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
September 30, 1998 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 [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . 17
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 23
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 13,455,874 21,051,953
Interest, rents and other receivables (net of allowance
for doubtful accounts of $65,405 and $27,963 at
September 30, 1998 and December 31, 1997, respectively) . . . . . . 272,985 253,069
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 56,185 25,860
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,875 292,110
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 13,985,919 21,622,992
------------ ------------
Investment property held for sale or disposition. . . . . . . . . . . . 34,183,685 33,994,623
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 4,611,360 6,570,294
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 882,855 1,082,305
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 567,961 559,255
------------ ------------
$ 54,231,780 63,829,469
============ ============
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 379,428 357,323
Accounts payable and other current liabilities. . . . . . . . . . . . 817,035 1,394,605
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 1,978,414 1,345,828
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 170,717 172,492
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . 412,500 593,054
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 3,758,094 3,863,302
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 18,219 17,169
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 6,231,467 5,650,592
Partnership's share of the maximum unfunded obligation
under the indemnification agreement . . . . . . . . . . . . . . . . . 8,061,388 8,262,766
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 54,284,674 51,768,623
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 72,353,842 69,562,452
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (15,034,308) (15,021,857)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (1,316,336) (1,316,336)
------------ ------------
(16,349,644) (16,337,193)
------------ ------------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (295,314,162) (296,966,598)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (58,205,092) (44,176,028)
------------ ------------
(1,772,418) 10,604,210
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . . . (18,122,062) (5,732,983)
------------ ------------
$ 54,231,780 63,829,469
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 2,136,483 2,076,372 6,629,893 6,387,732
Interest income . . . . . . . . . . . . . . . . 302,328 311,538 873,130 777,848
Other income. . . . . . . . . . . . . . . . . . -- -- 186,042 377,802
----------- ---------- ---------- ----------
2,438,811 2,387,910 7,689,065 7,543,382
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 1,465,523 1,471,837 4,402,111 4,420,930
Property operating expenses . . . . . . . . . . 816,454 983,405 2,936,319 2,875,606
Professional services . . . . . . . . . . . . . 29,240 313 390,552 329,111
Amortization of deferred expenses . . . . . . . 47,236 56,227 138,274 160,702
Management fees to Corporate General Partner. . 556,709 -- 556,709 --
General and administrative. . . . . . . . . . . 154,128 88,584 451,916 568,210
----------- ---------- ---------- ----------
3,069,290 2,600,366 8,875,881 8,354,559
----------- ---------- ---------- ----------
(630,479) (212,456) (1,186,816) (811,177)
Partnership's share of the reduction of the
maximum unfunded obligation under the
indemnification agreement . . . . . . . . . . . 67,126 67,126 201,378 201,378
Partnership's share of operations
of unconsolidated ventures. . . . . . . . . . . (159,773) (619,044) 23,738 (1,062,388)
----------- ---------- ---------- ----------
Earnings (loss) before gain on
sale of interest in uncon-
solidated venture . . . . . . . . . . . (723,126) (764,374) (961,700) (1,672,187)
Gain on sale of interest in
unconsolidated venture. . . . . . . . . . . . . -- -- 2,601,685 --
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . . $ (723,126) (764,374) 1,639,985 (1,672,187)
=========== ========== ========== ==========
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gain
on sale of interest in
unconsolidated venture . . . . . . . . $ (1.73) (1.83) (2.30) (4.00)
Gain on sale of interest in
unconsolidated venture. . . . . . . . -- -- 6.43 --
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . $ (1.73) (1.83) 4.13 (4.00)
=========== ========== ========== ==========
Cash distributions per limited
partnership interest. . . . . . . . . . $ 35.00 -- 35.00 --
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,639,985 (1,672,187)
Items not requiring (providing) cash or cash equivalents:
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 138,274 160,702
Long-term debt - deferred accrued interest. . . . . . . . . . . . . . . 2,803,449 2,803,450
Partnership's share of the reduction of the maximum
unfunded obligation under the indemnification agreement . . . . . . . (201,378) (201,378)
Partnership's share of operations of unconsolidated ventures. . . . . . (23,738) 1,062,388
Gain on sale of interest in unconsolidated venture. . . . . . . . . . . (2,601,685) --
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . (19,916) 95,429
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,325) (20,998)
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,235 (148,339)
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (8,706) (71,983)
Accounts payable and other current liabilities. . . . . . . . . . . . . (577,570) (997,329)
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 632,586 94,800
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,775) (2,033)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . (180,554) 145,428
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 1,050 501
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,660,932 1,248,451
------------ -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997
------------ -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (189,062) (308,149)
Partnership's distributions from unconsolidated ventures. . . . . . . . . 584,492 --
Partnership's contributions to unconsolidated ventures. . . . . . . . . . (146,241) --
Cash proceeds from sale of interest in unconsolidated venture . . . . . . 4,726,981 --
Refund (payment) of deferred expenses, net. . . . . . . . . . . . . . . . 61,176 (143,663)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . 5,037,346 (451,812)
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (265,293) (137,862)
Distributions to Limited Partners . . . . . . . . . . . . . . . . . . . . (14,029,064) --
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . . (14,294,357) (137,862)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . (7,596,079) 658,777
Cash and cash equivalents, beginning of year. . . . . . . . . . . . 21,051,953 18,069,904
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . $ 13,455,874 18,728,681
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,600,437 1,619,513
============ ===========
Non-cash investing and financing activities:
Sale of interest in unconsolidated venture:
Gain on sale of interest in unconsolidated venture. . . . . . . . . $ 2,601,685 --
Basis in unconsolidated venture . . . . . . . . . . . . . . . . . . 2,125,296 --
------------ -----------
Cash proceeds from sale of interest in uncon-
solidated venture. . . . . . . . . . . . . . . . . . . . . . . . $ 4,726,981 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1997 which are
included in the Partnership's 1997 Annual Report on Form 10-K as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
Capitalized terms used but not defined in this quarterly report have the
same meanings as in the Partnership's 1997 Annual Report on Form 10-K.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS 121") as required in
the first quarter of 1996. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term or the Partnership has concluded that it may dispose of the property
by no longer funding operating deficits or debt service requirements of the
property thus allowing the lender to realize upon its security. In
accordance with SFAS 121, any properties identified as "held for sale or
disposition" are no longer depreciated. As of December 31, 1996, the
Partnership has committed to a plan to sell the Louis Joliet Mall
investment property, its last remaining consolidated property. The net
results of operations for the nine months ended September 30, 1998 and 1997
for the consolidated property classified as held for sale or disposition
for the past two years were income of $2,156,124 and $1,806,772,
respectively. In addition, as of September 30, 1998, the Partnership's
have or had previously committed to a plan to sell the Piper Jaffray Tower
and 900 Third Avenue investment properties. Accordingly, these properties
have been classified as held for sale or disposition. The accompanying
consolidated financial statements include earnings (losses) of $107,753 and
($965,957), as the Partnership's share of total property losses of
$10,475,817 and $12,590,911 for unconsolidated properties for the nine
months ended September 30, 1998 and 1997, respectively, which are held for
sale or disposition or have been sold or disposed of during the past two
years.
