occupied.
In addition, substantially all of the leases at the Partnership's shopping
center investments contain provisions which entitle the property owner to
participate in gross receipts of tenants above fixed minimum amounts.
Future inflation may also cause capital appreciation of the
Partnership's investment properties over a period of time if rental rates
and replacement costs of properties increase.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations, years ended December 31, 1994,
1993 and 1992
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, years ended December 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements
SCHEDULE
--------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV
CERTAIN UNCONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Combined Balance Sheets, December 31, 1994 and 1993
Combined Statements of Operations (Deficits), years ended December 31,
1994, 1993 and 1992
Combined Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1994, 1993 and 1992
Combined Statements of Cash Flows, years ended December 31, 1994,
1993 and 1992
Notes to Combined Financial Statements
SCHEDULE
--------
Combined Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the combined financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV:
We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XIV, a limited partnership, (the Partnership),
and its consolidated ventures as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and the
financial statement schedule are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Partnership and its consolidated venture at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Note 3(c) to the consolidated financial statements,
beginning July 1, 1993, the Partnership and its affiliated partners in
JMB/NYC Office Building Associates, L.P. (JMB/NYC) were in dispute with the
unaffiliated venture partners in the real estate ventures over the
calculation of the effective interest rate with reference to the first
mortgage loan, which covers the real estate owned through JMB/NYC's joint
ventures. The Partnership's share of disputed interest aggregated
$12,218,000 and $4,771,000 for the years ended December 31, 1994 and 1993,
respectively, and has not been included in the Partnership's share of loss
from operations of unconsolidated ventures for 1994 or 1993 in the
accompanying consolidated financial statements. In October 1994, JMB/NYC
entered into an agreement (the Agreement) with the unaffiliated venture
partners in the real estate ventures which, when effective, would resolve
this dispute by providing for interest at the same rate as the first
mortgage loan and would eliminate any funding obligations by JMB/NYC.
However, as discussed in Note 3(c), there are no assurances that the
Agreement will be finalized and become effective. In addition, as
described in Notes 3, 4 and 6 of the notes to the consolidated financial
statements, the Partnership is in dispute or negotiations with various
venture partners in connection with certain of its investment properties.
Further, as described in such notes, a number of mortgage loans secured by
the Partnership's or its venture's investment properties are in default at
December 31, 1994 or mature in 1995. The Partnership has sold, in 1995,
(Continued)
one of these properties for which such mortgage loans were in default. For
certain others, foreclosure actions have been initiated or the Partnership
has commenced or intends to commence discussion with the mortgage lenders
in order to extend and/or modify such loans. Such disputes, negotiations
and discussions could result, under certain circumstances, in the
Partnership no longer having an ownership interest in these investment
properties. The ultimate outcome of these uncertainties cannot presently
be determined. The consolidated financial statements do not include any
adjustments that might result from these uncertainties.
KPMG Peat Marwick LLP
Chicago, Illinois
March 27, 1995
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
------
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . $ 18,419,385 2,830,985
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . 2,129,166 16,190,375
Restricted funds (note 4(b)) . . . . . . . . . . . . . . . . . . . . . 203,852 1,903,509
Interest, rents and other receivables (net of allowance
for doubtful accounts of $791,916 for 1994 and
$816,356 for 1993) . . . . . . . . . . . . . . . . . . . . . . . . . 621,516 647,505
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,055 158,107
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,378 540,794
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . 21,891,352 22,271,275
------------ ------------
Investment properties (notes 2, 3, 4 and 8) - Schedule III:
Land and leasehold interest. . . . . . . . . . . . . . . . . . . . . 10,788,810 10,788,810
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . 150,959,418 147,556,586
------------ ------------
161,748,228 158,345,396
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . 49,431,004 44,635,592
------------ ------------
Total investment properties,
net of accumulated depreciation. . . . . . . . . . . . . . . 112,317,224 113,709,804
------------ ------------
Investment in unconsolidated ventures, at equity
(notes 1, 3 and 10). . . . . . . . . . . . . . . . . . . . . . . . . . 8,864,503 9,517,271
Deferred expenses (note 1) . . . . . . . . . . . . . . . . . . . . . . . 2,776,163 2,514,464
Accrued rents receivable (note 1). . . . . . . . . . . . . . . . . . . . 1,226,212 1,503,871
------------ ------------
$147,075,454 149,516,685
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1994 1993
------------ ------------
Current liabilities:
Current portion of long-term debt (note 4) . . . . . . . . . . . . . . $ 94,880,985 28,107,327
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,048,221 835,762
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,575,385 2,447,554
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,640,409 3,729,532
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . 810,997 804,760
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,079 800,195
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 114,581,076 36,725,130
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 423,743 292,009
Investment in unconsolidated ventures, at equity
(notes 1, 3 and 10). . . . . . . . . . . . . . . . . . . . . . . . . . 167,376,693 148,714,348
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,443,153 1,412,837
Long-term debt, less current portion (note 4). . . . . . . . . . . . . . 25,794,970 98,747,743
------------ ------------
Commitments and contingencies (notes 3, 4 and 8)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 309,619,635 285,892,067
Partners' capital accounts (deficits) (notes 1 and 5):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . (20,281,012) (19,183,198)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (1,235,319) (1,235,319)
------------ ------------
(21,515,331) (20,417,517)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . (456,620,305) (431,549,320)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (36,155,381) (36,155,381)
------------ ------------
(141,028,850) (115,957,865)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . (162,544,181) (136,375,382)
------------ ------------
$147,075,454 149,516,685
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 22,212,040 24,836,574 25,742,900
Interest income. . . . . . . . . . . . . . . . . . . 985,270 353,270 459,735
Other income (note 3(h)) . . . . . . . . . . . . . . 400,000 406,593 650,000
------------ ------------ ------------
23,597,310 25,596,437 26,852,635
------------ ------------ ------------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . 13,670,591 18,701,027 18,672,539
Depreciation . . . . . . . . . . . . . . . . . . . . 4,795,412 5,701,647 6,127,557
Property operating expenses. . . . . . . . . . . . . 11,299,218 12,113,541 13,231,545
Professional services. . . . . . . . . . . . . . . . 779,846 676,490 786,264
Amortization of deferred expenses. . . . . . . . . . 472,735 426,906 413,074
General and administrative . . . . . . . . . . . . . 598,531 448,812 633,713
Provision for value impairment (note 1). . . . . . . -- -- 9,548,085
------------ ------------ ------------
31,616,333 38,068,423 49,412,777
------------ ------------ ------------
Operating loss . . . . . . . . . . . . . . . . . . (8,019,023) (12,471,986) (22,560,142)
Partnership's share of loss from
operations of unconsolidated ventures
(notes 1 and 10) . . . . . . . . . . . . . . . . . . (16,851,858) (60,283,861) (22,495,785)
Venture partners' share of ventures'
operations (note 3). . . . . . . . . . . . . . . . . -- 22,472 70,706
------------ ------------ ------------
Net operating loss . . . . . . . . . . . . . . . . (24,870,881) (72,733,375) (44,985,221)
Gain from sale or disposition of
unconsolidated ventures (notes 3(b),
3(d) and 3(i)) . . . . . . . . . . . . . . . . . . . 1,702,082 7,898,727 8,783,892
Gain from sale or disposition of
investment properties (note 6(a)). . . . . . . . . . -- 18,382,769 --
------------ ------------ ------------
Net loss before extraordinary item . . . . . . . . (23,168,799) (46,451,879) (36,201,329)
Extraordinary item (note 2(b)) . . . . . . . . . . . . (3,000,000) -- --
------------ ------------ ------------
Net loss . . . . . . . . . . . . . . . . . . . . . $(26,168,799) (46,451,879) (36,201,329)
============ ============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1994 1993 1992
------------ ------------ ------------
Net earnings (loss) per limited
partnership interest (note 1):
Net operating loss . . . . . . . . . . . . . . $ (59.53) (177.06) (107.68)
Gain from sale or disposition of
unconsolidated ventures. . . . . . . . . . . 4.20 19.50 21.68
Gain from sale or disposition of
investment properties. . . . . . . . . . . . -- 45.38 --
Extraordinary item . . . . . . . . . . . . . . (7.18) -- --
------------ ------------ ------------
Net loss . . . . . . . . . . . . . . . . . . . $ (62.51) (112.18) (86.00)
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET OF
CONTRI- NET CASH OFFERING NET CASH
BUTIONS LOSS DISTRIBUTIONS TOTAL COSTS LOSS DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficits)
Decem-
ber 31,
1991. . . . .$1,000 (16,011,607) (1,235,319) (17,245,926) 351,746,836 (352,067,703) (36,155,381) (36,476,248)
Net loss . . . -- (1,711,570) -- (1,711,570) -- (34,489,759) -- (34,489,759)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1992. . . . .1,000 (17,723,177) (1,235,319) (18,957,496) 351,746,836 (386,557,462) (36,155,381) (70,966,007)
Net loss . . . -- (1,460,021) -- (1,460,021) -- (44,991,858) -- (44,991,858)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1993. . . . . 1,000 (19,183,198) (1,235,319) (20,417,517) 351,746,836 (431,549,320) (36,155,381) (115,957,865)
Net loss . . . -- (1,097,814) -- (1,097,814) -- (25,070,985) -- (25,070,985)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1994. . . . .$1,000 (20,281,012) (1,235,319) (21,515,331) 351,746,836 (456,620,305)(36,155,381)(141,028,850)
====== =========== ========== =========== =========== ============ =========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . $(26,168,799) (46,451,879) (36,201,329)
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . 4,795,412 5,701,647 6,127,557
Amortization of deferred expenses. . . . . . . . 472,735 426,906 413,074
Amortization of discount on long-term debt . . . 540,492 502,792 537,671
Partnership's share of loss from operations
of unconsolidated ventures . . . . . . . . . . 16,851,858 60,283,861 22,495,785
Venture partner's share of venture operations. . -- (22,472) (70,706)
Gain on sale or dispositions of interests in
unconsolidated ventures (notes 3(b), 3(d)
and 3(i)). . . . . . . . . . . . . . . . . . . (1,702,082) (7,898,727) (8,783,892)
Gain on disposition of investment
properties (note 6(a)) . . . . . . . . . . . . -- (18,382,769) --
Provision for value impairment (note 1). . . . . -- -- 9,548,085
Extraordinary item (note 2 (b)). . . . . . . . . 3,000,000 -- --
Changes in:
Restricted funds . . . . . . . . . . . . . . . . . 1,699,657 640,800 1,963,323
Interest, rents and other receivables. . . . . . . 25,989 2,436,524 4,748
Prepaid expenses . . . . . . . . . . . . . . . . . 17,052 20,083 10,907
Escrow deposits. . . . . . . . . . . . . . . . . . 164,416 180,009 46,644
Accrued rents receivable . . . . . . . . . . . . . 277,659 471,522 77,218
Accounts payable . . . . . . . . . . . . . . . . . 212,459 95,585 609,827
Due to affiliates. . . . . . . . . . . . . . . . . 127,831 47,554 --
Accrued interest . . . . . . . . . . . . . . . . . (728,768) 1,356,214 2,877,677
Deferred interest. . . . . . . . . . . . . . . . . 2,648,987 1,512,583 540,671
Accrued real estate taxes. . . . . . . . . . . . . 6,237 (9,271) (51,526)
Unearned rents . . . . . . . . . . . . . . . . . . (175,116) (476,759) 120,910
Tenant security deposits . . . . . . . . . . . . . 131,734 (10,187) 12,625
Other liabilities. . . . . . . . . . . . . . . . . 30,316 (13,691) 1,264
------------ ----------- -----------
Net cash provided by
operating activities . . . . . . . . . . . 2,228,069 410,325 280,533
------------ ----------- -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1994 1993 1992
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . . . 14,061,209 (15,847,146) 3,400,878
Additions to investment properties . . . . . . . . . (3,402,832) (525,771) (473,799)
Partnership's distributions from
unconsolidated ventures. . . . . . . . . . . . . . 5,925,748 18,332,690 3,012,444
Partnership's contributions to
unconsolidated ventures. . . . . . . . . . . . . . (1,760,411) (1,737,231) (3,157,044)
Payment of deferred expenses . . . . . . . . . . . . (734,434) (12,236) (261,762)
------------ ----------- -----------
Net cash provided by
investing activities . . . . . . . . . . . 14,089,280 210,306 2,520,717
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . (728,949) (652,443) (606,596)
------------ ----------- -----------
Net cash used in financing
activities . . . . . . . . . . . . . . . . (728,949) (652,443) (606,596)
------------ ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . 15,588,400 (31,812) 2,194,654
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . 2,830,985 2,862,797 668,143
------------ ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . $ 18,419,385 2,830,985 2,862,797
============ =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . $11,209,880 15,329,438 14,716,520
Non-cash investing and financing activities:
Gain recognized on dispositions of
interests in unconsolidated ventures
(notes 3(d) and 3(i)). . . . . . . . . . . . . . -- -- 8,783,892
Gain recognized on disposition of investment
properties (note 6(a)) . . . . . . . . . . . . . -- 18,382,769 --
Contributions payable to unconsolidated
venture (note 3(c)). . . . . . . . . . . . . . . -- 2,400,000 --
============ =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, Mariners Pointe
Associates ("Mariners Pointe"). The effect of all significant transactions
between the Partnership and the consolidated venture has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interests in Orchard Associates (note 3(b)); Gateway Associates ("Gateway")
(note 3(d)); JMB/Piper Jaffray Tower Associates ("JMB/Piper") and JMB Piper
Jaffray Tower Associates II ("JMB/Piper II"); 900 3rd Avenue Associates
("JMB/900"); 1090 Vermont Avenue, N.W. Associates Limited Partnership
("1090 Vermont"); Maguire/Thomas Partners - South Tower ("South Tower");
Carlyle Yerba Buena Limited Partnership ("Yerba Buena") (note 3(i)) and the
Partnership's indirect (through Carlyle-XIV Associates, L.P.) interest in
JMB/NYC Office Building Associates, L.P. ("JMB/NYC").
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:
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
1994 1993
-------------------------------------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . $147,075,454 139,188,017 149,516,685 143,677,403
Partners' capital accounts
(deficits):
General partners . . . . . . . . (21,,515,331) (22,036,030) (20,417,517) (21,548,425)
Limited partners . . . . . . . . (141,028,850) (143,776,876) (115,957,865) (131,751,039)
Net loss:
General partners . . . . . . . . (1,097,814) (487,604) (1,460,021) 4,622,079
Limited partners . . . . . . . . (25,070,985) (12,025,837) (44,991,858) (2,774,876)
Net loss per limited
partnership interest . . . . . . . (62.51) (29.99) (112.18) (5.18)
=========== =========== =========== =============
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The net loss per limited partnership interest is based upon the
limited partnership interests outstanding at the end of each period.
Deficit capital accounts will result, through the duration of the
Partnership, in the recognition of net gain to the Limited Partners for
financial reporting and Federal income tax purposes. Reference is made to
note 5 for a discussion of the allocations of profits and losses.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from its unconsolidated ventures are considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership records
amounts held in U.S. Government obligations at cost which approximates
market. For the purposes of these statements, the Partnership's policy is
to consider all such amounts held with original maturities of three months
or less ($18,160,234 and $1,555,066 at December 31, 1994 and 1993,
respectively) as cash equivalents with any remaining amounts (generally
with original maturities of one year or less) reflected as short-term
investments being held to maturity.
Deferred expenses consist primarily of mortgage fees which are
amortized on a straight-line basis over the terms of the related mortgage
notes and deferred leasing commissions and concessions which are amortized
over the lives of the related leases.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrues
rental income for the full period of occupancy on a straight-line basis.
Such amounts are reflected in accrued rents receivable in the accompanying
balance sheets.
Provisions for value impairment (as discussed below) are recorded with
respect to the investment properties whenever the estimated future cash
flows from a property's operations and projected sale are less than the
property's net carrying value.
As more fully discussed in note 3(c), due to the potential sale of the
2 Broadway building at a sales price significantly below its net carrying
value and the reallocation to the 1290 Avenue of America's and 237 Park
Avenue ventures of the unpaid first mortgage indebtedness currently
allocated to 2 Broadway, the 2 Broadway venture made a provision for value
impairment on such investment property of $192,627,560 at December 31,
1993. The provision for value impairment was allocated $136,534,366 and
$56,093,194 to the Olympia & York affiliates and to JMB/NYC, respectively.
Such provision was allocated to the partners to reflect their respective
ownership percentages before the effect of the non-recourse purchase notes
including the related accrued interest. The Partnership's share of the
provision was $28,046,597.
Due to the uncertainty of the 1290 Associates venture's ability to
recover the net carrying value of the 1290 Avenue of the Americas Building
through future operations and sale, the 1290 Associates venture made a
provision for value impairment on such investment property of $51,423,084.
Such provision at September 30, 1992 was recorded to effectively reduce the
net carrying value of the investment property and the related deferred
expenses to the then outstanding balance of the related non-recourse
financing allocated to the joint venture and its property. This provision
was allocated to the unaffiliated venture partners in accordance with the
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
terms of the venture agreement and accordingly is not included in the
accompanying consolidated financial statements. (See Notes 1, 3 and 5 of
Notes to Combined Financial Statements).
Due to the uncertainty of the South Tower venture's ability to recover
the net carrying value of the Wells Fargo Center - IBM Tower investment
property through future operations and sale, the South Tower venture made a
provision for value impairment on such investment property of $67,479,871.
Such provision at September 30, 1993 was recorded to effectively reduce the
net carrying value of the investment property to the then outstanding
balance of the related non-recourse financing. The Partnership's share of
such provision was $22,493,290.
Due to the uncertainty of the Partnership's ability to recover the net
carrying value of the Wilshire Bundy investment property through future
operations and sale, the Partnership made a provision for value impairment
on such investment property of $9,548,085. Such provision at June 30, 1992
was recorded to effectively reduce the net carrying value of the investment
property and the related deferred expenses to the then outstanding balance
of the related non-recourse financing.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments," requires entities
with total assets exceeding $150 million at December 31, 1992 to disclose
the SFAS 107 value of all financial assets and liabilities for which it is
practicable to estimate. Value is defined in the Statement as the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. The
Partnership believes the carrying amount of its current assets and
liabilities (excluding current portion of long-term debt) approximates SFAS
107 value due to the relatively short maturity of these instruments. There
is no quoted market value available for any of the Partnership's other
financial instruments. As the debt secured by the Brittany Downs
Apartments - Phase II, Louisiana Tower Office Building, Wilshire Bundy
Plaza and the Partnership's interest in the Wells Fargo Center South Tower
office building have been reclassified by the Partnership as current
liabilities at December 31, 1994 as a result of defaults (see note 4) and
because resolution of such defaults are uncertain, the Partnership
considers the disclosure of the SFAS 107 value of such debt to be
impracticable. The remaining debt and related accrued interest, with a
carrying balance of $37,971,997, has been calculated to have an SFAS 107
value of $37,084,481 by discounting the scheduled loan payments to
maturity. Due to restrictions on transferability and prepayment and the
inability to obtain comparable financing due to previously modified debt
terms or other property specific competitive conditions, the Partnership
would be unable to refinance these properties to obtain such calculated
debt amounts reported (see note 4). The Partnership has no other
significant financial instruments.
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to tax authorities amounts
representing withholding from distributions paid to partners.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through joint
ventures, two apartment complexes, fourteen office buildings and three
shopping centers. Seven properties have been sold or disposed of by the
Partnership as of December 31, 1994. Reference is made to note 4(b) for a
discussion of the Partnership's sale of Brittany Downs Apartments, Phase I
and II on January 10, 1995. All of the properties owned at December 31,
1994 were operating. The cost of the investment properties represents the
total cost to the Partnership or its ventures plus miscellaneous
acquisition costs and net of value impairment adjustments.
Depreciation on the consolidated investment properties has been
provided over the estimated useful lives of 5 to 30 years using the
straight-line method.
The investment properties or the Partnership's interest in
unconsolidated ventures are pledged as security for the long-term debt, for
which there is generally no recourse to the Partnership. The long-term
debt (other than the second mortgage notes on Louis Joliet Mall and
Brittany Downs - Phase II) represents senior mortgage loans.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
(b) The Wilshire Bundy Plaza incurred minimal damage as a result of
the earthquake in southern California on January 17, 1994. On February 22,
1995, the City Council of the City of Los Angeles passed an ordinance
relating to the repair of welded steel moment frame buildings in an area of
the city that includes Wilshire Bundy Plaza. While a complete
determination of the requirements to comply with the ordinance is not as
yet completed, it is currently estimated that the cost of such repairs,
which has been reflected as an extraordinary item in the accompanying
Consolidated Financial Statements, will be approximately $3 million.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1994 is a party to seven operating
joint venture agreements. Pursuant to such agreements, the Partnership
made initial capital contributions of approximately $192,607,000 (before
legal and other acquisition costs and its share of operating deficits as
discussed below). 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. Five of the joint venture agreements
(JMB/NYC (through an interest in Carlyle-XIV Associates, L.P.), JMB/Piper,
JMB/Piper II, JMB/900 and South Tower) are, directly or indirectly, with
partnerships (JMB/Manhattan Associates, Ltd. ("JMB/Manhattan"), Carlyle
Real Estate Limited Partnership XIII ("C-XIII") and Carlyle Real Estate
Limited Partnership XV ("C-XV")) sponsored by the Corporate General Partner
or its affiliates. These five joint ventures have entered into a total of
six property joint venture agreements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership has acquired, through the above ventures, interests in
one apartment complex and seven office buildings. The venture properties
have been financed under various long-term debt arrangements as described
below and in note 4.
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.
(b) Orchard Associates
The Partnership's interest in Old Orchard shopping center (through
Orchard Associates and Old Orchard Urban Venture ("OOUV") was sold in
September 1993, as described below.
The maturity date for Orchard Associates' loan in the amount of
$18,000,000 from a commercial bank, secured solely by its interest in Old
Orchard shopping center, and originally due October 1, 1991, was extended
to December 31, 1993. The agreement required monthly installments of
interest only at the prime rate plus 1% per annum. Orchard Associates
continued to negotiate with the lender for permanent financing of this note
prior to its payoff in September 1993 as described below.
At sale, OOUV and an unaffiliated third party contributed the Old
Orchard shopping center and $60,366,572 in cash (before closing costs and
prorations), respectively, to a newly formed limited partnership.
Immediately at closing, the new partnership distributed to OOUV $60,366,572
in cash (before closing costs and prorations) in redemption of
approximately 89.5833% of OOUV's interest in the new partnership. OOUV,
the limited partner, has retained a 10.4167% interest in the new limited
partnership after such redemption. OOUV was also entitled to receive up to
an additional $4,300,000 based upon certain events (as defined), all of
which was earned and was subsequently received in 1994. Upon receipt, OOUV
distributed the $4,300,000 to the respective partners based upon their pre-
contribution percentage interests. OOUV still may earn up to an additional
$3,400,000 based upon certain future earnings of the property (as defined),
none of which has been earned or received as of the date of this report.
Contemporaneously with the formation of the new limited partnership,
OOUV redeemed Orchard Associates' ("Orchard") interest in OOUV for
$56,689,747 (before closing costs and prorations). This transaction has
resulted in Orchard having no ownership interest in the property as of the
effective date of the redemption agreement. Orchard recognized a gain of
$15,797,454 for financial reporting purposes ($7,898,727 allocable to the
Partnership) and recognized a gain for Federal income tax reporting
purposes of $32,492,776 ($16,246,388 allocable to the Partnership) in 1993.
OOUV and Orchard have also entered into a contribution agreement
whereby they have agreed to share future gains and losses which may arise
with respect to potential revenues and liabilities from events which
predated the contribution of the property to the new venture (including,
without limitation the distribution to OOUV of $4,300,000 and the potential
future distribution of $3,400,000 as described above) in accordance with
their pre-contribution percentage interests. In September 1994, Orchard
received its share of the contingent $4,300,000, as discussed above, and
distributed to each of the respective partners their 50% share ($1,702,082
to the Partnership) of such amount. The Partnership recognized a gain of
$1,702,082 for financial reporting purposes and recognized a gain for
Federal income tax purposes in 1994. Upon receipt of all or a portion of
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the remaining contingent amounts, Orchard and the Partnership would expect
to recognize additional gain for Federal income tax and financial reporting
purposes in the year of such receipts. However, there can be no assurance
that any portion of the remaining contingent amount will be received.
(c) JMB/NYC
The Partnership owns indirectly through Carlyle-XIV Associates, L.P.
and JMB/NYC, an interest in (i) the 237 Park Avenue Associates venture
which owns an existing 23-story office building, (ii) the 1290 Associates
ventures which own an existing 44-story office building, and (iii) the 2
Broadway Associates and 2 Broadway Land Company ventures which own an
existing 32-story office building (together "Three Joint Ventures" and
individually a "Joint Venture"). All of the buildings are located in New
York, New York. In addition to JMB/NYC, the partners of the Three Joint
Ventures include O & Y Equity Company, L.P. and O & Y NY Building Corp.
(hereinafter sometimes referred to as the "Olympia & York affiliates"),
both of which are affiliates of Olympia and York Developments, Ltd.
(hereinafter sometimes referred to as "O&Y").
JMB/NYC is a joint venture among Carlyle-XIV Associates, L.P.,
Property Partners, L.P. and Carlyle-XIII Associates, L.P. as limited
partners and Carlyle Managers, Inc. as the sole general partner. Effective
March 25, 1993, the Partnership became a 40% shareholder of Carlyle
Managers, Inc. Related to this investment, the Partnership has an
obligation to fund $1,200,000 of additional paid-in capital to Carlyle
Managers, Inc. (reflected in amounts due to affiliates in the accompanying
financial statements). The terms of the JMB/NYC venture agreement
generally provide that JMB/NYC's share of the Three Joint Ventures' annual
cash flow, sale or refinancing proceeds, operating and capital costs (to
the extent not covered by cash flow from a property) and profit and loss
will be distributed to, contributed by or allocated to the Partnership in
proportion to its (indirect) share of capital contributions to JMB/NYC. As
discussed below, an agreement with the Olympia & York affiliates, when
effective, would provide first for allocation of cash flow to the Olympia &
York affiliates to the level of certain preference amounts, as defined.
The agreement would also, among other things, provide for no further
allocation from the Three Joint Ventures of depreciation, amortization or
operating losses and the allocation of operating income from the Three
Joint Ventures only to the extent of cash flow distributions to JMB/NYC.
In March 1993, JMB/NYC, originally a general partnership, was converted to
a limited partnership, and the Partnership's interest in JMB/NYC, which
previously had been held directly, was contributed to Carlyle-XIV
Associates, L.P. in exchange for its limited partnership interest in that
partnership. As a result of these transactions, the Partnership currently
holds, indirectly as a limited partner of Carlyle-XIV Associates, L.P., an
approximate 50% limited partnership interest in JMB/NYC. The sole general
partner of Carlyle-XIV Associates, L.P. is Carlyle Investors, Inc., of
which the Partnership became a 40% shareholder effective March 25, 1993.
Related to this investment, the Partnership has an obligation to fund, on
demand, $1,200,000 of additional paid-in capital (reflected in amounts due
to affiliates in the accompanying financial statements). The general
partner in each of JMB/NYC and Carlyle-XIV Associates, L.P. is an affiliate
of the Partnership. For financial reporting purposes, the allocation of
profits and losses of JMB/NYC to the Partnership is 50%.
In October 1994, JMB/NYC entered into an agreement (the "Agreement")
with the affiliates (the "Olympia & York affiliates") of Olympia & York
Developments, Ltd. ("O&Y") who are the venture partners in the Three Joint
Ventures to resolve certain disputes which are more fully discussed below.
Certain provisions of the Agreement are immediately effective and,
therefore, binding upon the partners, while others become effective upon
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
either certain conditions being met or upon execution and delivery of final
documentation. In general, the parties have agreed to: (i) amend the
Three Joint Ventures' agreements to eliminate any funding obligation by
JMB/NYC for any purpose in return for JMB/NYC relinquishing its rights to
approve almost all property management, leasing, sale (certain rights to
control a sale were retained by JMB/NYC through March 31, 2001) or
refinancing decisions and the establishment of a new preferential
distribution level payable to the Olympia & York affiliates from all future
sources of cash, (ii) sell the 2 Broadway Building, and (iii) restructure
the first mortgage loan on the terms discussed below. A more detailed
discussion of each of these items is contained below. As part of the
Agreements, in order to facilitate the restructuring, JMB/NYC and the
Olympia & York affiliates have agreed to file for each of the Three Joint
Ventures a pre-arranged bankruptcy plan for reorganization under Chapter 11
of the Bankruptcy Code. Such filings are expected to occur in 1995. The
reorganization plan is expected to incorporate the proposed transactions
contained in the Agreement. During the bankruptcy proceedings, there
exists a possibility that one or more of the proposed transactions could be
challenged by certain creditors resulting in the elimination or changes to
all or portions of the Agreement by the bankruptcy court. Consequently,
there are no assurances that the transactions contemplated in the Agreement
will be finalized. If the transactions contemplated in the Agreement are
finalized, there would nevertheless need to be a significant improvement in
current market and property operating conditions resulting in a significant
increase in the value of the 237 Park Avenue and 1290 Avenue of the
Americas properties before JMB/NYC would receive any share of future net
proceeds from operations, sale or refinancing. As a further consequence of
the effectiveness of the reorganization plan, the restructuring of the
Three Joint Ventures' agreements would include JMB/NYC converting from a
general partner to a limited partner and the elimination of any funding
obligation by JMB/NYC for any purpose. Consequently, JMB/NYC would
recognize, for financial reporting purposes, a gain to the extent of the
then current deficit investment balance (which amount was $187,775,761 as
of December 31, 1994). No significant net Federal income tax gain or any
distributable proceeds would result from the consummation of the
reorganization plan.
JMB/NYC purchased a 46.5% interest in each of the Three Joint Ventures
for approximately $173,600,000, subject to a long-term first mortgage loan
which has been allocated among the individual Joint Ventures. A portion of
the purchase price is represented by four 12-3/4% promissory notes (the
"Purchase Notes") which have an aggregate outstanding principal balance of
$34,158,225 at December 31, 1994 and 1993. Such Purchase Notes, which
contain cross-default provisions, and are non-recourse to JMB/NYC, are
secured by JMB/NYC's interests in the Three Joint Ventures, and such
Purchase Note relating to the purchase of the interest in the ventures
owning the 2 Broadway Building is additionally secured by JMB/NYC's
interest in $19,000,000 of distributable sale proceeds from the other two
Joint Ventures. A default under the Purchase Notes would include, among
other things, a failure by JMB/NYC to repay a Purchase Note upon
acceleration of the maturity, and could cause an immediate acceleration of
the Purchase Notes for the other ventures. Beginning in 1992, the Purchase
Notes provide for monthly interest only payments on the principal and
accrued interest based upon the level of distributions payable to JMB/NYC
discussed below. If there are no distributions payable to JMB/NYC or if
the distributions are insufficient to cover monthly interest on the
Purchase Notes, then the shortfall interest (as defined) accrues and
compounds monthly. Interest accruals total $93,853,559 at December 31,
1994. During 1993 and 1994, no payments were made on the Purchase Notes.
All of the principal and accrued interest on the Purchase Notes is due in
1999 or, if earlier, on the sale or refinancing of the related property.
The Agreement with the Olympia & York affiliates, when effective, would
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
provide for a 5-year extension of the due dates on the Purchase Notes to
2004. It further provides, upon the sale of the 2 Broadway Building, for
the cancellation of indebtedness under the 2 Broadway Purchase Notes in
excess of $19 million. As discussed more fully below, the Olympia & York
affiliates have informed JMB/NYC that they have received a contract for the
sale of the 2 Broadway Building at a price which will not provide any
proceeds to JMB/NYC to repay the related Purchase Notes. Consequently, if
the proposed sale is finalized, $19,000,000 of the 2 Broadway Purchase
Notes will be reallocated and will be payable out of JMB/NYC's share of
distributable cash flow or sale proceeds, if any, from the other two Joint
Ventures.
Prior to 1992, operating profits (excluding depreciation and
amortization) were allocated 30% to JMB/NYC and 70% to the Olympia & York
affiliates, and operating losses (excluding depreciation and amortization)
were allocated 96% to JMB/NYC and 4% to the Olympia & York affiliates.
