CARLYLE REAL ESTATE LTD PARTNERSHIP XIV /IL/, 10-K405, 1999-03-31

CARLYLE REAL ESTATE LTD PARTNERSHIP XIV /IL/
10-K405, 1999-03-31
REAL ESTATE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934

For the fiscal year
ended December 31, 1998 Commission File No. 0-15962

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)

Illinois 36-3256340
(State of organization) (I.R.S. Employer Identification No.)

900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312-915-1987

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
- ------------------- ------------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.

Documents incorporated by reference: None

<PAGE>

TABLE OF CONTENTS

Page
----
PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . 1

Item 2. Properties . . . . . . . . . . . . . . . . . . . 8

Item 3. Legal Proceedings. . . . . . . . . . . . . . . . 11

Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 11

PART II

Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . . . 11

Item 6. Selected Financial Data. . . . . . . . . . . . . 13

Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . 17

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . . . 27

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . 28

Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . 64

PART III

Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . 64

Item 11. Executive Compensation . . . . . . . . . . . . . 67

Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . 69

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 70

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . 70

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 75

<PAGE>

PART I

ITEM 1. BUSINESS

Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report. Capitalized
terms used herein, but not defined, have the same meanings as used in the
Notes.

The registrant, Carlyle Real Estate Limited Partnership-XIV (the
"Partnership"), is a limited partnership formed in late 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois to invest in improved income-producing commercial and residential
real property. On June 4, 1984, the Partnership commenced an offering to
the public of $250,000,000 (subject to increase by up to $250,000,000) in
Limited Partnership Interests (and assignee interests therein)
("Interests") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (No. 2-88687). A total of 401,048.66 Interests were
sold to the public at $1,000 per Interest. The offering closed July 15,
1985. No holder of Interests (herein after "Holder" or "Holders of
Interests") has made any additional capital contribution after such date.
The Holders of Interests share in their portion of the benefits of
ownership of the Partnership's real property investments according to the
number of Interests held.

The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are or have been held by fee title, leasehold estates
and/or through joint venture partnership interests. The Partnership's real
estate investments are or have been located throughout the nation and it
has no real estate investments located outside of the United States. A
presentation of information about industry segments, geographic regions,
raw materials or seasonality is not applicable and would not be material to
an understanding of the Partnership's business taken as a whole. Pursuant
to the Partnership Agreement, the Partnership is required to terminate no
later than December 31, 2034. The Partnership is self-liquidating in
nature. At sale of a particular property, the net proceeds, if any, are
generally distributed or reinvested in existing properties rather than
invested in acquiring additional properties. The Partnership currently
expects to conduct an orderly liquidation of its interests in 900 Third
Avenue, Piper Jaffray Tower and Louis Joliet Mall investment properties
during 1999, barring any unforseen economic developments. However, the
Partnership may be unable to dispose of the Piper Jaffray Tower prior to
December 31, 1999. In addition, the Partnership currently expects to
retain its indirect interests in the 237 Park Avenue and 1290 Avenue of the
Americas investment properties and its interests in the Wells Fargo Center
- - South Tower beyond 1999.

The Partnership has made the real property investments set forth in
the following table:

<PAGE>

SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1998,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (g) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Old Orchard Shopping
Center
Skokie (Chicago),
Illinois. . . . . . 783,000 4/1/84 8/30/93 fee ownership of
sq.ft. land and improvements
g.l.a. (through joint venture
partnerships) (c)(d)
2. Brittany Downs
Apartments
Phase I and Phase II,
Thornton (Denver),
Colorado. . . . . . 464 units 8/15/84 1/10/95 fee ownership of land and
improvements
3. Scottsdale Financial
Center I
Scottsdale,
Arizona . . . . . . 106,800 9/28/84 12/17/93 fee ownership of land and
sq.ft. improvements
n.r.a.
4. Scottsdale Financial
Center II
Scottsdale,
Arizona . . . . . . 151,625 9/28/84 10/1/93 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land
5. 237 Park Avenue
Building
New York,
New York. . . . . . 1,140,000 8/14/84 (i) fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)
6. 1290 Avenue of the
Americas Building
New York,
New York. . . . . . 2,000,000 7/27/84 (i) fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
(c)

<PAGE>

7. 2 Broadway Building
New York,
New York. . . . . . 1,600,000 8/14/84 9/18/95 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
8. 1090 Vermont Avenue
Building
Washington, D.C.. . 140,000 9/26/84 5/29/98 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)(d)
9. Mariners Pointe
Apartments
Stockton,
California. . . . . 220 units 10/2/84 10/11/96 fee ownership of land and
improvements (through joint
venture partnership) (c)(f)
10. Louisiana Tower
Shreveport,
Louisiana . . . . . 349,000 11/14/84 8/30/95 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land
11. Marketplace at
South Street
Seaport
New York,
New York. . . . . . 263,000 12/14/84 3/8/88 fee ownership of improve-
sq.ft. ment and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
12. Gateway Tower
White Plains,
New York. . . . . . 552,000 12/31/84 12/30/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
13. Piper Jaffray Tower
Minneapolis,
Minnesota . . . . . 723,755 12/27/84 5% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)

<PAGE>

14. 900 Third Avenue
Building
New York,
New York. . . . . . 517,000 12/28/84 5% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)
15. Wells Fargo Center -
South Tower
Los Angeles,
California. . . . . 1,100,000 6/28/85 10% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(c)
16. Louis Joliet Mall
Joliet, Illinois. . 305,000 7/31/85 5% fee ownership of land and
sq.ft. improvements (g) (h)
g.l.a.
17. Turtle Creek Centre
Dallas, Texas . . . 296,378 8/30/85 3/7/89 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)(e)
18. Yerba Buena West
Office Building
San Francisco,
California. . . . . 267,687 8/30/85 6/24/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
19. Wilshire Bundy
Plaza
Los Angeles,
California. . . . . 284,724 11/7/85 3/27/96 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (e)

<PAGE>

<FN>
- -----------------------
(a) The computation of this percentage for properties held at
December 31, 1998 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.

(b) Reference is made to the Notes filed with this annual report for the
current outstanding principal balances and a description of the long-term
mortgage indebtedness secured by the Partnership's real property
investments.

(c) Reference is made to the Notes for a description of the joint venture
partnership or partnerships through which the Partnership made this real
property investment.

(d) Reference is made to the Notes for a description of the sale of the
Partnership's interest in this investment property.

(e) Reference is made to the Notes for a description of the disposition
of this investment property.

(f) Reference is made to the Notes for a description of the sale of this
investment property.

(g) Reference is made to Item 8 - Schedule III to the Consolidated
Financial Statements filed with this annual report for further information
concerning real estate taxes and depreciation.

(h) Reference is made to Item 6 - Selected Financial Data for additional
operating and lease expiration data concerning this investment property.

(i) The original invested capital percentage for the 237 Park Avenue
Building and the 1290 Avenue of the Americas Building was 7% and 15%,
respectively. Reference is made to the Notes for a description of the
reorganization and restructuring of the Partnership's indirect interests in
these investment properties.

</TABLE>

<PAGE>

The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned by affiliates of the General Partners or properties owned by certain
of the joint venture partners) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing
tenants. Additionally, the Partnership is in competition for new tenants
in markets where significant vacancies are present. Reference is made to
Item 7 below for a discussion of competitive conditions and capital
improvement plans of the Partnership and certain of its significant
investment properties. Approximate occupancy levels for the properties are
set forth in the table in Item 2 below to which reference is hereby made.
The Partnership maintains the suitability and competitiveness of its
properties in its markets primarily on the basis of effective rents, tenant
allowances and service provided to tenants. In the opinion of the
Corporate General Partner of the Partnership, all of the investment
properties held at December 31, 1998 are adequately insured. Although
there is earthquake insurance coverage for a portion of the value of the
Partnership's investment properties, the Corporate General Partner does not
believe that such coverage for the entire replacement cost of the
investment properties is available on economic terms.

In October 1994, the Partnership and its affiliated partners (together
with the Partnership, the "Affiliated Partners"), through JMB/NYC, entered
into an agreement (the "Agreement") with affiliates (the "Olympia & York
affiliates") of Olympia & York Developments, Ltd. ("O&Y") who were the
venture partners in the Joint Ventures that owned 237 Park Avenue, 1290
Avenue of the Americas and 2 Broadway Buildings, to resolve certain
disputes among the Affiliated Partners and the Olympia & York affiliates.
In general, the parties agreed to: (i) restructure the first mortgage
loan; (ii) sell the 2 Broadway Building; (iii) reduce or eliminate approval
rights of JMB/NYC with respect to virtually all property management,
leasing, sale or refinancing; (iv) amend the Joint Ventures' agreements to
eliminate any funding obligations by JMB/NYC and (v) establish a new
preferential cash distribution level for the Olympia & York affiliates. In
accordance with the Agreement and in anticipation of the sale of the 2
Broadway Building, the unpaid first mortgage indebtedness previously
allocated to 2 Broadway was allocated in 1994 to 237 Park Avenue and 1290
Avenue of the Americas Buildings.

As part of the Agreement, JMB/NYC and the Olympia & York affiliates
agreed to file a pre-arranged bankruptcy plan for reorganization under
Chapter 11 of the Bankruptcy Code in order to facilitate the restructuring
of the Joint Ventures between JMB/NYC and the Olympia & York affiliates and
the debt encumbering the two properties remaining after the sale of 2
Broadway. In June 1995, the 2 Broadway Joint Ventures filed their pre-
arranged bankruptcy plans for reorganization, and in August 1995, the
bankruptcy court entered an order confirming their plans of reorganization.

In September 1995, the sale of the 2 Broadway Building was completed. Such
sale did not result in any distributable proceeds to JMB/NYC or the Olympia
and York affiliates.

Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue
and 1290 Avenue of the Americas properties were made in April 1996, and in
August 1996, an Amended Plan of Reorganization and Disclosure Statement
(the "Plan") was filed with the Bankruptcy Court for these Joint Ventures.
The Plan was accepted by the various classes of debt and equity holders and
confirmed by the Court on September 20, 1996 and became effective
October 10, 1996 ("Effective Date"). The Plan provides that 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") owned primarily by holders of the first
mortgage debt that 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

<PAGE>

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. In addition, the original
purchase money notes made by JMB/NYC for its interest in the Properties,
which had outstanding principal and accrued and deferred interest of
approximately $117,679,000 at December 31, 1998, mature on January 2, 2001.

If such REIT affiliate exercises such right to purchase, due to the level
of indebtedness remaining on the Properties, the original purchase money
notes payable by JMB/NYC, and the significant preference levels to the
other partners within the reorganized structure of the joint ventures
owning the Properties and liabilities of the Partnership, it is unlikely
that such purchase would result in payment of any significant amount to
JMB/NYC. Additionally, at any time, JMB/NYC has 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.

The Affiliated Partners entered into a joint and several obligation 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, it is highly likely that the Partnership's share of
the collateral will be returned (including interest earned) at the
termination of the indemnification agreement.

While the Partnership is not expected to terminate in the near term,
it currently appears unlikely that any significant distributions will be
made by JMB/NYC to the Partnership at any time (other than a return of
funds held in escrow pursuant to the indemnification obligation) due to the
level of indebtedness remaining on the Properties, the original purchase
money notes payable by JMB/NYC and the significant preference levels for
the other partners within the reorganized joint ventures.

On May 29, 1998, the Partnership sold its interest in the 1090 Vermont
venture, as described more fully in the Notes.

Reference is made to Item 6 and to the Notes filed with this annual
report for a schedule of minimum lease payments to be received in each of
the next five years, and in the aggregate thereafter, under leases in
effect at the Partnership's investment property as of December 31, 1998.

<PAGE>

The Partnership has no employees.

The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.

ITEM 2. PROPERTIES

The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to
under Item 1 above to which reference is hereby made for a description of
said properties.

