SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1995 Commission file number 0-15962
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)
Illinois 36-3256340
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 30
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 42
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 42
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 43
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 44
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . $ 428,667 18,165,563
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . 15,721,967 2,129,166
Restricted funds (note 4(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . 656,957 457,674
Interest, rents and other receivables (net of allowance
for doubtful accounts of $241,798 and $791,916 at
March 31, 1995 and December 31, 1994, respectively). . . . . . . . . . . . . . 430,972 621,516
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,525 141,055
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 376,378
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,339,088 21,891,352
------------ ------------
Investment properties, at cost:
Land and leasehold interests . . . . . . . . . . . . . . . . . . . . . . . . . 9,018,934 10,788,810
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 136,933,047 150,959,418
------------ ------------
145,951,981 161,748,228
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 45,589,503 49,431,004
------------ ------------
Total investment properties, net of
accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 100,362,478 112,317,224
------------ ------------
Investment in unconsolidated ventures, at equity
(notes 1, 2 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,320,791 8,864,503
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,396,105 2,776,163
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,153,162 1,226,212
------------ ------------
$129,571,624 147,075,454
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1995 1994
------------ -----------
Current liabilities:
Current portion of long-term debt (notes 2(f), 4(b), 4(d) and 4(e)). . . . . . . $ 86,167,237 94,880,985
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,212,684 4,048,221
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740,391 --
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,648,085 2,575,385
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,329,515 11,640,409
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 948,604 810,997
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,573 625,079
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 107,254,089 114,581,076
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396,933 423,743
Investment in unconsolidated ventures, at
equity (notes 1, 2 and 7). . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,774,735 167,376,693
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,611 1,443,153
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . 18,693,025 25,794,970
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,971,393 309,619,635
Commitments and contingencies (notes 1, 2, 3, 4, 5 and 6)
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,517,931) (20,281,012)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . (1,316,336) (1,235,319)
------------ ------------
(21,833,267) (21,515,331)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (456,137,310) (456,620,305)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . (44,176,028) (36,155,381)
------------ ------------
(148,566,502) (141,028,850)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . (170,399,769) (162,544,181)
------------ ------------
$129,571,624 147,075,454
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,358,014 5,515,839
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318,166 204,458
----------- ----------
4,676,180 5,720,297
----------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,109,491 3,362,084
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127,429 1,197,930
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,972,708 2,892,546
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,464 240,497
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 139,982 188,502
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,174 97,330
----------- ----------
6,804,248 7,978,889
----------- ----------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,128,068) (2,258,592)
Partnership's share of operations of unconsolidated
ventures (notes 1, 2 and 7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,851,254) (4,009,109)
----------- ----------
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,979,322) (6,267,701)
Gain on sale of investment properties (note 4(a)). . . . . . . . . . . . . . . . . . . 6,638,774 --
----------- ----------
Net loss before extraordinary item . . . . . . . . . . . . . . . . . . . . . . (1,340,548) (6,267,701)
Extraordinary item (note 4(a)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586,624 --
----------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,076 (6,267,701)
=========== ==========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1995 1994
------------ -----------
Net earnings (loss) per limited partnership interest
(note 1):
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (19.10) (15.00)
Gain from sale of investment properties. . . . . . . . . . . . . . . . . . . 16.38 --
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.92 --
----------- ----------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.20 (15.00)
=========== ==========
Cash distributions per limited partnership
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.00 --
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 246,076 (6,267,701)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127,429 1,197,930
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . 139,982 188,502
Amortization of deferred rental income . . . . . . . . . . . . . . . . . . . . . . -- 36,837
Amortization of discount on long-term debt . . . . . . . . . . . . . . . . . . . . 90,337 131,435
Partnership's share of operations of unconsolidated ventures . . . . . . . . . . . 5,851,254 4,009,109
Gain on sale of investment properties (note 4(a)). . . . . . . . . . . . . . . . . (6,638,774) --
Extraordinary item (note 4(a)) . . . . . . . . . . . . . . . . . . . . . . . . . . (1,586,624) --
Changes in:
Restricted funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199,283) 1,750,674
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . 190,544 5,292
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,530 (57,480)
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,500) (61,151)
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,050 99,680
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,463 67,381
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,700 39,104
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (417,506) (561,369)
Deferred interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,860 937,221
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,144,297 (1,737,455)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,607 370,732
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,950 13,896
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (590,542) (4,148)
------------ -----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 1,415,850 158,489
------------ -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Cash flows from investing activities:
Net purchases of short-term investments. . . . . . . . . . . . . . . . . . . . . . . (13,592,801) (3,365,801)
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . . . . (194,573) (215,525)
Partnership's distributions from unconsolidated ventures . . . . . . . . . . . . . . 90,500 1,621,000
Cash proceeds from sale of investment properties (note 4(a)) . . . . . . . . . . . . 2,795,768 --
Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . . . . -- (317,000)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,787) (133,383)