Depreciation and amortization were allocated 46.5% to JMB/NYC and 53.5% to
the Olympia & York affiliates. Subsequent to 1991, pursuant to the
agreement between JMB/NYC and the Olympia & York affiliates, for the period
January 1, 1992 to June 30, 1993, as discussed below, gross income was
allocable to the Olympia & York affiliates to the extent of the
distributions of excess monthly cash flow received for the period with the
balance of operating profits or losses allocated 46.5% to JMB/NYC and 53.5%
to the Olympia & York affiliates. Beginning July 1, 1993, operating
profits or losses, in general, are allocated 46.5% to JMB/NYC and 53.5% to
the Olympia & York affiliates. The Agreement with the Olympia & York
affiliates, when effective, would provide for no further allocation to
JMB/NYC of depreciation, amortization or operating losses and the
allocation of operating income only to the extent of cash flow
distributions, if any, during the remaining term of the Joint Ventures.
There was no allocation of depreciation, amortization or operating income
or losses to JMB/NYC for Federal income tax purposes in 1994.
Under the terms of the Three Joint Ventures' agreements, JMB/NYC was
entitled to a preferred return of annual cash flow, with any additional
cash flow distributable 99% to the Olympia & York affiliates and 1% to
JMB/NYC, through 1991. The Olympia & York affiliates were obligated to
make capital contributions to the Three Joint Ventures to pay any operating
deficits (as defined) and to pay JMB/NYC's preferred return through
December 31, 1991. JMB/NYC did not receive its preferred return for the
fourth quarter 1991 and the Olympia & York affiliates applied JMB/NYC's
preferred return to 1992 disputed interest calculations (see below).
Subsequent to 1991, capital contributions to pay for property operating
deficits and other requirements that may be called for under the Three
Joint Ventures' agreements are required to be shared 46.5% by JMB/NYC and
53.5% by the Olympia & York affiliates. The Olympia & York affiliates have
alleged that pursuant to the Three Joint Ventures' agreements between the
Olympia & York affiliates and JMB/NYC, the effective rate of interest with
reference to the first mortgage loan for calculating JMB/NYC's share of
operating cash flow or deficits through 1991 was as though the rate were
fixed at 12-3/4% per annum (versus the short-term U.S. Treasury obligation
rate plus 1-3/4% per annum (with a minimum 7%) payable on the first
mortgage loan). JMB/NYC believes that, commencing in 1992, the Three Joint
Ventures' agreements require an effective rate of interest with reference
to the first mortgage loan, based upon each Joint Venture's allocable share
of the loan, to be 1-3/4% over the short-term U.S. Treasury obligation rate
plus any excess monthly operating cash flow after capital costs of the
Three Joint Ventures, such sum not to be less than a 7% nor exceed a 12-
3/4% per annum interest rate, rather than the 12-3/4% per annum fixed rate
that applied prior to 1992. The Olympia & York affiliates disputed this
calculation of interest expense and contended that the 12-3/4% per annum
fixed rate applied after 1991.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During the quarter ended March 31, 1993, an agreement was reached
between JMB/NYC and the Olympia & York affiliates (the "1993 Agreement")
which rescinded the default notices previously received by JMB/NYC and
eliminated the alleged operating deficit funding obligation of JMB/NYC for
the period January 1, 1992 through June 30, 1993. Pursuant to the 1993
Agreement, during this period, JMB/NYC recorded interest expense at 1-3/4%
over the short-term U.S. Treasury obligation rate (subject to a minimum
rate of 7% per annum), which is the interest rate on the underlying first
mortgage loan. Under the terms of the 1993 Agreement, during this period,
the amount of capital contributions that the Olympia & York affiliates and
JMB/NYC would have been required to make to the Three Joint Ventures, if
the first mortgage loan bore interest at a rate of 12-3/4% per annum (the
Olympia & York affiliates' interpretation), became a priority distribution
level to the Olympia & York affiliates from the Three Joint Ventures'
annual cash flow or net sale or refinancing proceeds. The 1993 Agreement
also entitles the Olympia & York affiliates to a 7% per annum return on
such unpaid priority distribution level. During this period, the excess
available operating cash flow after the payment of the priority
distribution level discussed above from any of the Three Joint Ventures was
advanced in the form of loans to pay operating deficits and/or unpaid
priority distribution level amounts of any of the other Three Joint
Ventures. Such loans bear a market rate of interest, have a final maturity
of ten years from the date when made and are repayable only out of first
available annual cash flow or net sale or refinancing proceeds. The 1993
Agreement also provides that, except as specifically agreed otherwise, the
parties each reserve all rights and claims with respect to each of the
Three Joint Ventures and each of the partners thereof, including, without
limitation, the interpretation of or rights under each of the joint venture
partnership agreements for the Three Joint Ventures. As a result of the
above noted agreement with the Olympia & York affiliates, the cumulative
priority distribution level payable to the Olympia & York affiliates at
December 31, 1994 is approximately $50,000,000. The term of the 1993
Agreement expired on June 30, 1993. Therefore, effective July 1, 1993,
JMB/NYC is recording interest expense at 1-3/4% over the short-term U.S.
Treasury obligation rate plus any excess operating cash flow after capital
costs of the Three Joint Ventures, such sum not to be less than a 7% nor
exceed a 12-3/4% per annum interest rate. The Olympia & York affiliates
continued to dispute this calculation and for the period commencing July 1,
1993 contend that a 12-3/4% per annum fixed rate applies. Based upon this
interpretation, interest expense for the Three Joint Ventures for the
twelve months ended December 31, 1994 was $117,033,279. Based upon the
amount of interest determined by JMB/NYC for the twelve months ended
December 31, 1994, interest expense for the Three Joint Ventures was
$64,482,676. The cumulative effect of recording the interest expense
calculated by JMB/NYC is to reduce the losses of the Three Joint Ventures
by $73,071,429 (of which the Partnership's share is $16,989,108) for the
period of July 1, 1993 through December 31, 1994 and to correspondingly
reduce what would otherwise be JMB/NYC's funding obligation with respect to
the Three Joint Ventures.
The Agreement with the Olympia & York affiliates, when effective,
would resolve the funding obligation dispute. In general, the priority
distribution level created in the 1993 Agreement and JMB/NYC's alleged
funding obligation subsequent to June 30, 1993 would be eliminated in
return for the creation of a new preferential distribution level to the
Olympia & York affiliates payable from all sources of available cash
("Preference Amount"). Such Preference Amount would be $81.5 million for
1290 Avenue of the Americas and $38.5 million for 237 Park Avenue and both
amounts would bear interest at 9% per annum, compounded monthly,
retroactive effective May 1, 1994. Net proceeds available, if any, after
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
repayment of the Preference Amounts plus interest, would then be
distributable in accordance with the original terms of the Three Joint
Ventures Agreements which provide for, in general, that net proceeds from
all sources will be distributable 46.5% to JMB/NYC and 53.5% to the Olympia
& York affiliates, subject to, as described above, repayment by JMB/NYC of
its Purchase Notes.
The terms of the current joint venture partnership agreements between
the Olympia & York affiliates and JMB/NYC for the Three Joint Ventures
provide, in the event of a dissolution and liquidation of a Joint Venture,
that if there is a deficit balance in the tax basis capital account of
JMB/NYC, after the allocation of profits or losses and the distribution of
all liquidation proceeds, then JMB/NYC generally would be required to
contribute cash to the Joint Venture in the amount of its deficit capital
account balance. Taxable gain arising from the sale or other disposition
of a Joint Venture's property generally would be allocated to the joint
venture partner or partners then having a deficit balance in its or their
respective capital accounts in accordance with the terms of the joint
venture partnership agreement. However, if such taxable gain is
insufficient to eliminate the deficit balance in its account in connection
with a liquidation of a Joint Venture, JMB/NYC would be required to
contribute funds to the Joint Venture (regardless of whether any proceeds
were received by JMB/NYC from the disposition of the Joint Venture's
property) to eliminate any remaining deficit capital account balance.
The Partnership's liability for such contribution, if any, would be
its share, if any, of the liability of JMB/NYC and would depend upon, among
other things, the amounts of JMB/NYC's and the Olympia & York affiliates'
respective capital accounts at the time of a sale or other disposition of
Joint Venture property, the amount of JMB/NYC's share of the taxable gain
attributable to such sale or other disposition of the Joint Venture
property and the timing of the dissolution and liquidation of the Joint
Venture. In such event, the Partnership could be required to sell or
dispose of its other assets in order to satisfy any obligation attributable
to it as a partner of JMB/NYC to make such contribution. Although the
amount of such liability could be material, the Limited Partners of the
Partnership would not be required to make any additional contributions of
capital to satisfy such obligation, if any, of the Partnership. The
Partnership's deficit investment balance in JMB/NYC as reflected in the
balance sheet (aggregating $158,166,504 at December 31, 1994) does not
necessarily represent the amount, if any, the Partnership would be required
to pay to satisfy its deficit restoration obligation. Under the Agreement
with the Olympia & York affiliates, subject to the satisfaction of certain
conditions, any deficit capital account funding obligation of JMB/NYC to
the Joint Ventures would be eliminated.
All of the office buildings serve as collateral for the first mortgage
loan. The lender has asserted various defaults under the loan. On June
30, 1994, the Olympia & York affiliates, on behalf of the Three Joint
Ventures, signed a non-binding letter of intent with the lender (consisting
of a steering committee of holders of notes evidencing the mortgage loan)
to restructure certain terms of the existing mortgage loan. The Agreement
with the Olympia & York affiliates, when effective, would provide for
acceptance by JMB/NYC of this proposed restructuring. The restructuring,
as proposed, would change the annual interest rate on the notes from a
floating rate equal to 1.75% over the rate on the three-month U.S. treasury
bills to a fixed rate of 9% per annum with periodic payments of interest
only at a pay rate of 7% per annum. Unpaid interest will accrue at 9% per
annum and unless previously paid out of excess property cash flow
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
will be payable at maturity. There is no assurance that a restructuring of
the loan will be obtained under these or any other terms. In previous
negotiations, the Olympia & York affiliates reached an agreement with the
first mortgage lender whereby effective January 1, 1993, the Olympia & York
affiliates are limited to taking distributions of $250,000 on a monthly
basis from the Three Joint Ventures reserving the remaining excess cash
flow in a separate interest-bearing account to be used exclusively to meet
the obligations of the Three Joint Ventures as approved by the lender.
Interest on the first mortgage loan is currently calculated based upon a
variable rate related to the short-term U.S. Treasury obligation rate,
subject to a minimum rate on the loan of 7% per annum. An increase in the
short-term U.S. Treasury obligation rate could result in increased interest
payable on the first mortgage loan by the Three Joint Ventures.
The Olympia & York affiliates have informed JMB/NYC that they have
received a contract for the sale of 2 Broadway for a net purchase price of
$15 million. The first mortgage lender has preliminarily agreed, in the
loan restructuring proposal discussed above, to the sale of the building
according to the terms of the 2 Broadway sales contract. A sale pursuant
to the contract received by the Olympia & York affiliates would be subject
to, among other things, the final approval of the first mortgage lender as
well as JMB/NYC, whose approval is incorporated into the Agreement.
Furthermore, in the event of the filing of a prearranged bankruptcy plan
for reorganization, such sale would be subject to the approval of the
bankruptcy court as part of the plan of reorganization of the Joint Venture
that owns the building. In anticipation of this sale and in accordance
with the Agreement, the unpaid first mortgage indebtedness previously
allocated to 2 Broadway has been re-allocated to 237 Park Avenue and 1290
Avenue of the Americas. While there can be no assurance that a sale would
occur pursuant to such contract or any other contract, if this contract
were to be accepted by or consented to by all required parties and the sale
completed pursuant thereto, JMB/NYC would no longer have an ownership
interest in the 2 Broadway Joint Ventures. A provision for value
impairment was recorded at December 31, 1993 for financial reporting
purposes for $192,627,560, net of the non-recourse portion of the Purchase
Notes given to the Olympia & York affiliates as part of the consideration
of JMB/NYC's acquisition of its interest in the Three Joint Ventures
including accrued interest related to the 2 Broadway Joint Venture
interests that are payable by JMB/NYC to the Olympia & York affiliates in
the amount of $46,646,810. The provision for value impairment was
allocated $136,534,366 and $56,093,194 to the Olympia & York affiliates and
to JMB/NYC, respectively. Such provision was allocated to the partners to
reflect their respective ownership percentages before the effect of the
non-recourse purchase notes including accrued interest.
O & Y and certain of its affiliates have been involved in bankruptcy
proceedings in the United States and Canada and similar proceedings in
England. The Olympia & York affiliates have not to date been directly
involved in these proceedings. In addition, a reorganization of the
management of the company's United States operations has been completed,
and affiliates of O & Y are in the process of renegotiating or
restructuring a number of loans affecting various properties in the United
States in which they have an interest. The Partnership is unable to assess
and cannot presently determine to what extent these events may adversely
affect the willingness and ability of the Olympia & York affiliates either
to meet their own obligations to the Joint Ventures and JMB/NYC or to
finalize the transactions contemplated by the Agreement.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Should a restructuring of the joint venture partnership agreements
providing for the elimination of JMB/NYC's funding obligations in
accordance with the Agreement not be finalized, JMB/NYC may decide not to
commit any additional amounts to the Three Joint Ventures. In addition,
under these circumstances, it is possible that JMB/NYC may determine to
litigate these issues with the Olympia & York affiliates. A decision not
to commit any additional funds or an adverse litigation result could, under
certain circumstances, result in the loss of JMB/NYC's interest in the
related Joint Ventures. The loss of an interest in a particular Joint
Venture could, under certain circumstances, permit an acceleration of the
maturity of the related purchase note (each purchase note is secured by
JMB/NYC's interest in the related Joint Venture). Under certain
circumstances, the failure to repay a purchase note could constitute a
default under, and permit an immediate acceleration of, the maturity of the
purchase notes for the other Joint Ventures. In such event, JMB/NYC may
decide not to repay, or may not have sufficient funds to repay, any of the
purchase notes and accrued interest thereon. This could result in JMB/NYC
no longer having an interest in any of the related Joint Ventures, which
would result in substantial net gain for financial reporting and Federal
income tax purposes to JMB/NYC (and through JMB/NYC and the Partnership, to
the Limited Partners) with no distributable proceeds.
The properties are being managed by an affiliate of the Olympia & York
affiliates for a fee equal to 1% of gross receipts. An affiliate of the
Olympia & York affiliates performs certain maintenance and repair work and
construction of certain tenant improvements at the investment properties.
Additionally, the Olympia & York affiliates have lease agreements and
occupy approximately 95,000 square feet of space at 237 Park Avenue at
rental rates which approximate market.
(d) Gateway
On December 30, 1992, the lender obtained title to this property as
discussed below.
In 1984, the Partnership acquired, with the developer and certain of
its affiliates, an interest in Gateway Tower, an office building in White
Plains, New York. The purchase price for the Partnership's interest in
Gateway was $16,900,000.
Under the terms of the Gateway joint venture agreement, one of the
Partnership's joint venture partners was obligated to make capital
contributions to the joint venture in order to fund property operating
deficits, leasing costs and the Partnership's stated return through June
1995. Subsequent to June 1995, any operating deficits were to be borne 49%
by the Partnership and 51% by the venture partners. The Partnership was
also entitled to receive preferential distributions from net sale or
refinancing proceeds in amounts related to the Partnership's investment in
the venture. Operating profits and losses, in general, were to be
allocated in relation to the economic interests of the joint venture
partners. Accordingly, prior to 1991, when the venture partners were
funding operating deficits, operating profits and losses (excluding
depreciation and amortization) were allocated 0% to the Partnership and
100% to the venture partners. Subsequent to 1990, operating profits or
losses were allocated 49% to the Partnership and 51% to the venture
partners as a result of the venture partners' default on their funding
obligations as discussed below.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Gateway Tower property was operating at a significant deficit due
to higher than originally expected leasing costs and lower than originally
expected rental rates achieved on leasing. During 1990, the joint venture
partner ceased making the required capital contributions necessary to make
the quarterly guaranteed payments to the Partnership and the debt service
payments.
During the first quarter of 1991, the lender filed a lawsuit to
realize on its security and take title to the property. On December 30,
1992, the lender concluded proceedings to realize on its security and took
title to the property resulting in the Partnership no longer having an
ownership interest in the property. The Partnership received no cash
proceeds from the transfer of ownership interest; it did, however,
recognize a gain for financial reporting and Federal income tax purposes
during 1992 of $7,130,438 and $14,604,506, respectively.
The joint venture partner's funding obligation was secured by a
guarantee from an affiliated entity of the joint venture partner. After
careful review of the joint venture partner and its affiliate's financial
condition, the Partnership determined that they did not have the ability to
satisfy any of their financial obligations under the joint venture
agreement. Therefore, the Partnership decided to forego any further
attempts to recover amounts due from them as a result of their defaults.
(e) JMB/Piper
In 1984, the Partnership acquired, through a joint venture partnership
"JMB/Piper", with Carlyle Real Estate Limited Partnership-XV, an interest
in a 42-story office building known as the Piper Jaffray Tower in
Minneapolis, Minnesota with the developer and certain limited partners. In
April 1986, JMB/Piper II, a joint venture partnership between the
Partnership and Carlyle Real Estate Limited Partnership-XV, acquired the
developer's interest in the OB Joint Venture. As of December 31, 1994,
JMB/Piper holds its interest in the property through three existing joint
ventures (OB Joint Venture, OB Joint Venture II and 222 South Ninth Street
Limited Partnership, together "Piper").
The terms of the JMB/Piper and JMB/Piper II venture agreements
generally provide that JMB/Piper's and JMB Piper II's respective shares of
Piper's annual cash flow, sale or refinancing proceeds and profits and
losses will be distributed or allocated to the Partnership in proportion to
its 50% share of capital contributions.
JMB/Piper invested approximately $19,915,000 for its 71% interest in
Piper. JMB/Piper is obligated to loan amounts to Piper to fund operating
deficits (as defined). The loans bear interest at a rate of not more than
14.36% per annum, provide for payments of interest only from net cash flow,
if any, and are repayable from net sale or refinancing proceeds. Such
loans and accrued interest aggregated approximately $72,272,000 and
$63,214,000 at December 31, 1994 and 1993, respectively.
In August 1992, the venture signed an agreement with the lender,
effective April 1, 1991, to modify the terms of the mortgage notes which
are secured by the investment property. The principal balance of the
mortgage notes has been consolidated into one note in the amount of
$100,000,000. Under the terms of the modification, commencing on April 1,
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1991 and continuing through and including January 30, 2020, fixed interest
will accrue and is payable on a monthly basis at a $10,250,000 per annum
level. Contingent interest is payable in annual installments on April 1
and is computed at 50% of gross receipts, as defined, for each fiscal year
in excess of $15,200,000; none was due for 1992, 1993 or 1994. In
addition, to the extent the investment property generates cash flow after
payment of the fixed interest on the mortgage, contingent interest, leasing
and capital costs, and 25% of the ground rent, such amount will be paid to
the lender as a reduction of the principal balance of the mortgage loan.
The excess cash flow generated by the property in 1992 totalled $923,362
and was remitted to the lender in September 1993. During 1993, the excess
cash flow generated under this agreement was $1,390,910 and was remitted to
the lender in May 1994. During 1994, the excess cash flow generated under
this agreement was $353,251 which is expected to be remitted to the lender
during the second quarter of 1995. On a monthly basis, the venture
deposits the property management fee into an escrow account to be used for
future leasing costs to the extent cash flow is not sufficient to cover
such items. To date, no escrow funds have been required to be used for
leasing costs. The manager of the property (which was an affiliate of the
Corporate General Partner through November 1994 (see note 6(b)) has agreed
to defer receipt of its management fee until a later date. As of December
31, 1994, the manager has deferred approximately $2,398,000 ($2,357,000 of
which represents fees deferred by the former affiliated manager) of
management fees. If upon sale or refinancing as discussed below, there are
funds remaining in this escrow after payment of amounts owed to the lender,
such funds will be paid to the manager to the extent of its deferred and
unpaid management fees. Any remaining unpaid management fees would be
payable out of the venture's share of sale or refinancing proceeds.
Additionally, pursuant to the terms of the loan modification, effective
January 1992, OB Joint Venture, as majority owner of the underlying land,
began deferring receipt of its share of land rent. These deferrals will be
payable from potential net sale or refinancing proceeds, if any.
Furthermore, pursuant to the loan modification, the venture can prepay
the mortgage note beginning February 1, 1996, subject to a prepayment fee.
The prepayment fee is calculated pursuant to a formula to provide the
lender a minimum return of 13.59% per annum (if the loan is held to
maturity) plus a participation in excess sale and refinancing proceeds, if
any. For financial reporting purposes, interest expense has been accrued
at a rate of 13.59% per annum. In order for the venture to share in future
net sale or refinancing proceeds, there must be a significant improvement
in current market and property operating conditions resulting in a
significant increase in value of the property.
The Piper venture agreements provide that any net cash flow, as
defined, will be used to pay principal and interest on the operating
deficit loans (as described above) with any excess generally distributable
71% to JMB/Piper and 29% to the venture partners, subject to certain
adjustments (as defined). In general, operating profits or losses are
allocated in relation to the economic interests of the joint venture
partners. Accordingly, operating profits (excluding depreciation and
amortization) were allocated 71% to the JMB/Piper and 29% to the venture
partners during 1994 and 1993, and 100% to the JMB/Piper during 1992.
The Piper venture agreements further provide that, in general, upon
any sale or refinancing of the property, the principal and any accrued
interest outstanding on any operating deficit loans will be repaid. Any
remaining proceeds will be distributable 71% to JMB/Piper and 29% to the
joint venture partners, subject to certain adjustments, as defined.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During the fourth quarter 1991, Larkin, Hoffman, Daly & Lindgren, Ltd.
(23,344 square feet) approached the joint venture indicating it was
experiencing financial difficulties and desired to give back a portion or
all of its leased space. Larkin's lease was scheduled to expire in January
2005 and provided for annual rental payments which were significantly
higher than current market rental rates. Larkin was also a limited partner
with partial interests in the building and the land under the building. On
January 15, 1992, the joint venture agreed to terminate Larkin's lease in
return for its partial interest in the land under the building and a
$1,011,798 note payable to the joint venture. The note payable provides
for monthly payments of principal and interest at 8% per annum with full
repayment over ten years. Larkin may prepay all or a portion of the note
payable at any time. As of the date of this report, all amounts due under
the note payable have been received.
During the fourth quarter of 1993, the joint venture finalized a lease
amendment with Popham, Haik, Schnobrich & Kaufman, Ltd. (104,843 square
feet). The amendment provides for the extension of the lease term from
February 1, 1997 to January 31, 2003 in exchange for a rent reduction
effective February 1, 1994. In addition, the tenant will lease an
additional 10,670 square feet effective August 1, 1995. The rental rate on
the expansion space approximates market which is significantly lower than
the reduced rental rate on the tenant's current occupied space.
During the second quarter of 1994, a major tenant and joint venture
partner, Piper Jaffray, Inc. (275,758 square feet) agreed to expand its
leased space by 3,362 square feet in July 1995 and 19,851 square feet in
December 1995. Such space is currently leased to tenants whose leases
expire just prior to the effective dates for Piper Jaffray, Inc.'s
expansions. The expansion space lease expiration date will be coterminous
with Piper Jaffray, Inc.'s existing lease expiration date of March 2000 and
the net effective rental rate approximates market.
(f) JMB/900
In 1984, the Partnership acquired, through JMB/900, an interest in an
existing joint venture ("Progress Partners") which owns a 36-story office
building known as the 900 Third Avenue Building in New York, New York. The
partners of Progress Partners were the developer of the property and an
original affiliate of the developer (the "Venture Partners") and JMB/900.
In 1986, one of the unaffiliated partners transferred a portion of its
interest to another partnership in which it and a major tenant of the
building (Central National Bank) were partners. In 1987 the bank failed
and the Federal Deposit Insurance Corporation ("FDIC") assumed its position
as a partner in this unaffiliated partnership.
The terms of the JMB/900 venture agreement generally provide that
JMB/900's share of Progress Partners' cash flow, sale or refinancing
proceeds and profits and losses will be distributed or allocated to the
Partnership in proportion to its 33-1/3% share of capital contributions.
JMB/900 has made capital contributions to Progress Partners and
certain payments to an affiliate of the developer, in the aggregate amount
of $18,270,000, subject to the obligation to make additional capital
contributions as described below.
JMB/900 has also made a loan to the developer in the amount of
$20,000,000 which is secured by the Venture Partners' interest in Progress
Partners. The loan bears interest at the rate of 16.4% per annum and is
payable in monthly installments of interest only until maturity on the
earlier of the sale or refinancing of the property or August 2004. For
financial reporting purposes, the loan is classified as an additional
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
investment in Progress Partners and any related interest received would be
accounted for as distributions (none in 1992, 1993 and 1994). To the
extent that JMB/900 has not received annual distributions equal to the
interest payable on such loan, the deficiency becomes a cumulative
preferred return payable out of future net cash flow or net sale or
refinancing proceeds.
The Progress Partners venture agreement provides that the venture is
required to pay the Venture Partners a stated return of $3,285,000 per
annum payable quarterly. Generally, JMB/900 is required to contribute
funds to the venture, to the extent net cash flow is not sufficient, to
enable the venture to make this payment. As a result of the lawsuit
discussed below, such amounts have not been contributed by JMB/900 to pay
the Venture Partner and consequently interest has not been received by
JMB/900 on the $20,000,000 loan discussed above. Under the terms of the
Progress Partners' venture agreement, the Venture Partners are generally
entitled to receive a non-cumulative preferred return of net cash flow (net
after the $3,285,000 per annum stated return payable to the Venture
Partners discussed above) of approximately $3,414,000 per annum, with any
remaining net cash flow distributable 49% to JMB/900 and 51% to the Venture
Partners.
The Progress Partners venture agreement further provides that net sale
or refinancing proceeds are distributable to JMB/900 and the Venture
Partners, on a pro rata basis, in an amount equal to the sum of any
deficiencies in the receipt of their respective cumulative preferred
returns of net cash flow plus certain contributions to the venture made by
JMB/900 to pay for the Venture Partner stated return. Next, proceeds will
be distributable to the Venture Partners in an amount equal to $20,000,000.
JMB/900 is entitled to receive the next $21,000,000 and the Venture
Partners will receive the next $42,700,000. Any remaining net proceeds are
to be distributed 49% to JMB/900 and 51% to the Venture Partners. As
discussed above, the $20,000,000 loan to the Venture Partners matures upon
sale or refinancing (under certain conditions) of the property.
Consequently, the $20,000,000 distribution level to the Venture Partners
would be used to pay off the $20,000,000 loan from JMB/900. Furthermore,
to the extent that JMB/900 has not received annual distributions equal to
the interest payable on the $20,000,000 loan discussed above, JMB/900's
preferred return deficiency is increased by the amounts not received.
Operating profits, in general, are allocated 49% to JMB/900 and 51% to
the Venture Partners. Operating losses, in general, are allocated 90% to
JMB/900 and 10% to the venture partners.
As a result of certain defaults by one of the unaffiliated joint
venture partners, an affiliate of the General Partners assumed management
responsibility for the property as of August 1987 for a fee computed as a
percentage of certain revenues. In December 1994, the affiliated property
manager entered into a sub-management contract with an unaffiliated third
party. Pursuant to the sub-management agreement, the unaffiliated property
manager is managing the property.
Through December 31, 1991, it was necessary for JMB/900 to contribute
approximately $4,364,000 ($1,457,000 of which was contributed by the
Partnership) to pay past due property real estate taxes and to pay certain
costs, including litigation settlement costs, which were the responsibility
of one of the unaffiliated joint venture partners under the terms of the
joint venture agreement to the extent such funds were not available from
the investment property.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In July 1989, JMB/900 filed a lawsuit in Federal court against the
former manager and one of the unaffiliated venture partners to recover the
amounts contributed and to recover certain other joint venture obligations
on which the unaffiliated partner has defaulted. This lawsuit was
dismissed on jurisdictional grounds. Subsequently, however, the FDIC filed
a complaint, since amended, in a lawsuit against the joint venture partner,
the Partnership, Carlyle Real Estate Limited Partnership - XV ("C-XV") and
JMB/900, which has enabled the Partnership and C-XV to refile its
previously asserted claims against the unaffiliated joint venture partner
as part of that lawsuit in Federal court. There is no assurance that
JMB/900 will recover the amounts of its claims as a result of the
litigation. Due to the uncertainty, no amounts in addition to the amounts
advanced to date, noted above, have been recorded in the financial
statements. Settlement discussions with one of the venture partners and
the FDIC continue. In addition, it appears that the unaffiliated venture
partners may not have the financial capabilities to repay amounts advanced
on their behalf. Consequently, a final settlement may involve redirecting
to JMB/900 amounts otherwise payable to the unaffiliated venture partners
in accordance with the venture agreement. Under certain circumstances,
JMB/900 may consider purchasing one or all of the unaffiliated venture
partners position in Progress Partners in order to resolve this and
potential future disputes. There are no assurances that a settlement will
be finalized or that the Partnership and affiliated partner will be able to
recover any amounts from the unaffiliated venture partners.
During the fourth quarter of 1994, JMB/900, on behalf of Progress
Partners, successfully completed an extension of its mortgage loan, which
was scheduled to mature on December 1, 1994. As a result, the loan has
been extended to December 1, 2001 with monthly payments of principal and
interest based on an interest rate of 9.375% per annum and a 30 year
principal amortization schedule. The previous interest rate was 13% per
annum. In addition, net cash flow after debt service and capital will be
paid into an escrow account controlled by the lender to be used, including
interest earned thereon, by the joint venture for releasing costs
associated with leases which expire in 1999 and 2000 (approximately 240,000
square feet of space). The remaining proceeds in this escrow plus interest
earned thereon, if any, will be released to the joint venture once 90% of
such leased space has been renewed or released.
(g) South Tower
In June 1985, the Partnership acquired an interest in a joint venture
partnership ("South Tower") which owns a 44-story office building in Los
Angeles, California. The joint venture partners of the Partnership include
Carlyle Real Estate Limited Partnership-XV ("Affiliated Partner"), one of
the sellers of the interests in South Tower, and another unaffiliated
venture partner.
The Partnership and the Affiliated Partner purchased their interests
for $61,592,000. In addition, the Partnership and the Affiliated Partner
made capital contributions to South Tower totaling $48,400,000 for general
working capital requirements and certain other obligations of South Tower.
The Partnership's share of the purchase price, capital contributions (net
of additional financing) and interest thereon totaled $26,589,500.
The terms of the South Tower agreement generally provide that the
Partnership and Affiliated Partner's aggregate share of the South Tower's
annual cash flow, net sale or refinancing proceeds, and profits and losses
are to be distributed or allocated to the Partnership and the Affiliated
Partner in proportion to their aggregate capital contributions.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Annual cash flow will be distributed 80% to the Partnership and
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner have received, in the aggregate, a cumulative preferred
return of $8,050,000 per annum. The remaining cash flow is to be
distributable 49.99% to the Partnership and the Affiliated Partner, and the
balance to the other joint venture partners. Additional contributions to
South Tower were contributed 49.99% by the Partnership and the Affiliated
Partner until all partners had contributed $10,000,000 in aggregate.
Operating profits and losses, in general, are to be allocated 49.99%
to the Partnership and the Affiliated Partner and the balance to the other
joint venture partners. Substantially all depreciation and certain
expenses paid from the Partnership's and Affiliated Partner's capital
contributions are to be allocated to the Partnership and Affiliated
Partner. In addition, operating profits, up to the amount of any annual
cash flow distribution, are allocated to all partners in proportion to such
distributions of annual cash flow.
In general, upon sale or refinancing of the property, net sale or
refinancing proceeds will be distributed 80% to the Partnership and the
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner have received the amount of any deficiency in their
preferred cash flow distributions described above plus an amount equal to
their "Disposition Preference" (which, in general, begins at $120,000,000
and increases annually by $8,000,000 to a maximum of $200,000,000). Any
remaining net sale or refinancing proceeds will be distributed 49.99% to
the Partnership and the Affiliated Partner and the remainder to the other
partners.
The office building is being managed by an affiliate of one of the
venture partners under a long-term agreement pursuant to which the
affiliate is entitled to receive a monthly management fee of 2-1/2% of
gross project income, a tenant improvement fee of 10% of the cost of tenant
improvements, and commissions on new leases.