Certain amounts in the 1997 financial statements have been
reclassified to conform with the 1998 presentation.
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees and certain of its officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investments. Fees, commissions and
other expenses required to be paid by the Partnership to the General
Partners and their affiliates as of September 30, 1998 and for the nine
months ended September 30, 1998 and 1997 were as follows:
Unpaid at
September 30,
1998 1997 1998
-------- ------- -------------
Property management
and leasing fees . . . . . . $236,930 211,623 --
Insurance commissions . . . . 30,846 33,076 --
Management fees to
Corporate General
Partners . . . . . . . . . . 556,709 -- 556,709
Reimbursement (at cost)
for out-of-pocket salary
and salary-related
expenses related to the
on-site and other costs
for the Partnership and
its investment properties. . 114,595 86,672 24,849
-------- ------- -------
$939,080 331,371 581,558
======== ======= =======
The Partnership is obligated to fund, on demand, $400,000 and $400,000
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 September 30, 1998,
these obligations bore interest at 5.35% per annum and interest accrued on
these obligations was $596,856 after the Partnership made payments of
$4,000 in 1998.
The manager of Piper Jaffray Tower (which was an affiliate of the
Corporate General Partner through November 1994) had agreed to defer
receipt of its property management fees. Such fees deferred by the
affiliate were approximately $1,839,000 (of which approximately $919,500 is
the Partnership's share) at September 30, 1998.
JMB/NYC
As a result of the 1996 restructuring, JMB/NYC has an indirect limited
partnership interest which, before taking into account significant
preferences to other partners, equals approximately 4.9% of the reorganized
and restructured ventures owning 237 Park and 1290 Avenue of the Americas
(the "Properties"). Neither O&Y nor any of its affiliates has any direct
or indirect continuing interest in the Properties. The new ownership
structure gives control of the Properties to an unaffiliated real estate
investment trust ("REIT"), which is owned primarily by holders of the
mortgage debt which encumbered the Properties prior to the bankruptcy.
JMB/NYC has, under certain limited circumstances, through January 1, 2001
rights of consent regarding sale of the Properties or the consummation of
certain other transactions that significantly reduce indebtedness of the
Properties. In general, at any time on or after January 2, 2001, an
affiliate of the REIT has the right to purchase JMB/NYC's interest in the
Properties for certain amounts relating to the operations of the
Properties. There can be no assurance that such REIT affiliate will not
exercise such right on or after January 2, 2001. If such REIT affiliate
exercises such right to purchase, for the reasons discussed below, it is
unlikely that such purchase would result in any significant distributions
to the partners of the Partnership. Additionally, at any time, JMB/NYC has
<PAGE>
the right to require such REIT affiliate to purchase the interest of
JMB/NYC in the Properties for the same price at which such REIT affiliate
can require JMB/NYC to sell such interest as described above.
Pursuant to the indemnification agreement, the Affiliated Partners are
jointly and severally obligated to indemnify, through a date no later than
January 2, 2001, the REIT to the extent of $25 million to ensure their
compliance with the terms and conditions relating to JMB/NYC's indirect
limited partnership interest in the restructured and reorganized joint
ventures that own the Properties. The Affiliated Partners contributed
approximately $7.8 million (of which the Partnership's share was
approximately $3.9 million) to JMB/NYC which was deposited into an escrow
account as collateral for such indemnification. These funds have been
invested in stripped U.S. Government obligations with a maturity date of
February 15, 2001. The Partnership's share of the reduction of the maximum
unfunded obligation under the indemnification agreement recognized as
income, is a result of interest earned on amounts contributed by the
Partnership and held in escrow by JMB/NYC. Such income earned reduces the
Partnership's share of the maximum unfunded obligation under the
indemnification agreement, which is reflected as a liability in the
accompanying financial statements.
The provisions of the indemnification agreement generally prohibit the
Affiliated Partners from taking actions that could have an adverse effect
on the operations of the REIT. Compliance, therefore, is within the
control of the Affiliated Partners and non-compliance with such provisions
by either the Partnership or the other Affiliated Partners is highly
unlikely. Therefore, the Partnership expects its share of the collateral
to be returned (including interest earned) at the termination of the
indemnification agreement.