------------ -----------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (10,960,893) (2,410,709)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (830,580) (167,427)
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740,391 --
Distributions to general partners. . . . . . . . . . . . . . . . . . . . . . . . . . (81,017) --
Distributions to limited partners. . . . . . . . . . . . . . . . . . . . . . . . . . (8,020,647) --
------------ -----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . (8,191,853) (167,427)
------------ -----------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . (17,736,896) (2,419,647)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 18,165,563 2,830,985
------------ -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . $ 428,667 411,338
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . $ 234,660 4,030,882
============ ===========
Sale of investment properties (note 4(a)):
Total sale proceeds, net of selling expenses . . . . . . . . . . . . . . . . . . . $ 17,925,768 --
Principal balances due on mortgages payable. . . . . . . . . . . . . . . . . . . . (15,130,000) --
------------ -----------
Cash proceeds from sale of investment property,
net of selling expenses. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,795,768 --
============ ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Forgiveness of indebtedness - Brittany Downs Apartments - Phase II (note 4(a)):
Balance due on long-term debt cancelled. . . . . . . . . . . . . . . . . . . . . . $ 495,310 --
Accrued interest on long-term debt cancelled . . . . . . . . . . . . . . . . . . . 1,455,191 --
Reduction of escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . (363,877) --
------------ -----------
Extraordinary item due to forgiveness of indebtedness
secured by Brittany Downs Apartments - Phase II. . . . . . . . . . . . . . $ 1,586,624 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1994 which are
included in the Partnership's 1994 Annual Report on Form 10-K (File No. 0-
15962) filed on March 28, 1995, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial
statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, Mariners Pointe
Associates ("Mariners Pointe"). The effect of all significant transactions
between the Partnership and its 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 2(b)); 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"); 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 effect of these items is summarized as follows for the
three months ended March 31:
1995 1994
------------------------ -------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ --------- ---------- ---------
Net income
(loss). . . . . . . . $246,076 5,199,643 (6,267,701) 469,301
Net income
(loss) per
limited
partnership
interest. . . . . . . $ 1.20 12.97 (15.00) (1.30)
======== ========== ========== ==========
The net income (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 for financial reporting and
Federal income tax purposes.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 ($172,862 and $18,160,234 at March 31, 1995 and December 31, 1994,
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.
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 accrued for and are included in accounts payable in the
accompanying consolidated financial statements, will be approximately $3
million
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived assets (primarily its consolidated investments in land, buildings and
improvements) whenever their carrying value cannot be fully recovered
through estimated undiscounted future cash flows from operations and sale.
The amount of the impairment loss to be recognized would be the difference
between the long-lived asset's carrying value and the asset's estimated
fair value less costs to sell.
The amount of any impairment loss recognized by the Partnership under
its current accounting policy has been limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness. An impairment loss under SFAS 121
would be determined without regard to the nature or the balance of such
non-recourse indebtedness. Upon the disposition of a property for which an
impairment loss has been recognized under SFAS 121, the Partnership would
recognize, at a minimum, a net gain for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership expects to adopt SFAS 121 no later than the first
quarter of 1996. Although the Partnership has not currently assessed the
full impact of adopting SFAS 121, the amount of any such required
impairment loss could be materially higher than the amounts that have been
recorded in the past or may be recorded in 1995 under the Partnership's
current impairment policy. In addition, upon the disposition of an
impaired property, the Partnership would generally recognize more net gain
for financial reporting purposes under SFAS 121 than it would have under
the Partnership's current impairment policy, without regard to the amount,
if any, of cash proceeds received by the Partnership in connection with the
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
disposition. Although implementation of this new accounting statement
could significantly impact the Partnership's reported earnings, there would
be no impact on cash flows. Further, any such impairment loss would not be
recognized for Federal income tax purposes.
(2) VENTURE AGREEMENTS
(a) General
The Partnership at March 31, 1995 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.
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.
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 is also entitled to receive up to
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
an additional $4,300,000 based upon certain events (as defined), all of
which was earned in 1993 and received in 1994. Upon receipt, OOUV
distributed the $4,300,000 to the respective partners, based upon their
precontribution percentage interests. OOUV may still 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.
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 the $4,300,000 and the
potential future distribution of $3,400,000 amounts 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. Orchard distributed to each of the respective partners their fifty
percent share ($1,702,082) of such amount. The Partnership recognized a
gain of $1,702,082 for financial reporting and Federal income tax purposes
in 1994. Upon receipt of all or a portion of the remaining contingent
interest amounts, Orchard and the Partnership would expect to recognize
additional gain for financial reporting and Federal income tax purposes in
the year of such receipts. However, there can be no assurance that any
portion of the remaining contingent amounts 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
venture which owns 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
consolidated financial statements).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 consolidated
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%.
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 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
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 during 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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. 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, in such event, JMB/NYC would
recognize, for financial reporting purposes, a gain to the extent of the
then current deficit investment balance (which amount was $162,150,566 as
of March 31, 1995). 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 March 31, 1995 and December 31, 1994. 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 $97,977,442 at March 31, 1995.
During 1994 and through March 31, 1995, 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 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%
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 after 1991 is 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 have disputed
this calculation of interest expense and contended that the 12-3/4% per
annum fixed rate applied after 1991.