The mortgage note secured by the property, as well as the promissory
note secured by the Partnership's interest in the joint venture matured
December 1, 1994. The Partnership and the joint venture have been in
discussions with the respective lenders regarding an extension of the
mortgage note and the promissory note. The Partnership and the joint
venture have reached an agreement with the lender of the mortgage note
whereby the lender will refrain from exercising its rights and remedies
under the loan documents through April 1, 1995 while the Partnership and
the venture continue to negotiate an extension or refinancing of the note
with the lender. The venture continues to make interest payments to the
lender under the original terms of the mortgage note and is required to
escrow all available cash flow. The Partnership has ceased making debt
service payments on the promissory note and is negotiating an extension or
refinancing with the venture. Such extension or refinancing is likely to
be dependent on the results of negotiations with the lender of the mortgage
note. There is no assurance that the joint venture or the Partnership will
be able to refinance these notes. In March 1995, the venture entered into
a seven year direct lease with the Los Angeles Unified School District
("LAUSD") for approximately one-half of a major tenant's (IBM's) space.
Under the terms of an agreement reached with IBM, the joint venture will be
reimbursed by IBM for all shortfalls between amounts due under the LAUSD
and the IBM leases. In early 1995, two major law firm tenants occupying
approximately 5% of the building's space notified the joint venture of
their intentions to disband each of these respective firms. The joint
venture has been negotiating separate termination agreements with these
tenants which provide for a combination of lump sum payments to be received
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
by the joint venture upon execution of the termination agreements, as well
as additional monthly payments to be received over a ten month period from
one of these tenants. In the absence of an extension or refinancing of the
notes, and due to the uncertainty that IBM will renew any of its remaining
space, the Partnership may decide not to commit any significant additional
amounts to the property. This would likely result in the Partnership no
longer having an ownership interest in the property, which would result in
a gain for financial reporting and for Federal income tax purposes with no
corresponding distributable proceeds. The promissory note secured by the
Partnership's interest in the joint venture has been classified at December
31, 1994 and 1993 as a current liability in the accompanying consolidated
financial statements.
(h) Turtle Creek
Under the terms of the Turtle Creek venture agreement, through
December 1990, the joint venture partner was obligated to make capital
contributions to the venture to fund operating deficits of the property and
to pay the Partnership a preferential return. The joint venture partner
defaulted on such obligations and in this regard, the joint venture partner
had not made the required debt service payments since December 1988 nor had
it paid the Partnership's preferential return since the third quarter of
1988. Due to the non-payment of debt service, the lender, on March 7,
1989, concluded proceedings to realize on its security and took title to
the property.
The joint venture partner's obligations to the Partnership were
guaranteed by certain of the joint venture partner's principals. The
Partnership filed a lawsuit against the joint venture partner and certain
of the joint venture partner's principals seeking to recover amounts lost
resulting from their defaults. On April 3, 1992, the Partnership signed a
settlement agreement with the joint venture partner and its principals.
Under the terms of the settlement, the Partnership is scheduled to receive
total payments of $4,075,000. The Partnership received $650,000 of this
amount upon execution of the agreement. The remainder of the settlement
amount is represented by a promissory note issued to the Partnership in the
amount of $3,425,000. The note provides for monthly interest payments over
a six-year period at interest rates which vary from 4.8613% to 5.3684% per
annum. In addition, the note provides for annual principal payments of
$400,000 due every April for five years with a final payment in the amount
of $1,425,000 due on the sixth anniversary of the date of issuance of the
note. Due to the uncertainty of collection of the remaining settlement
amounts, settlement payments are reflected in other income only as
collected. As of December 31, 1994, all scheduled payments have been
received. The joint venture partner and its principals have recently
contacted the Partnership regarding a discounted prepayment of the note,
however, no agreement for such prepayment has been reached.
(i) Yerba Buena
In June 1992, Yerba Buena transferred title to the property to the
lender in return for an opportunity to share in future sale or refinancing
proceeds above certain levels. In order for the joint venture to share in
future sale or refinancing proceeds, however, there must be a significant
improvement in current market and property operating conditions resulting
in a significant increase in value of the property. In addition, through
June 1998, the joint venture has right of first opportunity to purchase the
property if the lender chooses to sell. An affiliate of the Partnership's
Corporate General Partner had been managing and leasing the property for
the lender. In December 1994, the affiliate was replaced as manager and
leasing agent for the property. As a result of the transfer of title to
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the lender as discussed above, the Partnership no longer has an ownership
interest in the property and recognized a gain of $1,653,454 and $1,117,418
in 1992 for financial reporting and Federal income tax purposes,
respectively, with no corresponding distributable proceeds.
(j) 1090 Vermont
Through 1993, the Partnership and joint venture partners had
contributed a total of $4,076,000 ($2,038,000 for the Partnership) to the
joint venture to cover releasing costs and costs of a lobby renovation.
The Partnership and joint venture partner had agreed that the contributions
made to the joint venture would be repaid along with a return thereon out
of first available proceeds from property operations, sale or refinancing.
During the fourth quarter of 1993, the joint venture finalized a
refinancing of the existing mortgage loan with a new loan in the amount of
$17,750,000. The refinancing resulted in net proceeds of approximately
$2,259,000 for the joint venture. Of such proceeds, $1,785,560 (of which
the Partnership's share was $889,064) was distributed in December 1993 as a
partial return of the additional capital contributed. The new loan
provides for interest only monthly payments for the entire ten-year term.
The interest rate for the first five years is 8.01% per annum. The fixed
interest rate thereafter until maturity will be 2.8% per annum over the
five year Treasury rate at the beginning of such five-year period. In
addition to providing refinancing proceeds to the joint venture, the debt
service payments due under the new loan are significantly lower than the
payments due under the prior loan.
As a result of the reduced debt service payments under the new loan,
the property produced cash flow for the joint venture in 1994.
Consequently, the Partnership and joint venture partners received
distributions totalling approximately $1 million in 1994 (the Partnership's
share was $500,000). Such distributions represent a partial return of the
additional capital contributed.
(k) Mariners Pointe
Under the terms of the joint venture agreement, the joint venture
partner is obligated to contribute 22.3% of annual cash operating deficits.
The Partnership had made a request for capital from the joint venture
partner for its share of the 1992 deficit. The joint venture partner's
obligation to make the capital contribution is secured by its interest in
the joint venture as well as personal guarantees by certain of its
principals. The joint venture partner has not made the required
contribution, however, the Partnership is currently negotiating with the
joint venture partner to obtain its interest in the joint venture and
receive certain amounts in satisfaction of its funding obligation. The
Partnership is currently marketing the property for sale. There can be no
assurance that the Partnership will collect any or all of the amounts due
from the joint venture partner in satisfaction of its funding obligation or
will sell the property.
The underlying mortgage loan was scheduled to mature in October, 1994.
See note 4(b)(iii) regarding the extension of such loan.
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) LONG-TERM DEBT
(a) Long-term debt consists of the following at December 31, 1994 and 1993:
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
11.5% mortgage note (in default); secured by the
Wilshire Bundy Plaza in Los Angeles, California;
principal and interest payments of $416,000 are
due monthly through March 1996; unpaid balance
of $40,920,000 is due April 1996 . . . . . . . . . . . . . . . . . . . $ 41,292,105 41,500,130
9.0% mortgage note (in default); secured by the
Louisiana Tower Office Building located in
Shreveport, Louisiana; payments of $100,000 per
annum plus monthly cash flow (as defined) due with
the difference being deferred until cash flow is
available or the maturity of note; unpaid principal
balance of $22,225,000 is due January 1995. Balance is
net of $102,299 and $409,196 unamortized discount based
on an imputed interest rate of 11.0% at December 1994 and
1993, respectively (note 4(b)) . . . . . . . . . . . . . . . . . . . . 22,122,701 21,815,804
12% promissory note (in default); secured by the
Partnership's interest in the Wells Fargo Center South
Tower office building in Los Angeles, California;
monthly interest only payments of $122,500 through
November 1994; principal balance of $12,250,000 was
due in December 1994 (note 3(g)) . . . . . . . . . . . . . . . . . . . 12,250,000 12,250,000
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1994 1993
----------- -----------
8.75% first mortgage note; secured by the Louis Joliet Mall
in Joliet, Illinois, monthly principal and interest payments
of $134,000 until April 1998 when the remaining balance of
$10,969,000 is due . . . . . . . . . . . . . . . . . . . . . . . . . . 12,792,560 13,257,387
10% second mortgage note; secured by the Louis Joliet Mall
in Joliet, Illinois; payable interest only at 8.5% per annum
plus 1.5% payable from operating cash flow (as defined)
above a specified amount (none paid in 1994, 1993 and 1992)
until September 1995 when the remaining principal amount
is due.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,000,000
Other mortgage notes with interest rates ranging from
6.2% to 9.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,218,589 28,031,749
------------ ------------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . 120,675,955 126,855,070
Less current portion of long-term debt
(note 4(b)). . . . . . . . . . . . . . . . . . . . . . . . . 94,880,985 28,107,327
------------ ------------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . $ 25,794,970 98,747,743
============ ============
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Five year maturities of long-term debt are as follows:
1995. . . . . . . . . . . $ 94,880,985
1996. . . . . . . . . . . 622,407
1997. . . . . . . . . . . 678,184
1998. . . . . . . . . . . 11,203,234
1999. . . . . . . . . . . 80,000
============
(b) Long-term Debt Restructurings
(i) Brittany Downs Apartments - Phase I and II
In June 1993, the Partnership refinanced the Brittany Downs Apartments
Phase I $7,090,000 mortgage loan resulting in a reduction of the effective
interest rate on the loan from 8.0% per annum to 6.2% per annum.
Brittany Downs Apartments Phase II does not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership had been paying a reduced amount of debt service since November
1990. As a result, the Partnership was negotiating with the RTC to obtain
a loan modification to reduce the property's required debt service
payments. During the fourth quarter 1992, the RTC sold the Phase II
mortgage loans. The new underlying lender has placed the Partnership in
default for failure to pay the required debt service. Accordingly, the
balances of the Phase II first mortgage note, the second mortgage note, and
related accrued interest have been classified as current liabilities in the
accompanying consolidated financial statements at December 31, 1994 and
1993. Based upon the notice of default, the total amount of interest in
arrears on the existing mortgage notes for Brittany Downs Apartment Phase
II in the principal amount of $8,645,310 as of December 31, 1994, equals
$1,455,200.
As previously reported, the Partnership had been marketing the two
Phases together for sale. In this regard, on January 10, 1995, the
Partnership sold the Brittany Downs Apartments Phase I and II to an
unaffiliated third party.
The sale price was $18,380,000 (before selling costs and prorations),
of which $2,390,974 was received in cash at closing and $14,340,000
represented the purchaser's assumption of the underlying debt (net of a
payoff discount granted by the underlying lender for Brittany Downs
Apartments Phase II). The sale will result in a gain of approximately
$6,900,000 and $9,000,000 for financial reporting purposes and Federal
income tax reporting purposes in 1995, respectively. In addition, as a
result of the payoff discount granted by the underlying lender for Brittany
Downs Apartments Phase II, the Partnership will recognize an additional
gain on forgiveness of indebtedness of approximately $2,000,000 and
$270,000 for financial reporting purposes and Federal income tax reporting
purposes in 1995, respectively.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(ii) Louisiana Tower
During 1988, Louisiana Tower restructured its existing mortgage note
with the lender. Under the terms of the agreement, Louisiana Tower paid
the lender a total of $13,000,000, representing a principal reduction of
$10,775,000 and an interest rate reduction fee of $2,225,000. In return,
the interest rate on the remaining non-recourse note balance of $22,225,000
was lowered from 12.5% to 9.0% per annum. The lender is also entitled to
additional contingent interest equal to 30% of the net sale or refinancing
proceeds (as defined) in excess of $35,225,000. In order for the lender to
realize this additional contingent interest and for the Partnership to
share in future net sale or refinancing proceeds, there must be a
significant improvement in current market and property operating conditions
resulting in a significant increase in value of the property. Accordingly,
no additional contingent interest has been accrued by the Partnership.
In 1990, the Partnership signed an agreement with the lender to
provide additional debt restructuring in order to reduce current and
anticipated deficits resulting from the termination of a major tenant's
lease and costs associated with leasing. The terms of the agreement
require debt service payments in an amount equal to the monthly cash flow
generated by the property (before payment of property management fees) plus
$100,000 per annum for a five-year period commencing with the January 1990
payment. The cash flow of the property is escrowed monthly and remitted to
the lender annually on March 31. For calendar 1993, excess cash flows of
$973,118 were deposited in escrow and included in the March 31, 1994
remittance to the lender of net annual cash flow (as defined). The
difference between the above pay rate and the contract pay rate of 9% per
annum on the principal balance will accrue at 9% per annum compounded
monthly until maturity when the principal and accrued interest is due and
payable. The existing modification period expired and the loan matured in
January 1995. Accordingly, the principal balance of the property's
underlying mortgage loan ($22,122,701) and related deferred interest
($5,826,026) has been classified as a current liability in the accompanying
consolidated financial statements as of December 31, 1994. The Partnership
has decided that it will not commit any significant amounts of capital to
this property due to the fact that the recovery of such amounts would be
unlikely. Consequently, commencing in June 1994, the Partnership ceased
making the required debt service payments to the lender and commenced
discussions with it to provide further modifications to the loan in order
to eliminate a deficit funding obligation. The lender informed the
Partnership that it is unwilling to provide further modifications to the
loan. The lender is currently pursuing a course of significantly reducing
its holdings in commercial real estate loans. The lender can achieve this
through a sale of the loan or through obtaining title to the underlying
real estate and subsequently selling it. The lender has informed the
Partnership that it will pursue the latter method for divesting itself of
this real estate investment. Under either scenario, however, the lender
would receive significantly less than the full amount of its loan due to
the depressed value of the property. The lender began foreclosure
proceedings in October 1994. A receiver has been appointed for the
property and a third party manager has been appointed to manage the
property on the receiver's behalf. Title to the property is expected to
transfer to the lender in 1995. This property represents approximately 5%
of the Partnership's original cash investment in real properties. The
Partnership will recognize a gain for Federal income tax and financial
reporting purposes in 1995 in connection with this proposed transaction
with no distributable proceeds.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(iii) Mariners Pointe
During the third quarter of 1994, the Partnership obtained a two year
extension of the existing $6,500,000 mortgage loan which matured on
October 1, 1994. Under terms of the loan extension, the loan bears
interest at 2.75% above the floating weekly tax exempt rate. The weekly
tax exempt interest rate at December 31, 1994 was 4.41% per annum for an
interest rate of 7.16% per annum as of that date. Prior to the extension,
the loan bore interest of 10.875% per annum.
(iv) Wilshire Bundy Plaza
The Partnership has commenced discussions with the existing lender for
a possible debt modification on its mortgage loan which matures April 1996
in order to reduce its debt service and cover its releasing costs and
earthquake repair costs (note 2(b)) over the next several years. In this
regard, the Partnership suspended debt service payments commencing with the
December 1, 1994 payment in the amount of $415,922. Accordingly, the
principal balance of the mortgage loan ($41,292,105) and related accrued
interest ($791,196) has been classified as a current liability in the
accompanying consolidated financial statements as of December 31, 1994. If
the Partnership is unsuccessful in obtaining such modification, it may
decide not to commit additional amounts to the property, which could result
in a disposition of the property and a recognition of gain for financial
reporting and Federal income tax purposes with no distributable proceeds.
(v) Louis Joliet Mall
The second mortgage loan matures on September 1, 1995. In this
regard, the Partnership is currently seeking replacement financing.
Accordingly, the principal balance of the property's second mortgage loan
($10,000,000) and related deferred interest ($2,155,305) has been
classified as a current liability in the accompanying consolidated
financial statements as of December 31, 1994. There can be no assurance
that the Partnership will be able to refinance the second mortgage loan
upon its maturity.
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale of
investment properties are to be allocated to the General Partners to the
greatest of (i) 1% of such profits, (ii) the amount of cash distributions
to the General Partners, or (iii) an amount which will reduce the General
Partners' capital account deficits (if any) to a level consistent with the
gain anticipated to be realized from the sale of properties. Losses from
the sale of investment properties are to be allocated 1% to the General
Partners. The remaining profits and losses will be allocated to the
Limited Partners.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership. Distributions of "Net cash receipts" of the
Partnership are allocated 90% to the Limited Partners and 10% to the
General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership Agreement provides that subject to certain conditions,
the General Partners shall receive as a distribution from the sale of a
real property by the Partnership up to 3% of the selling price, and that
the remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, prior to such distributions being made, the Limited Partners are
entitled to receive 99% of net sale or refinancing proceeds and the General
Partners shall receive 1% until the Limited Partners (i) have received cash
distributions of sale or financing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership
and (ii) cumulative cash distributions from the Partnership's operations
which, when combined with the sale or financing proceeds previously
distributed, equal a 6% annual return on the Limited Partners average
capital investment for each year (their initial capital investment reduced
by sale or financing proceeds previously distributed) commencing with the
third fiscal quarter of 1985. If upon the completion of the liquidation of
the Partnership and the distribution of all Partnership funds, the Limited
Partners have not received the amounts in (i) and (ii) above, the General
Partners will be required to return all or a portion of the 1% distribution
of sale or financing proceeds described above in an amount equal to such
deficiency in payments to the Limited Partners pursuant to (i) and (ii)
above. Accordingly, $1,742,000 of proceeds have been deferred for the
General Partners at December 31, 1994.
(6) MANAGEMENT AGREEMENTS
(a) Scottsdale Financial Centers I & II
On October 1, 1993, the RTC sold the mortgage note underlying
Scottsdale Financial Center II and the Partnership simultaneously
transferred title to the purchaser of the note. On December 17, 1993, the
Partnership relinquished its ownership interest in Scottsdale Financial
Center I in a similar transaction.
A judicial hearing was held in early 1991 concerning, among other
things, an alleged default by the Partnership on the mortgage loans secured
by the Scottsdale Financial Center I and II investment properties. The
judge issued an order rendering the Partnership's rights of offset
unenforceable against the RTC acting as receiver of the lender. The court
entered a judgment pursuant to this order in February 1992. However, per
the judgment, the Partnership was not required to return the guaranteed
payments received from the manager since acquisition of the properties,
which totalled approximately $1,900,000 for both properties.
Both the Partnership and the RTC had filed a notice of appeal from the
judgment order of the court. During the appeal process, the RTC was
entitled to obtain title to the properties and the cash reserves on hand.
Accordingly, during 1992, the RTC withdrew the cash reserves on hand at the
properties. During the quarter ended March 31, 1993, the Partnership
reached an agreement with the RTC for the settlement of the disputes
through a dismissal of their respective appeals. In April 1993, in
accordance with the settlement, the Partnership returned $320,000, which
represented certain amounts (plus interest thereon) which were withdrawn
from the property operating accounts subsequent to the date of the alleged
default by the Partnership and set aside in a segregated interest bearing
account. However, the Partnership was not required to return the $1.9
million of guaranteed payments it had previously received. As a result of
the transfers of title discussed above, the Partnership recognized a gain
of $18,382,769 and $7,920,092 in 1993 for financial reporting and Federal
income tax purposes, respectively, without any corresponding distributable
proceeds.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(b) Other Management Agreements
Certain of the Partnership's properties are managed by affiliates of
the General Partners or their assignees for fees computed as a percentage
of certain rents received by the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is the property
manager of the Wilshire Bundy Office Building, the Brittany Downs
Apartments (Phase I and Phase II), the Mariner's Pointe Apartments, and the
Piper Jaffray Tower.
The Louis Joliet Mall is managed by an affiliate of the Corporate
General Partner for fees computed as a percentage of certain revenues.
(7) SALE OR DISPOSITION OF INVESTMENT PROPERTIES
(a) Yerba Buena West Office Building
A description of the disposition is contained in note 3(i) filed with
this annual report.
(b) Gateway Tower
A description of the disposition is contained in note 3(d) filed with
this annual report.
(c) Scottsdale Financial Centers - Phase I and II
A description of the disposition is contained in note 6(a) filed with
this annual report.
(d) Old Orchard Shopping Center
A description of the sale is contained in note 3(b) filed with this
annual report.
(e) Turtle Creek Centre
A description of the disposition is contained in note 3(h) filed with
this annual report.
(8) LEASES
(a) As Property Lessor
At December 31, 1994, the Partnership and its consolidated ventures'
principal assets are two office buildings, two apartment complexes and one
shopping mall. The Partnership has determined that all leases relating to
these properties are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of each of the
properties, excluding cost of land, is depreciated over the estimated
useful lives. Leases with commercial tenants range in term from one to 34
years and provide for fixed minimum rent and partial to full reimbursement
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
of operating costs. In addition, leases with shopping center tenants
provide for additional rent based upon percentages of tenant sales volumes.
With respect to the Partnership's shopping center investments, a
substantial portion of the ability of retail tenants to honor their leases
is dependent upon the retail economic sector. Apartment complex leases in
effect at December 31, 1994 are generally for a term of one year or less
and provide for annual rents of approximately $3,975,204.
Cost and accumulated depreciation of the leased assets are summarized
as follows at December 31, 1994:
Office buildings:
Cost . . . . . . . . . . . . . $ 90,929,970
Accumulated depreciation . . . (29,757,215)
------------
61,172,755
------------
Shopping mall:
Cost . . . . . . . . . . . . . 46,895,803
Accumulated depreciation . . . (12,129,153)
------------
34,766,650
------------
Apartment complexes:
Cost . . . . . . . . . . . . . 23,922,454
Accumulated depreciation . . . (7,544,635)
------------
16,377,819
------------
Total. . . . . . . . . . $112,317,224
============
Minimum lease payments including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements, are as follows:
1995. . . . . . . . . . . $10,254,796
1996. . . . . . . . . . . 8,951,751
1997. . . . . . . . . . . 7,395,417
1998. . . . . . . . . . . 6,143,687
1999. . . . . . . . . . . 4,162,482
Thereafter. . . . . . . . 7,971,449
-----------
$44,879,582
===========
(b) As Property Lessee
The following lease agreements have been determined to be operating
leases:
The Partnership owns, through Louisiana Tower (see note 4(b)(ii)), a
net leasehold interest, which expires in 2069, in a portion of the land
underlying the building. The ground lease provides for payments of
$120,000 a year through July 1992; $144,000 a year from August 1992 through
July 1993; 102% of the previous year's rent each year from August 1993
through July 2026; $277,000 a year from August 2026 through July 2027; and
for each remaining year through July 2069, $5,500 plus the previous year's
rent.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The land underlying Wilshire Bundy Plaza is subject to a ground lease
having a term ending in September 2047. In September 1987, and every five
years thereafter, the annual ground rent has and will be increased (from a
base amount of $338,000 per annum payable in equal monthly installments)
based on a formula equal to the lesser of a compounded amount or an amount
based on a price index. The required ground rent payments for the period
October 1987 through September 1992 and October 1992 through September 1998
equal $421,409 and $526,762, respectively, per annum payable in equal
monthly installments. The Partnership has an option to purchase the land
between October 2005 and October 2007 at fair market value.
Future minimum rental commitments under the leases are as follows:
1995 . . . . . . . . . . . $ 677,828
1996 . . . . . . . . . . . 680,849
1997 . . . . . . . . . . . 683,930
1998 . . . . . . . . . . . 687,074
1999 . . . . . . . . . . . 690,280
Thereafter . . . . . . . . 47,831,727
-----------
$51,251,688
===========
(9) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership (or in the case of certain property management fees and out-of-
pocket expenses, by the Partnership's ventures) to the Corporate General
Partners and its affiliates as of December 31, 1994 and for the years ended
December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
UNPAID AT
DECEMBER 31,
1994 1993 1992 1994
---------- --------- --------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . . . . $2,088,404 2,162,440 2,564,206 1,957,396
Insurance commissions. . . . . . . . . . 64,214 79,545 117,368 --
Reimbursement (at cost) for
administrative and accounting
services . . . . . . . . . . . . . . . 237,695 155,561 194,975 --
Reimbursement (at cost) for
legal services . . . . . . . . . . . . 14,185 11,714 54,111 --
Reimbursement (at cost) for
out-of-pocket expenses. . . . . . . . . 79,548 84,531 43,287 12
Reimbursement (at cost) for
out-of-pocket salary and
salary related expenses
relating to on-site and
other costs for the Partner-
ship and its investment
properties . . . . . . . . . . . . . . 219,027 228,172 198,840 4,984
---------- ---------- --------- ---------
$2,703,073 2,721,963 3,172,787 1,962,392
========== ========== ========= =========
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As more fully discussed in note 3(c), the Partnership has an
obligation to fund, on demand, $1,200,000 and $1,200,000 to Carlyle
Investors, Inc. and Carlyle Managers, Inc., respectively of additional
paid-in capital (reflected in the amounts due to affiliates in the
accompanying financial statements). As of December 31, 1994, these
obligations bore interest of 5.78% per annum and interest accrued on these
obligations was $175,384 as of December 31, 1994.
All amounts currently payable to the General Partners and their
affiliates do not bear interest and are expected to be paid in future
periods. Reference is made to note 5 above for a discussion of certain
subordinated distributions payable to the General Partners under certain
circumstances.
(10) INVESTMENT IN UNCONSOLIDATED VENTURES
Summary combined financial information for Orchard Associates,
JMB/NYC, Gateway, JMB/Piper, JMB/Piper II, JMB/900, 1090 Vermont, Yerba
Buena, South Tower and their unconsolidated ventures (note 3) as of and for
the years ended December 31, 1994 and 1993 is presented below.
1994 1993
-------------- --------------
Current assets . . . . . . . . . . $ 61,559,349 41,432,795
Current liabilities (including
$1,111,408,477 and $923,041,198
respectively, of debt in
default at December 31, 1994
and December 31, 1993)
(note 3). . . . . . . . . . . . . (1,153,329,220) (1,246,476,073)
-------------- --------------
Working capital (deficit). . . (1,091,769,871) (1,205,043,278)
-------------- --------------
Investment properties, net . . . . 1,055,303,077 1,096,520,780
Other assets . . . . . . . . . . . 105,872,114 107,336,751
Other liabilities. . . . . . . . . (150,860,322) (115,020,293)
Long-term debt . . . . . . . . . . (221,001,770) (126,882,022)
-------------- --------------
Partners' capital. . . . . . . $ (302,456,774) (243,088,062)
============== ==============
Represented by:
Invested capital . . . . . . . . $1,078,356,674 1,073,795,691
Cumulative distributions . . . . (265,345,596) (249,692,383)
Cumulative losses. . . . . . . . (1,115,467,853) (1,067,191,370)
-------------- --------------
$ (302,456,774) (243,088,062)
============== ==============
Total income . . . . . . . . . . . $ 242,197,996 287,330,325
============== ==============
Expenses applicable to
operating loss . . . . . . . . . $ 287,980,902 594,569,521
============== ==============
Net loss . . . . . . . . . . . . . $ (45,782,906) (307,239,196)
============== ==============
Total income and net loss for 1994 includes gain of $3,404,164 related
to the sale of the Old Orchard Shopping Center.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
Total income and net loss for 1993 includes gain of $36,387,799
related to the sale of the Old Orchard Shopping Center, a $192,627,560
provision for value impairment at the 2 Broadway Building and a $67,479,871
provision for value impairment at the Wells Fargo Center.
Total income and net loss for 1992 includes gain income of $36,455,387
related to the disposition of the Gateway Tower and Yerba Buena West Office
Building.
(11) SUBSEQUENT EVENTS
(a) Cash Distributions
On February 28, 1995, the Partnership paid a distribution of
$8,020,647 to the Limited Partners ($20 per limited partnership interest)
and $81,017 to the General Partners from sales and refinancing proceeds
(see notes 3(b) and 3(j)).
(b) Brittany Downs Apartments Phase I and II
The Partnership sold its interest in the Brittany Downs Apartments
Phase I and II on January 10, 1995 (see note 4(b)).
<TABLE>
SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<CAPTION>
COSTS
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
----------------------------- -------------- --------------------------------------------
LAND AND BUILDINGS LAND AND LAND AND BUILDINGS
LEASEHOLD AND BUILDINGS AND LEASEHOLD AND
ENCUMBRANCE(C) INTEREST IMPROVEMENTS IMPROVEMENTS(F) INTEREST IMPROVEMENTS TOTAL (G)
-------------- ----------- ------------ --------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
APARTMENT
BUILDINGS:
Thornton,
Colorado
(Phase I). . $ 7,035,000 889,875 6,600,075 152,582 889,875 6,752,657 7,642,532
Thornton,
Colorado
(Phase II) . 8,566,458 880,000 7,479,122 (10,834) 880,000 7,468,288 8,348,288
Stockton,
California
(E). . . . . 6,500,000 786,961 7,082,651 62,022 786,961 7,144,673 7,931,634
OFFICE
BUILDINGS:
Shreveport,
Louisiana
(D). . . . . 21,815,804 2,036,886 27,933,752 4,245,381 2,036,886 32,179,133 34,216,019
Los Angeles,
California
(D). . . . . 41,500,130 2,449,356 60,122,288 (5,857,692) 2,094,674 54,619,278 56,713,952
SHOPPING MALL:
Joliet,
Illinois . . 23,257,386 4,100,414 35,752,871 7,042,518 4,100,414 42,795,389 46,895,803
------------ ---------- ----------- ----------- ---------- ----------- -----------
Total. . . $108,674,778 11,143,492 144,970,759 5,633,977 10,788,810 150,959,418 161,748,228
============ ========== =========== =========== ========== =========== ===========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1994
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(H) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
APARTMENT BUILDINGS:
Thornton, Colorado
(Phase I) . . . . . . . . . $ 2,709,339 1984 8/15/84 5-30 years 105,576
Thornton, Colorado
(Phase II). . . . . . . . . 2,247,984 1985 12/18/87 5-30 years 102,379
Stockton, California
(E) . . . . . . . . . . . . 2,587,312 1984 10/2/84 5-30 years 89,059
OFFICE BUILDINGS:
Shreveport, Louisiana
(D) . . . . . . . . . . . . 11,124,573 1983 11/14/84 5-30 years 253,664
Los Angeles,
California (D) . . . . . . 18,632,643 1984 11/7/85 5-30 years 715,083
SHOPPING MALL:
Joliet, Illinois. . . . . . 12,129,153 1978 7/31/85 5-30 years 550,920
----------- ---------
Total . . . . . . . . . $49,431,004 1,816,681
=========== =========
<FN>
Notes:
(A) The initial cost represents the original purchase price of the properties, including amounts incurred subsequent
to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1994 for Federal income tax purposes was
$96,528,582.
(C) Amounts disclosed exclude current accrued and deferred interest.
(D) Property operated under ground lease; see Note 8.
(E) Property owned and operated by joint venture; see Note 3.
(F) Includes provision for value impairment at Wilshire Bundy of $9,495,459 recorded June 30, 1992. See Note 1
for further discussion.
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(G) Reconciliation of real estate owned:
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . $158,345,396 194,946,080 203,967,740
Additions during period. . . . . . . . . . . . . . 3,402,832 525,771 473,799
Disposals during period. . . . . . . . . . . . . . -- (37,126,455) --
Provision for value impairment . . . . . . . . . . -- -- (9,495,459)
Revaluation of land leasehold. . . . . . . . . . . -- -- --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . $161,748,228 158,345,396 194,946,080
============ ============ ============
(H) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . $ 44,635,592 49,123,417 42,995,860
Depreciation expense . . . . . . . . . . . . . . . 4,795,412 5,701,647 6,127,557
Disposals. . . . . . . . . . . . . . . . . . . . . -- (10,189,472) --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . $ 49,431,004 44,635,592 49,123,417
============ ============ ============
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV:
We have audited the combined financial statements of Certain
Unconsolidated Ventures of Carlyle Real Estate Limited Partnership-XIV (the
Partnership) (Note 1) as listed in the accompanying index. In connection
with our audits of the combined financial statements, we also have audited
the financial statement schedule as listed in the accompanying index.
These combined financial statements and the financial statement schedule
are the responsibility of the General Partners of the Partnership. Our
responsibility is to report on these combined financial statements and the
financial statement schedule based on the results of our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our report.
In our opinion, the 1992 combined financial statements referred to
above present fairly, in all material respects, the results of operations
and cash flows of Certain Unconsolidated Ventures of the Partnership for
the year ended December 31, 1992, in conformity with generally accepted
accounting principles.