The Partnership has discontinued the application of the equity method
of accounting for the indirect interests in the Properties and additional
losses from the investment in unconsolidated venture will not be
recognized. Should the unconsolidated venture subsequently report income,
the Partnership will resume applying the equity method on its share of such
income only after such income exceeds net losses not previously recognized.
While the Partnership is not expected to terminate in the near term,
it currently appears unlikely that any significant distributions will be
made by the Partnership at any time due to the level of indebtedness
remaining on the Properties, the original purchase money notes payable by
JMB/NYC, the significant preference levels within the reorganized joint
ventures and the liabilities of the Partnership.
JMB/PIPER
Occupancy of the building at the end of the third quarter of 1998 was
89%.
During the third quarter of 1997, Popham informed Piper that effective
in November 1997, it would cease operations as Popham and consolidate with
another law firm, Hinshaw & Culberson ("Hinshaw"). In December 1997, Piper
signed a non-binding letter of intent with Hinshaw to lease 31,920 square
feet of the Popham space for a term of five years, commencing January 1,
1998, at a market rental rate which exceeded Popham's modified rate which
became effective in August 1997. Popham had paid its modified rent through
the end of 1997. Commencing in January 1998, Hinshaw began paying rent in
accordance with the letter of intent. In addition, once a lease was
finalized with Hinshaw in accordance with the letter of intent, Piper had
agreed to terminate Popham's lease (for approximately 47,000 square feet)
effective December 31, 1997 with no further consideration. In May 1998,
Piper executed the lease with Hinshaw.
<PAGE>
The property is subject to a mortgage loan in the original principal
amount of $100,000,000, of which approximately $95,741,000 is outstanding
as of June 30, 1998. The lender is essentially entitled to all operating
cash flow. Excess cash flow generated during 1997 of $385,523 was remitted
to the lender during the second quarter of 1998 from cash held by the
venture.
In addition, the mortgage loan provides that upon sale or refinancing,
the lender is entitled to prepayment fees as well as a significant level of
proceeds in excess of the then unpaid principal balance prior to
JMB/Piper's receipt of proceeds. While the loan modification provides
JMB/Piper with an opportunity to retain an ownership position in the
property, under the current terms of the modified debt, there must be
significant additional improvement in current market and property operating
conditions resulting in a substantial increase in the value of the property
before JMB/Piper can share in sale or refinancing proceeds. Currently,
Piper generates enough operating cash flow to meet the required debt
service payments. However, Piper may not be able to pay the required debt
service over the next several years. JMB/Piper will not commit additional
capital to Piper unless, among other things, it believes that upon sale of
the property it will receive a return of such funds and a reasonable rate
of return thereon. If a funding requirement arises and none of the Piper
partners contribute the required capital, the lender would likely take
title to the property. Such disposition of the property would result in
JMB/Piper, and therefore the Partnership, recognizing a significant amount
of gain for financial reporting and Federal income tax purposes with no
corresponding distributable proceeds.
During 1997, JMB/Piper, on behalf of Piper, explored refinancing
alternatives with the lender. Although JMB/Piper had intended to pursue
further discussions with the lender concerning possible refinancing and/or
loan modification alternatives, it currently appears unlikely that an
agreement with respect to such a transaction will be made.
JMB/900
Occupancy of this building at the end of the third quarter of 1998 was
99%.
Progress Partners had been negotiating with the building's major
tenant, Schulte, Roth & Zabel (120,991 square feet with a lease expiration
date of May 31, 2000), for an early renewal and expansion of its lease.
However, in the second quarter of 1998, the tenant informed Progress
Partners of its intent to vacate all of its space upon the expiration of
its current lease.
Pursuant to the extension on the mortgage loan, net cash flow (as
defined) is paid into an escrow account controlled by the lender. The
escrow account, including interest earned thereon, will be used by Progress
Partners for payment of property taxes and releasing costs associated with
leases which expire in 1999 and 2000 (approximately 50% of the building
including the Schulte, Roth & Zabel lease discussed above). The remaining
proceeds in this escrow plus interest earned thereon, if any, will be
released to Progress Partners once 90% of such leased space has been
renewed or released. During 1998, approximately $8,091,000 has been
deposited into escrow from net cash flow from property operations.
In December, 1997, two of the Venture Partners, JRA and PPI, filed for
bankruptcy in order to prevent the foreclosure of their interests by MDIFC.
Since the bankruptcy filing, an affiliate of PPI effected a settlement with
MDIFC by purchasing its claims. JMB/900 pursued its claims against the
Venture Partners in the bankruptcy forum and sought to either foreclose on
or buy-out the interests of the Venture Partners in the venture, or to
otherwise dispose of those interests pursuant to a bankruptcy plan. The
Venture Partners asserted claims against the venture and JMB/900 including
claims for unpaid Guaranteed Payments in the purported amount of $36
million. JMB/900 denied that such claims were due and owing and contended
<PAGE>
that, in any event, such claims were offset by PPI's failure to pay
interest in the aggregate amount of approximately $36 million on a $20
million loan to PPI. To the extent that JMB/900 would have been required
to make contributions to pay for any part of the purported claim for
Guaranteed Payments, a portion of the Guaranteed Payments actually paid may
have been allocated to other unsecured creditors of PPI and JRA and,
therefore, JMB/900 might not have received the full amount of the interest
due on the $20 million loan. However, JMB/900's contributions would have
created a preferred return level payable out of future net cash flow or net
sale or refinancing proceeds. Furthermore, JMB/900 took the position that
to the extent that it did not receive annual distributions equal to the
interest payable on the $20,000,000 loan, JMB/900's preferred return
deficiency would be increased by the amounts not received, but the Venture
Partners disputed this characterization.