The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1998 and 1997 for the Partnership's investment properties owned
during 1998:

<PAGE>

<TABLE>
<CAPTION>
1997 1998
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1. 237 Park Avenue
Building
New York, New York. . . . Advertising/
Insurance/Paper/
Real Estate
Investment * * * * * * * *

2. 1290 Avenue of the
Americas Building
New York, New York. . . . Financial Services * * * * * * * *

3. 1090 Vermont Avenue
Building
Washington, D.C.. . . . . Trade Associations 84% 84% 91% 93% 93% N/A N/A N/A

4. Piper Jaffray Tower
Minneapolis,
Minnesota . . . . . . . . Legal Services/
Advertising/
Financial Services 98% 98% 93% 93% 91% 89% 89% 89%

5. 900 Third Avenue
Building
New York, New York. . . . Legal Services/
Detective Agency/
Financial Services 98% 98% 97% 97% 97% 100% 99% 97%

6. Wells Fargo Center -
South Tower
Los Angeles,
California. . . . . . . . Business Infor-
mation Systems 93% 90% 90% 90% 90% 90% 90% 85%

7. Louis Joliet Mall
Joliet, Illinois. . . . . Retail 82% 80% 82% 84% 83% 83% 84% 84%

<PAGE>

<FN>
- --------------------

Reference is made to Item 6, Item 7, and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.

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.

</TABLE>

<PAGE>

ITEM 3. LEGAL PROCEEDING

The Partnership is not subject to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
fiscal years 1998 and 1997.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of December 31, 1998, there were 41,057 record Holders of the
400,830.39402 Interests outstanding of the Partnership. There is no public
market for Interests and it is not anticipated that a public market for
Interests will develop. Upon request, the Corporate General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any economic aspects of the transaction, will be
subject to negotiation by the investor. There are certain conditions and
restrictions on the transfer of Interests, including, among other things,
the requirement that the substitution of a transferee of Interests as a
Limited Partner of the Partnership be subject to the written consent of the
Corporate General Partner, which, may be granted or withheld in its sole
and absolute discretion. The rights of a transferee of Interests who does
not become a substituted Limited Partner will be limited to the rights to
receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Corporate General Partner
has been received by the Corporate General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses from operations of the
Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the Holder of the
Interests, without regard to the results of the Partnership's operations
during particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized Holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a Holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
Holder of the Interests as of the last day of the quarterly period with
respect to which such distribution is made.

Reference is made to the Notes for a discussion of the provisions of
the Partnership Agreement relating to cash distributions. Reference is
made to Item 6 below for a discussion of cash distributions made to the
Holders of Interests. The mortgage loans secured by the 900 Third Avenue,
Wells Fargo Center - South Tower and Piper Jaffray Tower investment
properties restrict the use by the joint ventures which own such properties
of the cash flows from those properties as discussed more fully in the
Notes. In addition, the purchase money notes issued by JMB/NYC in
connection with its acquisition of interests in the 237 Park Avenue and
1290 Avenue of the Americas investment properties require that any
distributions payable to JMB/NYC with respect to such investment properties

<PAGE>

be applied to reduce the outstanding principal and interests on the
purchase notes.

Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.

<PAGE>

<TABLE>

ITEM 6. SELECTED FINANCIAL DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)

<CAPTION>
1998 1997 1996 1995 1994
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . $ 9,772,720 11,393,348 11,830,330 19,054,756 23,597,310
============ =========== =========== =========== ===========
Earnings (loss) before
gains on sale or
disposition of
investment properties . . . $ (1,838,405) 8,080,035 152,923,409 (27,465,134) (24,870,881)
Gains (losses) on sale of
the Partnership's interest
in unconsolidated venture,
sale of investment
properties by uncon-
solidated ventures
or on sale or
disposition of
investment properties . . . 2,594,828 -- 2,928,068 (14,886,886) 1,702,082
Extraordinary items. . . . . -- -- 23,622,011 35,711,359 (3,000,000)
Cumulative effect of an
accounting change . . . . . -- -- (16,000,000) -- --
------------ ----------- ----------- ----------- -----------
Net earnings (loss). . . . . $ 756,423 8,080,035 163,473,488 (6,640,661) (26,168,799)
============ =========== =========== =========== ===========

<PAGE>

1998 1997 1996 1995 1994
------------- ------------- ----------- ------------ ------------
Net earnings (loss) per
Interest (b):
Earnings (loss) before
gains on sale or
disposition of invest-
ment properties. . . . . $ (4.40) 19.35 366.18 (65.74) (59.53)
Gains (losses) on sale
of the Partnership's
interest in uncon-
solidated venture,
sale of investment
properties by
unconsolidated
ventures or on sale
or disposition
of investment
properties . . . . . . . 6.41 -- 7.23 (36.75) 4.20
Extraordinary items . . . -- -- 58.33 87.94 (7.18)
Cumulative effect of
an accounting
change . . . . . . . . . -- -- (38.31) -- --
------------ ----------- ----------- ----------- -----------
Net earnings (loss). . . . . $ 2.01 19.35 393.43 (14.55) (62.51)
============ =========== =========== =========== ===========

Total assets . . . . . . . . $ 48,869,476 63,829,469 60,002,966 106,113,792 147,075,454
Long-term debt . . . . . . . $ 55,119,460 51,768,623 48,359,317 26,000,000 25,794,970
Cash distributions
per Interest (c) . . . . . $ 45.00 -- -- 20.00 --
============ =========== =========== =========== ===========

<FN>
- -------------

(a) The above selected financial data should be read in conjunction with the consolidated financial statements
and the related notes appearing elsewhere in this annual report.

(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of the
period.

(c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for financial
reporting or Federal income tax purposes. Each Partner's taxable income (or loss) from the Partnership in each year
is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the cash generated
or distributed by the Partnership. Accordingly, cash distributions to the Holders of Interests since the inception
of the Partnership have represented a return of capital for financial reporting purposes.

</TABLE>

<PAGE>

<TABLE>

SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1998

Property
- --------

Louis Joliet
Mall
a) The gross leasable area ("GLA") occupancy rate and average base rent per
square foot as of December 31, for each of the last five years were
as follows:

GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>

1994. . . . . . 79% $13.53
1995. . . . . . 88% 13.29
1996. . . . . . 82% 14.65
1997. . . . . . 84% 15.37
1998. . . . . . 84% 15.94
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>

None - No single tenant represents more than 10%
of the gross leasable area of the property.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Louis Joliet Mall:

Annualized Percent of
Number of Approx. Total Base Rent Total 1998
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1999 12 15,450 $369,479 9%
2000 9 19,290 320,938 8%
2001 8 4,772 219,655 5%
2002 8 9,366 319,072 8%
2003 8 18,134 394,248 10%
2004 10 27,657 575,938 14%
2005 17 47,213 892,992 22%
2006 7 25,744 433,572 11%
2007 7 16,308 434,505 11%
2008 5 10,881 266,520 7%
<FN>
(1) Excludes leases that expire in 1999 for which renewal leases or leases with replacement
tenants have been executed as of January 5, 1999.
</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

Capitalized terms used herein but not defined have the same meanings
as in the Notes.

As a result of the public offering as described in Item 1, the
Partnership had approximately $351,747,000 after deducting selling expenses
and other offering costs with which to make investments in income-producing
commercial and residential real property, to pay legal fees and other costs
(including acquisition fees) related to such investments and for working
capital. A portion of such proceeds was utilized to acquire the properties
described in Item 1 above.

The board of directors of JMB Realty Corporation ("JMB") the Corporate
General Partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender 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. through June 1998 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. All of such offers have expired. As of the date of this
report, the Partnership is aware that approximately 1.56% 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 December 31, 1998, the Partnership had cash and cash equivalents of
approximately $6,876,000. Such funds were available for working capital
requirements.

As discussed more fully below, in March 1999 JMB/900 settled various
claims and acquired the interest of the FDIC and the unaffiliated venture
partners in Progress Partners, which owns the 900 Third Avenue office
building, for $16,300,000, of which $13,800,000 was paid upon closing of
the various transactions. In connection with these transactions, the
Partnership contributed its proportionate share (approximately $4,600,000)
of the $13,800,000 contributed to JMB/900.

The Partnership has currently budgeted in 1999 approximately $902,000
for tenant improvements and other capital expenditures. Such amount does
not include any portion of additional funds recently requested by the
replacement cinema operator at Louis Joliet Mall in connection with cost
overruns incurred in reconfiguring its tenants space, which is discussed
below. Such items and the Partnership's share of such similar items for
its unconsolidated ventures in 1999 is currently budgeted to be
approximately $1,870,000. Actual amounts expended in 1999 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.

<PAGE>

The source of capital for such items 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 of such investments. However, due to
the property specific concerns discussed below, the Partnership currently
considers only Louis Joliet Mall and 900 Third Avenue to be potential
sources of future cash generated from operations or sales. In such regard,
reference is made to the Partnership's property specific discussions below.

The Partnership distributed approximately $14,029,000 ($35/interest)
to the Holders of Interest in the third quarter of 1998. Although, it was
previously reported that the distribution was composed solely of sale
proceeds, it in fact 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. In connection with this
distribution, the Corporate General Partner received a management fee of
approximately $557,000. Additionally, the Partnership distributed
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 connection with this
distribution, the Corporate General Partner received a management fee of
approximately $278,000.

Piper Jaffray Tower

Occupancy of the building at the end of the fourth quarter of 1998 was
89%.

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 December 31, 1998. The lender is essentially entitled to all
operating cash flow. In addition to fixed interest on the mortgage notes
secured by the Piper Jaffray Tower, contingent interest is payable in
annual installments on April 1 computed at 50% of gross receipts, as
defined, for each fiscal year in excess of $15,200,000. No such contingent
interest was due for 1996, 1997 or 1998. 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 1996 and 1997 totalled $741,627
and $385,523, respectively. During 1998, no such excess cash flow was
generated.

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 as a result of the Popham Haik
("Popham") and Piper Jaffray, Inc. ("PJI") situations discussed below.
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

<PAGE>

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.

On a monthly basis, Piper deposits the property management fee into an
escrow account to be used (including interest earned thereon) 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. At December 31, 1998, the balance of such escrow account totaled
approximately $5,441,000. The manager of the property (which was an
affiliate of the Corporate General Partner through November 1994) has
agreed to defer receipt of its management fee until a later date. As of
December 31, 1998, the manager has deferred approximately $4,445,000
($1,839,000 of which represents deferred fees due to affiliates through
November 1994, of which $919,500 is the Partnership's share) of management
fees.

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 that
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 May 1998, Piper executed the
lease with Hinshaw in accordance with the letter of intent and Piper
terminated Popham's lease (for approximately 47,000 square feet) effective
December 31, 1997 with no further consideration.

Piper had discussed an early renewal with PJI which occupies 332,823
square feet or approximately 46% of the building's rentable square feet,
with a lease expiration date at March 31, 2000. Piper and PJI were unable
to come to terms and PJI announced that it would be moving to a new
building (to be built in Minneapolis) upon expiration of its existing lease
in 2000.

As a result of a flood in 1997, the property incurred significant
repair costs in 1998. Piper completed such repairs and the balance
(approximately $1,100,000) is expected to be reimbursed by the insurance
carrier in 1999. JMB/Piper made certain advances to Piper for such costs,
and expects to have the advances repaid upon reimbursement from the
insurance carrier.

As of September 30, 1997, the JMB/Piper venture has classified the
property as held for sale or disposition. The Property will therefore no
longer be subject to continued depreciation.

<PAGE>

Wells Fargo Center - South Tower

The Wells Fargo Center ("South Tower") operates in the downtown Los
Angeles office market, which has become extremely competitive over the last
several years. The Partnership expects that the competitive market
conditions in Southern California will have an adverse affect on the
building through lower effective rental rates achieved on re-leasing of
existing space which expires or is given back over the next several years.
In addition, new leases are expected to require substantial 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 next several years.

During 1996, the Partnership, the joint venture, and the lenders
reached an agreement to modify the mortgage note and the promissory note
secured by the Partnership's interest in the property. In conjunction with
the note modifications, the Maguire/Thomas Partners - South Tower LLC was
converted to a limited liability company with members' interests in the
same ratio as the prior venture ownership interests. The conversion of the
Partnership's interest to a member's interest in a limited liability
company eliminates any potential additional obligation of the Partnership
in the future to provide additional funds under the previous joint venture
agreement. As a result, previously recognized losses of $5,712,902 have
been reversed and the Partnership's 1998 and 1997 shares of income for
financial reporting purposes (approximately $267,000 and $152,000,
respectively) have not been recognized as such amounts are not considered
realizable. Since the terms of modified mortgage note and the amended and
restated promissory note make it unlikely that the Partnership would
recover any incremental investment, the Partnership has decided not to
commit any significant additional amounts to the property. Reference is
made to the Notes for a further description of these events.