As discussed in Note 3(c) of the Partnership's notes to the
consolidated financial statements, incorporated by reference in Note 2 of
the combined financial statements, beginning July 1, 1993, JMB/NYC Office
Building Associates, L.P. (JMB/NYC) was in dispute with the unaffiliated
venture partners in the real estate ventures over the calculation of the
effective interest rate with reference to the first mortgage loan, which
covers the real estate owned through JMB/NYC's joint ventures. The
disputed interest aggregated $52,550,000 and $20,521,000 for the years
ended December 31, 1994 and 1993, respectively, and has not been included
in mortgage and other interest for 1994 or 1993 in the accompanying
combined financial statements. In October 1994, JMB/NYC entered into an
agreement (the Agreement) with the unaffiliated venture partners in the
real estate ventures which, when effective, would resolve this dispute by
providing for interest at the same rate as the first mortgage loan and
would eliminate any funding obligations by JMB/NYC. However, as discussed
in Note 2 of the combined financial statements, there are no assurances
that the Agreement will be finalized and become effective. The ultimate
outcome of this uncertainty cannot presently be determined.
The accompanying financial statements and financial statement schedule
have been prepared assuming that the ventures comprising Certain
Unconsolidated Ventures of the Partnership will continue as going concerns.
As discussed in Note 3(c) of the Partnership's notes to consolidated
financial statements incorporated by reference in Note 2 of the combined
financial statements, certain of JMB/NYC's investments in real estate joint
ventures have suffered recurring losses from operations and expect to incur
cash flow deficits in the future. Such deficits may be impacted by the
resolution of the matter referred to above. JMB/NYC's interest in each of
the real estate joint ventures is pledged to secure its obligations under
the joint venture agreements, including its obligation to fund possible
cash flow deficits incurred by the real estate ventures commencing July 1,
1993. There can be no assurance that either the unaffiliated venture<PAGE>
partners or JMB/NYC will be able to fund possible cash flow deficits in the
future. Also, as described in Note 2 of the combined financial statements,
the holder of the first mortgage loan alleged certain defaults under the
loan agreements. Further, JMB/NYC and the unaffiliated venture partners in
the real estate ventures have agreed to file, for each of the real estate
joint ventures, a prearranged bankruptcy plan for reorganization under
Chapter 11 of the Bankruptcy Code. Such filings are expected to occur in
1995. These circumstances raise substantial doubt about JMB/NYC's and its
real estate joint ventures' ability to continue as going concerns. The
General Partners' plans in regard to these matters are also described in
Note 3(c) of the Partnership's notes to the consolidated financial
statements. The combined financial statements and financial statement
schedule do not include any adjustments that might result from the outcome
of this uncertainty.
Additionally, as discussed in Notes 1, 2, and 3 of notes to the
combined financial statements, the mortgage loan secured by the property
owned by the South Tower venture matured in December 1994. The South Tower
venture has entered into a forbearance agreement with the mortgage lender
through April 1, 1995 whereby the lender has agreed not to proceed with
default remedies. In the event the South Tower venture is not successful
in extending or refinancing the mortgage loan, the Partnership and its
venture partners may be unable or unwilling to commit additional amounts to
South Tower. These circumstances could result in the Partnership no longer
having an ownership in South Tower and raise substantial doubt about South
Tower venture's ability to retain its ownership in the property and
continue as a going concern. The General Partners' plans with regard to
this matter are also described in Note 3(g) of the Partnership's notes to
consolidated financial statements, incorporated by reference in Note 2 and
3 of the combined financial statements. The accompanying combined
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.
Because of the significance of the uncertainties discussed in the
preceding three paragraphs, we are unable to express, and we do not
express, an opinion on the accompanying 1994 and 1993 combined financial
statements and 1994 financial statement schedule.
KPMG Peat Marwick LLP
Chicago, Illinois
March 27, 1995
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
------
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Current assets:
Cash (including amounts held by property manager) (note 1) . . . . . . $ 1,529,078 1,287,362
Restricted funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,929,599 11,638,258
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . -- 2,862,784
Rents and other receivables (net of allowance for doubtful
accounts of $8,167,305 and $5,777,252 at December 31, 1994
and 1993, respectively). . . . . . . . . . . . . . . . . . . . . . . 4,068,623 3,887,742
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,949,400 1,331,457
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,553,812 1,508,043
Tenant notes receivable. . . . . . . . . . . . . . . . . . . . . . . . 969,535 1,188,252
Due from the O&Y affiliates (net of allowance for uncollecti-
bility of $13,608,787 and $11,946,284 at December 31,
1994 and 1993, respectively) (note 1). . . . . . . . . . . . . . . . -- --
-------------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . 50,000,047 23,703,898
-------------- --------------
Investment properties (notes 1, 2, 3 and 4) - Schedule III:
Land and leasehold interest. . . . . . . . . . . . . . . . . . . . . 196,326,359 196,326,359
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . 1,211,838,899 1,209,233,415
-------------- --------------
1,408,165,258 1,405,559,774
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . (506,534,332) (468,502,205)
-------------- --------------
Total investment properties,
net of accumulated depreciation. . . . . . . . . . . . . . . 901,630,926 937,057,569
-------------- --------------
Deferred expenses (note 1) . . . . . . . . . . . . . . . . . . . . . . . 16,763,865 16,901,549
Accrued rents receivable (note 1). . . . . . . . . . . . . . . . . . . . 57,714,529 55,220,022
-------------- --------------
$1,026,109,367 1,032,883,038
============== ==============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1994 1993
-------------- --------------
Current liabilities:
Mortgage debt - in default (note 3). . . . . . . . . . . . . . . . . . $ 1,111,408,477 1,121,518,395
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . 9,712,996 6,767,627
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,557,267 5,384,407
Tenant allowance payable . . . . . . . . . . . . . . . . . . . . . . . 2,809,707 2,369,373
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,816,794 2,415,520
Interest payable to the O&Y affiliates . . . . . . . . . . . . . . . . 1,570,237 4,570,237
-------------- --------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 1,145,875,478 1,143,025,559
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,704,669 --
Notes payable (notes 3 and 5). . . . . . . . . . . . . . . . . . . . . . 34,158,225 34,158,225
Deferred interest payable (notes 3 and 5). . . . . . . . . . . . . . . . 93,853,559 78,605,523
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 1,506,368 1,660,303
Lease take-back obligation . . . . . . . . . . . . . . . . . . . . . . . 982,077 1,440,327
-------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 1,296,080,377 1,258,889,937
Partners' capital accounts (deficits) (note 2):
Carlyle-XIV:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 134,594,010 134,594,010
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . (262,630,707) (249,414,648)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (33,914,823) (31,800,823)
-------------- --------------
(161,951,520) (146,621,461)
-------------- --------------
Venture partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 720,086,398 719,615,922
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . (706,478,958) (682,670,430)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (121,626,929) (116,330,930)
-------------- --------------
(108,019,489) (79,385,438)
-------------- --------------
Total partners' capital accounts . . . . . . . . . . . . . . . (269,971,009) (226,006,899)
-------------- --------------
Commitments and contingencies (notes 1 and 2)
$1,026,109,367 1,032,883,038
============== ==============
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF OPERATIONS (DEFICITS)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
------------- ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 193,635,899 212,541,476 221,692,502
Interest income. . . . . . . . . . . . . . . . . . . 409,425 535,618 538,202
------------- ------------ ------------
194,045,324 213,077,094 222,230,704
------------- ------------ ------------
Expenses:
Mortgage and other interest (notes 3 and 5). . . . . 106,643,807 111,864,613 104,279,237
Property operating expenses. . . . . . . . . . . . . 75,714,397 79,342,161 80,843,762
Depreciation . . . . . . . . . . . . . . . . . . . . 38,032,127 48,668,505 52,579,883
Amortization of deferred expenses. . . . . . . . . . 2,916,084 3,129,098 3,462,448
Professional services. . . . . . . . . . . . . . . . 2,491,222 2,314,088 1,286,443
Provision for value impairment (note 1). . . . . . . -- 260,107,431 51,423,084
Provision for doubtful accounts (note 1) . . . . . . 5,272,274 23,497,333 803,717
Loss on disposal of fixed assets (note 2). . . . . . -- 905,466 --
------------- ------------ ------------
231,069,911 529,828,695 294,678,574
------------- ------------ ------------
Net loss . . . . . . . . . . . . . . . . . . $ 37,024,587 316,751,601 72,447,870
============= ============ ============
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
VENTURE
CARLYLE-XIV PARTNERS
------------- -----------
<S> <C> <C>
Balance at December 31, 1991 . . . . . . . . . . . . . . . . . . . . . . $ (72,509,603) 254,364,195
Cash contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,000 15,107,109
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,919,267) (56,528,603)
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (619,150) (25,584,752)
------------- ------------
Balance at December 31, 1992 . . . . . . . . . . . . . . . . . . . . . . (88,977,020) 187,357,949
Cash contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 1,111,010
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,954,441) (259,797,160)
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (700,000) (8,057,237)
------------- ------------
Balance at December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . (146,621,461) (79,385,438)
Cash contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 470,476
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,216,059) (23,808,528)
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,114,000) (5,295,999)
------------- ------------
Balance at December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . $(161,951,520) (108,019,489)
============= ============
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . $(37,024,587) (316,751,601) (72,447,870)
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . . . 38,032,127 48,668,505 52,579,883
Amortization of deferred expenses. . . . . . . . 2,916,084 3,129,098 3,462,448
Write-off of tenant allowances payable . . . . . (1,337,328) -- --
Accrued rents receivable . . . . . . . . . . . . (2,494,507) 84,844 2,441,156
Loss on disposal of fixed assets . . . . . . . . -- 905,466 --
Provision for doubtful accounts. . . . . . . . . 5,272,274 23,497,333 803,717
Provision for value impairment . . . . . . . . . -- 260,107,431 51,423,084
Changes in:
Rents and other receivables. . . . . . . . . . . . (3,790,652) (3,377,286) (1,964,903)
Prepaid expenses . . . . . . . . . . . . . . . . . (13,617,943) (373,110) (137,626)
Escrow deposits. . . . . . . . . . . . . . . . . . (3,045,769) (24,494) (11,376)
Tenant notes receivable. . . . . . . . . . . . . . 218,717 354,079 (64,177)
Accounts payable and accrued expenses. . . . . . . 2,945,369 (1,495,849) 1,628,002
Accrued interest . . . . . . . . . . . . . . . . . 172,860 (50,248) (4,545,929)
Tenant security deposits . . . . . . . . . . . . . (153,935) 143,273 11,376
Interest payable to the O&Y affiliates . . . . . . (3,000,000) 4,570,237 (1,171,214)
Deferred interest payable. . . . . . . . . . . . . 15,248,036 13,431,777 11,831,859
Unearned rent. . . . . . . . . . . . . . . . . . . 32,105,943 (99,732) (1,236,104)
Other liabilities. . . . . . . . . . . . . . . . . (458,250) 1,440,327 --
----------- ------------ -----------
Net cash provided by
operating activities . . . . . . . . . 31,988,439 34,160,050 42,602,326
----------- ------------ -----------
Cash flows from investing activities:
Restricted funds . . . . . . . . . . . . . . . . . . (12,291,341) (11,638,258) --
Net sales and maturities (purchases)
of short-term investments. . . . . . . . . . . . . 2,862,784 (665,608) 1,327,824
Additions to investment properties,
net of tenant allowance payable. . . . . . . . . . (827,822) (4,304,526) (5,826,028)
Payment of deferred expenses . . . . . . . . . . . . (2,778,400) (3,256,357) (3,525,189)
----------- ------------ -----------
Net cash used in investing activities. . (13,034,779) (19,864,749) (8,023,393)
----------- ------------ -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
1994 1993 1992
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . (10,109,918) (9,063,859) (8,089,917)
Capital contributed to ventures. . . . . . . . . . . 470,476 1,121,010 15,178,109
Advances to the O&Y affiliates . . . . . . . . . . . (1,662,503) (1,176,224) (10,770,060)
Distributions to partners. . . . . . . . . . . . . . (7,409,999) (8,757,237) (26,203,902)
------------ ------------ -----------
Net cash used in financing activities. . (18,711,944) (17,876,310) (29,885,770)
------------ ------------ -----------
Net increase (decrease) in cash. . . . . 241,716 (3,581,009) 4,693,163
Cash and cash equivalents,
beginning of year. . . . . . . . . . . 1,287,362 4,868,371 175,208
------------ ------------ -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . $ 1,529,078 1,287,362 4,868,371
============ ============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . $ 94,172,911 93,912,847 96,993,307
============ ============ ===========
Non-cash investing and financing activities:
Retirement of investment property. . . . . . . . $ -- 3,240,368 1,469,160
Write-off of related accumulated
depreciation . . . . . . . . . . . . . . . . . -- (2,334,902) --
------------ ------------ -----------
Loss on disposal of fixed assets . . . . . . . . $ -- 905,466 1,469,160
============ ============ ===========
<FN>
See accompanying notes to combined financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) ORGANIZATION AND BASIS OF ACCOUNTING
The accompanying combined financial statements have been prepared for
the purpose of complying with Rule 3.09 of Regulation S-X of the Securities
and Exchange Commission. They include the accounts of certain
unconsolidated joint ventures in which Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV") or Carlyle-XIV Associates, L.P. owns a
direct interest. Also included are the accounts of those joint venture
partnerships (underlying ventures) in which Carlyle-XIV owns an indirect
interest through one of these unconsolidated joint ventures. The entities
(the "Combined Ventures") included in the combined financial statements are
as follows:
1. JMB/NYC Office Building Associates, L.P. ("JMB/NYC") (a)
-237 Park Avenue Associates (b) } (together
-1290 Associates (b) } "Three Joint
-2 Broadway Associates } Ventures")
-2 Broadway Land Company (b) }
2. Maguire/Thomas Partners - Crocker Properties South Tower
("South Tower") (c)
(a) Carlyle-XIV owns an indirect interest in this unconsolidated
joint venture through Carlyle-XIV Associates, L.P.
(b) Represents a joint venture in which Carlyle-XIV owns an
indirect ownership interest through JMB/NYC.
(c) Represents the unconsolidated venture in which Carlyle-XIV owns
a direct ownership interest.
For purposes of preparing the combined financial statements, the
effect of all significant transactions between an unconsolidated joint
venture and an underlying joint venture has been eliminated.
The ventures' records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying combined financial statements have been prepared from such
records after making appropriate adjustments to reflect the ventures'
accounts in accordance with generally accepted accounting principles. Such
adjustments are not recorded on the records of the ventures.
Statement of Financial Accounting Standards No. 95 requires the
Combined Ventures to present a statement which classifies receipts and
payments according to whether they stem from operating, investing or
financing activities. The required information has been segregated and
accumulated according to the classification specified in the pronouncement.
Deferred expenses are comprised of leasing and renting costs which are
amortized using the straight-line method over the terms of the related
leases, property management and operating deficit funding fees which are
amortized using the straight-line method over the terms stipulated in the
related agreements, financing costs which are amortized over the term of
the related debt.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
Depreciation on the investment properties has been provided over the
estimated useful lives of 5 to 30 years using the straight-line method.
All investment properties are pledged as security for the long-term
debt, for which there is generally no recourse to the ventures. The
long-term debt represents senior mortgage loans.
Although certain leases of the Combined Ventures provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease the Combined Ventures
accrue rental income for the full period of occupancy on a straight-line
basis. Such amounts are primarily reflected in accrued rents receivable in
the accompanying balance sheets. Straight-line rental income (reduction)
was $2,494,507, ($7,759,263) and ($2,441,156) for the years ended
December 31, 1994, 1993 and 1992, respectively.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Provisions for value impairment (as discussed below) are recorded with
respect to the investment properties whenever the estimated future cash
flows from a property's operations and projected sale are less than the
property's net carrying value.
The mortgage note secured by Wells Fargo Center matured December 1,
1994. The Partnership and the joint venture have been in discussions with
the lender of the mortgage note regarding an extension. There is no
assurance that the venture will be able to obtain such an extension. In
view of, among other things, current and anticipated market and leasing
conditions affecting the property, including uncertainty regarding the
amount of space, if any, which IBM will renew when its lease expires in
1998, the venture may then decide not to commit any significant additional
amounts to the property. This may result in the venture no longer having
an ownership interest in the property, and would result in a gain for
financial reporting and for Federal income tax purposes with no
corresponding distributable proceeds. As a matter of prudent accounting
practice, the South Tower Venture recorded a provision for value impairment
of $67,479,871 as of August 31, 1993, to reduce the net carrying value of
the Wells Fargo Center to the then outstanding balance of the related non-
recourse debt.
In conjunction with the negotiations with representatives of the first
mortgage lender regarding a loan restructuring, the Olympia & York
affiliates reached an agreement with the first mortgage lender whereby
effective January 1, 1993, the Olympia & York affiliates are limited to
taking distributions of $250,000 on a monthly basis from the Three Joint
Ventures reserving the remaining excess cash flow in a separate interest-
bearing account to be used exclusively to meet the obligations of the Three
Joint Ventures as approved by the lender. Such reserved amounts, of
approximately $23,930,000 in the aggregate and $11,638,000 at December 31,
1994 and 1993, respectively, are classified as restricted funds in the
accompanying combined balance sheet.
As more fully discussed in Note 3(c) of Carlyle-XIV financial
statements filed with this annual report, due to the potential sale of the
2 Broadway building at a sales price significantly below its original
carrying value, net of depreciation, the 2 Broadway venture made a
provision for value impairment on such investment property of $192,627,560
during 1993. The provision for value impairment was allocated $136,534,366
and $56,093,194 to the O&Y affiliates and to JMB/NYC, respectively. Such
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
provision was allocated to the partners to reflect their respective
ownership percentages before the effect of the non-recourse purchase notes
including related accrued interest.
In response to persistent operating deficits and vacancy levels at the
2 Broadway Building and due to the uncertainty of the 2 Broadway joint
ventures' ability to recover the net carrying value of the investment
property through future operations and sale, the 2 Broadway joint ventures
made a provision for value impairment on such investment property of
$38,689,928 in 1990. Such provision was recorded to effectively reduce the
net carrying value of the investment property to the then outstanding
balance of the related non-recourse financing allocated to the joint
ventures and their property and was allocated to the unaffiliated venture
partners in accordance with the terms of the venture agreement (see notes 3
and 5).
Due to the uncertainty of the 1290 Associates venture's ability to
recover the net carrying value of the 1290 Avenue of the Americas Building
through future operations and sale, the 1290 Associates venture made a
provision for value impairment on such investment property of $51,423,084.
Such provision at September 30, 1992 was recorded to effectively reduce the
net carrying value of the investment property and the related deferred
expenses to the then outstanding balance of the related non-recourse
financing allocated to the joint venture and its property. This provision
was allocated to the unaffiliated venture partners in accordance with the
terms of the venture agreement (see notes 3 and 5).
Amounts due from the Olympia & York affiliates aggregated $13,608,787
and $11,946,284, respectively, at December 31, 1994 and 1993. Due to the
financial difficulties of O&Y and its affiliates, as more fully discussed
in Note 2 of JMB Manhattan filed with this annual report, and the resulting
uncertainty of collectibility of these amounts from the Olympia & York
affiliates, JMB/NYC has recorded a provision for doubtful accounts at
December 31, 1994 and 1993 for the full receivable amount, $13,608,787 and
$11,946,284, respectively, which is reflected in the accompanying combined
financial statements.
Amounts due from the Olympia & York affiliates aggregated $13,608,787
and $11,946,284, respectively, at December 31, 1994 and 1993. Due to the
financial difficulties of O&Y and its affiliates, as more fully discussed
in Note 3(c) of Carlyle-XIV filed with this annual report, and the
resulting uncertainty of collectibility of these amounts from the Olympia &
York affiliates, JMB/NYC has recorded a provision for doubtful accounts at
December 31, 1994 for the full receivable amount $13,608,787 at December
31, 1994 and 1993, which is reflected in the accompanying combined
financial statements.
Due to the uncertainty of collectibility of amounts due from certain
tenants at the Three Joint Venture investment properties, a provision for
doubtful accounts of $3,609,771, $11,551,048 and $803,717 at December 31,
1994, 1993 and 1992, respectively, is reflected in the accompanying
combined financial statements.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires entities
with total assets exceeding $150 million at December 31, 1994 to disclose
the SFAS 107 value of all financial assets and liabilities for which it is
practicable to estimate. Value is defined in the Statement as the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. The Combined
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
Ventures believe the carrying amount of their financial instruments
classified as current assets and liabilities (excluding current portion of
long-term debt) approximates SFAS 107 value due to the relatively short
maturity of these instruments. SFAS 107 states that quoted market prices
are the best evidence of the SFAS 107 value of financial instruments, even
for instruments traded only in thin markets. The Three Joint Ventures'
first mortgage loan is evidenced by certain bonds which are traded in
extremely thin markets. As of December 31, 1994 and through the date of
this report, a limited number of bonds have been sold and purchased in
transactions arranged by brokers for amounts ranging from approximately
$.58 to $.60 on the dollar. Assuming a rate of $.58 on the dollar, the
implied SFAS 107 value of the bonds (with an aggregate carrying balance of
$913,398,422 in the accompanying Combined Financial Statements) would be
approximately $530,000,000. Due to the significant discount at which the
bonds are currently trading, the SFAS 107 value of the JMB/NYC non-recourse
promissory notes payable and related deferred interest (aggregating
$128,011,784), which are effectively subordinated in payment to the bonds,
would be at a discount significantly greater than that at which the bonds
are currently traded. The South Tower debt, with a carrying balance of
$198,477,197, has been calculated to have an SFAS 107 value of $201,181,435
by discounting the scheduled loan payments to maturity. Due to, among
other things, the likely inability to obtain comparable financing under
current market conditions and property specific competitive conditions, and
the unresolved issues with venture partners as well as the alleged defaults
on the Three Joint Ventures' first mortgage loan, the Combined Ventures
would likely be unable to refinance these properties to obtain such
calculated debt amounts reported (see notes 3 and 5.) The Combined
Ventures have no other significant financial instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the venture partners rather than the
ventures.
Certain amounts in the 1993 and 1992 combined financial statements
have been restated to conform with the 1994 presentation.
(2) VENTURE AGREEMENTS
A description of the venture agreements and certain other information
relating to the ventures is contained in Notes 3(c) and 3(g) to the
consolidated financial statements. Such note, as it relates to the JMB/NYC
and South Tower ventures, is incorporated herein by reference.
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1994 and
1993:
1994 1993
------------ ------------
First mortgage loan bearing
interest at the short-term
U.S. Treasury obligation note
rate plus 1-3/4% with a minimum
rate on the loan of 7% per annum;
allocated among and cross-
collaterally secured by the
237 Park Avenue Building, 1290
Avenue of the Americas Building,
2 Broadway Land and 2 Broadway
Building; payments of principal
and interest based upon a 30-year
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
1994 1993
------------ ------------
amortization schedule are due
monthly, however, commencing on a
date six months following the
attainment of a certain level
of annualized cash flow, any
interest in excess of 12% per
annum may be accrued, to the
extent that monthly cash flow
is insufficient to pay the full
monthly debt service, by adding
such deferred amount to the
outstanding balance of the loan;
the loan is in alleged default
at December 31, 1994 and 1993
(Reference is made to Note 3(c)
of Carlyle-XIV filed with this
annual report as to the calculation
of interest rate with reference
to this first mortgage loan);
the stated maturity of principal
of $857,784,000 and accrued
interest is March 1999. . . . . . $913,398,422 923,041,198
13% mortgage note; secured by
the Wells Fargo Center South
Tower (in default); payable in
monthly installments (including
interest) of $2,190,000 until
December 1994 when the remaining
principal balance of $198,055,000
was due . . . . . . . . . . . . . 198,010,055 198,477,197
-------------- -------------
Total debt . . . . . . . 1,111,408,477 1,121,518,395
Less current portion
of long-term debt. . . 1,111,408,477 1,121,518,395
-------------- -------------
Total long-term debt . . $ -- --
============== =============
The allocation of the first mortgage loan among the JMB/NYC joint
ventures (which is non-recourse to the joint ventures) is as follows:
1994 1993
------------- ------------
237 Park Avenue Associates. . $365,278,508 214,107,494
1290 Associates . . . . . . . 548,119,914 453,194,197
2 Broadway Land Company . . . -- 17,842,291
2 Broadway Associates . . . . -- 237,897,216
------------ -----------
$913,398,422 923,041,198
============ ===========
(4) LEASES
As Property Lessor
At December 31, 1994, the properties in the combined group consisted
of four office buildings. All leases relating to the properties are
properly classified as operating leases; therefore, rental income is
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
reported when earned and the cost of each of the properties, excluding the
cost of land, is depreciated over the estimated useful lives. Leases with
commercial tenants range in term from one to 25 years and provide for fixed
minimum rent and partial to full reimbursement of operating costs.
Affiliates of the venture partners have lease agreements and occupy
approximately 95,000 square feet of space at 237 Park Avenue at rental
rates which approximate market. During 1993 and 1992, 2 Broadway
Associates collected $4,781,158 and $6,069,444, respectively, of a total
$13,340,601 bankruptcy claim against Drexel Burnham Lambert, a former
tenant of the 2 Broadway Building and is included in rental income in the
1993 and 1992 accompanying combined income statements. All remaining
claims against Drexel Burnham Lambert were sold during 1993.
During the fourth quarter of 1994, JMB/NYC negotiated an amendment
with a tenant at 1290 Avenue of the Americas, Deutsche Bank Financial
Products Corporation, under which the tenant will surrender space on the
12th and 13th floors (137,568 square feet or approximately 7% of the
buildings leasable space) on or before June 30, 1996. The original lease
(as amended) was to terminate on December 31, 2003. The amendment also
added space on the 8th and 9th floors (44,360 square feet or approximately
2% of the building's leasable space) which will expire on or before
December 31, 1997. In consideration for this amendment, the tenant paid an
early termination fee of $29,000,000 to the Joint Venture on December 1,
1994. John Blair & Co. (a tenant at 1290 Avenue of the Americas, which had
leased 253,193 square feet or approximately 13% of the building's leasable
space) filed for Chapter 11 bankruptcy protection in 1993. Because much of
the John Blair space had been subleased, the Joint Venture had been
collecting approximately 70% of the monthly rent due from John Blair from
the subtenants. Due to the uncertainty regarding the collection of the
balance of the monthly rents from John Blair, a provision for doubtful
accounts related to rents and other receivables and accrued rents
receivable aggregating $7,659,366 was recorded at December 31, 1993 related
to this tenant. During the second quarter of 1994, a settlement was
reached whereby the Joint Venture received a $7,000,000 lease termination
fee which included settlement of past due amounts. In conjunction with the
settlement, effective July 1, 1994, John Blair was released from all future
lease obligations and the Joint Venture now has direct leases with the
original John Blair subtenants. Such subtenants occupy 228,398 square feet
or approximately 11% of the building's leasable space. JMB/NYC is
amortizing the Deutsche Bank and John Blair lease termination fees over the
remaining terms of the amended lease and leases with former subtenants,
respectively.
Minimum lease payments including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements, are as follows:
JMB/NYC South Tower Total
------------ ----------- -------------
1995 . . . . . . $ 100,230,042 33,736,353 133,966,395
1996 . . . . . . 90,547,908 33,864,275 124,412,183
1997 . . . . . . 86,550,481 32,026,212 118,576,693
1998 . . . . . . 80,991,098 31,966,463 112,957,561
1999 . . . . . . 67,031,056 10,077,016 77,108,072
Thereafter . . . 332,342,740 60,921,494 393,264,234
------------ ----------- -------------
$757,693,325 202,591,813 960,285,138
============ =========== =============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONCLUDED
(5) NOTES PAYABLE
Notes payable consist of the following at December 31, 1994 and 1993:
1994 1993
----------- ----------
Promissory notes payable to an
affiliate of the unaffiliated
venture partners in the Three
Joint Ventures, bearing interest
at 12.75% per annum; cross-
collaterally secured by JMB/NYC's
interests in the Three Joint
Ventures one of which is addi-
tionally secured by $19,000,000 of
distributable proceeds from two
of the Three Joint Ventures;
interest accrues and is deferred,
compounded monthly, until
December 31, 1991; monthly
payments of accrued interest,
based upon the level of distri-
butions to JMB/NYC, thereafter
until maturity; principal and
accrued interest due March 20,
1999. Accrued deferred interest
of $93,853,559 and $78,605,523
is outstanding at December 31,
1994 and 1993, respectively . . . $34,158,225 34,158,225
----------- ----------
Less current portion of
notes payable. . . . . . . . -- --
----------- ----------
Long-term notes payable. . . . $34,158,225 34,158,225
=========== ==========
The allocation of the promissory notes and related deferred interest
among the JMB/NYC joint ventures is as follows:
1994 1993
------------ -----------
237 Park Avenue Associates. . $16,917,580 14,902,454
1290 Associates . . . . . . . 36,570,561 32,214,484
2 Broadway Land Company . . . 3,266,254 2,877,196
2 Broadway Associates . . . . 71,257,389 62,769,614
------------ -----------
$128,011,784 112,763,748
============ ===========
<TABLE>
SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<CAPTION>
COST
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
UNCONSOLIDATED VENTURES (A) ACQUISITION AT CLOSE OF PERIOD (B)
----------------------------- ------------- ----------------------------------------
LAND AND BUILDINGS BUILDINGS LAND AND BUILDINGS
LEASEHOLD AND AND LEASEHOLD AND
ENCUMBRANCE(C) INTEREST IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTS TOTAL (E)
-------------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
BUILDING:
New York,
New York
(237 Park
Avenue). . .$ 365,278,508 79,653,996 226,634,894 1,296,500 79,653,996 227,931,394 307,585,390
New York,
New York
(1290 Avenue
of the
Americas). . 548,119,914 90,952,993 556,434,718 (7,467,864) 84,285,719 555,634,128 639,919,847
New York,
New York
(2 Broad-
way) . . . . -- 26,421,677 378,445,199 (226,999,292) 4,858,599 173,008,985 177,867,584
Los Angeles,
California . 198,010,055 36,009,872 291,684,146 (44,901,581) 27,528,045 255,264,392 282,792,437
-------------- ----------- ------------- ------------ ----------- ------------- -------------
Total . .$1,111,408,477 233,038,538 1,453,198,957 (278,072,237) 196,326,359 1,211,838,899 1,408,165,258
============== =========== ============= ============ =========== ============= =============
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1994
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
--------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDING:
New York, New York
(237 Park Avenue). . . . . $78,638,559 1981 8/14/84 5-30 years 9,554,894
New York, New York
(1290 Avenue of
the Americas). . . . . . . 208,466,699 1963 7/27/84 5-30 years 19,267,433
New York, New York
(2 Broadway) . . . . . . . 119,585,160 1959 8/14/84 5-30 years 8,137,451
Los Angeles,
California . . . . . . . . 99,843,914 1983 6/28/85 5-30 years 2,895,243
------------ ----------
Total . . . . . . . . . $506,534,332 39,855,021
============ ==========
<FN>
------------------
Notes:
(A) The initial cost to the Unconsolidated Joint Ventures or Underlying Joint Ventures represents the
original purchase price of the properties, including amounts incurred subsequent to acquisition which were
contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1994 for Federal income tax purposes was
approximately $1,613,534,000.
(C) Reference is made to Note 5 of Combined Financial Statements for the current outstanding principal
balances and a description of the notes payable (which are not included in the amounts stated above) secured by
JMB/NYC's interests in the Three Joint Ventures.
(D) Includes provision for value impairment at South Tower of $65,837,633 recorded December 31, 1993, 2
Broadway of $192,144,503 recorded December 31, 1993, 1290 Avenue of the Americas of $50,446,010 recorded September
30, 1992 and 2 Broadway of $38,689,928 recorded December 31, 1990. See Note 1 of Notes to Combined Financial
Statements for further discussion.