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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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
March 31, 1995 was 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 three
months ended March 31, 1995 was $29,086,175. Based upon the amount of
interest determined by JMB/NYC for the three months ended March 31, 1995,
interest expense for the Three Joint Ventures was $17,466,639. The
cumulative effect of recording the interest expense calculated by JMB/NYC
is to reduce the losses of the Three Joint Ventures by $84,690,965 (of
which the Partnership's share is $19,690,649) for the period of July 1,
1993 through March 31, 1995 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
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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 $162,150,566 at March 31, 1995) 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 would accrue at 9% per
annum and unless previously paid out of excess property cash flow would 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.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 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.
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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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) JMB/Piper
Under the terms of a modification agreement with the lender,
commencing on April 1, 1991 and continuing through and including January
30, 2020, fixed interest on the mortgage notes secured by the Piper Jaffray
Tower will accrue and be 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 1991, 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, if any, 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 payments remitted to
the lender for 1992 and 1993 totalled $923,362 and $1,390,910,
respectively. During 1994, the excess cash flow generated under this
agreement was $353,251 and was remitted to the lender in May 1995. On a
monthly basis, the venture deposits the property management fee into an
escrow account (including interest earned thereon) 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) has agreed to
defer receipt of its management fee until a later date. As of March 31,
1995, the manager has deferred approximately $2,518,000 ($2,357,000 of
which represents fees deferred through November 1994) 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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.
(e) JMB/900
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 900 Third Avenue building 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. 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 Federal Deposit Insurance Corporation ("FDIC") filed a
complaint, since amended, in a lawsuit against the joint venture partner,
the Partnership, 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
In 1994, JMB/900, on behalf of Progress Partners, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. 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.
During April 1995, the Partnership deposited approximately $1,300,000
(representing cash flow generated by the property during the previous
quarter (as defined)) into escrow under the terms of the loan extension.
The agreement provides, however, that the joint venture can immediately
repay itself, out of the first available net cash flow, certain costs
incurred and deposits made by the joint venture in connection with the loan
extension.
(f) South Tower
The mortgage note secured by the South Tower Office Building in Los
Angeles, California, as well as the promissory note secured by the
Partnership's interest in the joint venture matured December 1, 1994. The
joint venture have been in discussions with the respective lenders
regarding an extension of the mortgage note and the promissory note. The
joint venture has reached an agreement with the lender of the mortgage note
whereby the lender would refrain from exercising its rights and remedies
under the loan documents through May 1, 1995 while the venture continues 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
lender. 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. During the first quarter, 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. 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 March 31, 1995 and December 31, 1994 as a current liability
in the accompanying consolidated financial statements.
(g) 1090 Vermont
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.
In 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. 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 is currently producing cash flow for the joint venture.
Consequently, the Partnership and joint venture partners received
distributions totalling approximately $1.2 million since the effective date
of the refinancing (the Partnership's share was approximately $600,000).
Such distributions represented a partial return of the additional capital
contributed.
(h) 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 their 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.
The underlying mortgage note was originally scheduled to mature in
October 1994. See note 4(c) regarding the extension of such loan.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) DISPOSITION OF INVESTMENT PROPERTIES
(a) 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 including debt
service of the property and to pay the Partnership a preferential return.
The joint venture partner defaulted on such obligations. 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. After
filing a lawsuit against the joint venture partner and certain of the joint
venture partner's principals, on April 3, 1992, the Partnership entered
into a settlement agreement whereby 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 principal payments are reflected in other income only
as collected. As of the date of this report, all scheduled principal and
interest payments have been received. During the fourth quarter of 1994,
the joint venture partner and its principals contacted the Partnership
regarding a discounted prepayment of the note, however, no agreement for
such prepayment has been reached.
(b) Brittany Downs Apartments Phase I and II
A summary description of the sale is contained in note 4(a).
(4) LONG-TERM DEBT
(a) 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 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 had 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 were classified as current liabilities in the
accompanying consolidated financial statements at December 31, 1994. 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, was $1,455,200.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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
$2,795,768 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 resulted in a gain of $6,638,774 for financial reporting purposes
and approximately $8,800,000 for Federal income tax reporting purposes in
1995. In addition, as a result of the payoff discount granted by the
underlying lender for Brittany Downs Apartments Phase II, the Partnership
recognized an additional gain on forgiveness of indebtedness of $1,586,624
for financial reporting purposes and approximately $140,000 for Federal
income tax reporting purposes in 1995, respectively.
(b) 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 ($22,148,275) and related deferred interest
($6,338,386) has been classified as a current liability in the accompanying
consolidated financial statements as of March 31, 1995. The Partnership
decided that it would 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 was unwilling to provide further modifications to the
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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. Accordingly, the cash balance at the
property as well as the monthly excess cash flow held in escrow are
classified as restricted funds in the accompanying consolidated balance
sheets. 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 expects to
recognize a gain for Federal income tax and financial reporting purposes in
1995 in connection with this transfer with no distributable proceeds.
(c) 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 March 31, 1995 was 4.2% per annum for an
interest rate of 6.95% per annum as of that date. Prior to the extension,
the loan bore interest of 10.875% per annum.
(d) 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. As of the date of this report, $2,495,532 of
principal and interest is in arrears relating to this mortgage loan.