JMB/NYC

Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue
and 1290 Avenue of the Americas properties (the "Properties") were made in
April 1996, and in August 1996, an Amended Plan of Reorganization and
Disclosure Statement (the "Plan") was filed with the Bankruptcy Court for
these Joint Ventures. The Plan was accepted by the various classes of debt
and equity holders and confirmed by the Court on September 20, 1996 and
became effective October 10, 1996 ("Effective Date"). The Plan provides
that 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"). The new ownership
structure gives control of the Properties to an unaffiliated real estate
investment trust ("REIT") is owned primarily by holders of the first
mortgage debt that 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. In addition, the original
purchase money notes made by JMB/NYC for its interest in the Properties
which had an outstanding principal and accrued and deferred interest of
approximately $117,679,000 at December 31, 1998, mature on January 2, 2001.

If such REIT affiliate exercises such right to purchase, due to the level
of indebtedness remaining on the Properties, the original purchase money
notes payable by JMB/NYC, and the significant preference levels within the
reorganized structure and liabilities of the Partnership, 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 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.

<PAGE>

The restructuring and reorganization discussed above eliminates any
potential additional obligation of the Partnership in the future to provide
additional funds under its previous joint venture agreements(other than
that related to a certain indemnification agreement provided in connection
with the restructuring). The Affiliated Partners entered into a joint and
several obligation 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.

1090 Vermont Avenue Building

On May 29, 1998, the Partnership sold its interest in the 1090 Vermont
venture to the unaffiliated venture partner for $4,725,409. Reference is
made to the Notes for a further description of such transaction.

900 Third Avenue Building

Occupancy of this building at the end of the fourth quarter of 1998
was 97%.

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 of 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 space has been renewed or
released. During 1998, approximately $10,262,000 has been deposited into
escrow from net cash flow from property operations. Additionally,
approximately $5,149,000 has been withdrawn from the escrow account for
payment of real estate taxes in 1998.

<PAGE>

In July 1998, JMB/900 entered into an agreement with the Venture
Partners and a judgment creditor of JRA and PPI (such judgment creditor,
JRA and PPI, are hereinafter collectively referred to as the "Progress
Parties") to resolve outstanding claims. The agreement was subject to
occurrence of various terms and conditions, which failed to occur. In a
further effort to resolve outstanding claims and to place JMB/900 in a
position to control and market the property, JMB/900 entered into a
settlement agreement with the Progress Parties effective as of March 17,
1999 ("Settlement Agreement"). The Settlement Agreement generally provides
for the settlement and release of all claims and causes of action by and
against JMB/900 and the Progress Parties related to or arising from the
joint venture relationship or the property including, without limitation,
any claims by the Venture Partners to Guaranteed Payments and any claims by
Progress Partners for capital contributions from JMB/900. Under the
Settlement Agreement and related transactions, JMB/900 and an affiliate
acquired all of the right, title and interest of the Progress Parties in
the property, Progress Partners and PC-900 and resolved all outstanding
litigation in exchange for a total payment of $16.0 million, $13.5 million
of which was paid at closing of the Settlement Agreement with the remaining
$2.5 million to be paid upon the earlier of (i) closing of a sale of the
property by Progress Partners or (ii) January 3, 2000. In a related
agreement and for the payment of $300,000 and the release of various
claims, the litigation and claims by and between the FDIC and JMB/900 were
resolved and dismissed. As part of the settlement, the limited partnership
interests in PC-900 in Progress Partners were assigned to 14-15 Office
Associates, L.P. ("Office Associates"), in which JMB/900 owns a 99% limited
partnership interest. P-C 900's interest in Progress Partners was then
transferred to JMB/900 and Office Associates, which are now the sole
remaining partners in Progress Partners. Amendments to the joint venture
agreement of Progress Partners were made to effectuate the terms of the
settlement and the substitution of partners.

Louis Joliet Mall

Occupancy of this mall at the end of the fourth quarter of 1998 was
84%.

The Partnership has negotiated a lease with Silver Cinemas, Inc., a
replacement operator for General Cinema, Inc. (approximately 5% of the mall
space). In connection with the new lease, the Partnership agreed to
contribute $700,000 to reconfigure the current four screen cinema to a six
screen cinema. The replacement operator has encountered cost overruns in
reconfiguring its tenant space and has requested that the Partnership agree
to contribute additional funds for the reconfiguration. The Partnership is
currently considering this request. Additionally, such tenant's credit
rating was recently downgraded. Two other tenants occupying approximately
8,900 square feet of space recently filed for protection from creditors
under chapter 11 of the Bankruptcy Code. There is no assurance that either
of these tenants will continue to honor their respective leases.

The Partnership had been marketing the property for sale. In March
1999, the Partnership entered into a contract for the sale of the Louis
Joliet Mall to BRE/Louis Joliet LLC, an unaffiliated third party. The sale
is subject to the satisfaction of various conditions and there is no
assurance that such sale will occur. In light of issues concerning one or
more of the tenants discussed above, it is expected that a modification of
the existing sale contract will be required if the sale is to be completed.

<PAGE>

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. In
addition, the former lender has filed an action and subsequently received
an order against the joint venture for fees expended in the litigation (the
Partnership's potential share of such order is approximately $245,000). In
December 1998, one of the affiliated venture partners, to resolve its
claims and liabilities, paid an agreed upon amount to the joint venture in
respect of its estimated liabilities related to the litigation and withdrew
from the venture. As of the date of this report, the joint venture does
not anticipate reimbursing the former lender for fees expended in the
litigation. There can be no assurance that the litigation will ultimately
be successful, or that the Partnership will ultimately realize any amounts
(or avoid any further payments) with respect thereto.

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. 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 its ventures' mortgage
obligations generally are separate non-recourse loans secured individually
by the investment properties and are not obligations of the entire
investment portfolio, and the Partnership and its ventures are not
personally liable for the payment of the 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 partner in an investment
might become unable or unwilling to fulfill its financial or other
obligations, or that such joint venture partner may have economic or
business interests or goals that are inconsistent with those of the
Partnership.

<PAGE>

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. All 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 to be able to conduct an
orderly liquidation of its interests in 900 Third Avenue, Piper Jaffray
Tower and Louis Joliet Mall investment properties during 1999, barring
unforeseen economic developments. However, the Partnership may be unable
to dispose of the Piper Jaffray Tower prior to December 31, 1999. In
addition, the Partnership currently expects to retain its indirect
interests in the 237 Park Avenue and the 1290 Avenue of the Americas
investment properties and the Partnership's interests in the Wells Fargo
Center - South Tower beyond 1999. Although the Partnership expects to
distribute sale proceeds from the sale 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 will be allocated 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 properties or the
Partnership's interest therein, the Partnership, and therefore the Holders
of Interest will recognize a substantial 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

At December 31, 1998, 1997 and 1996, the Partnership owned six, seven
and seven investment properties, respectively, all of which were operating.

Significant variances between periods reflected in the accompanying
consolidated financial statements not otherwise reported are primarily the
result of the sale of the Mariners Pointe Apartments in October 1996, the
lender realizing upon its security in the Wilshire Bundy Plaza in March
1996, and the restructuring of the Partnership's interest in JMB/NYC and
South Tower in 1996 and the sale of the Partnership's interest in the 1090
Vermont Venture in May 1998.

The decrease in cash and cash equivalents at December 31, 1998 as
compared to December 31, 1997 is primarily due to the distributions of
sales proceeds and previously undistributed cash flow from operations to
the General Partners of approximately $501,000 and Holders of Interests of
approximately $18,037,000 in 1998. The decrease is partially offset by
proceeds received from the sale of the Partnership's interest in the 1090
Vermont venture of approximately $4,725,000.

The increase in interest, rents and other receivable at December 31,
1998 as compared to December 31, 1997 is primarily due to advances to
JMB/Piper for payments of repairs for flood damage, which are expected to
be reimbursed by insurance proceeds.

The decrease in accounts payable and other current liabilities at
December 31, 1998 as compared to December 31, 1997 is primarily due to the
timing of redemption of gift certificates at the Louis Joliet Mall.

<PAGE>

The increase in long-term debt, less current portion at December 31,
1998 as compared to December 31, 1997 is primarily due to the accumulation
of deferred accrued interest related to the promissory note secured by the
Partnership's interest in the Wells Fargo - South Tower joint venture.

The decrease in interest income for the year ended December 31, 1998
as compared to the year ended December 31, 1997 is primarily due to a
decrease in average cash balances due to the distributions of sales
proceeds and previously undistributed cash flow from operations to the
General Partners and the Holders of Interests. The increase in interest
income for the year ended December 31, 1997 as compared to December 31,
1996 is primarily due to a higher average cash balance for investments in
1997.

The increase in other income for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is primarily due to the
receipt of the final settlement payment of $1,400,000 related to Turtle
Creek in December 1997. Other income for the year ended December 31, 1998
is due to the sale of stock in 1998 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 decrease in depreciation for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is primarily due to the
classification of Louis Joliet Mall as held for sale or disposition as of
December 31, 1996, and therefore, the property is no longer subject to
continuing depreciation.

The increase in professional fees for the year ended December 31, 1998
as compared to the year ended December 31, 1997 is primarily due to the
Partnership incurring additional legal fees for the Yerba Buena litigation.

The decrease in professional fees for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is primarily due to the
Partnership no longer incurring legal fees related to the restructurings in
1996 of the Partnership's interest in Wells Fargo Center and JMB/NYC's
interest in the 237 Park and 1290 Avenue of the Americas.

The increase in management fees to Corporate General Partner for the
year ended December 31, 1998 as compared to the years ended December 31,
1997 and December 31, 1996 is due to operating distributions made in 1998.

The decrease in general and administrative expenses for the year ended
December 31, 1998 as compared to the year ended December 31, 1997 is
primarily due to a decrease in certain expenses related to the
administration of the Partnership. The increase in general and
administrative expenses for the year ended December 31, 1997 as compared to
December 31, 1996 is primarily due to an increase in costs for the use of
independent third parties to perform certain administrative services for
the Partnership.

The restructuring fee for the year ended December 31, 1996 is due to
the loan modification of the Partnership's note payable to Wells Fargo and
restructuring of the South Tower venture during the fourth quarter of 1996.

The Partnership's share of the reduction of the maximum unfunded
obligation under the indemnification agreement recognized as income for the
period ending December 31, 1998 and December 31, 1997 is a result of
interest income earned on amounts contributed by the Partnership and held
in escrow by JMB/NYC. Such income reduces the Partnership's proportionate
share of its unfunded maximum obligation under the indemnification
agreement.

<PAGE>

The decrease in Partnership's share of operations of unconsolidated
ventures for the year ended December 31, 1998 as compared to December 31,
1997 is primarily due to the reversal of $18,600,000 of accrued contingent
interest related to the mortgage loan at the Piper Jaffray Tower. This
resulted in additional income allocated to the Partnership in 1997. The
decrease in Partnership's share of operations of unconsolidated ventures
for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 is primarily due to the restructuring of JMB/NYC's
interests in the 237 Park Avenue, 1290 Avenue of the Americas and Wells
Fargo Center - South Tower Properties. During 1996, the Partnership
recognized income from restructuring of $163,226,750, which is included
with losses from operations of unconsolidated ventures. Pursuant to the
terms of the Plan, JMB/NYC converted its general partnership interest in
the joint ventures which owned the Properties to a limited partnership
interest and accordingly no longer has a commitment to provide financial
support to the joint ventures owning the Properties. As of the Effective
Date, the Partnership has discontinued the application of the equity method
of accounting for its indirect interests in the properties and additional
losses from the investment in unconsolidated venture will not be
recognized. Additionally, the decrease in 1997 is partially offset by the
reversal of accrued contingent interest discussed above.

The gain on sale of interest in unconsolidated venture for the year
ended December 31, 1998 and related decrease in investment in
unconsolidated ventures, at equity is due to the sale of the Partnership's
interest in the 1090 Vermont venture in May 1998. Additionally, the
decrease is also due the Partnership's receipt of approximately $600,000 of
undistributed operating cash flow from that venture in 1998.

INFLATION

Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.