In order to avoid the risks and further expenses of litigation, and
without any admission of liability, in July 1998 JMB/900 entered into an
agreement (the "Settlement Agreement") with the Venture Partners and a
judgment creditor of JRA and PPI (such judgment creditor and the Venture
Partners are hereinafter collectively referred to as the "Progress
Parties") for the settlement and release of claims and causes of action by
and against JMB/900 and the Progress Parties. In addition to the
settlement and release of these claims and causes of action, the Settlement
Agreement generally provides for, among other things, agreement on certain
terms and conditions for sale of the building and subsequent winding up of
the venture. In addition, under the terms of the Settlement Agreement, JRA
and PPI will seek dismissal of their respective bankruptcy cases or, in the
absence of such dismissal, will seek bankruptcy court approval of the
Settlement Agreement. JMB/900 will seek to (a) obtain a settlement and
release of claims and causes of action (i) against the Federal Deposit
Insurance Corporation ("FDIC") and (ii) by the FDIC against JMB/900 and
each of the Progress Parties and certain of their related parties, and (b)
purchase the interests of the FDIC in P-C 900 in connection with the
settlement with the FDIC.
In general, certain terms and conditions of the Settlement Agreement
are to be effective immediately while others (such as the release of the
Venture Partners' claim to the Guaranteed Payments, JMB/900's claim to the
$20 million note payable and accrued interest thereon, as well as other
claims and causes of action in litigation) are conditioned upon the
occurrence of certain events or the satisfaction of specified conditions.
In addition, the entire Settlement Agreement will be of no further force or
effect unless, among other things, the bankruptcy proceedings involving JRA
and PPI are dismissed or the bankruptcy court approves the Settlement
Agreement by a specified date and JMB/900 acquires the interest of the FDIC
in PC-900 and enters into a settlement and release with the FDIC by
December 1, 1998. Although the releases by the parties of their respective
claims and causes of action is not effective until certain events occur or
conditions are satisfied, the parties have agreed not to pursue such claims
and causes of action unless the events do not occur or the conditions are
not satisfied and the Settlement Agreement terminates by its terms.
Under the terms of the Settlement Agreement, for an initial period
ending not later than January 14, 1999, the Progress Parties will have
authority and responsibility for marketing and selling the building,
subject to certain approval rights of JMB/900 with respect to the terms and
conditions of a sale contract for the building (including a specified
minimum sale price). The Progress Parties have authorized the judgment
creditor of JRA and PPI to take all actions on behalf of the Progress
Parties in respect of a sale of the building and any other matters on their
behalf under the Settlement Agreement. In the event that a sale of the
building has not been concluded by the end of the initial period, JMB/900
will have authority and responsibility for marketing and selling the
building, provided that the sale price is equal to or greater than a
specified minimum amount. Current arrangements for management of the
building will remain in effect until its sale.
<PAGE>
Under the terms of the Settlement Agreement, the venture will not make
distributions to JMB/900 or the Venture Partners until the venture has sold
the building and paid, obtained a release from or established reserves for
the payment of its expenses and liabilities. When made, distributions of
the venture generally are to be made as follows: (1) JMB/900 is to be paid
an amount equal to that paid to acquire the FDIC's interest in PC-900; (2)
up to the next $60 million of distributions are to be made 77.5% to JMB/900
and 22.5% to the Progress Parties, and (3) any additional distributions are
to be made 70% to JMB/900 and 30% to the Progress Parties. In addition, to
the extent that cash is not currently distributed to JMB/900 and the
Venture Partners, profits or losses from operations of the venture are to
be allocated 70% to JMB/900 and 30% to the Progress Parties. To the extent
that the venture's operating income exceeds the cash being distributed,
operating income will be allocated in the same manner that an equal amount
of cash from the sale of the building would be distributed (i.e., generally
in either the 77.5% and 22.5% ratio or the 70% and 30% ratio).
The Settlement Agreement expressly provides that JMB/900 will have no
further obligation to make any capital contributions to the venture and
that the Venture Partners will have no right to any Guaranteed Payments
from the venture. In addition, JMB/900 will release its claim for payment
of the $20 million loan and accrued interest thereon. After sale of the
building JMB/900 will be responsible for winding up the venture. Under the
Settlement Agreement, certain legal fees and expenses incurred by either
JMB/900 or the Progress Parties will be reimbursed by the venture.
There is no assurance that all requisite conditions will be satisfied
for effectiveness of all terms and conditions of the Settlement Agreement
or that all conditions will occur or be effected for the Settlement
Agreement (or any provisions thereof) to remain in force and effect.
Similarly, there is no assurance that JMB/900 will be able to effect a
settlement and release with the FDIC of claims and causes of action and a
purchase of the FDIC's interest in PC-900.
As the venture has committed to a plan to sell or dispose of the
property, 900 Third Avenue Building was classified as held for sale or
disposition as of July 1, 1998, and therefore, will not be subject to
continued depreciation beyond such date.
LOUIS JOLIET MALL
Occupancy of this mall at the end of the third quarter of 1998 was
84%.
The Partnership has negotiated a lease with a replacement operator for
General Cinema, Inc. (approximately 5% of the mall space). In connection
with the new lease, the Partnership will contribute $700,000 to reconfigure
the current four screen cinema to a six screen cinema, which is expected to
open in December 1998. A significant portion of the mall's vacant space is
contained in three large spaces which have been very difficult to lease due
to their size and location within the mall. The manager is exploring the
opportunity to lease some of this space to larger "big box" space users
which in the past have not occupied mall space. Given their size, these
types of tenants generally pay lower rents than typical regional and
national mall tenants. In addition, the Partnership would likely need to
commit substantial capital toward the build-out of this space for these
users. The Partnership will not commit additional capital to this property
for build out or other leasing costs unless, among other things, it
believes that upon sale of the property, the Partnership will receive a
return of such funds and a reasonable rate of return thereon.