Accordingly, the principal balance of the mortgage loan ($41,292,105) and
related accrued interest has been classified as a current liability in the
accompanying consolidated financial statements at March 31, 1995 and
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.
(e) 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 has been classified as a
current liability in the accompanying consolidated financial statements at
March 31, 1995 and December 31, 1994. There can be no assurance that the
Partnership will be able to refinance the second mortgage loan upon its
maturity.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(f) Wells Fargo Center
The mortgage note secured by the Wells Fargo Center 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 joint venture has reached an
agreement with the lender of the mortgage note whereby the lender would
refrain from exercising its rights and remedies under the loan documents
through May 1, 1995 while the venture continues to negotiate an extension
or refinancing of the note with the lender. The lender is currently
considering an extension of such agreement. 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 lender. Such extension or
refinancing is likely to be dependent on results from 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 March 31, 1995 and December 31, 1994 as a
current liability in the accompanying consolidated financial statements.
(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 accounts 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).
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 have received (i) cash
distributions of sale or refinancing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and (ii) cumulative cash distributions from the Partnership's operations
which, when combined with the sale or refinancing 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 refinancing 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 refinancing 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 net sale proceeds have been deferred for
the General Partners as of March 31, 1995.
(6) 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 consolidated ventures) to the
Corporate General Partner and its affiliates as of March 31, 1995 and 1994
and for the three months ended March 31, 1995 and 1994 are as follows:
Unpaid at
March 31,
1995 1994 1995
-------- ------- ----------
Property management
and leasing fees. . . . . . . . . $120,583 224,660 13,200
Insurance commissions
(refunds) . . . . . . . . . . . . -- (2,200) --
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . . . . . 10,463 64,579 7
-------- ------- ------
$131,046 287,039 13,207
======== ======= ======
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates relating to the
administration of the Partnership and the operation of Partnership
investment properties. For the three months ended March 31, 1995 and
fiscal 1994, such costs aggregated $98,256 and $214,504, respectively, all
of which was paid as of March 31, 1995. All amounts deferred or currently
due to the Corporate General Partner and its affiliates do not bear
interest and are expected to be repaid in future periods.
Reference is made to note 2(c) regarding the Partnership's obligation
to fund, on demand, $1,200,000 and $1,200,000 to Carlyle Managers, Inc. and
Carlyle Investors, Inc., respectively, for additional paid-in capital
(reflected in amounts due to affiliates in the accompanying consolidated
financial statements). As of March 31, 1995, these obligations bore
interest at 5.78% per annum and interest accrued on these obligations was
$248,085.
The manager of Piper Jaffray Tower (which was an affiliate of the
Corporate General Partner through November 1994) has agreed to defer
receipt of its property management fees as more fully discussed in note
2(d). Such fees were approximately $2,357,000 at March 31, 1995.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, has provided and continues to provide certain property
management services to certain properties owned by the Partnership. Such
acquisition had no effect on the fees payable by the Partnership under any
existing agreements with such company. The fees earned by such company
from the Partnership for the three months ended March 31, 1995 were
approximately $2,900, all of which have been paid.
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 Mariner's Pointe
Apartments, and the Piper Jaffray Tower. In addition, the affiliated
property manager entered into a sub-management agreement with the successor
for the management of the 900 Third Avenue office building.
The Louis Joliet Mall is managed by an affiliate of the Corporate
General Partner for fees computed as a percentage of certain revenues.
(7) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for Orchard Associates (note
2(b)), JMB/NYC, JMB/Piper, JMB/Piper II, South Tower, JMB/900 and 1090
Vermont for the three months ended March 31, 1995 and 1994 are as follows:
1995 1994
------------ ----------
Total income from properties
(unconsolidated) . . . . . . . . . . . . . . . . $60,198,472 62,325,520
=========== ==========
Operating loss of ventures . . . . . . . . . . . . $21,071,595 14,240,660
=========== ==========
Partnership's share of
operating loss . . . . . . . . . . . . . . . . . $ 5,783,038 4,009,109
=========== ==========
(8) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of March 31,
1995 and for the three months ended March 31, 1995 and 1994.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are Notes to Consolidated Financial
Statements contained in this report.
At March 31, 1995, the Partnership and its consolidated ventures had
cash and cash equivalents of approximately $429,000. Such funds and short-
term investments of approximately $15,722,000 are available for repayment
of the temporary bank overdraft at March 31, 1995 of approximately
$740,000, 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. The Partnership and its
consolidated venture have currently budgeted in 1995 approximately
$2,590,000 for tenant improvements and other capital expenditures. The
Partnership's share of such items and its share of such similar items for
its unconsolidated ventures in 1995 is currently budgeted to be
approximately $5,240,000. In addition, an estimated $3,000,000 (not
included in the budgeted amounts) is expected to be needed to make
structural modifications to the Wilshire Bundy office building to satisfy
the requirements of a recently enacted City of Los Angeles ordinance.
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, debt
modifications for certain of the Partnership's investment properties and
the sale or refinancing of such investments. However, due to the property
specific factors 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. 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 March 31, 1995, the current portion of the long-term
indebtedness of the Partnership and its consolidated ventures was
approximately $86,167,237, including the entire indebtedness encumbering
Louisiana Tower, 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 2(f), 4(b), 4(d) and 4(e).