Inflation in future periods may have an adverse impact on property
operating expenses, which would generally be offset by amounts recovered
from tenants as many of the long-term leases at the Partnership's
commercial properties have escalation clauses covering increases in the
cost of operating the properties as well as real estate taxes. Therefore,
the effect on operating earnings generally will depend upon the extent to
which the properties are occupied. In addition, substantially all of the
leases at the Partnership's shopping center investment contain provisions
which entitle the property owner to participate in gross receipts of
tenants above fixed minimum amounts.

YEAR 2000

The year 2000 problem is the result of computer programs being written
with two digits rather than four to define a year. Consequently, any
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations
including, among other things, an inability to process transactions or
engage in other normal business activities.

The Partnership uses the telephone, accounting, transfer agent and
other administrative systems, which include both hardware and software,
provided by affiliates of the Corporate General Partner and certain third
party vendors. Except as noted in the following sentence, the Partnership
or its affiliates have received representations to the effect that the
telephone, accounting, transfer agent and other administrative systems are
year 2000 compliant in all material respects. Both the hardware and
software for individual personal computers used in the Partnership's
administrative systems are expected to be tested for their year 2000
compliance during the summer of 1999.

<PAGE>

In addition, the Partnership has received written representation from
the property managers for 900 Third Avenue, Piper Jaffray Tower and Louis
Joliet Mall that the building systems (e.g., elevator, alarm, security and
HVAC systems) are or are being made year 2000 compliant in all material
respects. Certain of the building systems at these properties need minor
upgrading, which has been undertaken and is expected to be completed in the
near future without incurring material expense. In addition, the
Partnership currently expects that these properties will be sold during
1999, with the possible exception of the Piper Jaffray Tower. The
Partnership does not currently know the extent to which the Wells Fargo
Center - South Tower or the respective joint ventures that own these
properties are year 2000 compliant.

The Partnership does not believe that the year 2000 problem presents
any material additional risks to its business, results of operations or
financial condition and has not developed, and does not intend to develop,
any contingency plans to address the year 2000 problem. Given its limited
operations, the Partnership believes that its accounting, transfer agent
and most of its other administrative systems functions could, if necessary,
be performed manually (i.e., without significant information technology)
for an extended period of time without a material increase in costs to the
Partnership. The Partnership has not incurred and does not expect to
incur, any material direct costs for year 2000 compliance

The Partnership is relying on the representations of the property
managers for 900 Third Avenue, Piper Jaffray Tower and Louis Joliet Mall
regarding the ability of those properties to be year 2000 compliant in all
material respects. In the event that the Partnership's investment
properties are not year 2000 compliant in all material respects, the
relevant investment property or properties could experience various
operational difficulties, such as possible systems failures. Such
operational difficulties could result in remediation and, under certain
circumstances, possibly other costs and expenses. If such were to occur,
there is no assurance that such costs and expenses would not, under certain
circumstances, have a material adverse effect on the Partnership or its
investment in 900 Third Avenue, Piper Jaffray Tower and/or Louis Joliet
Mall in the event such properties are not sold during 1999.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership has identified interest rate changes as a potential
market risk. However, as the Partnership's long-term debt bears interest
at a fixed rate and is due to mature subsequent to the Partnership's
expected liquidation and termination date, the Partnership does not believe
that it is exposed to market risk relating to interest rate changes.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

INDEX

Independent Auditors' Report

Consolidated Balance Sheets, December 31, 1998 and 1997

Consolidated Statements of Operations, years ended December 31, 1998,
1997 and 1996

Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1998, 1997 and 1996

Consolidated Statements of Cash Flows, years ended December 31,
1998, 1997 and 1996

Notes to Consolidated Financial Statements

SCHEDULE
--------

Consolidated Real Estate and Accumulated Depreciation III

SCHEDULES NOT FILED:

All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV:

We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XIV, a limited partnership, (the Partnership),
and its consolidated venture as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and the
financial statement schedule are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Partnership and its consolidated venture at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated venture changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.

KPMG LLP

Chicago, Illinois
March 29, 1999

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 AND 1997

ASSETS
------
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 6,875,849 21,051,953
Interest, rents and other receivables (net of allowance
for doubtful accounts of $72,746 for 1998 and
$27,963 for 1997, respectively). . . . . . . . . . . . . . . . . . . . 685,990 253,069
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,860 25,860
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,268 292,110
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 7,939,967 21,622,992
------------ ------------
Investment property held for sale or disposition . . . . . . . . . . . . . 34,434,318 33,994,623
------------ ------------

Investment in unconsolidated ventures, at equity . . . . . . . . . . . . . 5,068,160 6,570,294
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856,169 1,082,305
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . 570,862 559,255
------------ ------------

$ 48,869,476 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)
-----------------------------------------------------

1998 1997
------------ ------------
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . $ 387,096 357,323
Accounts payable and other current liabilities . . . . . . . . . . . . . 774,360 1,394,605
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,415,702 1,345,828
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,101 172,492
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . 545,000 593,054
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 3,292,259 3,863,302
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . 19,919 17,169
Investment in unconsolidated ventures, at equity . . . . . . . . . . . . . 5,958,542 5,650,592
Partnership's share of the maximum unfunded obligation under the
indemnification agreement. . . . . . . . . . . . . . . . . . . . . . . . 7,994,262 8,262,766
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 55,119,460 51,768,623
------------ ------------
Commitments and contingencies

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 72,384,442 69,562,452

Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (15,069,445) (15,021,857)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (1,817,374) (1,316,336)
------------ ------------
(16,885,819) (16,337,193)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (296,162,587) (296,966,598)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (62,213,396) (44,176,028)
------------ ------------
(6,629,147) 10,604,210
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . (23,514,966) (5,732,983)
------------ ------------
$ 48,869,476 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

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 8,617,055 8,559,300 10,544,285
Interest income. . . . . . . . . . . . . . . . . . . 969,623 1,056,203 854,307
Other income . . . . . . . . . . . . . . . . . . . . 186,042 1,777,845 431,738
------------ ------------ ------------
9,772,720 11,393,348 11,830,330
------------ ------------ ------------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . 5,866,362 5,893,740 5,971,389
Depreciation . . . . . . . . . . . . . . . . . . . . -- -- 1,462,969
Property operating expenses. . . . . . . . . . . . . 4,289,800 4,145,604 5,289,810
Professional services. . . . . . . . . . . . . . . . 774,037 537,334 739,065
Amortization of deferred expenses. . . . . . . . . . 186,521 217,634 367,084
Management fees to Corporate General Partner . . . . 835,063 -- --
General and administrative . . . . . . . . . . . . . 686,594 783,752 659,725
Restructuring fee. . . . . . . . . . . . . . . . . . -- -- 6,118,255
------------ ------------ ------------
12,638,377 11,578,064 20,608,297
------------ ------------ ------------
(2,865,657) (184,716) (8,777,967)
Partnership's share of the reduction of the
maximum unfunded obligation under the
indemnification agreement. . . . . . . . . . . . . . 268,504 268,504 --
Partnership's share of operations of unconsolidated
ventures (including income from restructuring of
$163,226,750 in 1996). . . . . . . . . . . . . . . . 758,748 7,996,247 161,701,376
------------ ------------ ------------

Earnings (loss) before gain on sale or
disposition of investment properties . . . . . . (1,838,405) 8,080,035 152,923,409
Gain on sale of interest in unconsolidated venture . . 2,594,828 -- --
Partnership's share of gains (losses) on sale of
investment properties by unconsolidated ventures . . -- -- 870,837
Gain on sales or dispositions of
investment properties. . . . . . . . . . . . . . . . -- -- 2,057,231
------------ ------------ ------------
Earnings (loss) before
extraordinary items. . . . . . . . . . . . . . . 756,423 8,080,035 155,851,477

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1998 1997 1996
------------ ------------ ------------
Extraordinary items:
Gain on forgiveness of indebtedness. . . . . . . . . -- -- 23,622,011
Cumulative effect of an accounting change. . . . . . . -- -- (16,000,000)
------------ ------------ ------------
Net earnings (loss). . . . . . . . . . . . . . . . $ 756,423 8,080,035 163,473,488
============ ============ ============
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gains on sale or
disposition of investment properties . . . . $ (4.40) 19.35 366.18
Gain on sale of interest in unconsolidated
venture. . . . . . . . . . . . . . . . . . . 6.41 -- --
Partnership's share of gains (losses)
on sale of investment properties
by unconsolidated ventures . . . . . . . . . -- -- 2.15
Gains on sale or disposition of
investment properties. . . . . . . . . . . . -- -- 5.08
Extraordinary items. . . . . . . . . . . . . . -- -- 58.33
Cumulative effect of an accounting change. . . -- -- (38.31)
------------ ------------ ------------
Net earnings (loss). . . . . . . . . . . . . . $ 2.01 19.35 393.43
============ ============ ============

<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 PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficits)
Decem-
ber 31,
1994. . . . . $1,000 (20,281,012) (1,235,319) (21,515,331) 351,746,836 (456,620,305) (36,155,381) (141,028,850)

Cash dis-
tributions
$20 per
limited
Partnership . -- -- (81,017) (81,017) -- -- (8,020,647) (8,020,647)
Net earnings
(loss). . . . -- (806,483) -- (806,483) -- (5,834,178) -- (5,834,178)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1995. . . . . 1,000 (21,087,495) (1,316,336) (22,402,831) 351,746,836 (462,454,483) (44,176,028) (154,883,675)

Net earnings
(loss). . . . -- 5,742,437 -- 5,742,437 -- 157,731,051 -- 157,731,051
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED

GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- ------------
Balance
(deficits)
Decem-
ber 31,
1996. . . . . 1,000 (15,345,058) (1,316,336) (16,660,394) 351,746,836 (304,723,432) (44,176,028) 2,847,376

Net earnings
(loss). . . . -- 323,201 -- 323,201 -- 7,756,834 -- 7,756,834
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1997. . . . . 1,000 (15,021,857) (1,316,336) (16,337,193) 351,746,836 (296,966,598) (44,176,028) 10,604,210

Cash dis-
tributions
$45 per
limited
Partnership . -- -- (501,038) (501,038) -- -- (18,037,368) (18,037,368)
Net earnings
(loss). . . . -- (47,588) -- (47,588) -- 804,011 -- 804,011
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1998. . . . . $1,000 (15,069,445) (1,817,374) (16,885,819) 351,746,836 (296,162,587) (62,213,396) (6,629,147)
====== =========== ========== =========== =========== ============ =========== ============

<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
YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 756,423 8,080,035 163,473,488
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . -- -- 1,462,969
Amortization of deferred expenses. . . . . . . . . 186,521 217,634 367,084
Long-term debt - deferred accrued interest . . . . 3,737,933 3,737,933 --
Partnership's share of the reduction of the
maximum unfunded obligation under the
indemnification agreement. . . . . . . . . . . . (268,504) (268,504) --
Restructuring fee. . . . . . . . . . . . . . . . . -- -- 6,118,255
Partnership's share of operations of
unconsolidated ventures (including income
from restructuring of $163,662,750 in 1996). . . (758,748) (7,996,247) (161,701,376)
Gain on sale of interest in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . (2,594,828) -- --
Partnership's share of gain (loss) on
sale of investment properties by
unconsolidated ventures. . . . . . . . . . . . . -- -- (870,837)
Gain on sale or disposition of investment
properties . . . . . . . . . . . . . . . . . . . -- -- (2,057,231)
Extraordinary items. . . . . . . . . . . . . . . . -- -- (23,622,011)
Cumulative effect of an accounting change. . . . . -- -- 16,000,000
Changes in:
Restricted funds . . . . . . . . . . . . . . . . . . -- -- (861,169)
Interest, rents and other receivables. . . . . . . . (432,921) (90,769) (113,362)
Prepaid expenses . . . . . . . . . . . . . . . . . . -- -- 31,273
Escrow deposits. . . . . . . . . . . . . . . . . . . (60,158) (41,507) 98,715
Accrued rents receivable . . . . . . . . . . . . . . (11,607) (105,761) (42,471)
Accounts payable . . . . . . . . . . . . . . . . . . (620,245) (59,754) 299,424
Due to affiliates. . . . . . . . . . . . . . . . . . 69,874 71,970 129,878
Accrued interest . . . . . . . . . . . . . . . . . . (2,391) (1,491) 3,474,759
Accrued real estate taxes. . . . . . . . . . . . . . (48,054) (7,046) 158,390
Tenant security deposits . . . . . . . . . . . . . . 2,750 2,001 (7,188)
------------ ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . (43,955) 3,538,494 2,338,590
------------ ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
----------- ----------- -----------
Cash flows from investing activities:
Additions to investment properties . . . . . . . . . . (439,695) (392,235) (608,071)
Partnership's distributions from
unconsolidated ventures. . . . . . . . . . . . . . . 584,492 200,000 3,568,234
Cash proceeds from sale of investment
properties or interest in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . . . 4,725,409 -- 777,478
Partnership's contributions to
unconsolidated ventures. . . . . . . . . . . . . . . (146,241) -- (4,368,397)
Refund (payment) of deferred expenses, net . . . . . . 39,615 (141,396) (198,100)
------------ ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . 4,763,580 (333,631) (828,856)
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . (357,323) (222,814) --
Proceeds received on restructuring and
refinancing of long-term debt. . . . . . . . . . . . -- -- 350,000
Distributions to general partners. . . . . . . . . . . (501,038) -- --
Distributions to limited partners. . . . . . . . . . . (18,037,368) -- --
------------ ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . (18,895,729) (222,814) 350,000
------------ ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . (14,176,104) 2,982,049 1,859,734

Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . 21,051,953 18,069,904 16,210,170
------------ ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . . $ 6,875,849 21,051,953 18,069,904
============ =========== ===========

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
------------ ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . $ 2,130,820 2,082,634 2,496,630
============ =========== ===========
Non-cash investing and financing activities:
Sale of interest in unconsolidated venture:
Gain on sale of interest in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . $ 2,594,828 -- --
Basis in unconsolidated venture. . . . . . . . . . 2,130,581 -- --
------------ ----------- -----------
Cash proceeds from sale of interest in uncon-
solidated venture . . . . . . . . . . . . . . $ 4,725,409 -- --
============ =========== ===========
Sale of investment properties:
Total sale proceeds, net of selling expenses . . . $ -- -- 7,277,478
Principal balances due on mortgages payable. . . . -- -- (6,500,000)
------------ ----------- -----------
Cash proceeds from sale of investment
property, net of selling expenses. . . . . . . . $ -- -- 777,478
============ =========== ===========
Extraordinary item due to forgiveness
of indebtedness secured by
Wilshire Bundy Plaza . . . . . . . . . . . . . . $ -- -- 23,622,011
============ =========== ===========
Gross proceeds from restructuring and
refinancing of long-term debt. . . . . . . . . . $ -- -- 9,737,838
Restructuring fee. . . . . . . . . . . . . . . . . -- -- (6,118,255)
Accrued interest . . . . . . . . . . . . . . . . . -- -- (3,269,583)
------------ ----------- -----------
Proceeds received on restructuring
and refinancing of long-term debt. . . . . $ -- -- 350,000
============ =========== ===========
Gain recognized on disposition of investment
properties . . . . . . . . . . . . . . . . . . . $ -- -- 2,928,068
============ =========== ===========
Reduction in investment in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . $ -- 801,592 1,600,000
============ =========== ===========
Reduction in amounts due to affiliates . . . . . . $ -- -- (1,600,000)
============ =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996

GENERAL

The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a wide variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate.

The accompanying consolidated financial statements include the accounts
of the Partnership and its majority-owned venture, Mariners Pointe
Associates ("Mariners Pointe") (prior to its sale in October 1996). The
effect of all significant transactions between the Partnership and the
consolidated venture has been eliminated. The equity method of accounting
has been applied in the accompanying consolidated financial statements with
respect to the Partnership's interests in Orchard Associates; 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 prior to its sale in May 1998, N.W. Associates Limited
Partnership ("1090 Vermont"); Maguire/Thomas Partners - South Tower LLC
(formerly Maguire/Thomas Partners - South Tower) ("South Tower").

The Partnership holds an approximate 50% interest in JMB/NYC Office
Building Associates, L.P. ("JMB/NYC") which in turn owns an indirect
approximate 4.9% interest (before taking into account significant
preferences to other partners) in commercial real estate in the City of New
York, New York consisting of the 237 Park Avenue and 1290 Avenue of the
Americas properties (the "Properties").

The equity method of accounting has been applied in the accompanying
financial statements with respect to the Partnership's indirect 50%
interest in JMB/NYC through Carlyle XIV Associates, L.P. through the
confirmation and acceptance of the Amended Plan of Reorganization and
Disclosure Statement on October 10, 1996 ("Effective Date"). Accordingly,
the financial statements do not include the accounts of JMB/NYC or Carlyle
XIV Associates, L.P. The share of income from unconsolidated venture in
the accompanying consolidated financial statements includes the
Partnership's proportionate share of the operations of the Properties
through the Effective Date, as well as income from restructuring,
consisting primarily of the reversal of previously recognized losses and
adjustments necessary to record the restructuring. During 1996, the
Partnership reversed those previously recognized losses resulting from its
interest in JMB/NYC that it is no longer obligated to fund due to the
conversion of JMB/NYC's general partnership interest in the joint ventures
which owned the Properties to a limited partnership interest and the terms
of the restructuring. The Partnership has no future funding obligations
(other than that related to a certain indemnification agreement provided in
connection with the restructuring) and has no influence or control over the
day-to-day affairs of the joint ventures which own the Properties
subsequent to the Effective Date. Accordingly, the Partnership has
discontinued the application of the equity method of accounting for the

<PAGE>

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.

Due to the restructuring of the Partnership's interest in Wells Fargo
Center - South Tower, as discussed below, the Partnership has ceased loss
recognition relative to its real estate investment and has reversed those
previously recognized losses that the Partnership is no longer obligated to
fund, which is reflected as income from restructuring in 1996 in the
Partnership's share of income from operations of unconsolidated ventures.
The Partnership has no future funding obligations for its investment in
Wells Fargo Center - South Tower. Accordingly, the Partnership has
discontinued the application of the equity method of accounting and
additional losses from the investment in Wells Fargo Center - South Tower
will not be recognized.

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 GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1998 and 1997 is summarized as follows:

<PAGE>

1998 1997
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>

Total assets . . . . . . . . . . . . $48,869,476 80,878,765 63,829,469 97,077,969

Partners' capital accounts
(deficits):
General partners . . . . . . . . (16,885,819) (15,484,525) (16,337,193) (16,984,218)
Limited partners . . . . . . . . (6,629,147) (171,292,621) 10,604,210 (157,928,454)

Net earnings (loss):
General partners . . . . . . . . (47,588) 2,000,730 323,201 108,474
Limited partners . . . . . . . . 804,011 4,673,200 7,756,834 2,603,372

Net earnings (loss)
per limited
partnership interest . . . . . . . 2.01 11.66 19.35 6.49
=========== ============ =========== =============

</TABLE>

<PAGE>

The net earnings (loss) per limited partnership interest is based upon
the limited partnership interests outstanding at the end of each year
(400,830.39402 at 1998 and 400,863.85692 at 1997). Deficit capital
accounts will result, through the duration of the Partnership, in the
recognition of net gain to the General Partners and Holders of Interests
for financial reporting and Federal income tax purposes. Reference is made
to the Notes for a discussion of the allocations of profits and losses.

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.

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 (approximately $7,046,337 and $20,289,814 at December 31, 1998 and
1997, respectively) as cash equivalents, which includes investments in an
institutional mutual fund which holds U.S. Government obligations, with any
remaining amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.

Deferred expenses consist primarily of mortgage fees which are
amortized on a straight-line basis over the terms of the related mortgage
notes and deferred leasing commissions and concessions which are amortized
over the lives of the related leases.

Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrues
rental income for the full period of occupancy on a straight-line basis.
Such amounts are reflected in accrued rents receivable in the accompanying
balance sheets.

Certain amounts in the 1996 and 1997 financial statements have been
reclassified to conform with the 1998 presentation.

No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to tax authorities amounts
representing withholding from distributions paid to partners.

The Partnership has acquired, either directly or through joint
ventures, two apartment complexes, fourteen office buildings and three
shopping centers. Twelve properties have been sold or disposed of by the
Partnership as of December 31, 1998. All of the properties owned at
December 31, 1998 were operating. The cost of the investment properties
represents the total cost to the Partnership or its ventures plus
miscellaneous acquisition costs and net of value impairment adjustments.

Depreciation on the consolidated investment properties had been
provided over the estimated useful lives of 5 to 30 years using the
straight-line method.

The investment properties and, in some instances, the Partnership's
interest in unconsolidated ventures are pledged as security for the
long-term debt, for which there is generally no recourse to the
Partnership. The long-term debt represents senior mortgage loans.

<PAGE>

Maintenance and repair expenses are charged to operations as incurred.

Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.

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 in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
to be held for investment whenever their carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the property's carrying value and the
property's estimated fair value. 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. The
$16,000,000 impairment loss on the Wilshire Bundy investment property,
which was categorized as held for sale or disposition at January 1, 1996
upon adoption of SFAS 121, has been reflected in the accompanying
consolidated financial statements as the cumulative effect of an accounting
change as provided by SFAS 121. In accordance with SFAS 121, any
properties identified as "held for sale or disposition" are no longer
depreciated. Adjustments for impairment loss for such properties
(subsequent to the date of adoption of SFAS 121) are made in each period as
necessary to report these properties at the lower of carrying value or fair
value less costs to sell. In certain situations, such estimated fair value
could be less than the existing non-recourse debt which is secured by the
property. There can be no assurance that any estimated fair value of these
properties would ultimately be realized by the Partnership in any future
sale or disposition transaction.

Under the prior accounting policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's carrying value. The amount of any such impairment loss
recognized by the Partnership was 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 is determined
without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt 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 (comprised of gain on
extinguishment of debt and gain or loss on the sale or disposition of
property) 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.

In addition, upon the disposition of any impaired property, the
Partnership will generally recognize more gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's prior
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
implementation of this accounting statement could significantly impact the
Partnership's reported earnings, there would be no impact on cash flows.
Further, any such impairment loss is not recognized for Federal income tax
purposes.

The results of operations, net of venture partners' share, for
consolidated properties classified as held for sale or disposition as of
December 31, 1998 or sold or disposed of during the past three years were
net income (losses) of $2,253,874, $2,192,424 and ($106,017), respectively,
for the years ended December 31, 1998, 1997 and 1996.

<PAGE>

In addition, the accompanying financial statements include income
(losses) of $837,478, $8,989,749 and ($1,420,313), respectively, of the
Partnership's share of total property operations of $2,377,918, $18,219,313
and ($2,497,591) of unconsolidated properties held for sale or disposition
as of December 31, 1998 or sold or disposed of in the past three years.

The Partnership has adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Partnership defines each of
its property investments as an individual operating segment and has
determined such property investments exhibit substantially identical
economic characteristics and meet the other criteria specified by SFAS No.
131 which permits the property investments to be aggregated into one
reportable segment. The Partnership assesses and measures operating
results based on net operating income (rental income less property
operating expenses). With the exception of interest income, professional
services and general and administrative expenses, substantially all other
components of net earnings (loss) of the Partnership related to property
investments. With the exception of cash and cash equivalents,
substantially all other assets of the Partnership relate to property
investments.

VENTURE AGREEMENTS - GENERAL

The Partnership at December 31, 1998 is a party to five operating
joint venture agreements. Pursuant to such agreements, the Partnership
made initial capital contributions of approximately $146,000,000 (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 certain of the ventures. The five 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
six office buildings. The venture properties have been financed under
various long-term debt arrangements as described below.

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.

INVESTMENT PROPERTIES

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.

<PAGE>

OOUV could have received reimbursement, under certain conditions, of
up to an additional $3,400,000 (of which Orchard Associates had a 79.1667%
interest) of previously incurred development costs based upon certain
future earnings of the property (as defined). In December 1996, OOUV
received a final allocation of $2,450,000 (of which the Partnership's share
was $969,796) of such development costs related to the sale of Old Orchard
Shopping Center.

At the time of redemption, OOUV retained a portion of the Orchard
Associates redemption proceeds in order to fund certain contingent amounts
which may have been due in the future. In July 1995, OOUV distributed to
Orchard Associates a significant portion of its redemption holdback of
$2,083,644. As a result, the Partnership received its share of the
holdback of $1,041,820. In October 1995, OOUV distributed to Orchard
Associates its share of the pre-sale settlement with Federated Department
Stores of $288,452. As a result, Orchard distributed to the Partnership
its share of the settlement of $144,226. In 1996, OOUV distributed to
Orchard Associates $1,389,210 in proceeds from the settlement of operating
prorations. As a result, Orchard Associates distributed $694,405 to the
Partnership representing its share of such operating prorations. In 1998,
the Partnership received income of approximately $186,000 related to a sale
of stock received in the settlement of claims against a tenant in
bankruptcy (prior to the sale of the Partnership's interest in 1993). The
Partnership has retained these funds for working capital purposes.