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(E) Reconciliation of real estate owned:
<CAPTION>
1994 1993 1992
-------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . $1,405,559,774 1,663,662,295 1,710,905,674
Additions during period. . . . . . . . . . . . 2,605,484 3,119,983 4,671,791
Provision for value impairment . . . . . . . . -- (257,992,136) (50,446,010)
Retirement during period . . . . . . . . . . . -- (3,240,368) (1,469,160)
-------------- ------------- -------------
Balance at end of period . . . . . . . . . . . $1,408,165,258 1,405,559,774 1,663,662,295
============== ============= =============
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . $ 468,502,205 422,168,602 371,057,879
Depreciation expense . . . . . . . . . . . . . 38,032,127 48,668,505 52,579,883
Retirement during period . . . . . . . . . . . -- (2,334,902) (1,469,160)
-------------- ------------- -------------
Balance at end of period . . . . . . . . . . . $ 506,534,332 468,502,205 422,168,602
============== ============= =============
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of in or disagreements with accountants during
1993 or 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. The outstanding shares of JMB
are owned by certain of its officers and directors and members of their
families. JMB has responsibility for all aspects of the Partnership's
operations, subject to the requirement that sales of real property must be
approved by the Associate General Partner of the Partnership, Realty
Associates-XIV, L.P., an Illinois limited partnership with JMB as the sole
general partner. The Associate General Partner shall be directed by a
majority in interest of its limited partners (who are generally officers,
directors and affiliates of JMB or its affiliates) as to whether to provide
its approval of any sale of real property (or any interest therein) of the
Partnership. The Partnership is subject to certain conflicts of interest
arising out of its relationships with the General Partners and their
affiliates as well as the fact that the General Partners and their
affiliates are engaged in a range of real estate activities. Certain
services have been and may in the future be provided to the Partnership or
its investment properties by affiliates of the General Partners, including
property management services and insurance brokerage services. In general,
such services are to be provided on terms no less favorable to the
Partnership than could be obtained from independent third parties and are
otherwise subject to conditions and restrictions contained in the
Partnership Agreement. The Partnership Agreement permits the General
Partners and their affiliates to provide services to, and otherwise deal
and do business with, persons who may be engaged in transactions with the
Partnership, and permits the Partnership to borrow from, purchase goods and
services from, and otherwise to do business with, persons doing business
with the General Partners or their affiliates. The General Partners and
their affiliates may be in competition with the Partnership under certain
circumstances, including, in certain geographical markets, for tenants for
properties and/or for the sale of properties. Because the timing and
amount of cash distributions and profits and losses of the Partnership may
be affected by various determinations by the General Partners under the
Partnership Agreement, including whether and when to sell or refinance a
property, the establishment and maintenance of reasonable reserves, the
timing of expenditures and the allocation of certain tax items under the
Partnership Agreement, the General Partners may have a conflict of interest
with respect to such determinations.
The names, positions held and length of service therein of each
director and executive officer and certain officers of the Corporate
General Partner of the Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Chief Executive Officer 8/01/93
Executive Vice President 1/02/87
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Jeffrey R. Rosenthal Chief Financial Officer 8/01/93
Douglas H. Cameron Executive Vice President 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Ira J. Schulman Executive Vice President 6/01/88
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve one-year
terms until the annual meeting of the Corporate General Partner to be held
on June 7, 1995. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1995. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI
("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-
XVII"), JMB Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage
Partners, Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and
Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the managing
general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB
Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties,
Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"),
JMB Income Properties, Ltd.-XI ("JMB Income-XI"),JMB Income Properties,
Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB
Income-XIII"). Most of the foregoing directors and officers are partners
in the Associate General Partner and also officers and/or directors of
various affiliated companies of JMB including Income Growth Managers, Inc.
(the corporate general partner of IDS/JMB Balanced Income Growth, Ltd.
("IDS/BIG"), Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB
Partners, L.P.) and Arvida/JMB Managers-II, Inc. (the general partner of
Arvida/JMB Partners, L.P.-II ("Arvida-II")). Most of such directors and
officers are also partners, directly or indirectly, of certain partnerships
which are associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-VII, Carlyle-IX, Carlyle-X,
Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XV, Carlyle-XVI, Carlyle-
XVII, JMB Income-VI, JMB Income-VII, JMB Income-VIII, JMB Income-IX, JMB
Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage
Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage
Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 57) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.,
an affiliate of JMB that is a real estate investment trust in the business
of owning, managing and developing shopping centers, and a director of
Catellus Development Corporation, a major diversified real estate
development company. He is a Certified Public Accountant.
Neil G. Bluhm (age 57) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 56) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 53) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 61) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 48) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
a company which is engaged in the real estate investing business. He is
also a senior advisor and partner of Blackstone Real Estate Partners, an
affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also
served as a Trustee of Amli Residential Property Trust, a publicly-traded
real estate investment trust that invests in multi-family properties. Mr.
Schreiber is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of a
number of investment companies advised or managed by T. Rowe Price
Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 45) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 47) has been associated with JMB since December,
1979. Prior to becoming Vice President of JMB in 1993, Mr. Emig was
Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Jeffrey R. Rosenthal (age 43) has been associated with JMB since
December, 1987. He is a Certified Public Accountant.
Douglas H. Cameron (age 45) has been associated with JMB since April,
1977. Prior to becoming Executive Vice President of JMB in 1995, Mr.
Cameron was Managing Director of Capital Markets-Property Sales from June
1990. He holds a Masters degree in Business Administration from the
University of Southern California in 1974.
Gary Nickele (age 41) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Ira J. Schulman (age 42) has been associated with JMB since February,
1983. He holds a Masters degree in Business Administration from the
University of Pittsburgh.
Gailen J. Hull (age 45) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 58) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Limited Partners, and a
share of profits or losses. Reference is made to Notes 5 and 9 for a
description of such transactions, distributions and allocations. In 1994,
1993 and 1992, the General Partners received distributions of $0, $0 and
$0, respectively, and the Corporate General Partner received management
fees of $0, $0 and $0, respectively.
Affiliates of the Corporate General Partner provided property
management services during 1994 for eleven investment properties. In 1994
such affiliates earned property management and leasing fees amounting to
$2,088,404 for such services, of which $1,957,396 was unpaid as of December
31, 1994. As set forth in the Prospectus of the Partnership, the Corporate
General Partner must negotiate such agreements on terms no less favorable
to the Partnership than those customarily charged for similar services in
the relevant geographical area (but in no event at rates greater than 6% of
the gross income from a property), and such agreements must be terminable
by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1994
aggregating $64,214 in connection with the provision of insurance coverage
for certain of the real property investments of the Partnership. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The General Partners of the Partnership or their affiliates may be
reimbursed or paid for their direct expenses or out-of-pocket expenses and
salary and salary-related expenses relating to the administration of the
Partnership and the operation of the Partnership's real property
investments. In 1994, the Corporate General Partner of the Partnership was
due reimbursement for such expenses in the amount of $298,575, of which
$4,996 was unpaid at December 31, 1994. Additionally, the General Partners
are also entitled to reimbursements for legal and accounting services.
Such costs for 1994 were $14,185, all of which were paid as of December 31,
1994.
The Partnership is permitted to engage in various transactions
involving the General Partners and their affiliates, as described in Item
10.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner and its officers and directors own the following Interests of the
Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
-------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 5 Interests (1) Less than 1%
indirectly
Limited Partnership
Interests Corporate General Partner 16.9 Interests (1) (2) Less than 1%
and its officers and
directors as a group
<FN>
(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB, as its
indirect majority shareholder, is deemed to have sole voting and investment power.
(2) Includes 11.9 Interests owned by officers or their relatives for which each officer has investment and
voting power as to such Interests so owned.
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent data
result in a change in control of the Partnership.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the General
Partners, the executive officers and directors of the Corporate General Partner and persons who own more than ten
percent of the Interests to file an initial report of ownership or changes in ownership of Interests on Form 3, 4
or 5 with the Securities and Exchange Commission (the "SEC"). Such persons are also required by SEC rules to
furnish the Partnership with copies of all Section 16(a) forms they file. Timely filing of an initial report of
ownership on Form 3 or Form 5 was not made on behalf of Glenn Emig.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this annual report).
(2) Exhibits.
3-A.* Amended and Restated Agreement of Limited
Partnership.
3-B.* Assignment Agreement by and among the
Partnership, the General Partners and the Initial Limited Partner.
4-A. Long-term debt documents relating to the first
mortgage loan secured by the Wilshire Bundy Plaza in Los Angeles,
California are hereby incorporated by reference to the Partnership's Report
on Form 8-K (File No. 0-15962) dated February 19, 1986.
4-B. Long-term debt documents relating to the first
mortgage loan secured by the 2 Broadway, 1290 Avenue of the Americas and
237 Park Avenue Buildings are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #1 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
4-C. Long-term debt documents relating to the first
mortgage loan secured by the Louisiana Tower in Shreveport, Louisiana are
hereby incorporated by reference to the Partnership's Post-Effective
Amendment #4 to the Partnership's Registration Statement on Form S-11 (File
No. 0-15962) dated June 4, 1984.
4-D. Long-term debt documents relating to the first
and second mortgage loans secured by the Louis Joliet Mall in Joliet,
Illinois are hereby incorporated by reference to the Partnership's Report
on Form 8-K (File No. 0-15962) dated August 1, 1985.
4-E. Long-term debt documents relating to the
refinancing of the first mortgage loan secured by the 1090 Vermont office
building in Washington, D.C., copies of which are filed herewith.
10-A. Acquisition documents relating to the purchase
by the Partnership of the Wilshire Bundy Plaza in Los Angeles, California
are hereby incorporated by reference to the Partnership's Report on Form 8-
K (File No. 0-15962) dated February 19, 1986.
10-B. Acquisition documents relating to the purchase
by the Partnership of an interest in the 1290 Avenue of the Americas
Building in New York, New York are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #1 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-C. Acquisition documents relating to the purchase
by the Partnership of an interest in the 237 Park Avenue Building in New
York, New York are hereby incorporated by reference to the Partnership's
Post-Effective Amendment #1 to the Partnership's Registration Statement on
Form S-11 (File No. 0-15962) dated June 4, 1984.
10-D. Acquisition documents relating to the purchase
by the Partnership of an interest in the 2 Broadway Building in New York,
New York are hereby incorporated by reference to the Partnership's Post-
Effective Amendment #1 to the Partnership's Registration Statement on Form
S-11 (File No. 0-15962) dated June 4, 1984.
10-E. Acquisition documents relating to the purchase
by the Partnership of an interest in the Wells Fargo Center - IBM Tower in
Los Angeles, California are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #5 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-F. Acquisition documents relating to the purchase
by the Partnership of an interest in the Louisiana Tower in Shreveport,
Louisiana are hereby incorporated by reference to the Partnership's Post-
Effective Amendment #2 to the Partnership's Registration Statement on Form
S-11 (File No. 0-15962) dated June 4, 1984.
10-G. Acquisition documents relating to the purchase
by the Partnership of the Louis Joliet Mall in Joliet, Illinois are hereby
incorporated by reference to the Partnership's Report on Form 8-K (File No.
0-15962) dated August 1, 1985.
10-H.* Agreement dated March 25, 1993 between JMB/NYC
and the Olympia & York affiliates regarding JMB/NYC's deficit funding
obligations from January 1, 1992 through June 30, 1993 is hereby
incorporated by reference.
10-I. Settlement Agreement dated March 12, 1993
between the Resolution Trust Corporation and Carlyle-XIV is hereby
incorporated by reference to the Partnership's Report on Form 10-Q dated
May 14, 1993.
10-J. Agreement of Limited Partnership of Carlyle-
XIV Associates, L.P. is hereby incorporated by
reference to the Partnership's Report on Form 10-Q (File No. 0-15962) dated
May 14, 1993.
10-K Second Amended and Restated Articles of
Partnership of JMB/NYC Office Building Associates, is hereby incorporated
by reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-L. Documents relating to the sale by the
Partnership of its interest in the Old Orchard Urban Venture are hereby
incorporated by reference to the Partnership's report on Form 8-K (File No.
0-15962) for August 30, 1993, dated November 12, 1993.
10-M. Amended and Restated Certificate of
Incorporation of Carlyle-XIV Managers, Inc., (known as Carlyle Managers,
Inc.) is hereby incorporated by reference to the Partnership's report for
December 31, 1993 on Form 10-K (File No 0-15962) dated March 28, 1994.
10-N. Amended and Restated Certificate of
Incorporation of Carlyle-XIII Managers, Inc., (known as Carlyle Investors,
Inc.), is hereby incorporated by reference to the Partnership's report for
December 31, 1993 on Form 10-K (File No. 0-15962) dated March 28, 1994.
10-O. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Managers, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-P. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Investors, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-Q. Proposed Restructure of Two Broadway, 1290
Avenue of the Americas and 237 Park Avenue, New York, New York and Summary
of Terms dated October 14, 1994, a copy of which is filed herewith.
10-R. Assumption Agreements dated October 14, 1994
made by 237 Park Avenue Associates and by 1290 Associates in favor and for
the benefit of O&Y Equity Company, L.P., O&Y NY Building Corp. and JMB/NYC
Office Building Associates, L.P., copies of which are filed herewith.
10-S. Assumption Agreements dated October 14, 1994
made by O&Y Equity Company, L.P., and by O&Y NY Building Corp. and by
JMB/NYC Office Building Associates, L.P. in favor and for the benefit of 2
Broadway Associates and 2 Broadway Land Company, copies of which are filed
herewith.
10-T. Lockbox and forbearance agreements related to
the mortgage note secured by the Wells Fargo Building, copies of which are
filed herewith.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
--------------
* Previously filed as Exhibits 3-B, 3-C and 10-H to the Partnership's
Report for December 31, 1992 on Form 10-K of the Securities Exchange Act
(File No. 0-15962) filed on March 30, 1993 and hereby incorporated herein
by reference.
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commission upon request.
(b) No reports on Form 8-K were filed since the beginning of the
last quarter of the period covered by this report.
No annual report for the year 1994 or proxy material has been sent
to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and Director
Date: March 27, 1995
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 27, 1995
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 27, 1995
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 27, 1995
JEFFREY R. ROSENTHAL*
By: Jeffrey R. Rosenthal, Chief Financial Officer
Principal Financial Officer
Date: March 27, 1995
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 27, 1995
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 27, 1995
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 27, 1995
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 27, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3-A. Pages 8-18, 68-71, A-7 to A-12
and A-14 to A-20 of Prospectus
of the Partnership dated
June 4, 1984 Yes
3-B. Amended and Restated Agreement of
Limited Partnership Yes
3-C. Assignment Agreement by and among
the Partnership, the General Partners
and the Initial Limited Partners is
filed herewith Yes
4-A. -
4-D. Long-Term Debt Documents are hereby
incorporated herein by reference Yes
4-E. Long-term debt documents relating
to the refinancing of the first
mortgage loan secured by the
1090 Vermont Office Building
in Washington, D.C. Yes
10-A -
10-G. Acquisition Documents are hereby
incorporated herein by reference Yes
10-H. Agreement dated March 25, 1993
between JMB/NYC and the Olympia
& York affiliates Yes
10-I. Settlement Agreement dated March 12,
1993 between the Resolution Trust
Corporation and Carlyle-XIV Yes
10-J. Agreement of Limited Partnership
of Carlyle-XIV Associates, L.P. Yes
10-K. Second Amended and Restated Articles
of Partnership of JMB/NYC Office
Building Associates Yes
10-L. Documents relating to the sale by
the Partnership of its interest
in the Old Orchard Venture Yes
10-M. Amended and Restated Certificate
of Incorporation of Carlyle-XIV
Managers, Inc. (known as Carlyle
Managers, Inc.) Yes
10-N. Amended and Restated Certificate
of Incorporation of Carlyle-XIII
Managers, Inc. (known as Carlyle
Investors, Inc.) Yes
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX - CONTINUED
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
10-O. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Managers, Inc. Yes
10-P. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Investors, Inc. Yes
10-Q. Proposed Restructure of Two Broadway,
1290 Avenue of the Americas and
237 Park Avenue, New York, New York
and Summary of Terms dated October
14, 1994 No
10-R. Assumption Agreements dated October
14, 1994 made by 237 Park Avenue
Associates and by 1290 Associates in
favor and for the benefit of O&Y
Equity Company, L.P., O&Y NY Building
Corp. and JMB/NYC Office Building
Associates, L.P. No
10-S. Assumption Agreements dated October 14,
1994 made by O&Y Equity Company, L.P.,
and by O&Y NY Building Corp. and by
JMB/NYC Office Building Associates, L.P.
in favor and for the benefit of 2 Broadway
Associates and 2 Broadway Land Company. No
10-T. Lockbox and forbearance agreements
related to the mortgage note secured
by the Wells Fargo Building. No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
October 14, 1994
Mr. John Moore
Olympia & York
237 Park Avenue
New York, New York 10017
Re: Proposed Restructure of Two Broadway,
1290 Avenue of the Americas and
237 Park Avenue, New York, New York
Dear John:
This letter summarizes the general terms and
conditions of certain agreements among O&Y Equity Company,
L.P. ("Equity"), O&Y NY Building Corp. ("Building Corp"
and, together with Equity, "O&Y") and JMB/NYC Office
Building Associates, L.P. ("JMB") with respect to the New
York partnerships named 1290 Associates ("1290"), 237 Park
Avenue Associates ("237"), 2 Broadway Associates ("2
Broadway Building") and 2 Broadway Land Company ("2
Broadway Land"). 1290, 237, 2 Broadway Building and 2
Broadway Land will be collectively herein called the
"Partnerships". Such agreements are as follows:
Mr. John Moore
October 14, 1994
Page 2
1. As soon as practicable and, in any event, prior
to the bankruptcy filing described in the Summary of Terms
referred to in paragraph 3 below:
(a) O&Y and JMB will assume (subject to the
limitation on liability described in the next sentence),
as partners in 2 Broadway Building and 2 Broadway Land, in
the amounts set forth below, that portion of those certain
floating rate notes ("Bondholder Debt") in the original
principal amount of $970,000,000 (secured by a mortgage
covering property of each of the Partnerships) which is
allocable to 2 Broadway Building and 2 Broadway Land,
respectively. The amount of the Bondholders Debt assumed
by O&Y and JMB as aforesaid will be as follows:
Bondholder Debt
Bondholder Debt
Allocable to 2 Allocable
to 2
Broadway Building Broadway
Land
Equity $ 93,345,927. 00 $ 7,000,945.00
Building Corp. 6,734,375.00 505,078.00
JMB 135,979,509.00 10,198,463.00
$236,059,811. 00 $17,704,486.00
The respective liability of O&Y and JMB by reason of
such assumption will be limited to their respective equity
interests in 237 and 1290 and neither O&Y nor JMB shall
have any personal liability in connection with the
Bondholder Debt.
Mr. John Moore
October 14, 1994
Page 3
(b) Immediately following the assumption of
indebtedness described in subsection (a) above, 237 and
1290 will assume, for the benefit of O&Y and JMB, that
portion of the Bondholder Debt that had been assumed by
O&Y and JMB pursuant to subsection (a) above. The portion
of the Bondholder Debt assumed by 237 and 1290 as
aforesaid will be $153,764,297 by 237 and $100,000,000 by
1290. The liability of 237 and 1290 under the assumption
of Bondholder Debt pursuant to this subsection (b) will be
limited to 237's and 1290's respective interests in the
property subject to the Bondholder Debt and neither 237 or
1290 nor any partner in either shall have any personal
liability in connection with the Bondholder Debt.
2. O&Y and JMB, as partners in the Partnership and
the "Conversion Partnerships" (as defined in paragraph 5
hereof), and on behalf of themselves and their respective
affiliates, successors and assigns, agree that:
(a) the result of the transactions described in
paragraph 1 above will be, among other things, that O&Y
and JMB will be deemed to have made capital contributions
to 2 Broadway Building and 2 Broadway Land in an amount
equal to the respective
amounts of the Bondholder Debt that they assume pursuant
to
Mr. John Moore
October 14, 1994
Page 4
paragraph 1(a) above and that such capital Contributions
will no way be deemed to be reduced or otherwise affected
by the limitation of the liability of O&Y or JMB or the
assumption or such Bondholder Debt by 237 and 1290
described in said paragraph 1 or any of the other
transactions or events described in said paragraph 1;
(b) By reason of the deemed capital contributions to
2 Broadway Building and 2 Broadway Land as hereinabove set
forth, (i) the capital accounts of O&Y and JMB in 2
Broadway Building and 2 Broadway Land will be increased by
the amount of their respective deemed contributions, and
(ii) the deficit, if any, in the capital accounts of O&Y
or JMB in 2 Broadway Building or 2 Broadway Land will be
eliminated for all purposes of 2 Broadway Building and 2
Broadway Land and the respective partnership agreements
for the same; by reason of the assumption of such
Bondholder Debt by 237 and 1290 as aforesaid, the capital
accounts of O&Y and JMB in 237 and 1290, respectively,
shall be reduced by the amount of the Bondholder Debt
assumed by such Partnership for the benefit of such
partner as aforesaid, i.e., the Bondholder Debt assumed by
O&Y or JMB, as the case may be, as set forth in paragraph
l(a) hereof that is assumed in turn by such Partnership as
set forth in paragraph 1(b) hereof;
Mr. John Moore
October 14, 1994
Page 5
(c) following the sale of assets of 2 Broadway
Building and 2 Broadway Land or of the Conversion
Partnerships which are successors to 2 Broadway Building
and 2 Broadway Land (whether or not pursuant to the
"Purchase Agreement" described in paragraph 6 hereof),
neither O&Y nor JMB will have a negative balance in its
capital account in any of such Partnerships or Conversion
Partnerships and accordingly, even if such Partnerships of
Conversion Partnerships are liquidated following such
sale, neither O&Y nor JMB will have any obligation to make
a contribution to such Partnerships or Conversion
Partnerships by reason of any provision in the partnership
agreement of such Partnerships or Conversion Partnerships
(including, but not limited to, Section 8.8 of the
partnership agreements for 2 Broadway Building and 2
Broadway Land or similar provision in the partnership
agreements for such Conversion Partnerships or
requirements of law or otherwise) to the effect that a
partner in a partnership having a negative balance in its
capital account is obligated, upon the dissolution or
liquidation of such partnership, to contribute to such
partnership an amount equal to all or a portion of such
negative balance; (d) none of the transactions described
or referred to in this letter or the Summary of Terms
referred to in paragraph 3
Mr. John Moore
October 14, 1994
Page 6
hereof, and whether such transactions are considered
individually or collectively, will be deemed to have
caused or resulted in the dissolution or liquidation of
237, 1290, 2 Broadway Building, 2 Broadway Land or the
Conversion Partnerships. Accordingly, in addition to the
matters set forth in Subsection (c) above, none of such
transactions will have the effect of causing or resulting
in any obligation ("Deficit Restoration Obligation") of a
partner in a Partnership or Conversion Partnership having
a negative balance in its capital account in such
Partnership or Conversion Partnership to make a
contribution to such Partnership (whether pursuant to
Section 8.8 of the partnership agreement for each of the
Partnerships or similar provision in the partnership
agreements for the Conversion Partnerships or requirement
of law or otherwise);
(e) the parties acknowledge that no event has
ever occurred to the date of this letter which has caused
or resulted in a Deficit Restoration Obligation of any
present or past partner with respect to any of the
Partnerships.
3. The parties approve the Summary of Terms dated
October 14, 1994, a copy of which is attached to this
letter as such Summary of Terms is supplemented by this
letter.
Mr. John Moore
October 14, 1994
Page 7
4. Even if the Plan referred to in the Summary of
Terms is not consummated or there is no approval by the
bankruptcy court or the creditors of the Partnerships of
the elimination of the Deficit Restoration Obligation, O&Y
and JMB each agrees, effective upon the bankruptcy filing
referred to in paragraph 3 of the Summary of Terms, that
neither it nor any of its affiliates, successors or
assigns will at any time assert that another partner has a
Deficit Restoration Obligation under the partnership
agreement of any Partnership, Conversion Partnerships or
"New Partnership" (as defined in the Summary of Terms),
regardless of the facts or circumstances, including, but
not limited to, a liquidation of such Partnership or
Conversion Partnership or New Partnership and a negative
capital account of a partner at the time of such
liquidation. The agreement of the parties under the
foregoing sentence will be deemed canceled in the event
JMB fails (i) to enter into the modifications any releases
contemplated by Sections 1 and 2 of the Summary of
Terms, or (ii) to fulfill its obligations under Section 3
of the summary of Terms to vote to accept the Plan, and to
execute such documents as are required to be executed by
it pursuant to the Restructuring Proposal and consistent
with the contemplated Plan as a partner in each
Partnership, Conversion Partnership or New
Mr. John Moore
October 14, 1994
Page 8
Partnership, and to take such other actions reasonably
requested by O&Y in connection with the Restructuring
Proposal, so long as the same do not adversely affect
JMB's rights and interests as otherwise contemplated by
this letter and the Summary of Terms.
5. At JMB's option, prior to the bankruptcy filing,
the assets of the Partnerships will be conveyed to newly
formed Delaware limited partnerships ("Conversion
Partnerships") which O&Y or an affiliate of O&Y will be
the 1% general partner and O&Y and JMB will be the limited
partners, but which otherwise will have provisions,
ownership and interests which are, in substance, the same
as contemplated for the Partnerships (after the changes
referred to in this letter and Section 1 of the Summary of
Terms are made). If the Conversion Partnerships are
formed, then the New Partnerships will be amended and
restated versions of the relevant Conversion Partnerships
(and the transfers to 2 Bway L.P., 237 L.P. and 1290 L.P.
referred to in Sections 5(a) and 5(b) of the Summary of
Terms will not be necessary).
6. (a) O&Y has executed on behalf of 2 Broadway
Land and 2 Broadway building, as sellers, a purchase and
sale agreement
Mr. John Moore
October 14, 19 94
Page 9
("Purchase Agreement") dated July, 1994 with Ben Ploiny,
Inc. ("Purchaser"), as buyer, providing for the sale of
the land and building and related assets of such sellers.
The Purchase Agreement provides in part that it will not
be effective unless JMB executes the same on behalf of
such sellers on or before August 25, 1994 (as such date
has been or may be extended). JMB agrees that it will
execute the Purchase Agreement on behalf of such sellers
as a general partner thereof and will execute such other
documents as a general partner in 2 Broadway Land and 2
Broadway Building as O&Y reasonably requests (so long as
the same do not impose any recourse liability on JMB nor
reduce any of its
rights and interests as contemplated by this letter
agreement and the Summary of Terms).
(b) Olympia & York Massachusetts Financial Company
("MassFin"), an affiliate of O&Y, has obtained or will
obtain a consent by Citibank, N.A., as pledgee of the "JMB
Notes" described in paragraph 6 of the Summary of Terms,
to the amendment of the JMB Notes and the substitution of
collateral with respect thereto described in the Summary
of Terms, such consent ("Consent") being substantially in
the form attached to this letter. The Consent provides,
among other things, that the
Mr. John Moore
October 14, 1994
Page 10
same may not be modified, terminated or rescinded without
the prior approval of MassFin. O&Y hereby agrees that
neither MassFin nor any of its successors or assigns will
agree to any such modification, termination or rescission
without the prior written approval of JMB (and O&Y will
prevent MassFin and its successors and assigns from so
doing).
The provisions of paragraphs 1, 2, 4 and 6 hereof are
final and binding upon the parties. The parties
understand that, except for said paragraphs 1, 2, 4 and 6,
this letter sets forth in summary fashion the terms and
conditions of certain agreements in principle and (i) does
not represent a commitment of any kind or waiver or
relinquishment of any of the rights, remedies, claims or
collateral of O&Y or JMB; and (ii) is subject in all
respects to the execution of final definitive
documentation. Matters not covered by this letter are
subject to further discussion.
If this letter sets forth our mutual understanding,
then please so indicate by signing a copy of this letter
at the place indicated below.
Mr. John Moore
October 14, 1994
Page 11
Yours very truly,
JMB/NYC OFFICE BUILDING
ASSOCIATES,
L P.
By: Carlyle Managers, Inc.
General Partner
By:
Stuart C. Nathan
President
ACCEPTED AND AGREED TO:
O&Y EQUITY COMPANY, L.P.
By: O&Y Equity General Partner Corp.
By:
O&Y NY BUILDING CORP.
By:
Mr. John Moore
October 14, 1994
Page 12
The undersigned Olympia & York Massachusetts Financial
Company, hereby agrees that neither it nor any of its
successors
or assigns will agree to any modification, termination or
rescission of the Consent referred to in paragraph 6 (b)
or
without the prior written approval of JMB.
OLYMPIA & YORK MASSACHUSETTS
FINANCIAL COMPANY
By: O&Y (U.S.) Financial
Company,
General Partner
By: O&Y (U.S.) Development
Company, L.P., General
Partner
By: O&Y (U.S.) Development
General
Partner Corp., General
Partner
By:
Name:
Title:
October 14, 1994
OLYMPIA & YORK - JMB
Restructuring of Partnerships Owning
2 Broadway, 1290 Avenue of the Americas
and 237 Park Avenue
SUMMARY OF TERMS
The following sets forth in summary fashion the
general terms and conditions of certain agreements in
principle between O&Y Equity Company, L.P. ("Equity"), O&Y
NY Building Corp. ("Building Corp" and together with
Equity, "O&Y") and JMB/NYC Office Building Associates,
L.P. ("JMB") with respect to 2 Broadway ("2 Bway"), 1290
Avenue of the Americas ("1290") and 237 Park Avenue
("237") and the respective partnerships (the
"Partnerships") that own 2 Bway, 1290 and 237 (the
"Properties").
This Summary of Terms (i) does not represent a
commitment of any kind or a waiver or relinquishment of
any of the rights, remedies, claims or collateral of O&Y
or JMB, and (ii) is subject in all respects to internal
approval by O&Y and JMB and the execution of final,
definitive documentation. Matters not covered by this
Summary of Terms are subject to further discussion.
1. Modification of Partnership Agreements
As soon as practicable, and prior to the
bankruptcy filing described in Paragraph 3 below, the
partnership agreement of each of the Partnerships will be
modified (and O&Y, JMB and the Partnerships will enter
into such other agreements as shall be
appropriate) to provide as follows:
a) Distributions. All available cash (revenues
from all sources, including net cash flow and sale or
refinancing proceeds, minus (x) all expenditures, (y) the
fees described in paragraph 1(d) (iii) below and (z)
reserves required under loan documents or otherwise
established by O&Y) will be distributed (i) first to O&Y
until O&Y receives its Preference Amount (as hereinafter
defined) plus interest at 9% per annum, compounded
monthly, from May 1, 1994 and then (ii) pro rata to the
partners (53.5%k to O&Y and 46.5% to JMB) (with JMB's
share being first applied to the JMB Notes as described in
paragraph 6 below). The Preference Amounts will be
$58,900,000 for 1290, $27,800, 000 for 237 and $33,300,000
for 2 Bway) (subject to reallocation of any unpaid
Preference Amount from one Property to the others upon the
sale of such Property).
(b) Pooling of Funds. Cash from 1290, 237 and 2
Bway will be "pooled", such that, unless O&Y elects
otherwise, (i) cash from one Partnership that would
otherwise be available for
distribution, must be loaned to the other Partnership(s)
to the extent the other Partnerships need it to cover a
shortfall between expenditures and revenues (plus
available reserves), and (ii) cash from one Partnership
that would otherwise be available
for distribution to its partners pro rata (i e., under
clause 1(a) (ii) above) must be loaned to the other
Partnership(s) to the extent O&Y has not yet received in
full its Preference Amount plus interest from such other
Partnerships, (iii) cash reserves of the partnerships may
be commingled, but withdrawals therefrom by one
Partnership in excess of its deposits thereto will be
treated as loans by the other Partnerships to the
withdrawing
Partnership, and (iv) all such loans must be repaid, with
interest at 9% per annum, before the borrowing
Partnerships makes any distributions.
(c) Tax Allocations. For calendar years 1994 and
thereafter, tax allocations shall be made as described in
Exhibit A hereto.
(d) Management.
(i) Equity will have exclusive power and
authority to make all Partnership decisions and to take
all Partnership actions, including, without limitation,
leasing, management, sale or refinancing of the Property.
Except (A) in connection with the Plan (as described in
paragraph 3 below) and (B) as described in subparagraph
(d)(ii) below, JMB will have no right to approve or veto
any Partnership decision or action. Without limiting the
generality of the foregoing (except as described an
subparagraph (d)(ii) below), (x) JMB shall have no right
to approve or veto the entry into, or the modification,
termination or enforcement of, agreements or transactions
with O&Y affiliates (including, without limitation, loans
from and leases and services contracts with, O&Y
affiliates), (y) JMB shall have no right of first refusal
(or first offer) with respect to any sale of a Property,
and (z) JMB shall have no right to propose or oppose any
sale or refinancing. In taking actions and making
decisions on behalf of each Partnership, Equity will owe a
fiduciary duty to JMB, as its partner, as to all
Partnership matters, including, without limitation, all
matters set forth in this paragraph 1(d).