Piper Jaffray Tower
At the Piper Jaffray Tower, occupancy decreased slightly to 97% during
the quarter, down from 98% at the end of 1994.
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 payment of
fixed interest on the mortgage, contingent interest, if any, 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 payments remitted to the lender for 1992 and 1993 totalled
$923,362 and $1,390,910, respectively. During 1994, the excess cash flow
generated under this agreement was $353,251 and was remitted to the lender
during May 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) has agreed to defer receipt of its management fee until a
later date. As of March 31, 1995, the manager has deferred approximately
$2,518,000 of management fees ($2,357,000 of which represents fees deferred
through November 1994). 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
2(d) for further discussion of this investment property.
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 had been placed in default for failure to pay the
required debt service.
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 $2,795,768
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
resulted in a gain of $6,638,774 for financial reporting purposes and
approximately $8,800,000 for Federal income tax reporting purposes in 1995.
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 $1,586,624
for financial reporting purposes and approximately $140,000 for Federal
income tax reporting purposes in 1995.
JMB/NYC
At the 2 Broadway Building, occupancy during the quarter remained at
18%. 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 remained at 94% during the
quarter. A new lease with Alex Brown (78,000 square feet or approximately
4% of the building's leasable space) 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 that owns the building 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 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. 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 during the quarter 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 Agreement, 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
during 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. 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, in such event, JMB/NYC would
recognize, for financial reporting purposes, a gain to the extent of the
then current deficit investment balance (which amount was $191,560,351 as
of March 31, 1995). 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 Olympia & York affiliates 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 2 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 7% nor exceed a 12-3/4% per annum
interest rate. The Olympia & York affiliates continued to dispute this
calculation 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 would accrue
at 9% per annum and unless previously paid out of excess property cash flow
would 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 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 was reallocated to 237 Park Avenue and 1290 Avenue
of the Americas during 1994. 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 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 the quarter, occupancy of this office building remained at 95%.
Through 1993, the Partnership and joint venture partners 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. In 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 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 2(b).
Wilshire Bundy Plaza
Occupancy at the Wilshire Bundy Plaza increased to 83% during the
quarter, up from 80% at the end of 1994. From 1995 through 1996,
approximately 59% of the building's square feet under tenant leases
expires. Included in such expirations are Dun & Bradstreet (60,000 square
feet or approximately 21% of the buildings leasable space) 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 Brentwood 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 accrued for and are included in account payable in the
accompanying consolidated financial statements, will be approximately $3
million (none of which had 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. As of the date of this report,
$2,495,532 of principal and interest is in arrears relating to this
mortgage loan. Accordingly, the principal balance of the property's
underlying mortgage loan ($41,292,105) and related accrued interest
($1,976,518) has been classified as a current liability in the accompanying
consolidated financial statements as of March 31, 1995. 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.<PAGE>
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.
During the first quarter of 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 joint venture has reached an
agreement with the lender of the mortgage note whereby the lender would
refrain from exercising its rights and remedies under the loan documents
through May 1, 1995 while the venture continues 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 March 31, 1995 and December 31, 1994 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.
900 Third Avenue Building
During the quarter, occupancy of this building remained at 94%. The
midtown Manhattan market remains competitive. Approximately 53,000 square
feet (approximately 10% of the building's 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. In 1994, JMB/900 Third
Avenue Associates, on behalf of the property joint venture, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. 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. The agreement provides,
however, that the joint venture can immediately repay itself, out of the
first available net cash flow, certain costs incurred and deposits made by
the joint venture in connection with the loan extension. During April
1995, the Partnership deposited approximately $1,300,000 (representing cash
flow generated during the first quarter) into escrow under terms of the
loan extension.
Louis Joliet Mall
Occupancy of this mall remained at 79% (excluding the effect of the
move-out of General Cinema, Inc., as discussed below) during the quarter.
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 completed in November
1994 at a cost of approximately $2,500,000. 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 has been classified as a
current liability in the accompanying consolidated financial statements at
March 31, 1995 and 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 remained at 88% during the quarter. 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 $22,148,276 at March 31, 1995) matured in January 1995. The
Partnership decided that it would 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 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 was appointed for the property and
a third party manager was appointed to manage the property on the
receiver's behalf. Accordingly, the cash balance at the property as well
as the monthly excess cash flow held in escrow are classified as restricted
funds in the accompanying consolidated balance sheets. Title to the
property is expected to transfer to the lender during 1995. This property
represents approximately 5% of the Partnership's original cash investment
in real properties. The Partnership expects to recognize a gain for
Federal income tax and financial reporting purposes in 1995 in connection
with this transfer with no distributable proceeds.
Mariners Pointe Apartments
Occupancy at the Mariners Pointe Apartments decreased during the
quarter to 85%, down from 91% at the end of 1994. 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 March 31, 1995 was
4.2% per annum resulting in an interest rate of 6.95% 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 above, 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 when 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 its interest in the joint venture
and receive certain amounts in satisfaction of its 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 its
funding obligation or that the Partnership will sell the property in the
near future.