OOUV and Orchard Associates had also entered into a contribution
agreement whereby they 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 potential future
distribution of $3,400,000 as described above) in accordance with their
pre-contribution percentage interests. In December 1996, Orchard received
its share of the earn out provision of $2,450,000, as discussed above, and
distributed to each of the respective partners their share ($969,796 to the
Partnership) of such amount. The Partnership recognized a gain of $870,837
for financial reporting purposes and for Federal income tax purposes in
1996.

JMB/NYC

JMB/NYC is a limited partnership among Carlyle-XIV Associates, L.P.,
Carlyle-XIII Associates, L.P. and Property Partners, L.P. as limited
partners and Carlyle Managers, Inc. as the sole general partner. The
Partnership is a 40% shareholder of Carlyle Managers, Inc. and related to
this investment, has an obligation to fund, on demand, $400,000 (reduced
from $1,200,000 during 1996) of additional paid-in capital to Carlyle
Managers, Inc. (reflected in amounts due to affiliates in the accompanying
consolidated financial statements). 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 is a 40% shareholder. Related to this investment,
the Partnership has an obligation to fund, on demand, $400,000 (reduced
from $1,200,000 during 1996) 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.

<PAGE>

approval rights of JMB/NYC with respect to virtually all property
management, leasing, sale or refinancing; (iv) amend the Joint Ventures'
agreements to eliminate any funding obligations by JMB/NYC and (v)
establish a new preferential cash distribution level for the Olympia & York
affiliates. In accordance with the Agreement and in anticipation of the
sale of the 2 Broadway Building, the unpaid first mortgage indebtedness
previously allocated to 2 Broadway was allocated in 1994 to 237 Park Avenue
and 1290 Avenue of the Americas.

In September 1995, the sale of the 2 Broadway Building was completed. Such
sale did not result in any distributable proceeds to JMB/NYC or the Olympia
and York affiliates.

Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue
and 1290 Avenue of the Americas properties were made in April 1996, and in
August 1996, an Amended Plan of Reorganization and Disclosure Statement
(the "Plan") was filed with the Bankruptcy Court for these Joint Ventures.
The Plan was accepted by the various classes of debt and equity holders and
confirmed by the Court on September 20, 1996 and became effective
October 10, 1996 ("Effective Date"). The Plan provides that 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. 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 first
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.

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.

<PAGE>

The provisions of the indemnification agreement generally prohibit the
Affiliated Partners from taking any 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, it is highly likely that the Partnership's share of
the collateral will be returned (including interest earned) at the
termination of the indemnification agreement.

A portion of the purchase price for JMB/NYC's interest in the 1290
Avenue of the Americas and 237 Park Avenue office buildings (the
"Properties") is represented by certain promissory notes (the "Purchase
Notes") bearing interest at 12-3/4% per annum. The Purchase Notes, which
are payable to the REIT, are secured by JMB/NYC's indirect interest in the
Properties and are non-recourse to JMB/NYC. Prior to maturity, the
Purchase Notes require payment of principal and interest out of
distributions made to JMB/NYC from the joint ventures owning the
Properties. Unpaid interest accrues and is deferred, compounded monthly.
Unpaid principal and interest are due at maturity on January 2, 2001, and
it is not expected that JMB/NYC will have funds to pay the Purchase Notes
at maturity. The outstanding principal and accrued and deferred interest
on the Purchase Notes at December 31, 1998, was approximately $117,679,000.

Due to the level of indebtedness remaining on the Properties, the
Purchase Notes payable by JMB/NYC and the significant preference levels to
other partners within the reorganized joint ventures owning the Properties,
it is unlikely that JMB/NYC will receive any significant distributions from
the joint ventures.

PIPER JAFFRAY TOWER

In 1984, the Partnership with C-XV acquired, through JMB/Piper, an
interest in a 42-story office building known as the Piper Jaffray Tower in
Minneapolis, Minnesota with the developer and certain limited partners. In
April 1986, JMB/Piper II, a joint venture partnership between the
Partnership and C-XV, acquired the developer's interest in the OB Joint
Venture. JMB/Piper holds its interest in the property through three
existing joint ventures (OB Joint Venture, OB Joint Venture II and 222
South Ninth Street Limited Partnership, together "Piper"). The terms of
the JMB/Piper and JMB/Piper II venture agreements generally provide that
JMB/Piper's and JMB Piper II's respective shares of Piper's annual cash
flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership in proportion to its 50% share
of capital contributions.

JMB/Piper invested approximately $19,915,000 for its 71% interest in
Piper. JMB/Piper is obligated to loan amounts to Piper to fund operating
deficits (as defined). The loans bear interest at a rate of not more than
14.36% per annum, provide for payments of interest only from net cash flow,
if any, and are repayable from net sale or refinancing proceeds. Such
loans and accrued interest were approximately $127,406,000 and $110,458,000
at December 31, 1998 and 1997, respectively.

The property is subject to a mortgage loan in the principal amount of
$100,000,000 of which approximately $95,741,000 is outstanding as of
December 31, 1998. Under the terms of a modification agreement with the
lender, in addition to fixed interest on the mortgage notes secured by the
Piper Jaffray Tower, contingent interest is payable in annual installments
on April 1 computed at 50% of gross receipts, as defined, for each fiscal
year in excess of $15,200,000. No such contingent interest was due for the
years ended December 31, 1996, 1997 or 1998. 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 1996 and 1997 totalled
$741,627 and $385,523, respectively. During 1998, no such excess cash flow

<PAGE>

was generated. On a monthly basis, Piper deposits the property management
fee into an escrow account to be used (including interest earned thereon)
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 escrow balance as of December 31, 1998 is approximately
$5,441,000. The manager of the property (which was an affiliate of the
Corporate General Partner through November 1994) has agreed to defer
receipt of its management fee until a later date. As of December 31, 1998,
the manager has deferred approximately $4,445,000 ($1,839,000 of which
represents deferred fees due to affiliates 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 Piper's share of sale or refinancing proceeds, if any.
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, which
totaled $7,100,000 as of December 31, 1998, will be payable from net sale
or refinancing proceeds, if any.

Furthermore, repayment of the mortgage loan is subject to a prepayment
fee ranging from 6% to 1% through the maturity date as well as an amount
that will provide the lender with an internal rate of return from 12.75% to
13.59% out of proceeds from the sale or refinancing of the property. After
the prepayment fees, the lender participates in any remaining sale or
refinancing proceeds. For financial reporting purposes, through
December 31, 1995, additional interest expense had been accrued at a rate
of 13.59% per annum. During 1997 and 1998, interest expense of $10,250,000
was recognized at the loan's stated payment rate. Additionally, based on
the Partnership's estimate of the value of the building at December 31,
1997, it was determined that the lender is not expected to receive the
entire balance of the loan and interest that Piper had accrued based on the
above mentioned internal rate of return, contingent upon the sale or
refinancing of the property. Therefore, in 1997, $18,600,000 of such
interest was reversed and charged to operations. Total indebtedness,
including such interest under the mortgage loan, is approximately
$99,384,000 and $99,769,000 at December 31, 1998 and 1997, respectively.
Under the current terms of the modified debt, there must be a significant
improvement in the current market and property operating conditions
resulting in a significant increase in value of the property in order for
JMB/Piper to share in any future net sale or refinancing 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.

The Piper venture agreements provide that any net cash flow, as
defined, will be used to pay principal and interest on the operating
deficit loans (as described above) with any excess generally distributable
71% to JMB/Piper and 29% to the venture partners, subject to certain
adjustments (as defined). In general, operating profits or losses are
allocated in relation to the economic interests of the joint venture
partners. Accordingly, operating profits (excluding depreciation and
amortization) were generally allocated 71% to the JMB/Piper and 29% to the
venture partners during 1998, 1997 and 1996.

The Piper venture agreements further provide that, in general, upon
any sale or refinancing of the property, the principal and any accrued
interest outstanding on any operating deficit loans are to be repaid out of
net proceeds. Any remaining proceeds will be distributable 71% to
JMB/Piper and 29% to the joint venture partners, subject to certain
adjustments, as defined.

<PAGE>

During the fourth quarter 1991, Larkin, Hoffman, Daly & Lindgren, Ltd.
(23,344 square feet) approached Piper indicating it was experiencing
financial difficulties and desired to give back a portion or all of its
leased space. Larkin's lease was scheduled to expire in January 2005 and
provided for annual rental payments which were significantly higher than
current market rental rates. Larkin was also a limited partner with
partial interests in the building and the land under the building. On
January 15, 1992, Piper agreed to terminate Larkin's lease in return for
its partial interest in the land under the building and a $1,011,798 note
receivable. The note receivable provides for monthly payments of principal
and interest at 8% per annum with full repayment over ten years. Larkin
may prepay all or a portion of the note at any time. As of the date of
this report, all amounts due under the note have been received. The
balance of the note receivable as of December 31, 1998 is $410,883.

The property was classified as held for sale or disposition as of
September 30, 1997 in the accompanying financial statements and, therefore,
was not subject to continuing depreciation.

JMB/900

In 1984, the Partnership with C-XV acquired, through JMB/900, an
interest in an existing joint venture ("Progress Partners") which owns a
36-story office building known as the 900 Third Avenue Building in New
York, New York. The partners of Progress Partners were the developer of
the property ("PPI") and an original affiliate of PPI ("JRA") and JMB/900.
In 1986, PPI transferred a portion of its interest to another partnership
("PC-900") in which it and a major tenant of the building (Central National
Bank) were partners. In 1987 the bank failed and the Federal Deposit
Insurance Corporation ("FDIC") assumed its position as a limited partner in
PC-900. The current partners of Progress Partners are PPI, JRA and PC-900
(together "Venture Partners") and JMB/900.

The terms of the JMB/900 venture agreement generally provide that
JMB/900's share of Progress Partners' cash flow, sale or refinancing
proceeds and profits and losses will be distributed or allocated to the
Partnership in proportion to its 33-1/3% share of capital contributions.

JMB/900 has made capital contributions to Progress Partners and
certain payments to an affiliate of the developer, in the aggregate amount
of $18,270,000, subject to the obligation to make additional capital
contributions as described below.

JMB/900 has also made a loan to PPI in the amount of $20,000,000 which
is secured by the Venture Partners' interest in Progress Partners. The
loan bears interest at the rate of 16.4% per annum and is payable in
monthly installments of interest only until maturity on the earlier of the
sale or refinancing of the property or August 2004. For financial
reporting purposes, the loan is classified as an additional investment in
Progress Partners and any related interest received would be accounted for
as distributions (none in 1996, 1997 and 1998). The source of funds from
which PPI was expected to pay interest were the Guaranteed Payments,
discussed below.

The Progress Partners venture agreement provides that the venture is
required to pay the Venture Partners a stated return of $3,285,000 per
annum payable quarterly (the "Guaranteed Payments"). Generally, JMB/900 is
required to contribute funds to the venture, to the extent net cash flow is
not sufficient, to enable the venture to make the Guaranteed Payments. As
a result of the lawsuit discussed below, such amounts have not been
contributed by JMB/900 to pay the Venture Partners and interest has not
been received by JMB/900 on the $20,000,000 loan discussed above.

<PAGE>

Under the terms of the Progress Partners' venture agreement, the
Venture Partners are generally entitled to receive a non-cumulative
preferred return of net cash flow (net after the $3,285,000 per annum
Guaranteed Payments to the Venture Partners discussed above) of
approximately $3,414,000 per annum, with any remaining net cash flow
distributable 49% to JMB/900 and 51% to the Venture Partners.