(ii) Except in connection with the
resolution of an event of default under a mortgage (i.e.,
a foreclosure, a transfer to the mortgagee or its designee
in lieu of foreclosure, or a sale to a third party to
avoid a reasonably foreseeable
foreclosure), Equity may not sell 237 or 1290 without
JMB's consent (which may be withheld by JMB in its
absolute discretion in the case of clause (A), but may not
be unreasonably withheld in the case of clause (B)), (A)
for any price if the closing will
occur prior to 1999 and (B) for a price that does not
exceed the Debt Balance (as hereinafter defined) allocable
to such Property if the Closing will occur during the
period from January 1, 1999
through April 1, 2001, provided that, if such price for a
sale during such period does exceed such Debt Balance,
then equity shall first give JMB notice of its intent to
sell and an opportunity to purchase O&Y's Partnership
interest for a price equal to the net proceeds that would
have been distributed to O&Y after the intended sale (and
(i) JMB will be required to cause O&Y to be released from
all recourse liability under the mortgage
loan and (ii) the procedure for giving JMB such
opportunity will otherwise be analogous to 6.2D(1) of the
existing Partnership agreements). Without limiting the
generality of the foregoing, Equity may not cause the
Partnership that owns 237 or 1290 to file a Chapter 11
bankruptcy petition without JMB's consent if the petition
is filed in furtherance of a pre-arranged plan to make a
sale of 237 or 1290 that would not be permitted without
JMB's consent as provided above. The "Debt Balance" shall
mean the outstanding balance of the mortgage debt
allocable to the Property in question as of the date
hereof (after accounting for the October 1994 payment and
the debt assumptions being made on the date hereof) (i.e.
$365,951,817 for 237 and $549,130,250 for 1290) plus
interest and other accruals thereon between the date
hereof and the date of such sale, less payments on such
mortgage debt between the date hereof and the date of such
sale. JMB shall have no right to approve or propose, and
no right of first refusal, right of first offer or
opportunity to purchase with respect to, any sale of a
Property that will close after April, 2001.
(iii) The existing management agreements with
an O&Y affiliate shall be modified to provide for the
following fees (alternatively, O&Y or its affiliate shall
be entitled to receive equivalent amounts, whether or not
characterized as fees, under one or more agreements other
than such management agreements):
(A) Property Management
fees: based on a percentage of gross
revenues from tenants, in accordance
with the provisions of the
Restructuring Proposal (as
hereinafter defined).
(B) Asset management fees:
0.5% of Gross Asset Value in each of
the first two years; .35% of Gross
Asset Value each year thereafter. "
Gross Asset Value" means net
operating income of the Property
divided by .09. The asset management
fee will be computed and payable
quarterly based on the previous
quarter's net operating income, as
further described in the
Restructuring Proposal.
(C) Leasing commissions:
Standard lease commissions on leasing
transactions not involving a
Commission to an outside broker, and
a 50% override on commissions to
outside brokers.
Such fees (or equivalent amounts) may be modified from
time to time as permitted under the mortgage loan then
affecting each Property. The continued payment of such
fees (or equivalent amounts) to O&Y or its affiliate shall
not be regarded as a breach of O&Y's fiduciary duty to
JMB.
(e) Accounting.
(i) The Partnerships' fiscal year for all
purposes will be the calendar year.
(ii) JMB will prepare the Partnerships' tax
returns in accordance with the provisions of paragraph
1(c), through the year in which the Plan is consummated.
O&Y shall give its approval or disapproval to the
allocations to JMB included in
such proposed returns within ten business days after JMB
provides them to O&Y. O&Y will prepare each Partnership's
tax returns for each year (if any) after the year in which
the Plan is consummated, if such Partnership continues to
exist, and will provide to JMB for its information (A) by
January 31 of each subsequent year the amount of JMB's tax
allocation for the preceding year and (B) such tax returns
at least five business days before the filing thereof.
(iii) O&Y will cause annual audited GAAP
financial statements to be prepared for 1994 and
subsequent years. If JMB desires to have its own audit
performed or additional statements or reports prepared, it
may do so at its expense. O&Y will give its approval or
disapproval to the results of any such JMB audit within
ten business days after the delivery of the audit report
to O&Y.
(f) Transfers of Partnership Interests.
(i) O&Y will have the right, without
obtaining JMB's consent and without giving JMB any right
of first refusal (or first offer), to sell, transfer,
assign, pledge, collaterally assign and grant security
interests in (collectively, "Transfer") all or part of its
Partnership interests.
(ii) JMB shall have no right to
Transfer all or part of its Partnership interests without
O&Y's consent, which may not be unreasonably withheld
(although it shall be considered reasonable for such
consent to be withheld if such a Transfer by JMB could
expose O&Y to a risk of gains or transfer tax liability
hosed upon an aggregation of such Transfer with a past or
planned future Transfer by O&Y).
(g) Capital Contributions. No partner will be
required to make any additional capital contributions; and
the partners' obligation to restore deficits in their
capital accounts upon the liquidation of a Partnership
("Deficit Restoration Obligations") will be eliminated,
effective upon consummation of the Plan.
2. Releases
Upon the modification of the partnership
agreements of the Partnerships, O&Y and JMB will deliver
mutual releases with respect to all prior agreements
(including the unmodified partnership agreements of the
Partnerships, the Basic Agreements under which JMB
acquired its interests, and any guarantees relating
thereto, but excluding the JMB Notes and related
agreements), and such releases shall apply to all
predecessors of
O&Y and JMB, respectively, as parties to such agreements.
3. Bankruptcy
As soon as practicable, the Partnerships will
file a pre-arranged bankruptcy case under chapter 11 of
the Bankruptcy Code. Prior to such filing, a plan of
reorganization for the Partnerships (the "Plan"),
including forms of documentation providing for the
restructuring of the mortgage debt of the Partnerships and
the sale of 2 Bway, and containing the provisions set
forth below (including, but not limited to, the
elimination of the Deficit Restoration Obligations with
respect to the Partnerships) will be negotiated and
approved by O&Y and the steering Committee (the
"Committee" ) of the mortgage debt bondholders (the
"Bondholders") (which Committee currently consists of
holders of approximately 63% of the principal of the
bonds). O&Y will give JMB reasonable notice of and a
reasonable opportunity to participate in, negotiating
sessions with the
Committee or the Bondholders. O&Y will also update JMB on
a weekly basis regarding the past week's discussions with
the Committee or the Bondholders and the expected schedule
thereof for the following week. JMB has received a copy
of the Restructuring Proposal dated June 30, 1994, among
the Partnerships and the Committee (the "Restructuring
Proposal"). JMB hereby approves the Restructuring
Proposal. JMB agrees (a) to execute such documents as are
required to be executed by it pursuant to the
Restructuring Proposal (as part of the approved Plan) as a
partner in each Partnership, Conversion Partnership or New
Partnership, including but not limited to the pledge of
its partnership interests provided in the Restructuring
Proposal and related financing statement and (b) to take
such other actions reasonably requested by O&Y in
connection with the Restructuring Proposal, so long as the
execution of such documents or the
taking of such actions does not materially adversely
affect JMB's rights and interests as otherwise
contemplated by the LOI and this Summary of Terns. The
Plan (i) will implement the Restructuring Proposal, (ii)
will provide for the elimination of
the Deficit Restoration Obligations with respect to the
Partnerships (and any Conversion Partnerships) and (iii)
will otherwise be substantially consistent, in all
respects materially affecting JMB, with the Restructuring
Proposal, this summary of terms and the letter of intent
to which it is attached (the "LOI"), except for changes
approved by JMB, which approval will not be unreasonably
withheld so long as the same do not materially adversely
affect JMB's rights and interests as otherwise
contemplated by the LOI and this Summary of Terms or
impose any personal liability on JMB or derogate in any
way any of the provisions referred to in clauses (ii) or
(iii) of this sentence. The term "Plan", as used in this
Summary of Terms, means and is limited to the plan of
reorganization described an the next preceding sentence.
The Plan will provide that if JMB votes to accept the
Plan, it will receive the treatment provided for in the
Restructuring Proposal and this summary of terms. The Plan
will further provide that if JMB votes to reject the Plan,
it will receive no distribution on account of its
partnership interests in the Partnerships or any
Conversion Partnerships (as defined an the LOI), and its
existing partnership interests in the Partnerships and any
Conversion Partnerships shall be extinguished. O&Y agrees
that it will support the elimination of the Deficit
Restoration Obligations with respect to the
Partnerships and any Conversion Partnerships and the
approval of such elimination by the creditors of each
Partnership and Conversion Partnership and the bankruptcy
court.
4. New Partnerships
Upon the consummation of the Plan, two new
Delaware limited partnerships (the "New Partnerships")
will be formed (which are referred to herein as "1290 LP"
and "237 LP"). The sole general partner (the "GP") of
each New Partnership will be a
Delaware business trust, and the limited partners of each
New Partnership will be O&Y (and/or its affiliate(s)) and
JMB. The trustee of the GP trust will be an institutional
trustee (the "Institutional Trustee"), selected by the
Bondholders or by O&Y with the approval of the
Bondholders, and the beneficiary of the GP trust will be
O&Y (and/or its affiliate(s)). Alternatively, the GP
trust may have Equity (or its affiliate), as well as the
Institutional Trustee, as trustees. The Institutional
Trustee will delegate to O&Y or its affiliate (as
co-trustee or as manager of the Property) all of its power
and authority to act as GP, except the Institutional
Trustee will retain authority with respect to certain
major decisions (including sole authority to make any
bankruptcy filing by a New Partnership) to be agreed upon
between O&Y and the Bondholders.
5. Transfer of Properties
(a) 2 Bway. Upon or prior to consummation of (and
in a manner not inconsistent with) the Plan, 2 Bway will
be sold to a third party. If appropriate, a third New
Partnership will be formed to acquire any remaining assets
of the Partnership that owns 2 Bway (including the
proceeds of the sale; but excluding, to the extent not
transferable, real estate tax refund claims), but such
assets will be subject to the provisions respecting them
set forth in the Restructuring Proposal.
(b) 1290 and 237. Upon consummation, 1290 and
237 (and all the other assets of the Partnerships that own
them) will be transferred to 1290 LP and 237 LP,
respectively.
6. JMB Notes
The purchase money notes (the "JMB Notes") issued
by JMB to an affiliate of O&Y, which have been pledged by
such affiliate to Citibank, will be amended (i) prior to
the bankruptcy filing (A) to provide for any distributions
to JMB from any of the Partnerships to be applied to
payment of such of the JMB Notes as the holder elects,
except that distributions from 237 and 1290 may not be
applied to more than $l9 million of the JMB Note relating
to 2 Bway, and (B) to extend the maturity date to 2004,
(ii) upon the sale of 2 Bway, to cancel any indebtedness
under the JMB Note relating to 2 Bway in excess of $l9
million, and (iii) concurrently with the transfers of the
Properties, to reflect such transfers and the New
Partnership agreements; provided that, unless Citibank
consents to the extension of maturity described in clause
(i)(B), the amendment referred to in clause (i)(A) will
not be effective. JMB will execute new pledge agreements
(and UCC-1 Financing Statements), pledging its interests
in the New Partnerships to secure (on a
cross-collateralized basis) the amended JMB Notes.
7. New Partnership Agreements
The Partnership agreement of each New Partnership
will reflect the following:
(a) Distributions. All available cash will be
distributed (i) first to O&Y until O&Y receives its New
Preference Amount (as hereinafter defined) plus interest
at 9%
per annum, compounded monthly, from May 1, 1994 and then
(ii) pro rata to the partners (1% to the GP, 52.5% to O&Y
and 46.5% to JMB) (with JMB's share being first applied to
the JMB Notes as described above). The New Preference
Amounts will be $81,500,000
for 1290 and $38,500,000 for 237 (in each case, (x) less
any proportionate share of distributions made in reduction
of the Preference Amounts after May l, 1994 as
contemplated by paragraph 1(a) (i) above and (y) subject
to reallocation of any unpaid New
Preference Amount from one Property to the other upon the
sale of
such Property).
(b) Pooling of Funds. Cash from 1290 and 237
will be "pooled", such that, unless O&Y elects otherwise,
(i) cash from one New Partnership that would otherwise be
available for distribution, must be loaned to the other
New Partnership to the
extent the other New Partnership needs it to cover a
shortfall between expenditures and revenues (plus
available reserves), and (ii) cash from one New
Partnership that would otherwise be available for
distribution to its partners pro rata (i.e., under
clause 7(a) (ii) above) must be loaned to the other New
Partnership to the extent O&Y has not yet received in full
its Preference Amount plus interest from such other New
Partnership, (iii) cash reserves of the New Partnerships
nay be commingled,
but withdrawals therefrom by one New Partnership in excess
of its deposits thereto will be treated as loans by the
other New Partnership to the withdrawing New Partnership,
and (iv) all such loans must be repaid, with interest at
9% per annum, before the
borrowing New Partnership makes any distributions.
(c) Tax Allocations. Tax allocations shall be
made as described in Exhibit A hereto.
(d) Management.
(i) The GP will have exclusive power and
authority (subject to its delegation thereof to O&Y as
described in paragraph 4 above) to make all New
Partnership decisions and to take all Partnership actions,
including, without limitation, leasing, management, sale
or refinancing of the Property. Except as described in
subparagraph (d) (ii) below, JMB will have no right to
approve or veto any New Partnership decision or action.
Without limiting the generality of the foregoing (except
as described in subparagraph (d)(ii) below), (x) JMB shall
have no right to approve or veto the entry into, or the
modification, termination or enforcement of, agreements or
transactions with O&Y affiliates (including, without
limitation, loans from and leases and service contracts
with, O&Y affiliates), (y) JMB shall have no right of
first refusal (or first offer) with respect to
any sale of a Property, and (z) JMB shall have no right to
propose or oppose any sale or refinancing. In taking
actions and making decisions on behalf of each New
Partnership, the GP will owe a fiduciary duty to the
limited partners, as to all New
Partnership matters, including, without limitation, all
matters set forth in this paragraph 7(d).
(ii) Except in connection with the
resolution of an extent of default under a mortgage (i.e.,
a foreclosure, transfer to the mortgagee or its designee
in lieu of foreclosure,
or a sale to a third party to avoid a reasonably
foreseeable foreclosure), GP may not sell 237 or 1290
without JMB's consent
(which may be withheld by JMB in its absolute discretion
in the case of clause (A), but may not be unreasonably
withheld in the case of clause (B)), (A) for any price if
the closing will occur prior to 1999 and (B) for a price
that does not exceed the Debt Balance allocable to such
Property if the closing will occur during the period from
January 1, 1999 through April 1, 2001, provided that, if
such price for a sale during such period does exceed such
Debt Balance, then the GP shall first give JMB notice of
its intent to sell and an opportunity to purchase O&Y's
Partnership interest (and beneficial interest in the GP
trust) for a price equal to the net proceeds that would
have been distributed to O&Y after the intended sale (and
(i) JMB will be required to cause O&Y to be released from
all recourse liability under the mortgage loan and (ii)
the procedure for giving JMB such opportunity will
otherwise be analogous to 6.2D(1) of the existing
Partnership agreements). Without limiting the generality
of the foregoing, the GP may not cause the New Partnership
that owns 237 or 1290 to file a Chapter 11 bankruptcy
petition without JMB's consent if the petition is filed in
furtherance of a pre-arranged plan to make a sale of 237
or 1290 that would not be permitted without JMB's consent
as provided above. JMB shall have no right to approve or
propose, and no right of first refusal, right of first
offer or opportunity to
purchase with respect to, any sale of a Property that will
close after April 1, 2001.
(iii) Each New Partnership will enter into a
management and leasing agreement with an O&Y affiliate
providing for (or O&Y or its affiliate will otherwise
become entitled to receive), the same fees (or equivalent
payments) as are described in Paragraph 1(d) (iii). Such
fees (or payments) may be modified from time to time as
permitted under the mortgage loan then affecting each
Property. The continued payment of such fees (or
equivalent amounts) to O&Y or its affiliate shall not be
regarded as a
breach of O&Y s fiduciary duty to JMB.
(e) Accounting
(i) The New Partnerships' fiscal year for
all purposes will be the calendar year.
(ii) JMB will prepare the New Partnerships'
tax returns in accordance with the provisions of paragraph
7(c), for the year in which the Plan is consummated. O&Y
shall give its approval or disapproval to the allocations
to JMB included in such proposed returns within ten
business days after JMB provides them to O&Y. O&Y will
prepare the New Partnerships' tax returns for each
subsequent year and will provide to JMB for its
information (A) by January 31 of each year after a year in
which O&Y has prepared such returns the amount of JMB's
tax allocation for the preceding year and (B) such tax
returns at least five business days before the filing
thereof.
(iii) O&Y will cause annual audited GAAP
financial statements to be prepared for each fiscal year
of the New Partnerships, within the time period required
under the New Partnerships' mortgage. If JMB desires to
have its own audit performed or additional statements or
reports prepared it may do so at its expense. If any
limited partner desires to have an audit performed or
additional statements or reports prepared, it may do so at
its expense. O&Y will give its approval or disapproval to
the results of any such JMB or limited partner audit
within ten business days after the delivery of the audit
report to O&Y.
(f) Transfers of Partnership Interests.
(i) The GP and O&Y (and their successors
and assigns) will have the right, without obtaining JMB's
consent and without giving JMB any right of first refusal
(or first offer), to sell transfer, assign, pledge,
collaterally assign and grant security interests in
(collectively, "Transfers") all or part of their New
Partnership interests and/or the beneficial interest in
the GP trust.
(ii) JMB shall have no right to Transfer
all or part of its New Partnership interests without the
GP's consent, which may not be unreasonably withheld
(although it shall considered reasonable for such consent
to be withheld if such a Transfer by JMB could expose O&Y
to a risk of gains or transfer tax liability based upon an
aggregation of such Transfer with a past or planned future
Transfer by O&Y).
(g) Capital Contributions. No partner will be
required to make any Capital Contributions (other than
nominal initial contributions, to the extent required to
form the Partnerships) or loans to the New Partnerships.
No partner will have any Deficit Restoration Obligations.
8. Legal Fees
The reasonable legal fees and expenses of O&Y,
JMB and the Partnerships incurred heretofore or hereafter
in connection with the Restructuring Proposal, the LOI,
this Summary of Terms, the transactions contemplated by
any of the foregoing, and the controversies related to or
resulting in any of the foregoing or such transactions
(collectively herein called the "Restructure") shall be
paid from available Property cash (and O&Y and JMB shall
each receive prompt reimbursement from such available
Property cash for any such legal fees and expenses paid by
it). For purposes of this paragraph 8, however, the
maximum amount of such legal fees and expenses paid or
incurred by JMB in connection with the Restructure for the
period prior to September 1, 1994 as deemed to be
$250,000. O&Y will promptly submit to the Partnerships,
the Conversion Partnerships or the New Partnerships, as
appropriate, for payment from available Property cash, all
statements from JMB or its counsel for such reasonable
legal fees and expenses. In the event that for any reason
(including, but not limited to, a determination that any
such payments are not in compliance with the Restructuring
Proposal), JMB shad not receive such payments from
available Property cash, then O&Y will pay JMB such
portion, if any, of such legal fees and expenses as shall
be necessary so that O&Y and JMB will each bear (without
reimbursement from Property cash) the same percentage of
its legal fees and expenses incurred in connection with
the Restructure.
Exhibit A
Certain Tax Allocations
(1) 2 Broadway
(a) Assumption of 2 Broadway debt by partners
pursuant to separate Assumption Agreements and movement of
that debt to 1290 Associates and 237 Park Avenue
Associates will be treated as capital contributions to 2
Broadway and distributions from 1290 Associates and 237
Park Avenue Associates.
(b) JMB's share of the loss from sale of the 2
Broadway property for $15 million will equal approximately
$75 million.
(2) 1290
As a result of the debt restructuring, the debt
inside 1290 Associates will be reallocated in accordance
with the current section 752 Regulations. This will
result in a deemed distribution to JMB in excess of its
basis. Thereafter, on a going-forward basis, there will
be further reallocation of debt away from JMB's since no
depreciation will be allocated to it.
(3) Operating Allocations
The partnership agreements will be amended to
provide:
(a) All future deductions and losses (except for
loss on disposition of properties) will be allocated to
O&Y.
(b) Operating income will be allocated to JMB to
the extent of any cash distributions received by JMB. All
other gross operating income will be allocated to O&Y.
(c) Gain or loss from disposition of the property
will be allocated in the same manner as under the existing
partnership agreements.
LOCKBOX AGREEMENT
Maguire/Thomas Partners-South Tower
Borrower
Aetna Life Insurance Company
Lender
CB Commercial Real Estate Group, Inc.
Agent
December 1, 1994
LOCKBOX AGREEMENT
THIS LOCKBOX AGREEMENT (this "AGREEMENT"), is made as of
December 1, 1994, by and among MAGUIRE/THOMAS PARTNERS-SOUTH TOWER, a
California limited partnership ("Borrower"), AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation ("Lender"), and CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware corporation ("Agent").
R E C I T A L S:
A. Borrower is the owner of that certain real property and
all appurtenances thereto and improvements thereon commonly known as the
IBM Tower at Wells Fargo Center located in Los Angeles, California (the
"Premises"), which property is more particularly described on Exhibit A to
the Deed of Trust (as defined herein).
B. Borrower executed and delivered to The Aetna Casualty and
Surety Company ("Aetna Casualty and Surety") that certain Promissory Note
in the original principal amount of two hundred million dollars
($200,000,000) dated November 26, 1984 (the "Note"); which Note and the
indebtedness evidenced thereby (the "Indebtedness"), is secured by, inter
alia, that certain Deed of Trust, Assignment of Rents and Security
Agreement ("Deed of Trust") executed by Borrower, as Trustor, in favor of
Ticor Title Insurance Company of California, as trustee, and naming Aetna
Casualty and Surety as Beneficiary, dated November 26, 1984, encumbering,
inter alia, the Premises and recorded on November 28, 1984, in the Official
Records of the Los Angeles County Recorder's office (the "Land Records"),
as Instrument Number 84-1399775 and that certain Assignment of Rents and
Leases (the "Assignment of Rents") executed by Borrower, as Assignor, in
favor of Aetna Casualty and Surety, as Assignee, dated November 26, 1984,
with respect to all leases affecting the Premises and recorded in the Land
Records on November 28, 1984 as Instrument Number 84-1399776. The Note,
the Deed of Trust, the Assignment of Rents and all other documents
evidencing or securing the Indebtedness are hereinafter collectively
referred to as the "Loan Documents."
C. Aetna Casualty and Surety assigned its rights under the
Loan Documents to Lender pursuant to an Assignment dated October 29, 1986
and recorded in the Land Records on December 4, 1986 as Instrument Number
86-167563.
D. Borrower has an existing lockbox arrangement and
associated deposit account (the Existing Account defined below) with Bank
of America NT & SA ("Bank of America") in order to collect all receipts
which are or may became due and payable under all leases of any part of the
Premises and under any other agreement or contract with respect to the
Premises. In order to effectuate the transactions provided for in this
Agreement:
(1) Lender has established a new deposit account with
Bank of America, in the name of Agent, as agent for Lender (the
Deposit Account provided for herein);
(2) simultaneously with the execution of this Agreement,
Borrower and Lender have irrevocably instructed Bank of America that
all funds which are hereafter received in the Bank of America lockbox
originally established for the Existing Account shall instead be
deposited into the Deposit Account; and
(3) Borrower and Lender have agreed that all funds from
time to time held in said Deposit Account, and in the Tax and
Insurance Escrow Account provided for herein, shall be held,
withdrawn and disbursed by Agent in accordance with the terms of this
Agreement.
E. Borrower has also agreed to the establishment of a tax
and insurance escrow (the Tax and Insurance Escrow Account provided for
herein) and has agreed to deposit certain funds therein to serve as
additional security for the Indebtedness and as a source of payment of real
property taxes and assessments and insurance premiums in respect of the
Premises.
F. Lender has requested Agent to act as its agent with
respect to the Deposit Account and the Tax and Insurance Escrow Account.
Agent has accepted its appointment in accordance with the terms of this
Agreement, has agreed to establish the Deposit Account and the Tax and
Insurance Escrow Account, and has agreed, in its capacity as agent for
Lender, to hold, disburse and otherwise pay over all funds from time to
time held in the Deposit Account and the Tax and Insurance Escrow Account
(the "Funds") in accordance with this Agreement.
NOW, THEREFORE, in consideration of the matters described in
the foregoing recitals (which are hereby incorporated fully into the terms
of this Agreement), and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
hereby covenant and agree as follows:
1. Deposit Account and Tax and Insurance Escrow Account.
(a) Borrower has an existing lockbox arrangement with
Bank of America (the "Lockbox") and an associated deposit account, Account
No. 14200-51462 (the "Existing Account"), in order to collect receipts
which are or may became due and payable with respect to the Premises.
(b) In connection with the transactions provided for
herein:
(1) Lender has established a new deposit account,
Account No. 1233-31968 (the "Deposit Account") with Bank of America,
in the name of Agent, as agent for Lender; and
(2) simultaneously with the execution of this
Agreement, Borrower and Lender have irrevocably instructed Bank of
America that, from and after the date of execution of this Agreement
until the Indebtedness and all other sums due and owing to Lender
have been paid in full, the Lockbox arrangements with Bank of America
shall be transferred from the Existing Account to the Deposit
Account, and all funds which are received in the Lockbox shall
instead be deposited into the Deposit Account, notwithstanding any
contrary provisions of the agreement(s) between Maguire Thomas
Partners, on behalf of Borrower and Bank of America regarding the
Existing Account and the Lockbox arrangements originally associated
therewith. In connection therewith, Agent, as agent for Lender,
shall be substituted for Maguire Thomas Partners and Borrower for all
purposes of such Lockbox arrangements with Bank of America, other
than obligations to pay fees to Bank of America (Borrower shall
remain liable for all such fees), including, without limitation,
receiving documents, correspondence and other materials delivered to
the Lockbox, for receiving notices and statements from Bank of
America, and for making withdrawals or other disbursements of funds
on deposit in the Deposit Account and in the Tax and Insurance Escrow
Account.
Borrower acknowledges and agrees that such transactions have been entered
in order that the Deposit Account will exclusively be used collect, hold
and disburse any and all Gross Receipts (as defined in Section 4 below)
which are or may became due and payable under all leases of any part of the
Premises and under any other agreement or contract with respect to the
Premises. Any such lease, contract, license, concession or other agreement
is herein collectively referred to as a "LEASE" and the party or parties
thereto, other than Borrower, are referred to herein as a "TENANT." All
Funds from time to time deposited and held in said Deposit Account and in
the Tax and Insurance Escrow Account shall be held, withdrawn and disbursed
by Agent in accordance with the terms of this Agreement.
(c) On or before the date of execution of this
Agreement:
(1) Borrower has paid, as an Approved Operating
Cost (as defined in Section 6 below) the first installment of 1994-95
ad valorem taxes on the Premises, in the amount of $1,464,017.17;
(2) Borrower has paid, as an Approved Operating
Cost, the annual premium for casualty and earthquake insurance on the
Premises for the period through November 30, 1995, in the amount of
$1,028,241.50 (as provided for in paragraph (2) of Section 2(e)
below, an additional insurance premium for such coverage is to be
paid by Borrower);
(3) Lender has established a new deposit account,
Account No. 1233-761942 (the "Tax and Insurance Escrow Account"), an
interest bearing money market account with Bank of America, in the
name of Agent, as agent for Lender. Borrower shall, not later than
December 30, 1994, pay to Agent for deposit into the Tax and
Insurance Escrow Account, the sum of $413,000.
Funds deposited into the Tax and Insurance Escrow Account shall be solely
the property of Lender, to be disbursed for the payment of either taxes and
assessments or insurance premiums for the Premises or applied to the
Indebtedness in accordance with the terms and conditions of this Agreement.
(d) In addition to the initial deposit into the Tax and
Insurance Escrow Account pursuant to Section 1(c)(3) above, and the monthly
deposits into such Account pursuant to Section 5(a)(3) below, additional
Funds shall be deposited by Borrower into the Tax and Insurance Escrow
Account after the date of execution of this Agreement from time to time in
accordance with Paragraphs 1.04 and 1.08(e) of the Deed of Trust.
(e) In connection with such Tax and Insurance Escrow
Account;
(1) Borrower shall deliver, or shall cause to be
delivered, to Agent and to Lender, promptly after receipt thereof by
Borrower, but in no event later than 30 days prior to the date any
such taxes are due, all invoices for real property taxes and
assessments in respect to the Premises. Lender shall direct Agent in
writing to disburse funds from the Tax and Insurance Escrow Account
(to the extent, and only to the extent, funds are then available
therein) and to pay such invoices directly to the taxing authority,
and Agent shall pay the same in accordance with the terms of said
direction on or prior to the date such payments are due.
(2) Borrower shall deliver, or shall cause to be
delivered, to Agent and to Lender, promptly after receipt thereof by
Borrower, but in no event later than 30 days prior to the date any
such insurance premiums are due, all invoices for premiums for the
insurance required to be maintained by Borrower pursuant to
Paragraphs 1.03 and 5.20 of the Deed of Trust. Lender shall direct
Agent in writing to disburse funds from the Tax and Insurance Escrow
Account (to the extent, any only to the extent, funds are then
available therein) and to pay such invoices directly to the
applicable insurance carrier, and Agent shall pay the same in
accordance with the terms of said direction on or prior to the date
such payments are due.
(3) Notwithstanding the provisions of paragraphs
(1) and (2) of this Section 1(e), however, (i) Lender shall not be
required to direct Agent to make any such disbursement from the Tax
and Insurance Escrow Account upon the occurrence and during the
continuance of an Event of Default hereunder, and (2) at any time and
from time to time during the continuance of any Event of Default
hereunder or under the Loan Documents, upon request of Lender, Agent
shall withdraw all funds then on deposit in the Tax and Insurance
Escrow Account and disburse such sums to Lender to be applied to the
Indebtedness or any other sums then due and owing to Lender under the
Loan Documents in such order as Lender shall determine in its sole
discretion.
(e) On or before the date of execution of this
Agreement, Borrower has paid to Lender the sum of Two Million One Hundred
Ninety Thousand Three Hundred Ninety-Six Dollars ($2,190,396), which
payment has been applied by Lender to the Indebtedness.
2. COMMENTS OF BORROWER. Borrower hereby covenants,
agrees, represents and warrants to Lender as follows:
(a) With respect to the Tenants: (1) Borrower
represents that Borrower has delivered to certain existing Tenants as of
the date of execution of this Agreement a written notice instructing such
existing Tenants to make all payments of Gross Receipts required pursuant
to its Lease directly to the Lockbox (not all such notified Tenants,
however, have complied with such notices), (2) simultaneously with the
execution of this Agreement, Borrower and Lender shall jointly give a
notice instructing International Business Machines Corporation, an existing
Tenant, to make all payments of Gross Receipts required pursuant to its
Lease directly to the Lockbox (3) promptly following execution of this
Agreement, Borrower shall deliver to each other existing Tenant who is not
now making payments to the Lockbox, a written notice instructing such
existing Tenant to make all payments of Gross Receipts required pursuant to
its Lease directly to the Lockbox, and (4) promptly upon execution of any
Lease for any part of the Premises after the date of execution of this
Agreement, Borrower shall deliver, or cause to be delivered, a written
notice instructing each such Tenant to make all payments of Gross Receipts
required pursuant to its Lease directly to the Lockbox. Each such written
notice to a Tenant is herein referred to as a "Payment Notice." Borrower
shall not give any instructions to any Tenant for any payments that are
inconsistent with the requirements of this Agreement or with the Payment
Notice delivered to such Tenant.
(b) If Borrower shall receive, directly or indirectly
through its managers, agents or partners, any cash or any checks, drafts,
or other instruments (hereinafter collectively referred to as "Checks")
from any Tenant in payment of Gross Receipts, Borrower shall immediately
endorse and deposit same into the Deposit Account.
(c) Until the Indebtedness and all other sums due and
owing to Lender have been paid in full, Borrower also agrees that Borrower
shall not, and shall have no right to, amend, terminate or modify in any
way the agreement(s) with Bank of America pertaining to the Tax and
Insurance Escrow Account or to the Deposit Account or the Lockbox
arrangements applicable thereto. Only persons designated by Agent, in its
discretion, shall have the authority to make withdrawals or disbursements
from the Deposit Account or the Tax and Insurance Escrow Account, and
Borrower shall have no right to withdraw or otherwise transfer funds from
the Deposit Account or the Tax and Insurance Escrow Account, to close the
Deposit Account or the Tax and Insurance Escrow Account, or to otherwise
modify or exercise any authority over the Deposit Account, the Tax and
Insurance Escrow Account or any Funds on deposit in either.