<PAGE>
During 1997, the Partnership agreed to dismiss the litigation
regarding the lease termination for a former tenant, Al Baskin Co., with
the resolution as to the amount of the Partnership's claim against the
former tenant, and the acceptance of such claim by the bankruptcy estate.
The Partnership's claim in the amount of $315,000 (reduced from a maximum
amount of approximately $415,000) had been accepted as an unsecured claim
by the bankruptcy estate. In May 1997, the Partnership, upon disposition
of its claim, received approximately $108,000 representing its share of
available proceeds from the bankruptcy estate.
As the Partnership had committed to a plan to sell or dispose of the
property, Louis Joliet Mall was classified as held for sale or disposition
as of December 31, 1996, and therefore has not been subject to continued
depreciation beyond such date for financial reporting purposes. The
Partnership is marketing the property for sale. However, there can be no
assurance that a sale will be consummated.
WELLS FARGO CENTER
The mortgage note secured by the property (with a balance of
approximately $176,347,000 as of June 30, 1998), as extended, matures
September, 2003. All excess cash flow is being escrowed for future tenant
improvements and principal payments. In addition, upon sale or refinancing
of the property subsequent to September 1, 1999, the mortgage loan requires
payment of participation interest (as defined) of any excess proceeds.
A promissory note secured by the Partnership's interest in the joint
venture, which has an adjusted principal balance of approximately
$21,988,000, and accrued interest of approximately $7,164,000 at
September 30, 1998 is due September 2003. The note accrues interest at 17%
per annum. The loan requires payments of cash flow distributed by the
venture from either property operations or sales proceeds as well as a
portion of the property management fee paid to the venture partner. The
loan is secured solely by the Partnership's interest in the joint venture.
Due to the significant level of indebtedness, it is unlikely that the
Partnership will receive any significant future proceeds from operations,
sale or refinancing. The disposition of the Partnership's ownership
interest in the property is therefore expected to result in a gain for
Federal income tax purposes with no corresponding distributable proceeds.
The Partnership has decided not to commit any significant additional
amounts to the property.
1090 VERMONT
The Partnership had been marketing the Property for sale (on behalf of
the Venture). On November 26, 1997, the Partnership obtained a non-binding
letter of intent to sell the Property to an unaffiliated third party.
Pursuant to the Venture Agreement, the Venture Partner had the right of
first refusal to purchase the Partnership's interest in the Venture. The
Venture Partner had 30 days from the date of notice to notify the
Partnership it was exercising its right, and 120 days from that date to
close such sale. The Venture Partner was required to purchase the
Partnership's interest for the same amount it would have received from the
sale of the Property to the proposed third party less payment of the
outstanding mortgage obligation. On December 30, 1997, the Partnership
properly notified the Venture Partner of its intent to sell the Property
for $27,000,000. On January 30, 1998, the Venture Partner exercised its
right to first refusal to purchase the Partnership's interest, and on
May 29, 1998, the Venture Partner purchased the Partnership's interest in
the Venture.
<PAGE>
The Partnership received cash at closing of approximately $4,700,000
after payment of closing costs. The Property was classified as held for
sale as of December 31, 1996 and has not been subject to continued
depreciation from such date for financial reporting purposes. In addition,
as a result of the sale, the Partnership recognized a gain for financial
reporting purposes of approximately $2,600,000 and expects to recognize a
gain for Federal income tax purposes in 1998 of $4,600,000. The
Partnership has no future liability for any representations, warranties and
covenants as a result of the sale.
YERBA BUENA OFFICE BUILDING
Due to the default of the joint venture that owned the Yerba Buena
Office Building (a partnership comprised of the Partnership, two other
partnerships sponsored by the Partnership's Corporate General Partner, and
four unaffiliated limited partners) in the payment of required debt
service, the former lender to such joint venture realized on its security
by taking title to the property in June 1992. In return for a smooth
transition of title and management of the property (relative to which the
existing property manager that was affiliated with the Partnership's
Corporate General Partner agreed to continue to manage the property), the
joint venture was able to negotiate, among other things, a right of first
opportunity to purchase the property during the time frame from June 1995
through May 1998 should the lender wish to market the property for sale.
The lender sold the property in 1996. However, the joint venture was not
given an opportunity to purchase the property as required by the previous
settlement with the lender. As previously reported, such joint venture
filed a lawsuit against the lender for breach of its obligations. In June
1998, the court granted the lender's motion for summary judgement and
dismissed the lawsuit. In dismissing the action, the court apparently
relied upon a release given by the management company (an affiliate of the
Partnership's Corporate General Partner) relative to the settlement of its
claims against the lender and the termination of its management contract
for the property. Such settlement was the result of claims made by the
management company in a separate lawsuit, due to the non-payment of
management fees. Though the intent of the management company in providing
the release was confined to matters relative to management only, the court
apparently ruled that it covered the earlier transaction with the joint
venture as well. The joint venture has appealed such dismissal, which
appeal is likely to extend the lawsuit beyond year-end. In addition, the
former lender has filed an action against the joint venture for fees
expended in the litigation. The Partnership and its affiliated partners in
the joint venture are also exploring the possibility of transferring their
rights in the litigation to the unaffiliated venture partners for a modest
sum. Any such transfer would require that the Partnership and its
affiliates be released and adequately indemnified from further liability
relative to matters surrounding this litigation, including, but not limited
to, a release from any claims that the unaffiliated venture partners may
have against them relative thereto. There can be no assurance that any
such transfer will be effected, that the litigation will ultimately be
successful, or that the Partnership will ultimately realize any amounts (or
avoid any further payments) with respect thereto.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/Piper and JMB/Piper II,
for the nine months ended September 30, 1998 and 1997 are as follows:
1998 1997
----------- ----------
Total income from properties
(unconsolidated). . . . . . . . . . . $14,460,554 15,186,074
=========== ==========
Operating loss of ventures. . . . . . . $13,630,436 14,218,922
=========== ==========
Partnership's share of
operating loss. . . . . . . . . . . . $ 587,848 1,228,519
=========== ==========
<PAGE>
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 September 30,
1998 and for the three and nine months ended September 30, 1998 and 1997.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying consolidated
financial statements for additional information concerning certain of the
Partnership's investment properties.