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.
While the real estate markets are recuperating, highly competitive
market conditions continue to exist in most locations. The Partnership's
philosophy and approach has been to aggressively and creatively manage the
Partnership's real estate assets to attract and retain tenants. Net
effective rents to the landlord from renewal tenants are much more
favorable than lease terms which can be negotiated with new tenants.
However, the Partnership's capital resources must also be preserved and
allocated in such a manner as to maximize the total value of the portfolio.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. The Partnership has also sought or is seeking additional loan
modifications where appropriate. By conserving working capital, the
Partnership will be in a better position to meet the future needs of its
properties since outside sources of capital may be limited.
Due to these issues, it is likely that the Partnership will hold
certain of its investment properties longer than originally anticipated in
an effort to maximize the return to the Limited Partners. Also, in light
of current severely depressed real estate markets, it currently appears
that the Partnership's goal of capital appreciation will not be achieved.
Although, the Partnership expects to distribute from sale proceeds some
portion of the Limited Partners' original capital, without a dramatic
improvement in market conditions, the Limited Partners will receive
substantially less than half of their original investment.
<PAGE>
RESULTS OF OPERATIONS
At March 31, 1995 and 1994, the Partnership owned eleven and twelve
investment properties, respectively, all of which were operating.
The aggregate decrease in the balance of cash and cash equivalents and
short-term investments as of March 31, 1995 as compared to December 31,
1994 is primarily due to the distribution to partners of $8,101,664 in
February 1995, partially offset by the receipt of $2,795,768 relating to
the sale of Brittany Downs Apartments Phase I and Phase II in January 1995.
The decrease in cash and cash equivalents and the increase in short-term
investments at March 31, 1995 as compared to December 31, 1994 is primarily
due to all of the Partnership's investments in U.S. Government obligations
being classified as short-term investments at March 31, 1995 and the
majority of the Partnership's investments in U.S. Government obligations
classified as cash equivalents at December 31, 1994. Reference is made to
Note 1.
The increase in restricted funds as of March 31, 1995 as compared to
December 31, 1994 is due to cash flow generated at Louisiana Tower which is
being retained by the lender (see Note 4(b)).
The decrease in interest, rents and other receivables, prepaid
expenses, escrow deposits, land and leasehold improvements, buildings and
improvements, accumulated depreciation, and deferred expenses as of March
31, 1995 as compared to December 31, 1994 is due primarily to the sale of
the Brittany Downs Apartments Phase I and Phase II in January 1995.
The decrease in current portion of long-term debt, long-term debt,
less current portion and tenant security deposits as of March 31, 1995 as
compared to December 31, 1994 is primarily due to the sale of the Brittany
Downs Apartments Phase I and Phase II during January 1995.
The increase in accounts payable as of March 31, 1995 as compared to
December 31, 1994 is due to the timing of the payment of certain expenses
at Wilshire Bundy Plaza and Louisiana Tower.
The increase in bank overdraft at March 31, 1995 as compared to
December 31, 1994 is attributable primarily to the Partnership's temporary
bank overdraft of approximately $740,000 at March 31, 1995 resulting from
the timing of the Partnership's maturities of short-term investments.
The increase in due to affiliates as of March 31, 1995 as compared to
December 31, 1994 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 2(c)).
The increase in accrued interest as of March 31, 1995 as compared to
December 31, 1994 is primarily due to the compounding of interest on the
debt underlying Louisiana Tower (Note 4(b)), Wilshire Bundy Plaza (Note
4(d)) and the debt secured by the Partnership's interest in the South Tower
Venture (Note 2(f)) for which the Partnership has suspended debt service,
partially offset by the sale of the Brittany Downs Apartments Phase I and
II in January 1995.
The increase in accrued real estate taxes as of March 31, 1995 as
compared to December 31, 1994 is due to the timing of the payment of real
estate taxes at Wilshire Bundy Plaza and Louis Joliet Mall, partially
offset by the sale of the Brittany downs Apartments Phase I and Phase II.
The decrease in unearned rents as of March 31, 1995 as compared to
December 31, 1994 is due to the timing of the collection of rental income
at Wilshire Bundy Plaza and Louis Joliet Mall.
The decrease in rental income, mortgage and other interest,
depreciation, property operating expenses and amortization of deferred
expenses for the three months ended March 31, 1995 as compared to the three
months ended March 31, 1994 is due primarily to the sale of Brittany Downs
Apartments Phase I and II in January 1995.
The increase in the Partnership's share of loss from operations of
unconsolidated ventures for the three months ended March 31, 1995 as
compared to the three months ended March 31, 1994 is primarily due to the
Partnership's share of a decrease in rental income at the 2 Broadway
building relating to Bear Stearns vacating its space (approximately 11% of
the building's leasable space) in April 1994 upon the expiration of its
lease.
The increase in the gain from the sale of investment properties and
extraordinary item for the three months ended March 31, 1995 as compared to
the three months ended March 31, 1994 is due to the sale of the Brittany
Downs Apartments Phase I and Phase II in January 1995 and the related gain
recognized on forgiveness of debt (Note 4(a)).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 13, 1994, an action entitled TRAVELERS INSURANCE COMPANY V.