The Progress Partners venture agreement further provides that net sale
or refinancing proceeds are distributable to JMB/900 and the Venture
Partners, on a pro rata basis, in an amount equal to the sum of any
deficiencies in the receipt of their respective cumulative preferred
returns of net cash flow plus certain contributions to the venture made by
JMB/900 to pay for the Venture Partners' Guaranteed Payments. Next,
proceeds will be distributable to the Venture Partners in an amount equal
to $20,000,000. JMB/900 is entitled to receive the next $21,000,000 and
the Venture Partners will receive the next $42,700,000. Any remaining net
proceeds are to be distributed 49% to JMB/900 and 51% to the Venture
Partners. As discussed above, the $20,000,000 loan to the Venture Partners
matures upon sale or refinancing (under certain conditions) of the
property. The $20,000,000 distribution level to the Venture Partners would
be used to pay off the $20,000,000 loan from JMB/900. Furthermore, to the
extent that JMB/900 has not received annual distributions equal to the
interest payable on the $20,000,000 loan discussed above, JMB/900's
preferred return deficiency is increased by the amounts not received.

Operating profits, in general, are allocated 49% to JMB/900 and 51% to
the Venture Partners. Operating losses, in general, are allocated 90% to
JMB/900 and 10% to the Venture Partners. As a result of the settlement
agreement discussed below, effective January 1, 1998 Operating Profits are
allocated 70% to JMB/900 and 30% to the Venture Partners.

As a result of certain defaults by PPI, 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 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 the Venture Partners to recover the amounts
contributed and to recover for certain other joint venture obligations on
which the Venture Partners had defaulted. This lawsuit was dismissed on
jurisdictional grounds. Subsequently, however, the FDIC filed a complaint,
since amended, in a lawsuit against PPI, JRA, JMB/900, and other
unaffiliated defendants, which has enabled JMB/900 to refile its previously
asserted claims against the Venture Partners 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.

During the fourth quarter of 1996, The State of Maryland Deposit
Insurance Fund Corporation (the "MDIFC") commenced an action against PPI
and JRA to collect on a certain note receivable by foreclosing its security
interest in PPI and JRA's interest in Progress Partners. The trial court
in that action had entered summary judgment in favor of MDIFC for in excess
of $6 million and authorized MDIFC to conduct a sale of PPI's and JRA's
interest in Progress Partners. MDIFC then entered into an agreement with
JMB/900 which provided that if MDIFC acquired those interests at the sale,
MDIFC would convey those interests to JMB/900. MDIFC's scheduled sale was

<PAGE>

cancelled as a result of the bankruptcy filing of JRA and PPI discussed
below. After the scheduled sale was cancelled, an affiliate of PPI
purchased MDIFC's claims. As a result, there are no assurances that the
agreement with MDIFC or its successor will be consummated.

Concurrent with the lawsuit filed by the MDIFC, FDIC has filed two
additional lawsuits against JMB/900, PPI, JRA, and other non-affiliated
defendants, in an attempt, among other things, to obtain a legal resolution
of competing claims made as to the interests in PC-900 and to challenge the
consent given by JMB/900 in 1990 to allow MDIFC, in the event it acquired
PPI and JRA's interest through foreclosure, to become a partner of Progress
Partners. JMB/900 has been discussing a settlement with the FDIC in which
JMB/900 would purchase the interest of the FDIC and/or PC-900 in Progress
Partners. If a settlement is not achieved and the FDIC pursues these
actions, JMB/900 intends to vigorously defend itself.

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 buyout 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
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.

<PAGE>

partnership interest. P-C 900's interest in Progress Partners was then
transferred to JMB/900 and Office Associates, which are now the sole
remaining partners in Progress Partners. Amendments to the joint venture
agreement of Progress Partners were made to effectuate the terms of the
settlement and the substitution of partners.

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.

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. Pursuant to the loan extension, net cash flow
(as defined) after debt service and capital expenditures and after
repayment of costs associated with and deposits made by Progress Partners
in connection with the loan extension (totaling approximately $3,229,000 of
which approximately $1,335,000 was advanced to Progress Partners by
JMB/900) was paid into an escrow account controlled by the lender. Such
escrow including interest earned thereon can be used by Progress Partners
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
Progress Partners once 90% of such leased space has been renewed or
released. As of July 1996, all of the amounts advanced by Progress
Partners have been repaid to Progress Partners and subsequently distributed
to JMB/900 (of which the Partnership's share was approximately $1,000,000).

The escrow balance at December 31, 1998 is approximately $10,172,000.

The Partnership will not commit additional capital to this property
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.

WELLS FARGO CENTER - SOUTH TOWER

In June 1985, the Partnership acquired an interest in a joint venture
partnership ("South Tower") which owns a 44-story office building in Los
Angeles, California. The joint venture partners of the Partnership include
C-XV ("Affiliated Partner"), one of the sellers of the interests in South
Tower, and another unaffiliated venture partner.

The Partnership and the Affiliated Partner purchased their interests
for $61,592,000. In addition, the Partnership and the Affiliated Partner
made capital contributions to South Tower totaling $48,400,000 for general
working capital requirements and certain other obligations of South Tower.
The Partnership's share of the purchase price, capital contributions (net
of additional financing) and interest thereon totaled $26,589,500.

The terms of the original South Tower agreement generally provided
that the Partnership and Affiliated Partner's aggregate share of the South
Tower's annual cash flow, net sale or refinancing proceeds, and profits and
losses be distributed or allocated to the Partnership and the Affiliated
Partner in proportion to their aggregate capital contributions.

Annual cash flow was to be distributed 80% to the Partnership and
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner received, in the aggregate, a cumulative preferred
return of $8,050,000 per annum. The remaining cash flow was to be
distributable 49.99% to the Partnership and the Affiliated Partner, and the
balance to the other joint venture partners. Additional contributions to
South Tower were contributed 49.99% by the Partnership and the Affiliated
Partner until all partners had contributed $10,000,000 in aggregate.

<PAGE>

Operating profits and losses, in general, were to be allocated 49.99%
to the Partnership and the Affiliated Partner and the balance to the other
joint venture partners. Substantially all depreciation and certain
expenses paid from the Partnership's and Affiliated Partner's capital
contributions were to be allocated to the Partnership and Affiliated
Partner. In addition, operating profits, up to the amount of any annual
cash flow distribution, were allocated to all partners in proportion to
such distributions of annual cash flow.

In general, upon sale or refinancing of the property, net sale or
refinancing proceeds were to be distributed 80% to the Partnership and the
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner received the amount of any deficiency in their preferred
return described above plus an amount equal to their "Disposition
Preference" (which, in general, begins at $120,000,000 and increases
annually by $8,000,000 to a maximum of $200,000,000). Any remaining net
sale or refinancing proceeds were to be distributed 49.99% to the
Partnership and the Affiliated Partner and the remainder to the other
partners.

The office building is being managed by an affiliate of one of the
venture partners under a long-term agreement pursuant to which the
affiliate is entitled to receive a monthly management fee of 2-1/2% of
gross project income, a tenant improvement fee of 10% of the cost of tenant
improvements, and commissions on new leases.

The mortgage note secured by the property (with a balance of
approximately $167,593,000 and accrued interest of approximately $1,445,000
as of December 31, 1998), matured December 1, 1994. The Partnership and
the joint venture had been in discussions with the lender regarding an
extension of the mortgage note. The venture continued to make interest
payments to the lender under the original terms of the mortgage note and
was required to escrow all available cash flow. In the fourth quarter of
1996, the joint venture and the lender reached an agreement to modify the
mortgage note. The agreement provides that the mortgage note be extended
to September, 2003 at an interest rate of 10% with all excess cash flow
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. The mortgage lender received a $2,000,000
extension fee paid by the venture partners in their ownership percentages
(of which the Partnership's share was $350,000).

The promissory note secured by the Partnership's interest in the joint
venture matured December 1, 1994. The Partnership had been in discussion
with the lender regarding an extension of the promissory note. The
Partnership has ceased making debt service payments on the promissory note.

In the fourth quarter of 1996, the Partnership reached an agreement with
the lender to modify the promissory note (with a principal balance of
$12,250,000 and accrued interest of approximately $3,270,000 prior to
modification). The Partnership's amended and restated promissory note has
an adjusted balance of approximately $26,349,000 consisting of the original
principal loan balance, unpaid accrued interest, the Partnership's share of
the mortgage loan extension fee and a restructuring fee of approximately
$6,118,000. The promissory note is due September 2003 and 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 property.

In conjunction with the note modifications, the South Tower was
converted to a limited liability company with members' interests in the
same ratio as the prior venture ownership interests. The conversion of the
Partnership's interest to a member's interest in a limited liability
company eliminates any potential additional obligation of the Partnership
in the future to provide additional funds under its previous joint venture
agreement. As a result, previously recognized losses of $5,712,902 have
been reversed and the Partnership's share of income for financial reporting

<PAGE>

purposes (approximately $152,000 in 1997 and $267,000 in 1998) has not been
recognized as such amount is not considered realizable.

At maturity of the loan, it is not anticipated that further
modifications or extensions can be obtained. This would likely result in
the Partnership no longer having an ownership interest in the property, and
in such event would result in a gain for Federal income tax purposes with
no corresponding distributable proceeds. Since the terms of the amended
and restated promissory note make it unlikely that the Partnership would
recover any incremental investment, the Partnership has decided not to
commit any significant additional amounts to the property.

TURTLE CREEK

Under the terms of the Turtle Creek venture agreement, through
December 1990, the joint venture partner was obligated to make capital
contributions to the venture to fund operating deficits of the property and
to pay the Partnership a preferential return. The joint venture partner
defaulted on such obligations and in this regard, the joint venture partner
had not made the required debt service payments since December 1988 nor had
it paid the Partnership's preferential return since the third quarter of
1988. Due to the non-payment of debt service, the lender, on March 7,
1989, concluded proceedings to realize on its security and took title to
the property.

The joint venture partner's obligations to the Partnership were
guaranteed by certain of the joint venture partner's principals. The
Partnership filed a lawsuit against the joint venture partner and certain
of the joint venture partner's principals seeking to recover damages
resulting from their defaults. On April 3, 1992, the Partnership signed a
settlement agreement with the joint venture partner and its principals.
Under the terms of the settlement, the Partnership was 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 was represented by a promissory note issued to the Partnership in
the amount of $3,425,000. The note provided 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 provided for annual principal payments of
$400,000 due every April for five years with a final payment in the amount
of $1,425,000 which was scheduled to be due on April 3, 1998. The venture
partner contacted the Partnership to discuss payment of this amount at the
end of 1997. The Partnership agreed to accept a payment of $1,400,000 if
paid by the end of 1997. The Partnership received the final payment on
December 31, 1997. Due to the uncertainty of collection of the settlement
amounts, settlement payments have been reflected in other income when
collected.

WILSHIRE BUNDY PLAZA

The Partnership had commenced discussions with the existing lender for
a possible debt modification on its mortgage loan which matured April 1996
in order to reduce its debt service and cover its releasing costs over the
next several years. In this regard, the Partnership suspended debt service
payments commencing with the December 1, 1994 payment. During July 1995,
the Partnership received a formal notice of default on its mortgage loan
from the lender. The lender began foreclosure proceedings in October 1995.

A receiver was appointed for the property and the previously affiliated
third party property manager continued to manage the property on behalf of
the receiver. Title to the property transferred to the lender on March 27,
1996. As a result of the transfer of title, the Partnership was relieved
of all obligations related to the property, including an estimated $100,000
in earthquake repairs related to the January 17, 1994 earthquake in
Southern California as discussed below. The property was classified as
held for sale or disposition as of January 1, 1996 and therefore was not
subject to continued depreciation. The accompanying consolidated financial

<PAGE>

statements include $16,000,000 as the cumulative effect of an accounting
change to record value impairment and $23,622,011 of extraordinary gain on
extinguishment of debt upon the lender's taking title to the property for
the year ended December 31, 1996. The Partnership recognized a gain of
approximately $9,200,000 for Federal income tax purposes in 1996 with no
corresponding distributable proceeds.

LOUIS JOLIET MALL

The second mortgage loan matured on September 1, 1995. During
September 1995, the Partnership finalized a refinancing of the property's
first (with a principal balance of approximately $12,400,000) and second
(with a principal balance of $10,000,000 and accrued and deferred interest
of approximately $2,500,000) mortgage loans with a new seven year first
mortgage loan in the amount of $26,000,000. Such refinancing resulted in
approximately $382,000 in net proceeds after payment of the existing loans,
closing costs and prepayment penalty, which the Partnership retained for
working capital purposes. The new loan matures on October 1, 2002 and may
be prepaid after the second loan year with a yield maintenance prepayment
penalty. As a result of the early refinancing of the first mortgage loan
(scheduled maturity April, 1998), the Partnership paid a prepayment penalty
of approximately $204,000.