The board of directors of JMB Realty Corporation ("JMB") the Managing
General Partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offer. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and previously
retained Lehman Brothers Inc. as financial advisor to assist the Special
Committee in evaluating and responding to potential tender offers for
Interests.
During 1997 and 1998, some of the Holders of Interests received
unsolicited offers from unaffiliated third parties to purchase up to 4.87%
of the Interests in the Partnership at prices ranging from $10 to $21 per
Interest. The Special Committee recommended against acceptance of these
offers on the basis that, among other things, the offer prices were
inadequate. Certain of such offers have expired and one other is currently
scheduled to expire in November 1998. As of the date of this report, the
Partnership is aware that approximately 1.49% of the Interests in the
Partnership have been purchased by such unaffiliated third parties either
pursuant to such offers or through negotiated purchases. It is possible
that other offers for Interests may be made by unaffiliated third parties
in the future, although there is no assurance that any other third party
will commence an offer for Interests, the terms of any such offer or
whether any such offer, if made, will be consummated, amended or withdrawn.
At September 30, 1998, the Partnership had cash and cash equivalents
of approximately $13,456,000. Such funds are available for working capital
requirements and distributions to the General Partners and Holders of
Interests. The Partnership has currently budgeted in 1998 approximately
$1,827,000 for tenant improvements and other capital expenditures including
$700,000 that the Partnership has agreed to contribute to reconfigure the
four screen cinema at the Louis Joliet Mall to a six screen cinema. Such
items and the Partnership's share of such similar items for its
unconsolidated ventures in 1998 is currently budgeted to be approximately
$2,343,000. The decrease in budgeted capital expenditures is due to the
sale of the Partnership's interest in 1090 Vermont and a change in leasing
estimates at the Piper Jaffray building. Actual amounts expended in 1998
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 Partnership may
also use a portion of its working capital for certain additional tenants
improvements and capital expenditures for certain "big box" space users who
may become tenants at the Louis Joliet Mall. The Partnership will not
commit working capital funds for these additional tenant improvements and
capital expenditures unless, among other things, the Partnership believes
that upon sale of the property, the Partnership will receive a return of
the incremental funds and a reasonable rate of return thereon. With regard
<PAGE>
to the Piper Jaffray Tower, although JMB/Piper had intended to pursue
further discussions with the lender concerning possible refinancing and/or
loan modification alternatives, it currently appears unlikely that an
agreement with respect to such a transaction will be made.
The source of capital for tenant improvements and other capital
expenditures and for both short-term and long-term future liquidity and
distributions to partners is dependent upon existing working capital, net
cash generated by the Partnership's investment properties and the sale or
refinancing of such investments. The venture partner in the 1090 Vermont
venture exercised its right of first refusal and purchased the
Partnership's interest in the venture in May 1998. The Partnership received
cash at closing of approximately $4,700,000 after payment of closing costs.
Due to property specific concerns discussed in the Notes to the
accompanying consolidated financial statements, the Partnership currently
considers only Louis Joliet Mall and 900 Third Avenue to be potential
significant sources of future cash generated from sales.
The Partnership distributed approximately $14,029,000 ($35/interest)
to the Holders of Interest in the third quarter of 1998. Due to clerical
error, it was previously reported that the distribution was composed solely
of sale proceeds. However, the distribution represented a distribution of
sales proceeds from the sale of the Partnership's interest in 1090 Vermont
of approximately $6,013,000 ($15/Interest) and previously undistributed
cash generated from operations of approximately $8,016,000 ($20/Interest).
Accordingly, the General Partners were entitled to receive a distribution
of previously undistributed cash generated from operations of approximately
$334,000, which was paid in the fourth quarter of 1998. Additionally, in
connection with the distribution of previously undistributed cash generated
from operations, the General Partners received a management fee of
approximately $557,000.
Additionally, the Partnership currently expects to distribute
approximately $4,009,000 ($10/interest) to the Holders of Interest and
$167,000 to the General Partners of previously undistributed cash generated
from operations in the fourth quarter of 1998.
In order to avoid the risks and further expenses of litigation, and
without any admission of liability, in July 1998 JMB/900 entered into an
agreement (the "Settlement Agreement") with the Venture Partners and a
judgment creditor of JRA and PPI (such judgment creditor and the Venture
Partners are hereinafter collectively referred to as the "Progress
Parties") for the settlement and release of claims and causes of action by
and against JMB/900 and the Progress Parties. In addition to the
settlement and release of these claims and causes of action, the Settlement
Agreement generally provides for, among other things, agreement on certain
terms and conditions for sale of the building and subsequent winding up of
the venture. In addition, under the terms of the Settlement Agreement, JRA
and PPI will seek dismissal of their respective bankruptcy cases or, in the
absence of such dismissal, will seek bankruptcy court approval of the
Settlement Agreement. JMB/900 will seek to (a) obtain a settlement and
release of claims and causes of action (i) against the Federal Deposit
Insurance Corporation ("FDIC") and (ii) by the FDIC against JMB/900 and
each of the Progress Parties and certain of their related parties, and (b)
purchase the interests of the FDIC in P-C 900 in connection with the
settlement with the FDIC.