(d) Effective on and after December 1,1994, until the
Indebtedness and all other sums due and owing to Lender have been paid in
full, Borrower agrees that no Gross Receipts, Funds or any other amounts
shall be paid or distributed, and no other property shall be distributed,
to any partner of Borrower, except for such distributions by Borrower.
(1) of the excess Balance Distribution approved by
Lender in accordance with Section 2(f) below;
(2) of not more than $100,000 for the month of
December, 1994, from Borrower's Operating Account as provided for in
Section 2(e)(6) below; and
(3) of not more than $100,000 per month, starting
with the month of January, 1995, from amounts disbursed by Agent from
the Deposit Account to Borrower for such purpose, as provided for in
Section 5(a)(4) of this Agreement.
(e) Borrower represents, warrants, covenants and agrees
with Lender as follows:
(1) that Borrower has paid the first installment
of 1994-95 ad valorem taxes on the Premises in the amount of
$1,464,017.17;
(2) that for casualty and earthquake insurance on
the Premises, Borrower has paid the sum of $1,028,241.50 and prior to
February 28, 1995, Borrower shall pay an additional amount (estimated
to be approximately $227,000), and that such amounts represent the
annual premium for casualty and earthquake insurance on the Premises
for the period through November 30, 1995;
(3) that on or about the date of execution of
this Agreement, Borrower has paid or shall pay Agent $500, as Agent's
fee for services in connection with the Deposit Account for the month
of December,1994;
(4) that all funds in the Existing Account
representing Gross Receipts applicable to the period after November
30,1994 (e.g., without limitation, any rents for the month of
December, 1994) have been transferred to the Deposit Account or to
Borrower's Account No. 142 0703576 with Bank of America (the
"Operating Account");
(5) that the Existing Account is being closed
simultaneously with the execution of this Agreement, that any funds
deposited in the Existing Account on or following the date of
execution of this Agreement until such Existing Account is closed
shall be immediately deposited into the Operating Account or the
Deposit Account, and that except for the Operating Account, and the
balances on deposit therein, Borrower has no deposit accounts, cash,
certificates of deposit, securities or other case equivalents;
(6) that Borrower has made, or shall be permitted
to make from the Operating Account, a single distribution to its
partners for the month of December, 1994, in an amount not to exceed
$100,000 and that, except for such $100,000 distribution, and any
Excess Balance Distribution in accordance with Section 2(f) below, no
other distributions to Borrower's partners have been made since
December 1,1994 or shall be permitted to be made during the month of
December,1994;
(7) that solely from Gross Receipts attributable
to the period through November 30,1994, and after (i) payment of all
costs and expenses of the Premises attributable to such period, (ii)
payment or provision for (i.e., deduction) of the first installment
of property taxes in accordance with Section 2(e)(1) above, and (iii)
payment of or provision for the insurance premium described in
Section 2(e)(2) above (but before establishment of a cash working
capital reserve for the Premises), as of November 30, 1994, Borrower
had a cash balance in the amount of Six Hundred Thousand Dollars
($600,000) (the "Excess Balance"), which Borrower desires to
distribute to its partners in accordance with Section 2(f) below;
(8) that as of December 19,1994, the total
outstanding balance on deposit in the Existing Account was
$3,649,993, including the Excess Balance, plus an additional amount
sufficient (i) to pay any remaining unpaid Approved Operating Costs
(as defined below) of Borrower through December 31, 1994, and (ii) to
make, to the extent not yet made, the $100,000 December, 1994
distribution to Borrower's partners permitted pursuant to Section
2(d)(2) and Section 2(e)(6) above; and
(9) that on or before January 3, 1995, Borrower
shall transfer from the Operating Account to the Deposit Account the
amount, if any, by which the aggregate balance in the Operating
Account exceeds the sum of (i) any undistributed balance of the
Excess Balance Distribution, plus (ii) if not then paid, the sum of
$227,000 for the additional insurance premium described in Section
2(e)(2) above, plus (iii) a working capital balance of $250,000 (to
the extent such working capital balance is less than $250,000,
Borrower may request additional funds to maintain such a working
capital balance in accordance with Section 6(b) below.
(f) Following execution and delivery of this Agreement,
Borrower shall be entitled to distribute the amount of the Excess Balance
(as specified in Section 2(e)(7) above) to its partners (the "Excess
Balance Distribution").
(g) Notwithstanding any provision of the Loan Documents
to the contrary, in the event of any breach by Borrower of its covenants,
agreement, representations or warranties set forth in this Section 2, the
direct and indirect general partners of Borrower (but not (i) JMB Realty
Corporation, or (ii) any shareholder of the indirect general partners of
Borrower) shall be personally obligated to Lender for any amounts which
would have been, but for such breach, deposited into the Deposit Account
and disbursed to Lender in accordance with the terms and conditions of this
Agreement; provided, however, that such amounts for which the direct and
indirect general partners of Borrower are personally liable to Lender shall
not include any amounts which, although not deposited into the Deposit
Account, were expended by Borrower in good faith for reasonable operating
costs and expenses of the Premises.
3. APPOINTMENT OF AND GRANT OF AUTHORITY TO AGENT. Lender
hereby appoints Agent as its agent and bailee hereunder. Agent accepts
such appointment and agrees to receive, hold and disburse the Funds in
accordance with the terms of this Agreement. Borrower hereby consents to
the appointment of Agent as the agent of Lender for the purpose of
performing the duties and obligations provided for by this Agreement, and
in connection therewith, Borrower hereby grants to Agent the following
authority and rights:
(a) to make withdrawals and disbursements from the
Deposit Account and the Tax and Insurance Escrow Account in
accordance with the terms and conditions of this Agreement;
(b) to open all mail and other documents sent either to
the Lockbox or to Agent at its address hereunder, whether such mail
is addressed to Borrower, Lender or any other person; provided,
however, that Agent shall forward all such mail addressed to Borrower
(exclusive of Gross Receipts) to Borrower at the address set forth
herein;
(c) to endorse in the name of Borrower or any of its
affiliates, or Lender, without recourse to Agent, Lender or Borrower,
all Checks in payment of the Gross Receipts and to deposit such
checks into the Deposit Account with Bank of America;
(d) upon request by Lender, to deliver copies of all
mail or other documents received by Agent to Lender or such other
party as Lender may designate; and
(e) to take such other action is respect of the Deposit
Account and the Tax and Insurance Escrow Account as may be necessary
or appropriate within the discretion of Agent for the purpose of
collecting and depositing the Gross Receipts (but without any
obligation to enforce the obligations of any Tenant under any Lease)
and disbursing the same to the persons and in the order of priority
set forth in Section 5 hereof, and to otherwise carry out the duties
and obligations imposed upon Agent pursuant to the terms of this
Agreement.
Borrower hereby irrevocably and unconditionally authorizes Agent, and
grants Agent, for the term hereof, a continuing, irrevocable, and
unconditional power of attorney (which power of attorney is coupled with an
interest) in the name of Borrower, without notice to or further consent or
authorization from Borrower, to receive, endorse, if necessary (as agent
for the payee but without recourse to Borrower), and forward for collection
any and all cash or Checks and to perform such other acts as may be
reasonably necessary under the terms of this Agreement. Borrower agrees to
indemnify, defend and hold Agent harmless from and against any and all
claims, actions, liabilities, judgments, costs, and expenses (including
attorneys' fees) arising out of the exercise of the foregoing power of
attorney, except for claims, actions, judgments, costs and expenses
resulting from Agent's gross negligence, intentional misconduct or bad
faith.
4. GROSS RECEIPTS. As used herein, "GROSS RECEIPTS" shall
mean, during the period commencing on December 1, 1994 and continuing until
the Indebtedness and all other sums due and owing to Lender have been paid
in full, the aggregate gross revenues derived or generated by or from the
Premises and received during such period by or for the account or benefit
of Borrower, including, without limitation, (A) all payments for use or
occupancy of all or any part of the Premises or for any services,
equipment or furnishings provided in connection with any such use or
occupancy, whether as rent, fees, charges, expense recoveries or otherwise
(but excluding security deposits until they are no longer subject to being
returned), (B) all revenues from any concessions, franchises or other
operations on or from the Premises, (C) all refunds, rebates and
reimbursements of any expenses or taxes related to the Premises previously
paid, (D) all insurance proceeds, condemnation awards and similar
compensation relating to all or any part of the Premises that are not
applied to payment of the Indebtedness or, to the extent permitted under
the Deed of Trust, to restoration of the portion of the Premises to which
such proceeds, awards or compensation related, (E) except to the extent
otherwise agreed by Lender in writing or expressly provided for in the Loan
Documents, all proceeds of any sale or other disposition of all or any part
of the Premises that are not applied to payment of the Indebtedness, but
excluding any funds withdrawn or otherwise disbursed from the Deposit
Account or the Tax and Insurance Escrow Account (the foregoing not
constituting any consent to the sale or disposition of any portion of the
Premises except in accordance with the Deed of Trust), and (F) the proceeds
of any rental interruption insurance.
5. DISBURSEMENTS FROM DEPOSIT ACCOUNT.
(a) As used herein, the "DISBURSEMENT DATE" means the
date each calendar month, commencing with the month of January 1995, which
is the first business day during such calendar month on which the aggregate
balance available for withdrawal from the Deposit Account first equals or
exceeds an amount equal to the sum of the amounts distributable for such
calendar month under clauses (1), (2), (3) and (4) below plus $2,190,396.
Until the Indebtedness and all other sums due and owing to Lender have been
paid in full, Agent shall withdraw all good, collected funds held in the
Deposit Account and remit such Funds as follows:
(1) first, on the Disbursement Date of each
calendar month, to Agent to pay all fees and expenses of Agent,
pursuant to this Agreement;
(2) second, on the Disbursement Date of each
calendar month, to Borrower, for deposit into Borrower's Operating
Account, an amount equal to the amount of any Approved Operating
Costs (as provided for below) for such calendar month in accordance
with the notice of approval thereof received by Agent from Lender in
accordance with Section 6 below -- all such amounts disbursed to
Borrower hereunder shall be used by Borrower solely to pay Approved
Operating Costs incurred or to be incurred in the operation of the
Premises, or approved for distribution to the partners of Borrower,
in either case only in accordance with the approved budget therefor
pursuant to Section 6 and in accordance with Borrower's usual custom
and practice for such operating costs, and any excess of such
disbursement over the amount of such Approved Operating Costs
actually paid by Borrower shall be credited against (and reduce) the
amount of the disbursement to Borrower under this clause (2) for the
next calendar month;
(3) third, on the Disbursement Date of each
calendar month, to Agent, for deposit into the Tax and Insurance
Escrow Account:
(i) the sum of $519,819 for each of the
months of January, February and March, 1995;
(ii) the sum of $304,819 for each of
the months of April through October,1995; and
(iii) the sum of $352,606 per month for
November, 1995 and each month thereafter (an amount equal
to $244,003 per month with respect to property taxes and
$108,603 per month for insurance);
or such other amount as determined by Lender in accordance with
Section 1(d) above:
(4) fourth, on the Disbursement Date of each
calendar month, to Borrower, for distribution to the partners of
Borrower that month, the sum of One Hundred Thousand Dollars
($100,000); and
(5) fifth, to Lender, on the Disbursement Date of
each calendar month and at any other time as may be requested from
time to time by Lender (by written notice to Agent), an amount equal
to all of the remaining Funds in the Deposit Account, to be applied
against the Indebtedness in accordance with the Loan Documents.
Notwithstanding the foregoing, however, if on the fifth day of any calendar
month, commencing January 5, 1995, the aggregate balance available for
withdrawal from the Deposit Account is less than the minimum sum provided
for above to qualify for the Disbursement Date, and provided that no Event
of Default has then occurred and is continuing, then:
(i) on such date (or the next business day, if the
fifth of such calendar month is not a business day), Lender shall
authorize Agent to make a supplemental distribution to Borrower for a
portion of Approved Operating Costs in an amount equal to the
aggregate utility costs and expenses for the Premises (electricity,
gas, water, trash and similar costs, but excluding management fees
and other payments to entities affiliated with Borrower or its
general partners) payable during such month (and Borrower represents
and warrants to Lender that such utility costs and expenses are
approximately $250,000 to $300,000 per month);
(ii) Borrower shall use such funds to pay all such
utility costs on or before the tenth day of such month; and
(iii) the amount of any distribution to Borrower of
Approved Operating Costs pursuant to Section 5(a)(2) above on the
Disbursement Date shall be reduced by the amount of any such
supplemental distribution (and such adjustment shall be taken into
account in the determination of whether or not there is a sufficient
balance in the Deposit Account to satisfy the criteria for the
Disbursement Date).
(b) Agent shall hold the Funds in trust in the Deposit
Account and in the Tax and Insurance Escrow Account as Lender's agent and
bailee, and Agent shall disburse such Funds, as Lender's agent, in
accordance with the foregoing until directed by Lender to disburse or
otherwise pay over such Funds in accordance with the terms of this
Agreement. All amounts disbursed to Lender pursuant to this Agreement
shall be paid, in immediately available funds, by wire transfer as follows:
Bank: Bank of America
REID Deposit Center - Los Angeles 1420
525 South Flower Street
Los Angeles, California 90071
ABA Number:121000358
Account Name: Aetna Life Insurance Company
Account No.: 14206-70255
Reference: CB Commercial/Maguire Investor Number 101
Within 15 days after the end of each month, and on any other date as Lender
shall request, Agent shall deliver to Borrower and Lender a statement in
reasonable detail showing the amount of the Funds then held in the Deposit
Account and the Tax and Insurance Escrow Account, and the amount and payee
of all Funds distributed from each of said Accounts in accordance with the
terms of this Agreement.
6. APPROVED OPERATING COSTS.
(a) On the date of execution of this Agreement, with
respect to such projected operating costs and expenses for December, 1994
and January, 1995, and by January 15,1995, and the 15th day of each month
thereafter until the Indebtedness has been repaid in full, with respect to
such projected operating costs and expenses for the following calendar
month, Borrower shall deliver to Lender and Agent a schedule (in reasonable
detail acceptable to Lender) of projected operating costs and expenses to
be paid by Borrower during the next following calendar month in connection
with the ownership and operation of the Premises (which costs and expenses
may include, without limitation, utility payments, professional fees in
connection with the negotiation of this Agreement and the operation,
maintenance or leasing of the Premises, payments due tenants under leases
(e.g., rental reimbursements for space vacated in other projects prior to
moving to the Premises) and payments to IBM of sublease rental received by
Borrower, payments under asset management contracts (e.g., elevator
maintenance, security, and parking), management fees, leasing commissions,
costs of repairs and maintenance and tenant improvement costs for the
Premises; provided, however, that such costs and expenses shall exclude,
without limitation, (i) real property taxes and assessments and insurance
premiums which are to be paid from the Tax and Insurance Escrow Account,
(ii) professional fees incurred in connection with any dispute,
negotiations or agreement by or between the partners in the Borrower or any
transaction related thereto and (iii) any costs or expenses in connection
with any proposed sale or financing of the Premises). To the extent such
operating costs or expenses will be paid by Borrower to any affiliate of
Borrower or any of the general partners of Borrower, Borrower shall
identify such proposed affiliate payments in such schedule. To the extent
such costs and expenses for the following month are approved by Lender,
Lender shall notify Borrower and Agent of such approval, whereupon such
approved costs and expenses shall constitute "Approved Operating Costs"
hereunder for purposes of the next monthly disbursement to Borrower in
accordance with Section 5(a) above.
(b) In connection with the foregoing, Borrower may
maintain a working capital balance in Borrower's Operating Account of Two
Hundred Fifty Thousand Dollars ($250,000) at any time. In no event,
however, shall the aggregate amount on deposit in the Operating Account at
any time exceed the sum of (i) $250,000, plus (ii) amounts disbursed to
Borrower for Approved Operating Costs and the monthly distribution to
partners pursuant to Section 5(a) above, minus (iii) the amounts of such
Approved Operating Costs paid by Borrower and the amounts of such
authorized monthly distributions made by Borrower. If at any time such
working capital balance is less than $250,000, in order to allow Borrower
to maintain such balance, Borrower may request additional funds as proposed
Approved Operating Costs in accordance with this Agreement.
(c) On the date of execution of this Agreement and on
January 15,1995, and on the 15th day of each succeeding month until the
Indebtedness and all other sums due and owing to Lender have been paid in
full, Borrower shall deliver to Lender and Agent a statement showing, in
reasonable detail (acceptable to Lender), the amounts of all payments of
operating costs and expenses for the Premises actually made by Borrower
during the immediately preceding calendar month, reconciling such payments
with the amounts distributed to Borrower therefor (i.e., for such
components of Approved Operating Costs) pursuant to Section 5(a) above,
together with a statement as to the balance on deposit in Borrower's
Operating Account as of the last day of such month. Borrower shall also
deliver to Agent each month, (i) copies of the invoices Borrower sends to
each Tenant for rent each month, and (ii) a copy of Borrower's "balance
forward" report, reflecting application of rental payments received to
amounts owed by each Tenant.
7. EXPENSES, INDEMNIFICATION AND COMPENSATION.
(a) Borrower shall pay, indemnify and hold Agent
harmless from and against all claims, actions, judgments, costs and
expenses (including reasonable attorneys' fees), incurred by Agent in the
performance, of its duties under this Agreement, except for claims,
actions, judgments, costs and expenses resulting from Agent's gross
negligence, intentional misconduct or bad faith. The provisions of this
subsection (a) shall survive the termination of this Agreement.
(b) In consideration for the services to be rendered by
Agent hereunder in connection with the Deposit Account, Borrower agrees to
pay the fees (not to exceed $500 per month) and expenses of Agent. In
consideration for the services to be rendered by Agent hereunder in
connection with the Tax and Insurance Escrow Account, Borrower agrees to
pay the fees (not to exceed $500 per year or portion thereof) and expenses
of Agent. Borrower acknowledges that notwithstanding Borrower's payment of
the compensation of Agent hereunder, Agent is acting solely as the agent of
Lender for the purposes of this Agreement. Borrower agrees that Agent has
the right to deduct the amount of such compensation from the amounts
deposited and collected in the Deposit Account as provided in Section 5
hereof. Without in any manner limiting the foregoing, Borrower agrees that
if (i) Borrower fails to pay Agent's fees and expenses, in violation of the
foregoing, and (ii) if insufficient Funds exist for payment of such Agent's
fees and expenses, then Lender may, at Lender's option, pay such fees and
expenses and such fees and expenses shall constitute an advance under the
Loan Documents.
8. ASSIGNMENT OF RENTS AND LEASES.
(a) The Payment Notices furnished to the Tenants under
the Leases and all other persons shall for all purposes be deemed given
pursuant to the Assignment of Rents. The Payment Notices shall be deemed
sufficient authorization for any such Tenant or other person to make all
payments of Gross Receipts directly to the Lockbox for the Deposit Account,
and each such Tenant or other person shall be entitled to rely on this
Agreement in making such payments and shall have no liability to Borrower
for any Gross Receipts duly and punctually paid to the Lockbox for the
Deposit Account in accordance with the terms of such Tenant's Lease or
other agreement. To the extent the interest of Lender in and to Gross
Receipts prior to the date hereof is deemed by any applicable state law as
an unperfected interest, this Agreement shall for purposes of any such law
be deemed a conversion of Lender's interest in and to the Gross Receipts
from an unperfected interest to a perfected interest for all purposes of
applicable state law; and provided further that the receipt by Lender of
such payments and the application thereof to the Indebtedness pursuant to
this Agreement shall be deemed to be an agreed method of payment between
Borrower and Lender and shall not constitute an "action" within the meaning
of California Code of Civil Procedure Section 726, or other similar law,
and Borrower hereby waives any and all rights with respect thereto.
(b) Lender and Borrower hereby acknowledge and agree
that upon the filing of a bankruptcy petition by or against Borrower under
the Bankruptcy Code, the Gross Receipts (whether then already in the
Deposit Account or the Tax and Insurance Escrow Account, or then due or
becoming due thereafter) shall be deemed not to be property of the
Borrower's bankruptcy estate within the meaning of Section 541 of the
Bankruptcy Code. In the event, however, that a court of competent
jurisdiction determines that, notwithstanding the foregoing
characterization of the Gross Receipts by Borrower and Lender, the Gross
Receipts do constitute property of the Borrower's bankruptcy estate, then
Lender and Borrower hereby further acknowledges and agree that all such
Gross Receipts whether due and payable before or after the filing of the
petition is and shall be cash collateral of Lender Borrower acknowledges
that Lender does not consent to Borrower's use of such cash collateral
(except to the extent expressly provided for in this Agreement or ordered
by a bankruptcy court) and that, in the event Lender elects (in its sole
discretion) to give such consent, such consent shall only be effective if
given in writing. Except as provided in the immediately preceding
sentence, Borrower shall have no right to use or apply or require the use
or application of such cash collateral (i) unless Borrower shall have
received a court order authorizing the use of the same, and (ii) Borrower
shall have provided such adequate protection to Lender as shall be required
by the bankruptcy court.
9. EVENT OF DEFAULT REMEDIES. The occurrence of any one or
more of the following events shall constitute an "Event of Default" under
this Agreement.
(a) If Borrower spends or uses any Funds disbursed to it
from the Deposit Account of the Tax and Insurance Escrow
Account in violation of the terms and conditions of this
Agreement; or
(b) If Borrower fails to comply with any of the terms
and conditions of this Agreement and such failure has not been
cured within five (5) business days following written notice
from Lender; or
(c) If an Event of Default, as defined in the Loan
Documents, occurs and is continuing.
Upon the occurrence of an Event of Default, Lender shall be entitled to
exercise any and all rights and remedies available to Lender under this
Agreement or the other Loan Documents, at law, or in equity.
10. SECURITY AGREEMENT AND REMEDIES.
(a) To the extent Borrower has any interest in the
Funds and in the Deposit Account or the Tax and Insurance Escrow Account,
Borrower hereby pledges to Lender, and grants to Lender a security interest
in, the Funds, the Deposit Account and the Tax and Insurance Escrow
Account, as additional security for the Indebtedness and for the
obligations of Borrower under the Loan Documents and this Agreement.
Borrower also hereby pledges Lender, and grants to Lender a security
interest in, the Gross Receipts (subject to the provisions of Section 8(b)
above), and Borrower's interest in all accounts, accounts receivable,
deposit accounts (including, without limitation, the Operating Account) and
all funds deposited therein, cash, instruments, negotiable documents,
letters of credit, securities, certificates of deposit, chattel paper,
contract rights, general intangibles, and all proceeds of any of the
foregoing (collectively, "Collateral"), as additional security for the
Indebtedness and for the obligations of Borrower under the Loan Documents
and this Agreement. In addition to Lender's other rights and remedies
under this Agreement, the other Loan Documents and applicable law, Borrower
hereby grants Lender all rights and remedies relating to the Funds, the
Deposit Account, the Tax and Insurance Escrow Account, and the Collateral,
of a secured party under the Uniform Commercial Code of the California.
The foregoing grant of a security interest is not intended to derogate from
the parties' intent that all Funds are and shall be the sole property of
Lender but, rather, is intended to protect Lender's interest in the Funds
in the event that a court, contrary to the parties' intent, determines that
Borrower has a legal or equitable interest in the Funds. To the extent
Lender had a security interest in any of the Collateral prior to the date
of execution of this Agreement, the foregoing shall be construed to confirm
such security interest.
(b) Concurrently with the execution and delivery of this
Agreement:
(1) Borrower and Lender shall execute and deliver
one or more UCC-2 Statements, amending the existing UCC-1 Financing
Statements which name Lender as Secured Party, to reflect the change
in Borrower's name from "Maguire Partners - Crocker Properties -
South Tower;"
(2) Borrower and Lender shall execute and deliver a
UCC-1 Financing Statement reflecting the security interest of Lender
in the Funds, the Deposit Account, the Tax and Insurance Escrow
Account and the Collateral, as provided for herein; and
(3) Borrower and Lender shall jointly notify Bank
of America confirming Lender's security interest in the Funds, the
Deposit Account, the Tax and Insurance Escrow Account and the
Collateral, as provided for herein.
(c) Lender hereby designates and appoints Agent as
Lender's bailee for purposes of taking possession of the Funds, and as
Lender's agent for purposes of controlling the disbursement of the Funds,
as security for the Indebtedness and for the obligations of Borrower under
the Loan Documents and for purposes of effectuating Lender's rights and
remedies relating to the Funds. Borrower hereby irrevocably consents and
agrees to such appointment and to Agent's actions that may be taken in that
capacity in accordance with this Agreement.
(d) Without limiting the rights of Lender pursuant to
Section 5(a)(5) above, Lender may, at, or at any time after, the occurrence
of an Event of Default, in addition to exercising any or all of its other
rights and remedies under the Loan Documents, direct Agent, in writing, to
pay over to Lender all or any part of the Funds specified by Lender in such
written direction, without demand or notice to Borrower. Promptly after
receiving such written direction, Agent shall pay over to Lender all of the
Funds or the part thereof specified in such written direction, as the case
may be. Lender may, at its option, without demand or notice, (i) setoff or
recoup or otherwise apply all or any part of the Funds so received by
Lender against all or any part of the Indebtedness (whether matured or
unmatured), in such order and priority as Lender may determine, or (ii)
apply all or any part of the Funds so received by Lender to satisfy any of
the other obligations of Borrower under the Loan Documents.
(e) No application of all or any part of the Funds
pursuant to this Agreement shall in any way release, satisfy or discharge
any of the unpaid Indebtedness, except to the extent applied to such
Indebtedness by the Lender pursuant to this Agreement. No delay or
omissions of Lender to exercise any of its rights or remedies shall waive,
exhaust or impair any of Lender's rights or remedies under the Loan
Documents. Notwithstanding any such delay or omission, Lender thereafter
shall have the right, from time to time and as often as Lender deems
advisable, to exercise any of its rights or remedies.
11. LIMITATION OF LIABILITY OF AGENT. Agent shall not be
responsible or liable in any manner whatsoever for the correctness,
genuineness or validity of any document or instrument, or any signature
thereon, deposited with or delivered to Agent pursuant to this Agreement,
except for acts or omissions resulting from Agent's gross negligence,
intentional misconduct or bad faith; provided nothing contained herein
shall relieve Agent from its obligation and responsibility to account for
all Funds received and held by Agent from time to time.
12. FURTHER ASSURANCES. Borrower shall cooperate with Lender
and shall execute and deliver, or cause to be executed and delivered, all
financing statements, payment notices and other documents and instruments,
and shall take all such other action as Lender may reasonably request from
time to time in order to accomplish and satisfy the provisions and purposes
of this Agreement.
13. REPLACEMENT OF AGENT.
(a) Agent (or any other agent and bailee from time to
time acting in those capacities under this Agreement) may resign as agent
and bailee under this Agreement by written notice to Lender specifying the
time and date when such resignation shall take effect (which shall be at
least sixty (60) days; after the giving of such notice). Such resignation
shall take effect at such time and date unless a successor agent and bailee
shall have been sooner appointed pursuant to this Agreement, in which event
such resignation shall take effect immediately upon the appointment of such
successor.
(b) Agent (or any other agent and bailee from time to
time acting in those capacities under this Agreement) may be removed as
agent and bailee under this Agreement by written notice from Lender to
Agent (or such other agent and bailee) and Borrower, specifying the time
and date when such removal is to take effect. Such removal shall take
effect at such time and date unless a successor agent and bailee shall have
been sooner appointed pursuant to this Agreement, in which event such
removal shall take effect immediately upon the appointment of such
successor.
(c) In the event of, or in connection with, any such
resignation or removal of the Agent by Lender. Borrower hereby irrevocably
authorizes Lender to make any such appointment of a successor Agent as
Lender deems advisable, and Borrower hereby irrevocably consents and agrees
to any such appointment. If Lender shall not have made any such
appointment within thirty (30) days after the giving of any such
resignation or removal notice, then a successor agent and bailee may be
appointed upon application of Borrower or the Agent, by any court of
competent jurisdiction.
(d) Any successor Agent appointed pursuant to this
Agreement shall execute and deliver to Lender, Borrower and the resigning
Agent an instrument pursuant to which such successor accepts such
appointment and agrees to hold, disburse and pay over the Funds in
accordance with this Agreement and to comply with all obligations and
duties of Agent under this Agreement from and after the effectiveness of
such appointment. Upon the execution and delivery of such instrument, the
resigning Agent shall deliver to such successor Agent all Funds and other
property (if any) then held by the resigning Agent, together with any and
all instruments, powers and authorizations required to enable such
successor Agent to perform and satisfy its obligations and duties under
this Agreement, and all books and records maintained by the resigning Agent
in connection with its duties hereunder. Thereupon, such successor shall
be immediately vested with all rights and responsibilities of Agent under
or relating to this Agreement, and the resigning Agent shall be immediately
discharged and released of all continuing obligations and duties as Agent
under this Agreement.
(e) Neither the resignation nor the removal of any Agent
from time to time acting in those capacities under this Agreement shall
release, discharge or satisfy any of Borrower's obligations under this
Agreement. Borrower and Lender shall deal with any successor Agent in the
manner prescribed in this Agreement.
14. NOTICES. Any notice, report, demand, request or other
instrument or communication which any party hereto may be required or may
desire to give hereunder to any other party hereto shall be in writing and
shall be deemed to have been properly given or delivered, if addressed to
the party intended to receive the same at the address of such party set
forth below, (a) when delivered at such address by hand or by overnight
courier or delivery service, or (b) three (3) business days after the same
shall have been deposited in the United States Mail as first class
registered or certified mail, return receipt requested, postage prepaid,
whether or not the same actually shall have been received by such party:
If to Borrower:
Maguire/Thomas Partners-South Tower
c/o Maguire/Thomas Partners, Inc.
355 South Grand Avenue, Suite 4500
Los Angeles, California 90071
Attention: Thomas E. McCarthy
Fax: (213) 687-4758<PAGE>
and
Maguire/Thomas Partners-South Tower
c/o Carlyle Real Estate Limited Partnership XIV
and Carlyle Real Estate Limited Partnership XV
c/o JMB Realty Corporation
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention: General Counsel
Fax: (312) 915-2310
with a copy to:
Gilchrist & Rutter
1299 Ocean Avenue, Suite 900
Santa Monica, California 90401
Attention: Paul S. Rutter, Esq.
Fax: (310) 394-4700
and
Paul, Hastings, Janofsky & Walker
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Attention: Paul R. Walker, Esq.
Fax: (213) 627-0705
If to Lender:
Aetna Life Insurance Company
c/o Aetna Investment Group
242 Trumbull Street IG4F
Hartford, Connecticut 06156
Attn: Thomas A. Brome
Fax: (203) 275-2974
with a copy to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attn: Laurence G. Preble, Esq.
Fax: (212) 326-2061
If to Agent:
CB Commercial Real Estate Group, Inc.
533 South Fremont Avenue
Los Angeles, California 90071
Attention: Odette De Lusignan
Fax: (213) 613-3060
with a copy to:
CB Commercial Real Estate Group, Inc.
533 South Fremont Avenue
Los Angeles, California 90071
Attention: John Thornton
Fax: (213) 613-3008
Any party may change the address to which any such notice, report, demand,
request or other instrument or communication intended to be received by
such party is to be delivered or mailed, by giving written notice of such
change to the other parties hereto, but no such notice of change shall be
effective against any party unless and until such notice of change shall
have been received by such party.
15. LENDER'S DISCRETION. Except as otherwise provided
herein, each and every decision, election, determination, estimate,
request, consent, approval or similar matter to be made or given by Lender
from time to time pursuant to or in connection with this Agreement shall,
unless and until an Event of Default exists, be made or given using
Lender's reasonable discretion, but upon and during the existence of an
Event of Default, such decision, election, determination, estimate,
request, requirement, consent, approval or similar matter shall be made
using Lender's sole and absolute discretion.
16. CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision hereof may be changed, waived, released, discharged, withdrawn,
revoked or terminated orally, or by any action or inaction. In order to he
effective and enforceable, any such change, waiver, release, discharge,
withdrawal, revocation or termination must be evidenced by a written
document or instrument signed by the party against which enforcement of
such change, waiver, release, discharge, withdrawal, revocation or
termination is sought, and then shall be effective and enforceable only to
the extent specifically provided in such document or instrument.