SHREVEPORT PLAZA ASSOCIATES LIMITED PARTNERSHIP was initiated in the 1st
Judicial District Court of Caddo Parish, Louisiana. In the lawsuit,
Travelers Insurance Company ("Travelers"), as the holder of a first
mortgage loan secured by the Louisiana Tower office building, seeks to
foreclose the mortgage and obtain title to the property. In June 1994, the
Partnership ceased making the required debt service payments on the first
mortgage loan and commenced discussions with Travelers to obtain a further
modification, to the terms of the loan in order to eliminate current
deficits being incurred for the property (the terms of the loan were
previously modified in 1990). Travelers has refused to provide a further
modification, and the Partnership has decided not to commit any significant
additional amounts of capital to the property since the recovery of such
amounts would be unlikely. In October 1994, a writ of sequestration and
appointment of receiver was issued by the court upon the motion of
Travelers. A receiver has been appointed and a third-party property
manager is managing the property on the receiver's behalf. The Partnership
is not contesting the foreclosure action. Title to the property is
expected to transfer to Travelers in 1995.
Reference is made to Note 2(e) for a discussion of certain other
litigation involving the Partnership.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Reference is made to Notes 2(c), 2(f), 4(a), 4(b) and 4(d) and the
Liquidity and Capital Resources section of Management's Discussion and
Analysis of Financial Condition and Results of Operations included with
this Report for a discussion of defaults under, and/or current attempts to
obtain modifications of, loans secured by the 237 Park Avenue, 1290 Avenue
of the Americas, 2 Broadway Office Buildings, the Wells Fargo South Tower
and the Partnership's interest in the South Tower Venture, the Louisiana
Tower and Wilshire Bundy Plaza, which discussions are hereby incorporated
by reference.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties.
<CAPTION>
1994 1995
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Wilshire Bundy Plaza
Los Angeles, California . . . . . 87% 87% 80% 80% 83%
2. Brittany Downs Apartments
Phase I and II
Thornton (Denver), Colorado . . . 96% 96% 96% 95% N/A
3. Mariners Pointe Apartments
Stockton, California. . . . . . . 84% 86% 96% 91% 85%
4. 237 Park Avenue Building
New York, New York. . . . . . . . 98% 98% 98% 98% 98%
5. 1290 Avenue of the
Americas Building
New York, New York. . . . . . . . 90% 91% 91% 94% 94%
6. 2 Broadway Building
New York, New York. . . . . . . . 30% 19% 19% 18% 18%
7. 1090 Vermont Avenue
Building
Washington, D.C.. . . . . . . . . 99% 99% 99% 95% 95%
8. Louisiana Tower
Shreveport, Louisiana . . . . . . 83% 86% 88% 88% 88%
9. Piper Jaffray Tower
Minneapolis, Minnesota. . . . . . 99% 99% 98% 98% 97%
10. 900 Third Avenue Building
New York, New York. . . . . . . . 94% 94% 94% 94% 94%
11. Wells Fargo Center
South Tower
Los Angeles, California . . . . . 97% 97% 97% 96% 96%
12. Louis Joliet Mall
Joliet, Illinois. . . . . . . . . 75% 72% 76% 79% 79%
<FN>
- ----------------
An "N/A" indicates that the property was sold or the Partnership's interest in the property was sold and
was not owned by the Partnership at the end of the quarter.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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 hereby incorporated by reference to
the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
15962) dated March 27, 1995.
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 hereby incorporated by reference
to the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
15962) dated March 27, 1995.
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 hereby incorporated
by reference to the Partnership's Report for December 31, 1994 on Form 10-K
(File No. 0-15962) dated March 27, 1995.
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 hereby
incorporated by reference to the Partnership's Report for December 31, 1994
on Form 10-K (File No. 0-15962) dated March 27, 1995.
10-T. Lockbox and forbearance agreements related to the
mortgage note secured by the Wells Fargo Building, copies of which are
hereby incorporated by reference to the Partnership's Report for December
31, 1994 on Form 10-K (File No. 0-15962) dated March 27, 1995.
10-U. Amendment No. 1 to the Agreement of Limited
Partnership of Carlyle-XIV Associates, L.P. dated January 1, 1994 by and
between Carlyle Investors, Inc. a Delaware corporation, as general partner,
and Carlyle Real Estate Limited Partnership-XIV, an Illinois limited
partnership, as limited partner, a copy of which is filed herewith.
10-V. Amendment No. 1 to the Second Amended and Restated
Articles of Partnership of JMB/NYC Office Building Associates, L.P. dated
January 1, 1994 by and between Carlyle Managers, Inc. a Delaware
corporation, as general partner, and Carlyle-XIII Associates, L.P. a
Delaware limited partnership, Carlyle-XIV Associates, L.P. a Delaware
limited partnership and Property Partners, L.P. a Delaware limited
partnership, as the limited partners, a copy of which is filed herewith.
27. Financial Data Schedule
- -------------------
(b) No reports on Form 8-K have been filed for the quarter
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 11, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 11, 1995
AMENDMENT NO. 1 TO THE
AGREEMENT OF LIMITED PARTNERSHIP OF
CARLYLE-XIV ASSOCIATES, L.P.