In general, certain terms and conditions of the Settlement Agreement
are to be effective immediately while others (such as the release of the
Venture Partners' claim to the Guaranteed Payments, JMB/900's claim to the
$20 million note payable and accrued interest thereon, as well as other
claims and causes of action in litigation) are conditioned upon the
occurrence of certain events or the satisfaction of specified conditions.
In addition, the entire Settlement Agreement will be of no further force or
effect unless, among other things, the bankruptcy proceedings involving JRA
<PAGE>
and PPI are dismissed or the bankruptcy court approves the Settlement
Agreement by a specified date and JMB/900 acquires the interest of the FDIC
in PC-900 and enters into a settlement and release with the FDIC by
December 1, 1998. Although the releases by the parties of their respective
claims and causes of action is not effective until certain events occur or
conditions are satisfied, the parties have agreed not to pursue such claims
and causes of action unless the events do not occur or the conditions are
not satisfied and the Settlement Agreement terminates by its terms.
Under the terms of the Settlement Agreement, for an initial period
ending not later than January 14, 1999, the Progress Parties will have
authority and responsibility for marketing and selling the building,
subject to certain approval rights of JMB/900 with respect to the terms and
conditions of a sale contract for the building (including a specified
minimum sale price). The Progress Parties have authorized the judgment
creditor of JRA and PPI to take all actions on behalf of the Progress
Parties in respect of a sale of the building and any other matters on their
behalf under the Settlement Agreement. In the event that a sale of the
building has not been concluded by the end of the initial period, JMB/900
will have authority and responsibility for marketing and selling the
building, provided that the sale price is equal to or greater than a
specified minimum amount. Current arrangements for management of the
building will remain in effect until its sale.
Under the terms of the Settlement Agreement, the venture will not make
distributions to JMB/900 or the Venture Partners until the venture has sold
the building and paid, obtained a release from or established reserves for
the payment of its expenses and liabilities. When made, distributions of
the venture generally are to be made as follows: (1) JMB/900 is to be paid
an amount equal to that paid to acquire the FDIC's interest in PC-900; (2)
up to the next $60 million of distributions are to be made 77.5% to JMB/900
and 22.5% to the Progress Parties, and (3) any additional distributions are
to be made 70% to JMB/900 and 30% to the Progress Parties. In addition, to
the extent that cash is not currently distributed to JMB/900 and the
Venture Partners, profits or losses from operations of the venture are to
be allocated 70% to JMB/900 and 30% to the Progress Parties. To the extent
that the venture's operating income exceeds the cash being distributed,
operating income will be allocated in the same manner that an equal amount
of cash from the sale of the building would be distributed (i.e., generally
in either the 77.5% and 22.5% ratio or the 70% and 30% ratio).
The Settlement Agreement expressly provides that JMB/900 will have no
further obligation to make any capital contributions to the venture and
that the Venture Partners will have no right to any Guaranteed Payments
from the venture. In addition, JMB/900 will release its claim for payment
of the $20 million loan and accrued interest thereon. After sale of the
building JMB/900 will be responsible for winding up the venture. Under the
Settlement Agreement, certain legal fees and expenses incurred by either
JMB/900 or the Progress Parties will be reimbursed by the venture.
There is no assurance that all requisite conditions will be satisfied
for effectiveness of all terms and conditions of the Settlement Agreement
or that all conditions will occur or be effected for the Settlement
Agreement (or any provisions thereof) to remain in force and effect.
Similarly, there is no assurance that JMB/900 will be able to effect a
settlement and release with the FDIC of claims and causes of action and a
purchase of the FDIC's interest in PC-900.
The Partnership has held certain of its investment properties longer
than originally anticipated in an effort to maximize the return of their
investment to the Holders of Interests. Certain of the properties have
been classified by the Partnership or its ventures as held for sale or
disposition, and therefore, will no longer be subject to continued
depreciation. The Partnership currently expects that it will sell or
dispose of its remaining investment properties, with the possible exception
of its indirect interests in the 237 Park Avenue and the 1290 Avenue of the
Americas investment properties and the Partnership's interest in the Wells
Fargo Center - South Tower and Piper Jaffray Tower, no later than the end
of 1999, barring unforeseen economic developments.
<PAGE>
Although the Partnership remains hopeful that it will be able to
distribute sale proceeds from the disposition of the 900 Third Avenue and
Louis Joliet Mall investment properties, aggregate distributions of sale
and refinancing proceeds received by Holders of Interest over the entire
term of the Partnership will be substantially less than one-fourth of their
original investment. However, in connection with sales or other
dispositions (including transfers to lenders) of properties (or interests
therein) owned by the Partnership or its joint ventures, Holders of
Interests may be allocated substantial gain for Federal income tax
purposes, regardless of whether any proceeds are distributable from such
sales or other dispositions. In particular, the Piper Jaffray Tower, 237
Park Avenue, 1290 Avenue of the Americas and the Wells Fargo Center - South
Tower investment properties continue to suffer from the effects of the high
levels of debt secured by each property and provide no cash flow to the
Partnership. While loan and joint venture modifications have been obtained
which enable the Partnership to retain an ownership interest in these
properties, it is currently unlikely under existing arrangements that the
Partnership will receive significant proceeds from operations or sales of
these properties. However, upon disposition of these investment
properties, the Partnership, and therefore the Holders of Interest will
recognize a significant amount of taxable income with no distributable
proceeds. For certain Holders of Interests, such taxable gain may be
offset by their suspended passive activity losses (if any). Each Holder's
tax consequences will depend on such Holder's own tax situation.