17. GOVERNING LAW; SEVERABILITY. This Agreement shall be
construed, interpreted, enforced and governed by and in accordance with the
internal laws of the State of California, without regard to principles of
conflicts of laws. All rights and remedies provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate
any applicable law and are intended to be limited to the extent necessary
to avoid rendering this Agreement invalid, illegal or unenforceable. In
the vent that any of the provisions of this Agreement shall be deemed
invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Agreement shall in
no way be affected, prejudiced or disturbed thereby.
18. MEANING OF CERTAIN TERMS. Each reference in this
Agreement to any gender shall be deemed also to include any other gender,
and the use in this Agreement of the singular shall be deemed also to
include the plural and vice versa unless the context requires otherwise.
As used in this Agreement, the term "person" shall mean and refer to any
and all individuals, sole proprietorships, partnerships, joint ventures,
associations, trusts, estates, business trusts, limited liability
companies, corporations (non-profit or otherwise), financial institutions,
governments (and agencies, instrumentalities and political subdivisions
thereof), and other entities and organizations.
19. HEADINGS. The headings and captions of the Sections,
paragraphs and other subdivisions of this Agreement are for convenience of
reference only, are not to be considered part of this Agreement and shall
not limit, expand or otherwise affect any of the provisions of this Agreement.
20. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original and all
of which shall be deemed to be one and the same Agreement.
21. BINDING EFFECT. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and
assigns. Each reference in this Agreement to Borrower, Lender or Agent
shall be deemed also to include the successors and assigns of such party.
Nothing set forth in this Section shall be deemed or construed to create,
recognize or allow any assignment or transfer rights not otherwise provided
for in this Agreement.
22. EXCLUSIVE BENEFIT. This Agreement and the obligations of
Lender, Borrower and Agent hereunder are and at all times shall be deemed
to be for the exclusive benefit of such parties and their respective
successors and permitted assigns. Nothing set forth herein shall be deemed
to be for the benefit of any other person.
23. TERMINATION OF AGREEMENT. This Agreement shall survive
the maturity date of the Loan under the Loan Documents and shall continue
so long as the Indebtedness remains outstanding and so long as any other
sums due and owing to Lender under the Loan Documents remain unpaid. Upon
the termination of this Agreement, all collected and available Funds shall
be disbursed to the Lender, to be held and applied or released in
accordance with this Agreement and the Loan Documents.
24. SURVIVAL OF LATTER AGREEMENT. Lender and Borrower have
entered into that letter agreement dated November 18, 1994 (the "Letter
Agreement"). While this Agreement constitutes a "fully approved, signed
and delivered written agreement" as contemplated by the Letter Agreement.
Lender and Borrower hereby agree that the Letter Agreement shall survive
the execution and delivery of this Agreement and shall remain enforceable
between Lender and Borrower with respect to any future discussions or
negotiations they may have regarding the Indebtedness, the Loan Documents
or the Premises.
25. RECOURSE. Except as otherwise provided for in Section
2(g) above, the liability of Borrower and its partners for the obligations
of Borrower under this Agreement shall be limited in accordance with the
provisions of Paragraph 5.27 of the Deed of Trust, which is incorporated by
reference as if set forth in full herein.
26. LOAN DOCUMENTS. The rights, powers, authorities,
remedies, interests and benefits conferred upon the Lender by this
Agreement are intended to supplement, and be in addition to (and shall not
in any way replace, supersede, amend, limit or restrict), the rights,
powers, authorities, remedies, interests, and benefits conferred by the
Loan Documents. Borrower acknowledges and agrees that under the Loan
Documents, the maturity of the Indebtedness is December 1, 1994 and
Borrower has failed to repay the Indebtedness as required by the Loan
Documents. Lender hereby agrees, in consideration of the execution and
delivery of this Agreement by Borrower and the consummation of the
transactions provided for herein, that until February 1, 1995 Lender shall
forebear from exercising its rights and remedies under the Loan Documents
with respect to such failure to repay the Indebtedness on December 1,
1994. Borrower acknowledges and agrees that, except as provided in the
preceding sentence, (i) Lender has not waived and does not waive, by
execution of this Agreement or consummation of the transactions provided
for herein, any existing or future breach or default by or with respect to
Borrower under the terms and conditions of the Loan Documents or this
Agreement, (ii) Lender shall continue to have all rights and remedies
specified or provided for in the Loan Documents and in this Agreement, and
all rights and remedies otherwise permitted by law, with respect to any
such breach or default, and (iii) this Agreement shall survive and continue
after February 1, 1995 pursuant to the provisions of Section 23 hereof
notwithstanding a default by Borrower hereunder or under the Loan Documents
and the exercise by Lender of any right or remedy provided in the Loan
Documents or this Agreement. Subject to the foregoing, the Loan Documents,
as supplemented by this Agreement, shall remain in full force and effect
and are hereby ratified and affirmed in all respects by Lender and
Borrower.
27. NO MORTGAGEE IN POSSESSION, NO JOINT VENTURE. Borrower
agrees that neither Lender nor Agent is a mortgagee in possession with
respect to the Premises and that this Agreement does not create any
obligation on the part of Lender or Agent to manage or operate the Premises
or give lender or Agent any control over the Premises; it being agreed that
the obligation to manage and operate and the right to control the Premises
remains with Borrower. The relationship between Lender and Borrower is
that of creditor and debtor and not that of partners or joint venturers.
Borrower agrees that neither Lender nor Agent shall have any fiduciary
obligations or trust obligations with respect to managing or operating the
Premises.
28. CONFIDENTIALITY. The terms and provisions of this
Agreement, and activities conducted pursuant to the terms thereof, shall
remain confidential and shall not be disclosed by Lender or Agent without
the consent of Borrower except (i) as is reasonably required in connection
with the transactions provided for herein, in connection with the
perfection of rights under this Agreement or in connection with
communications with Lender or (2) to such party's directors, officers,
partners, employees, legal counsel, accountants, engineers, architects,
financial advisors and similar professionals and consultants to the extent
such party deems it necessary or appropriate in connection with the
transactions contemplated hereunder (and such party shall inform each of
the foregoing parties of such party's obligations under this paragraph and
shall secure the agreement of such parties to be bound by the terms hereof)
or (3) as otherwise required by law or regulation. Notwithstanding the
foregoing, however, Lender and Agent shall have no obligations under this
Section 28 during the existence of any Event of Default.
29. LEGAL FEES AND EXPENSES. Borrower shall be obligated to
reimburse all of the legal fees and expenses of O'Melveny & Myers, counsel
to Lender, in connection the default by Borrower under the Loan Documents
(including advice to Lender with respect to its rights and remedies
thereunder), the execution and delivery of this Agreement and the
transactions provided for herein.
30. MISCELLANEOUS. This Agreement constitutes the entire
agreement between the parties concerning the matters provided for herein,
and all prior or contemporaneous understandings, oral representations or
agreements had among the parties with respect to such matters are merged in
this Agreement. Each party executing this Agreement represents that such
party has the full authority and legal power to do so and acknowledges that
it was represented by counsel in the negotiation and execution of this
Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered as of the date first above written.
MAGUIRE/THOMAS PARTNERS-SOUTH
TOWER, a California limited partnership
By: MAGUIRE PARTNERS-BUNKER HILL,
LTD., a California limited partnership,
General Partner
By: MAGUIRE/THOMAS PARTNERS,
INC., a California corporation,
General Partner
By: ____________________________
Title:
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited
partnership, General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation
Its general partner
By:
_____________________________
Title:
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XV, an Illinois limited
partnership, General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation
Its general partner
By:
_____________________________
Title:
AETNA LIFE INSURANCE COMPANY, a
Connecticut corporation
By: ______________________________________
Title:
CB COMMERCIAL REAL ESTATE GROUP,
INC., a Delaware corporation
By: _______________________________________
Title:
March 1, 1995
Maguire Thomas Partners-South Tower
c/o Mr. Thomas McCarthy
Maguire Thomas Partners
355 South Grand Avenue, Suite 4500
Los Angeles, CA 90071
Dear Tom:
The purpose of this letter is to advise you that the date for Aetna's
forbearance in the exercise of it's legal remedies referenced in paragraph
26 of a Lockbox Agreement dated December 1, 1994 between Maguire Thomas
Partners, Aetna Life Insurance Company and CB Commercial has been further
extended from March 1, 1995 to April 1, 1995. All other terms and
conditions shall remain the same.
As I stated in my previous correspondence dated February 1, 1995, I have
attempted to communicate Aetna's perspective on the current status of this
loan. The discussion which preceded the decision to grant additional time
through the forbearance extension raised issues which I would like to share
with you now. My primary purpose of reiterating our position is to insure
there are no misunderstandings and provide notice so that over this
additional forbearance period you can work on addressing Aetna's concerns
and requirements.
Through the forbearance mechanism we have provided ownership an additional
period in which to pay off the outstanding debt obligation. We have done
this in large part in reliance upon your verbal representations that the
raising of the capital necessary to pay the Aetna debt off in full was
proceeding smoothly, on track and had the requisite likelihood of success.
We have also done this in large part based on good faith, your reputation
and the protections inherent in the lockbox agreement executed by the
parties.
At this point, Aetna's grant of the additional forbearance referenced in
the first paragraph will be contingent upon your submission to Aetna of a
written list of prospective parties to the REIT together with a copy of
your counter proposal with respect to the REIT which we discussed during my
visit to the property the week of February 14, 1995.
Sincerely,
Thomas A. Brome
Investment Officer
cc: William Cooney
Larry Preble
Jane Boyle
Margaret Egazarian
Jack Gillies
CB Commercial<PAGE>
February 1, 1995
Maguire Thomas Partners-South Tower
c/o Mr. Thomas McCarthy
Maguire Thomas Partners
355 South Grand Avenue, Suite 4500
Los Angeles, CA 90071
Dear Tom:
The purpose of this letter is to advise you that the date for Aetna's
forbearance in the exercise of it's legal remedies referenced in paragraph
26 of a Lockbox Agreement dated December 1, 1994 between Maguire Thomas
Partners, Aetna Life Insurance Company and CB Commercial has been extended
from February 1, 1995 to March 1, 1995. All other terms and conditions
shall remain the same.
I have attempted in the past to communicate Aetna's perspective on the
current status of this loan. The discussion which preceded the decision to
grant additional time through the forbearance extension raised issues which
I would like to share with you now. My primary purpose in reiterating our
position is to insure there are no misunderstandings and provide notice so
that over the next 29 days you can work on addressing Aetna's concerns and
requirements.
Through the forbearance mechanism we have provided ownership an additional
three month period in which to pay off the outstanding debt obligation. We
have done this in large part in reliance upon your verbal representations
that the raising of the capital necessary to pay the Aetna debt off in full
was proceeding smoothly, on track and had the requisite likelihood of
success. We have also done this in large part based on good faith, your
reputation and the protections inherent in the lockbox agreement executed
by the parties.
At this point in the matter, I must advise you that Aetna will require
further assurances of the future success of private financing. In short,
our willingness to grant additional extensions of time will be directly
proportional to the degree of success associated with the recapitalization
and your willingness to exhibit or demonstrate the applicable commitment of
the respective parties to the deal. I do not believe this to be an
unreasonable request in that we are already more than two months into the
deal and at some point, you should be in a position to evaluate based on
the information available to you the risk of "going hard". I see no point
in granting additional time, without some tangible evidence of progress and
commitment.
Whether that is through an earnest money deposit, letter of credit or some
other consideration can be the subject of a future conversation. My
purpose in raising the subject now is so that you will be advised that it
is something which we will expect.
Sincerely,
Thomas A. Brome
Investment Officer
cc: William Cooney
Larry Preble
Jane Boyle
Margaret Egazarian
Jack Gillies
CB Commercial
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by 237 PARK AVENUE ASSOCIATES, a New York general
partnership (the "Partnership"), in favor and for the
benefit of O&Y EQUITY COMPANY, L.P., a Delaware limited
partnership ("Equity"), O&Y NY BUILDING CORP., a Delaware
corporation ("OYB"), and JMB/NYC OFFICE BUILDING
ASSOCIATES, L.P., an Illinois limited partnership ("JMB").
RECITALS:
A. Equity, O&Y and JMB (collectively, the
"Partners") are the partners in the Partnership and in 2
Broadway Associates ("2BL") and 2 Broadway Land Company
("2BL"), each a New York general partnership.
B. Capitalized terms used herein without
definition are used as defined in the First Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. Pursuant to three separate Assumption
Agreements dated the date hereof given by the respective
Partners in favor and for the benefit of 2BA, each Partner
assumed and agreed to pay, subject to the terms and
conditions thereof, a portion (as specified therein) (such
Partner's "2BA Portion") of the outstanding principal of
the Existing Note, such that the Partners together have so
assumed $236,059,811 of such outstanding principal (the
"2BA Assumed Debt").
D. Pursuant to three separate Assumption
Agreements dated the date hereof given by the respective
Partners in favor and for the benefit of 2BL, each Partner
assumed and agreed to pay, subject to the terms and
conditions thereof, in addition to such Partner's 2BA
Portion of the 2BA Assumed Debt, a portion (as specified
therein) (such Partner's 2BL Portion") of the outstanding
principal of the Existing Note, such that the Partners
together have so assumed $17,704,486 of such outstanding
principal (the "2BL Assumed Debt").
E. The Partnership desires to make a
distribution to each Partner by assuming and agreeing to
pay, subject to the terms and conditions hereof, the
following amounts of each Partner's Portion of the 2BA
Assumed Debt and of each Partner's 2BL Portion of the 2BL
Assumed Debt:
Amount
of 2BL
Amount of 2BA Assumed
Assumed Debt to
Debt to be assumed be
assumed by
Partner by the Partnership the
Partnership
Equity $71,375,240 $5,353,145
OYB 5,149,315 386,199
JMB 66,511,998 4,988,400
The total amount of the 2BA Assumed Debt and the
2BL Assumed Debt that is being assumed by the Partnership
is herein referred to as the "Assumed Debt". The
respective amounts of the 2BA Assumed Debt and 2BL Assumed
Debt that are being assumed by the Partnership for the
benefit of each Partner are herein referred to as such
Partner's "Portion" of the Assumed Debt.
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partnership hereby assumes and
agrees to pay when due each Partner's Portion (and,
therefore collectively 100%) of the Assumed Debt;
provided, however, that this assumption is made upon the
condition and with the qualification that no recourse
shall be had for the payment of the Assumed Debt against
any assets of the Partnership, any successor or assign of
the Partnership, or any other person or entity, other than
the Partnership's right, title and interest in the Trust
Estate (as such term is defined in the Existing
Encumbrance) (the "Mortgaged Property"); and provided
further, that the foregoing limitation on recourse shall
not limit the right of any person to name the Partnership
or any transferee of any or all of the Mortgaged Property
as a party defendant in any action or suit for a judicial
foreclosure on, or a sale of, the Mortgaged Property, or
in the exercise of any other remedy under this Assumption
Agreement, so long as no judgment in the nature of a
deficiency judgment or seeking personal liability shall be
asked of or (if obtained) enforced against the Partnership
(or any other person or entity) or against any such
transferee.
By virtue of the Partnership's assumption of the
Assumed Debt hereunder, the capital account of each
Partner in the Partnership shall be adjusted to account
for a distribution in the amount of such Partners Portion
of the Assumed Debt.
2
This Assumption Agreement shall not affect in
any manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note
IN WITNESS WHEREOF, the Partnership has executed
this Assumption Agreement as of the date first above
written.
237 PARK AVENUE ASSOCIATES
By: O&Y EQUITY COMPANY,
L.P.,
General Partner
By: O&Y Equity General
Partner Corp.,
General Partner
By:
Name:
Title:
By: O&Y NY BUILDING
CORP.,
General Partner
By:
Name:
Title:
By: JMB/NYC OFFICE
BUILDING
ASSOCIATES,
L.P.,
General Partner,
By: Carlyle
Managers, Inc.,
General
Partner
By:
Name:
Title:
3
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by 1290 ASSOCIATES, a New York general partnership (the
"Partnership"), in favor and for the benefit of O&Y EQUITY
COMPANY, L.P., a Delaware limited partnership ("Equity"),
O&Y NY BUILDING CORP., a Delaware corporation ("OYB"), and
JMB/NYC OFFICE BUILDING ASSOCIATES, L.P., an Illinois
limited partnership ("JMB").
RECITALS
A. Equity, OYB and JMB (collectively, the
"Partners") are the partners in the Partnership and in 2
Broadway Associates ("2BA") and 2 Broadway Land Company
("2BL"), each a New York general partnership.
B. Capitalized terms used herein without
definition are used as defined in the First Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. Pursuant to three separate Assumption
Agreements dated the date hereof given by the respective
Partners in favor and for the benefit of 2BA, each Partner
assumed and agreed to pay, subject to the terms and
conditions thereof, a portion (as specified therein) (such
Partner's "2BA Portion") of the outstanding principal of
the Existing Note, such that the Partners together have so
assumed $236,059,811 of such outstanding principal (the
"2BA Assumed Debt").
D. Pursuant to three separate Assumption
Agreements dated the date hereof given by the respective
Partners in favor and for the benefit of 2BL, each Partner
assumed and agreed to pay, subject to the terms and
conditions thereof, in addition to such Partner's 2BA
Portion of the 2BA Assumed Debt, a portion (as specified
therein (such Partner's "2BL Portion") of the outstanding
principal of the Existing Note, such that the Partners
together have so assumed $17,704,486 of such outstanding
principal (the "2BL Assumed Debt").
E. The Partnership desires to make a
distribution to each Partner by assuming and agreeing to
pay, subject to the terms and conditions hereof, the
following amounts of each Partner's Portion of the 2BA
Assumed Debt and of each Partner's 2BL Portion of the 2BL
Assumed Debt:
Amount
of 2BL
Amount of 2BA Assumed
Assumed Debt to
Debt to be assumed be
assumed by
Partner by the Partnership the
Partnership
Equity $21,970,687 $1,647,800
OYB 1,585,060 118,879
JMB 69,467,511 5,210,063
The total amount of the 2BA Assumed Debt and the
2BL Assumed Debt that is being assumed by the Partnership
is herein referred to as the "Assumed Debt". The
respective amounts of the 2BA Assumed Debt and 2BL Assumed
Debt that are being assumed by the Partnership for the
benefit of each Partner are herein referred to as such
Partner's Portion of the Assumed Debt.
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partnership hereby assumes and
agrees to pay when due each Partner's Portion (and,
therefore, collectively 100%) of the Assumed Debt;
provided, however, that this assumption is made upon the
condition and with the qualification that no recourse
shall be had for the payment of the Assumed Debt against
any assets of the Partnership, any successor or assign of
the Partnership, or any other person or entity, other than
the Partnership's right, title and interest in the Trust
Estate (as such term is defined in the Existing
Encumbrance) (the "Mortgaged Property"); and provided,
further, that the foregoing limitation on recourse shall
not limit the right of any person to name the Partnership
or any transferee of any or all of the Mortgaged Property
as a party defendant in any action or suit for a judicial
foreclosure on, or a sale of, the Mortgaged Property, or
in the exercise of any other remedy under this Assumption
Agreement, so long as no judgment in the nature of a
deficiency judgment or seeking personal liability shall be
asked of or (if obtained) enforced against the Partnership
(or any other person or entity) or against any such
transferee.
By virtue of the Partnership's assumption of the
Assumed Debt hereunder, the capital account of each
Partner in the Partnership shall be adjusted to account
for a distribution in the amount of such Partner's Portion
of the Assumed Debt.
2
This Assumption Agreement shall not affect in
any manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note
IN WITNESS WHEREOF, the Partnership has executed
this Assumption Agreement as of the date first above
written.
1290 ASSOCIATES
By: O&Y EQUITY COMPANY,
L.P.,
General Partner
By: O&Y Equity General
Partner Corp.,
General Partner
By:
Name:
Title:
By: O&Y NY BUILDING
CORP.,
General Partner
By:
Name:
Title:
By: JMB/NYC OFFICE
BUILDING
ASSOCIATES,
L.P.,
General Partner,
By: Carlyle
Managers, Inc.,
General
Partner
By:
Name:
Title:
3
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by O&Y EQUITY COMPANY, L.P., a Delaware limited
partnership (the "Partner"), in favor and for the benefit
of 2 BROADWAY ASSOCIATES, a New York general partnership
(the "Partnership").
RECITALS:
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$93,345,927 of the Pro Rata Portion of the Existing Note
(the "Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby resumes and agrees
to pay then due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights,
title and interest as a partner in the Partnership (the
Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partner's assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt
and such capital contribution will in no way be deemed to
be reduced or otherwise affected by the foregoing
limitation on recourse with respect to
the Assumed Debt or by the assumption of portions of the
Assumed Debt by 1290 Associates and 237 Park Avenue
Associates pursuant to Assumption Agreements entered into
concurrently with or following the execution of this
Agreement or by any other transaction or event occurring
prior to, concurrently with, or in connection with this
Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
O&Y EQUITY COMPANY,
L.P.
By: O&Y Equity
General
Partner Corp.,
General Partner
By:
Name:
Title:
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14 1994 made
by O&Y NY BUILDING CORP., a Delaware corporation (the
"Partner"), in favor and for the benefit of 2 BROADWAY
ASSOCIATES, a New York general partnership (the
"Partnership")
RECITALS:
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$6,734,375 of the Pro Rata Portion the Existing Note (the
"Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby assumes and agrees
to pay when due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights,
title and interest as a partner in the Partnership (the
Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partner's assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt
and such capital contribution will in no way be deemed to
be reduced or otherwise affected by the foregoing
limitation on recourse with respect to
the Assumed Debt or by the assumption of portions of the
Assumed Debt by 1290 Associates and 237 Park Avenue
Associates pursuant to Assumption Agreements entered into
concurrently with or following the execution of this
Agreement or by any other transaction or event occurring
prior to, concurrently with, or in connection with this
Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
O&Y BUILDING CORP.
By:
Name:
Title:
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by JMB/NYC OFFICE BUILDING ASSOCIATES, L.P., an Illinois
limited partnership (the "Partner"), in favor and for the
benefit of 2 BROADWAY ASSOCIATES, a New York general
partnership (the "Partnership")
RECITALS :
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$135,979,509 of the Pro Rata Portion of the Existing Note
(the "Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby assumes and agrees
to pay when due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights
title and interest as a partner in the Partnership (the
Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partners assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt and
such capital contribution will in no way be deemed to be
reduced or otherwise
affected by the foregoing limitation on recourse with
respect to the Assumed Debt or by the assumption of
portions of the Assumed Debt by 1290 Associates and 237
Park Avenue Associates pursuant to Assumption Agreements
entered into concurrently with or following the execution
of this Agreement or by any other transaction or event
occurring prior to, concurrently with, or in connection
with this Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
JMB/NYC OFFICE BUILDING
ASSOCIATES, L.P.
By: Carlyle Managers, Inc.
General Partner
By:
Name:
Title:
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by O&Y EQUITY COMPANY, L P , a Delaware limited
partnership (the "Partner") in favor and for the benefit
of 2 BROADWAY LAND COMPANY, a New York general partnership
(the "Partnership").
RECITALS:
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$7,000,945 of the Pro Rata Portion of the Existing Note
(the "Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby assumes and agrees
to pay when due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights,
title and interest as a partner in the Partnership (the
"Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partner's assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt and
such capital contribution will in no way be deemed to be
reduced or otherwise affected by the foregoing limitation
on recourse with respect to
the Assumed Debt or by the assumption of portions of the
Assumed Debt by 1290 Associates and 237 Park Avenue
Associates pursuant to Assumption Agreements entered into
concurrently with or following the execution of this
Agreement or by any other transaction or event occurring
prior to, concurrently with, or in connection with this
Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
O&Y EQUITY COMPANY, L.P.
By: O&Y Equity General
Partner Corp.,
General Partner
By:
Name:
Title:
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by O&Y NY BUILDING CORP., a Delaware corporation (the
"Partner"), in favor and for the benefit of 2 BROADWAY
LAND COMPANY, a New York general partnership (the
"Partnership").
RECITALS:
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$505,078 of the Pro Rata Portion of the Existing Note (the
"Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby assumes and agrees
to pay when due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights,
title and interest as a partner in the Partnership (the
"Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partner's assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt and
such capital contribution will in no way be deemed to be
reduced or otherwise affected by the foregoing limitation
on recourse with respect to
the Assumed Debt or by the assumption of portions of the
Assumed Debt by 1290 Associates and 237 Park Avenue
Associates pursuant to Assumption Agreements entered into
concurrently with or following the execution of this
Agreement or by any other transaction or event occurring
prior to, concurrently with, or in connection with this
Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
O&Y BUILDING CORP.
Name:
Title:
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated October 14, 1994 made
by JMB/NYC OFFICE BUILDING ASSOCIATES, L P , an Illinois
limited partnership (the "Partner"), in favor and for the
benefit of 2 BROADWAY LAND COMPANY, a New York general
partnership (the "Partnership").
RECITALS:
A. The Partner is a partner in the Partnership.
B. Capitalized terms used herein without
definition are used as defined in the Second Amended and
Restated Agreement of General Partnership of the
Partnership dated as of August 14, 1984, as amended.
C. The Partner desires to make a capital
contribution to the Partnership by assuming and agreeing
to pay, subject to the terms and conditions hereof,
$10,198,463 of the Pro Rata Portion of the Existing Note
(the "Assumed Debt").
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Partner hereby assumes and agrees
to pay when due the Assumed Debt; provided, however, that
this assumption is made upon the condition and with the
qualification that no recourse shall be had for the
payment of the Assumed Debt against any assets of the
Partner, any successor or assign of the Partner, or any
other person or entity, other than the Partner's rights,
title and interest as a partner in the Partnership (the
"Partnership Interest"); and provided, further, that the
foregoing limitation on recourse shall not limit the right
of any person to name the Partner or any transferee of any
or all of the Partnership Interest as a party defendant in
any action or suit for a judicial foreclosure on, or a
sale of, such Partnership Interest, or in the exercise of
any other remedy under this Assumption Agreement, so long
as no judgment in the nature of a deficiency judgment or
seeking personal liability shall be asked of or (if
obtained) enforced against the Partner (or any other
person or entity) or against any such transferee.
By virtue of the Partner's assumption of the
Assumed Debt hereunder, the capital account of the Partner
in the Partnership shall be adjusted to account for a
capital contribution in the amount of the Assumed Debt and
such capital contribution will in no way be deemed to be
reduced or otherwise
affected fly the foregoing limitation on recourse with
respect to the Assumed Debt or by the assumption of
portions of the Assumed Debt by 1290 Associates and 237
Park Avenue Associates pursuant to Assumption Agreements
entered into concurrently with or following the execution
of this Agreement or by any other transaction or event
occurring prior to, concurrently with, or in connection
with this Agreement.
This Assumption Agreement shall not affect in any
manner the obligations of the Partnership or any other
person or entity to the holder of the Existing Note.
IN WITNESS WHEREOF, the Partner has executed this
Assumption Agreement as of the date first above written.
JMB/NYC OFFICE BUILDING ASSOCIATES,
L.P.
By: Carlyle Managers, Inc.
General Partner
By:
Name:
Title:
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a partner of the following joint ventures: 1090
Vermont Ave., N.W. Associates Limited Partnership, a limited partnership,
which holds title to the 1090 Vermont Avenue Building in Washington, D.C.;
Mariners Pointe Associates, a limited partnership, which holds title to the
Mariners Pointe Apartments in Stockton, California; Carlyle-XIV Associates,
L.P., which is a partner of JMB/NYC Office Building Associates, L.P., a
limited partnership, which is a partner in (i) 237 Park Avenue Associates,
a general partnership, which holds title to the 237 Park Avenue Building,
(ii) 1290 Associates, a general partnership, which holds title to the 1290
Avenue of the Americas Building, (iii) 2 Broadway Associates, a general
partnership, which holds title to the 2 Broadway Building and (iv) 2
Broadway Land Company, a general partnership, which holds title to the land
underlying 2 Broadway Building (all of these office buildings are in New
York, New York); JMB/Piper Jaffray Tower Associates, a general partnership,
which is a partner in (i) OB Joint Venture II, a general partnership, which
is a partner of 222 South Ninth Street Limited Partnership, a limited
partnership, which holds title to the Piper Jaffray Tower office building
in Minneapolis, Minnesota, and (ii) OB Joint Venture, a general
partnership, which holds title to the land underlying the Piper Jaffray
Tower office building; JMB/Piper Jaffray Tower Associates II, a general
partnership, which also is a partner in OB Joint Venture, a general
partnership, which holds title to the land underlying the Piper Jaffray
Tower office building; 900 3rd Avenue Associates, a general partnership,
which is a partner of Progress Partners, a general partnership, which holds
title to 900 Third Avenue Building located in New York, New York; a general
partnership which recently held an interest in the Old Orchard Shopping
Center in Skokie (Chicago), Illinois. Generally, the developer of the
property is a partner in the joint ventures, however, the partners in the
JMB/NYC Office Building Associates, JMB/Piper Jaffray Tower Associates,
JMB/Piper Jaffray Tower Associates II, 900 3rd Avenue Associates and
Orchard Associates are affiliates of the General Partners of the
Partnership. Reference is made to Notes 3(a), 3(b) and 3(c) for a
description of the terms of such joint venture partnerships. The
Partnership is a 40% shareholder in Carlyle Managers, Inc. and a 40%
shareholder in Carlyle Investors, Inc.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and
directors of JMB Realty Corporation, the corporate general partner of
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV, do hereby nominate,
constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any
of them, attorneys and agents of the undersigned with full power of
authority to sign in the name and on behalf of the undersigned officer or
directors a Report on Form 10-K of said partnership for the fiscal year
ended December 31, 1994, and any and all amendments thereto, hereby
ratifying and confirming all that said attorneys and agents and any of them
may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 31st day of January, 1995.
JUDD D. MALKIN
-----------------------
Judd D. Malkin Chairman and Director
NEIL G. BLUHM
-----------------------
Neil G. Bluhm President and Director
H. RIGEL BARBER
-----------------------
H. Rigel Barber Chief Executive Officer
JEFFREY R. ROSENTHAL
-----------------------
Jeffrey R. Rosenthal Chief Financial Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officer and
directors, a Report on Form 10-K of said partnership for the fiscal year
ended December 31, 1994, and any and all amendments thereto, the 31st day
of January, 1995.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and
directors of JMB Realty Corporation, the corporate general partner of
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV, do hereby nominate,
constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any
of them, attorneys and agents of the undersigned with full power of
authority to sign in the name and on behalf of the undersigned officer or
directors a Report on Form 10-K of said partnership for the fiscal year
ended December 31, 1994, and any and all amendments thereto, hereby
ratifying and confirming all that said attorneys and agents and any of them
may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 31st day of January, 1995.
STUART C. NATHAN
-----------------------
Stuart C. Nathan Executive Vice President,
Director of General Partner
A. LEE SACKS
-----------------------
A. Lee Sacks Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officer and
directors, a Report on Form 10-K of said partnership for the fiscal year
ended December 31, 1994, and any and all amendments thereto, the 31st day
of January, 1995.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XIV, does hereby nominate, constitute and appoint
GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officer, a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1994, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 20th day of February, 1995.
GLENN E. EMIG
-----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officer, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1994,
and any and all amendments thereto, the 20th day of February, 1995.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000737291
<NAME> CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 18,419,385
<SECURITIES> 2,129,166
<RECEIVABLES> 1,342,801
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,891,352
<PP&E> 161,748,228
<DEPRECIATION> 49,431,004
<TOTAL-ASSETS> 147,075,454
<CURRENT-LIABILITIES> 114,581,076
<BONDS> 25,794,970
<COMMON> 0
0
0
<OTHER-SE> (162,544,181)
<TOTAL-LIABILITY-AND-EQUITY> 147,075,454
<SALES> 22,212,040
<TOTAL-REVENUES> 23,597,310
<CGS> 0
<TOTAL-COSTS> 16,567,365
<OTHER-EXPENSES> 1,378,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,670,591
<INCOME-PRETAX> (8,019,023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,870,881)
<DISCONTINUED> 1,702,082
<EXTRAORDINARY> (3,000,000)
<CHANGES> 0
<NET-INCOME> (26,168,799)
<EPS-PRIMARY> (62.51)
<EPS-DILUTED> 0
</TABLE>