This Amendment No. 1 to the Agreement of Limited Partnership made and
entered into as of January 1, 1994 by and between Carlyle Investors, Inc.,
a Delaware corporation, as general partner (hereinafter the "General
Partner") and Carlyle Real Estate Limited Partnership-XIV, an Illinois
limited partnership, as limited partner (hereinafter the "Limited Partner"
and, together with the General Partner, sometimes hereinafter collectively
referred to as the "Partners").
WITNESSETH
THAT WHEREAS, the parties hereto have formed a limited partnership,
(hereinafter the "Partnership") pursuant to the Revised Uniform Limited
Partnership Act as in effect in the State of Delaware (hereinafter the
"Act"), except as otherwise provided in the Partnership's Agreement of
Limited Partnership (the "Agreement");
THAT WHEREAS, the Partners desire to amend the Agreement to revise
the respective Partnership Shares of the Partners such that, from the date
hereof up to and including December 31, 1996, the Partnership Shares shall
be 90% to the Limited Partner and 10% to the General Partner.
NOW, THEREFORE, Section 7.A. of the Agreement is hereby amended such
that the Partnership Shares shall be, from the date hereof up to and
including December 31, 1996, 90% to the Limited Partner and 10% to the
General Partner.
IN WITNESS WHEREOF, the Partners have executed this Amendment No. 1
to the Agreement of Limited Partnership as of the day and year first above
written.
GENERAL PARTNER LIMITED PARTNER
Carlyle Investors, Inc. Carlyle Real Estate Limited
Partnership-XIV
By: By: JMB Realty Corporation,
Its: General Partner
By:
Its:
AMENDMENT NO. 1 TO THE
SECOND AMENDED AND RESTATED
ARTICLES OF PARTNERSHIP OF
JMB/NYC OFFICE BUILDING ASSOCIATES, L.P.
This Amendment No. 1 to the Second Amended and Restated Articles of
Partnership made and entered into as of January 1, 1994 by and between
Carlyle Managers, Inc., a Delaware corporation, as general partner
(hereinafter the "General Partner") and Carlyle-XIII Associates, L.P., a
Delaware limited partnership ("Carlyle- XIII"), Carlyle-XIV Associates, L.P.,
a Delaware limited partnership ("Carlyle-XIV"), and Property Partners, L.P.,
a Delaware limited partnership ("Property"), as the limited partners
(hereinafter collectively the "Limited Partners" and, together with the
General Partner, sometimes hereinafter collectively referred to as the
"Partners").
WITNESSETH
THAT WHEREAS, the parties hereto have formed, or ratified the
formation of, a partnership, (hereinafter the "Partnership") pursuant to the
Uniform Partnership Act as in effect in the State of Illinois; and, except as
otherwise provided in the Partnership's Articles of Partnership (the
"Articles");
THAT WHEREAS, the parties have continued the Partnership as a limited
partnership pursuant to the Revised Uniform Partnership Act as in effect in
the State of Illinois, as amended (the "Act"); and
THAT WHEREAS, the Partners desire to amend the Articles to revise the
respective Partnership Shares of the Partners such that, from the date hereof
up to and including December 31, 1996, the Partnership Shares shall be 10% to
the General Partner, 22.5% to Carlyle-XIII, 45% to Carlyle-XIV and 22.5% to
Property.
NOW, THEREFORE, Section 7.E of the Agreement is hereby amended such
that the Partnership Shares shall be, from the date hereof up to and including
December 31, 1996, 10% to the General Partner, 22.5% to Carlyle-XIII, 45% to
Carlyle-XIV and 22.5% to Property.
IN WITNESS WHEREOF, the Partners have executed this Amendment No. 1 to
the Second Amended and Restated Articles of Partnership as of the day and year
first above written.
GENERAL PARTNER LIMITED PARTNERS
Carlyle Managers, Inc. Carlyle-XIII Associates, L.P.
By: By: Carlyle Investors, Inc.,
Its: Corporate General Partner
By:
Its:
Carlyle-XIV Associates, L.P.
By: Carlyle Investors, Inc.
Corporate General Partner
By:
Its:
Property Partners, L.P.
By: Carlyle Investors, Inc.
General Partner
By:
Its:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> $ 428,667
<SECURITIES> 15,721,967
<RECEIVABLES> 1,188,454
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,339,088
<PP&E> 145,951,981
<DEPRECIATION> 45,589,503
<TOTAL-ASSETS> 129,571,624
<CURRENT-LIABILITIES> 107,254,089
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (170,339,769)
<TOTAL-LIABILITY-AND-EQUITY> 129,571,624
<SALES> 4,358,014
<TOTAL-REVENUES> 4,676,180
<CGS> 0
<TOTAL-COSTS> 3,240,119
<OTHER-EXPENSES> 454,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,109,491
<INCOME-PRETAX> (7,979,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,979,322)
<DISCONTINUED> 6,638,774
<EXTRAORDINARY> 1,586,624
<CHANGES> 0
<NET-INCOME> 246,076
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 0
</TABLE>