RESULTS OF OPERATIONS
The decrease in accounts payable and other current liabilities at
September 30, 1998 as compared to December 31, 1997 is primarily due to the
timing of redemptions of gift certificates at the Louis Joliet Mall.
The increase in due to affiliates at September 30, 1998 as compared to
December 31, 1997 is primarily due to the timing of payment for management
fees to the Corporate General Partner.
The increase in interest income for the nine months ended
September 30, 1998 as compared to the same period in 1997 is primarily due
the temporary investment of the proceeds from the sale of the Partnership's
interest in 1090 Vermont in May 1998. Such proceeds were distributed to
the Holders of Interests in September 1998.
The decrease in other income for the nine months ended September 30,
1998 as compared with the same period in 1997 is primarily due to the
discounted payoff of the Turtle Creek note in December of 1997. This
amount is partially offset by the 1998 sale of stock that was received in
the settlement of claims against a tenant in bankruptcy related to the
Partnership's interest in the Old Orchard venture (sold in August 1993).
The increase in property operating expenses for the nine months ended
September 30, 1998 as compared to the same period in 1997 is primarily due
to an increase in contract costs for security and cleaning at the Louis
Joliet Mall. The decrease in property operating expenses for the three
months ended September 30, 1998 as compared to the same period in 1997 is
primarily due to a decrease in utility expense as a result of a more
moderate summer in 1998.
The increase in management fees to Corporate General Partner for the
three and nine months ended September 30, 1998 as compared to the same
period in 1997 is due to operating distribution made in the third quarter
of 1998.
<PAGE>
The decrease in general and administrative expenses for the nine
months ended September 30, 1998 as compared to the same period in 1997 is
primarily due to a decrease in certain expenses related to the
administration of the Partnership.
The increase in Partnership's share of operations of unconsolidated
venture for the three and nine months ended September 30, 1998 as compared
to the same periods in 1997 is primarily due to the classification of the
Piper Jaffray Tower as held for sale as of September 30, 1997 and 900 Third
Avenue as held for sale as of the July 1998, and therefore, not subject to
continued depreciation. Additionally, the increase is also due to
additional profits being allocated to the Partnership as a result of the
Settlement Agreement related to 900 Third Avenue.
The gain on sale of interest in unconsolidated venture for the three
and nine months ended September 30, 1998 and related decrease in investment
in unconsolidated ventures, at equity is due to the sale of the
Partnership's interest in 1090 Vermont in May 1998. Additionally, the
decrease is also due the Partnership's receipt of approximately $600,000 of
undistributed operating cash flow in 1998.
<PAGE>
<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 owned during 1998.
<CAPTION>
1997 1998
------------------------------------- ------------------------------
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. 237 Park Avenue Building
New York, New York . . . . . * * * * * * *
2. 1290 Avenue of the
Americas Building
New York, New York . . . . . * * * * * * *
3. 1090 Vermont Avenue
Building
Washington, D.C. . . . . . . 84% 84% 91% 93% 93% N/A N/A
4. Piper Jaffray Tower
Minneapolis, Minnesota . . . 98% 98% 93% 93% 91% 89% 89%
5. 900 Third Avenue Building
New York, New York . . . . . 98% 98% 97% 97% 97% 100% 99%
6. Wells Fargo Center
South Tower
Los Angeles, California. . . 93% 90% 90% 90% 90% 90% 90%
7. Louis Joliet Mall
Joliet, Illinois . . . . . . 82% 80% 82% 84% 83% 83% 84%
<FN>
- ----------------
An "*" indicates that the joint venture which owns the property was restructured, and therefore, such
information is not meaningful for the Partnership. Reference is made to the Notes for further information
regarding the reorganized and restructured ventures.
An "N/A" indicates that the property, or the Partnership's interest in the property was sold or was not owned
by the Partnership at the end of the period.
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A.* Amended and Restated Agreement of Limited
Partnership.
3-B.* Assignment Agreement by and among the Partnership,
the General Partners and the Initial Limited Partner.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between ABPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is incorporated herein by reference to the
Partnership's Report for September 30, 1996 on Form 10-Q (File No. 0-15962)
dated November 8, 1996.
27. Financial Data Schedule.
- --------------
* Previously filed as Exhibits 3-B, 3-C and 10-H to the
Partnership's Report for December 31, 1992 on Form 10-K of the Securities
Exchange Act (File No. 0-15962) filed on March 30, 1993 and hereby
incorporated herein by reference.
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 11, 1998
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: November 11, 1998
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,455,874
<SECURITIES> 0
<RECEIVABLES> 530,045
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,985,919
<PP&E> 34,183,685
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,231,780
<CURRENT-LIABILITIES> 3,758,094
<BONDS> 54,284,674
<COMMON> 0
0
0
<OTHER-SE> (18,122,062)
<TOTAL-LIABILITY-AND-EQUITY> 54,231,780
<SALES> 6,629,893
<TOTAL-REVENUES> 7,689,065
<CGS> 0
<TOTAL-COSTS> 3,074,593
<OTHER-EXPENSES> 1,399,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,402,111
<INCOME-PRETAX> (1,186,816)
<INCOME-TAX> 0
<INCOME-CONTINUING> (961,700)
<DISCONTINUED> 2,601,685
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,639,985
<EPS-PRIMARY> 4.13
<EPS-DILUTED> 4.13
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