In March 1999, the Partnership entered into a contract for the sale of
the Louis Joliet Mall to BRE/Louis Joliet LLC, an unaffiliated third party.

The sale is subject to the satisfaction of various conditions and there is
no assurance that such sale will occur. In light of certain tenant issues,
it is expected that a modification of the existing sale contract will be
required if the sale is to be completed.

1090 VERMONT

The Partnership had been marketing the property for sale (on behalf of
the joint 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 joint venture agreement, the venture partner had
the right of first refusal to purchase the Partnership's interest in the
joint venture. 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. The venture partner exercised its right to first refusal,
and on May 29, 1998, the venture partner purchased the Partnership's
interest in the Venture.

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 a gain for Federal
income tax purposes of $4,650,000. The Partnership has no future liability
for any representations, warranties and covenants as a result of the sale.

MARINERS POINTE

During the third quarter of 1994, the Partnership obtained a two-year
extension of the existing $6,500,000 mortgage loan. The new maturity date
was October 1, 1996. Under terms of the loan extension, the loan bore
interest at 2.75% above the floating weekly tax exempt rate.

<PAGE>

In 1995, the joint venture commenced marketing the property for sale.
In October 1996, the joint venture sold the Mariners Pointe Apartments to
an unaffiliated third party. The sales price was $7,600,000 (before
selling costs and prorations), of which approximately $788,000 was received
in cash at closing and $6,500,000 represented the purchaser's assumption of
the underlying debt. The joint venture was also returned all amounts held
by the underlying lender in a collateral account. Upon receipt of the net
sale proceeds and proceeds from the collateral account, the joint venture
distributed such proceeds to the Partnership. The joint venture partner
received no distributions in connection with this transaction. As a result
of the sale during 1996, the joint venture allocated gains to the
Partnership of approximately $2,100,000 for financial reporting purposes
and approximately $4,700,000 for Federal income tax purposes. The property
was classified as held for sale or disposition as of January 1, 1996, and
therefore, was not subject to continued depreciation after such date.

YERBA BUENA OFFICE BUILDING

LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1998 and
1997:
1998 1997
----------- -----------
17% promissory note; secured by the
Partnership's interest in the Wells
Fargo Center South Tower office building
in Los Angeles, California; principal
and accrued interest due September 2003 . . . $30,086,692 26,348,759

<PAGE>

1998 1997
----------- -----------
8.03% first mortgage note; secured by
the Louis Joliet Mall in Joliet, Illinois;
monthly interest only payments of
$173,983 until May 1997; beginning
May 1, 1997, monthly principal and
interest payments of $201,189 until
November 1, 2002 when the remaining
balance of $23,751,765 is due . . . . . . . . 25,419,864 25,777,187
------------ ------------
Total debt . . . . . . . . . . . . . 55,506,556 52,125,946
Less current portion
of long-term debt. . . . . . . . . 387,096 357,323
------------ ------------
Total long-term debt . . . . . . . . $ 55,119,460 51,768,623
============ ============

Five year maturities of long-term debt are as follows:

1999 . . . . . . . . . . $ 387,096
2000 . . . . . . . . . . 419,350
2001 . . . . . . . . . . 454,291
2002 . . . . . . . . . . 24,159,127
2003 . . . . . . . . . . 47,530,378

PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Holders
of Interests and 4% to the General Partners. Profits from the sale of
investment properties are to be allocated to the General Partners to the
greatest of (i) 1% of such profits, (ii) the amount of cash distributions
to the General Partners, or (iii) an amount which will reduce the General
Partners' capital account deficits (if any) to a level consistent with the
gain anticipated to be realized from the sale of properties. Losses from
the sale of investment properties are to be allocated 1% to the General
Partners. The remaining profits and losses will be allocated to the
Holders of Interests.

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 Holders of Interests 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 of the
proceeds (net after expenses and liabilities and retained working capital)
from the sale or refinancing of a real property up to 3% of the selling
price for any property sold, and that the remaining net proceeds be
distributed 85% to the Holders of Interests and 15% to the General
Partners. However, prior to such distributions being made, the Holders of
Interests are entitled to receive 99% of net sale or refinancing proceeds
and the General Partners shall receive 1% until the Holders of Interests
have received (i) cash distributions of net sale or refinancing proceeds in
an amount equal to the Holders' aggregate initial capital investment in the
Partnership and (ii) cumulative cash distributions from the Partnership's
operations which, when combined with the net sale or refinancing proceeds
previously distributed, equal a 6% annual non-compounded return on the
Holders' average capital investment for each year (their initial capital
investment reduced by net sale or refinancing proceeds previously
distributed) commencing with the third fiscal quarter of 1985. If upon the

<PAGE>

completion of the liquidation of the Partnership and the distribution of
all Partnership funds, the Holders of Interests 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 net sale or refinancing
proceeds described above up to an amount equal to such deficiency in
payments to the Holders of Interests pursuant to (i) and (ii) above. The
Holders of Interests have not received and are not expected to receive over
the remaining term of the Partnership, distributions to the levels
described above. Accordingly, $1,742,000 of proceeds have been deferred
for the General Partners at December 31, 1998. The General Partners have
received $121,527 of sale proceeds as of December 31, 1998 representing its
1% share of total sale distributions made which will be required to be
returned before termination of the Partnership.

LEASES - AS PROPERTY LESSOR

At December 31, 1998, the Partnership's principal asset is one
shopping mall. The Partnership has determined that all leases relating to
this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of the property,
excluding cost of land, was depreciated over the estimated useful life
until such time the property is considered held for sale or disposition, at
which time depreciation is no longer taken. Leases with commercial tenants
range in term from one to 34 years and provide for fixed minimum rent and
partial to full reimbursement of operating costs. In addition, such leases
provide for additional rent based upon percentages of tenant sales volumes.

A substantial portion of the ability of retail tenants to honor their
leases is dependent upon the retail economic sector.

Minimum lease payments including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements, are as follows:

1999 . . . . . . . . . . $ 3,966,878
2000 . . . . . . . . . . 3,708,732
2001 . . . . . . . . . . 3,463,478
2002 . . . . . . . . . . 3,170,762
2003 . . . . . . . . . . 2,785,379
Thereafter . . . . . . . 5,937,859
-----------
$23,033,088
===========

Additional rent based upon percentages of tenants' sales volumes
included in rental income aggregated $649,035, $437,532 and $638,884 for
the years ended December 31, 1998, 1997 and 1996, respectively.

TRANSACTIONS WITH AFFILIATES

The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1998, 1997 and 1996 are as follows:

<PAGE>

UNPAID AT
DECEMBER 31,
1998 1997 1996 1998
---------- -------- -------- ------------
Property management
and leasing fees. . . . $ 309,167 284,751 273,795 --
Insurance commissions. . 32,729 33,198 28,745 --
Management fees to
Corporate General
Partners. . . . . . . . 835,063 -- -- --
Reimbursement (at
cost) for accounting
services. . . . . . . . 16,392 31,183 23,190 1,969
Reimbursement (at
cost) for portfolio
management services . . 115,808 73,802 53,223 24,324
Reimbursement (at
cost) for legal
services. . . . . . . . 20,399 14,301 11,557 6,692
Reimbursement (at
cost) for administra-
tive charges and
other out-of-pocket
expenses. . . . . . . . 1,616 369 4,684 --
---------- -------- --------- -------
$1,331,174 437,604 395,194 32,985
========== ======== ========= =======

In connection with the 1998 distributions of previously undistributed
cash flow from operations, the General Partners received distributions
aggregating approximately $501,000. In connection with such distributions,
the Corporate General Partner received management fees aggregating
approximately $835,000 in 1998.

Reference is made to the JMB/NYC discussion above regarding the
Partnership's obligation to fund, on demand, $400,000 and $400,000 to
Carlyle Managers, Inc. and Carlyle Investors, Inc., respectively,
additional paid-in capital (reflected in amounts due to affiliates in the
accompanying consolidated financial statements). As of December 31, 1998,
these obligations bore interest at 5.35% per annum and interest accrued on
these obligations was $615,702.

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 as more fully discussed above.
Such fees deferred by the affiliate were approximately $1,839,000, of which
$919,500 is the Partnership's share, at December 31, 1998.

All amounts currently payable to the General Partners and their
affiliates do not bear interest and are expected to be paid in future
periods.

INVESTMENT IN UNCONSOLIDATED VENTURES

Summary combined financial information for JMB/Piper, JMB/Piper II,
JMB/900, 1090 Vermont (immediately prior to the sale of the Partnership's
interest in the venture in May 1998), Wells Fargo Center - South Tower and
their unconsolidated ventures as of and for the years ended December 31,
1998 and 1997 is presented below.

1998 1997
-------------- --------------

Current assets . . . . . . . . . . . $ 30,571,080 24,794,458
Current liabilities. . . . . . . . . (18,663,923) (17,174,163)
-------------- --------------
Working capital (deficit). . . . 11,907,157 7,620,295
-------------- --------------

<PAGE>

1998 1997
-------------- --------------

Investment properties, net . . . . . 295,446,989 303,295,449
Other assets . . . . . . . . . . . . 52,888,933 55,178,757
Other liabilities. . . . . . . . . . (1,431,466) (3,463,866)
Long-term debt . . . . . . . . . . . (372,074,874) (382,675,620)
-------------- --------------
Partners' capital (deficit). . . $ (13,263,261) (20,044,985)
============== ==============
Represented by:
Invested capital . . . . . . . . . $ 317,159,274 316,716,544
Cumulative distributions . . . . . (115,304,138) (114,135,154)
Cumulative income (losses) . . . . (215,118,397) (222,626,375)
-------------- --------------
$ (13,263,261) (20,044,985)
============== ==============
Total income . . . . . . . . . . . . $ 88,489,716 91,294,780
============== ==============
Expenses applicable to
operating income . . . . . . . . . $ 81,089,234 69,851,004
============== ==============
Net income (loss) (including
income from reversal of
accrued contingent
interest of $18,600,000
in 1997) . . . . . . . . . . . . . $ 7,400,482 21,443,776
============== ==============

Total income, expenses related to operating loss and net loss for the
above mentioned ventures for the year ended December 31, 1996 were
$92,016,328 , $95,820,488 and ($3,804,160).

The Partnership's 1998 and 1997 share of income from Wells Fargo
Center - South Tower (approximately $267,000 and $152,000, respectively)
has not been recognized as such amount is not considered realizable.

<PAGE>

<TABLE>
SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998

COSTS
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
----------------------------- -------------- --------------------------------------------
LAND AND BUILDINGS LAND AND LAND AND BUILDINGS
LEASEHOLD AND BUILDINGS AND LEASEHOLD AND
ENCUMBRANCE(C) INTEREST IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTS TOTAL (D)
-------------- ----------- ------------ --------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING MALL:
Joliet,
Illinois . . $25,419,864 4,100,414 35,752,871 9,619,097 4,100,414 45,371,968 49,472,382
----------- --------- ---------- --------- --------- ---------- ----------

Total. . . $25,419,864 4,100,414 35,752,871 9,619,097 4,100,414 45,371,968 49,472,382
=========== ========= ========== ========= ========= ========== ==========

</TABLE>

<PAGE>

<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1998
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING MALL:
Joliet, Illinois. . . . . . . $15,038,064 1978 7/31/85 5-30 years 483,754
----------- -------
Total . . . . . . . . . . $15,038,064 483,754
=========== =======
<FN>
Notes:
(A) The initial cost represents the original purchase price of the property, including amounts incurred subsequent
to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1998 for Federal income tax purposes was approximately
$48,711,000.
(C) Amounts disclosed exclude current accrued interest.

</TABLE>

<PAGE>

<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998

(D) Reconciliation of real estate owned:

<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . $ 49,032,687 48,640,452 112,841,793
Additions during period. . . . . . . . . . . . . . . 439,695 392,235 608,071
Disposals during period. . . . . . . . . . . . . . . -- -- (48,809,412)
Provision for value impairment . . . . . . . . . . . -- -- (16,000,000)
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . . $ 49,472,382 49,032,687 48,640,452
============ ============ ============

(E) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . . $ 15,038,064 15,038,064 36,814,248
Depreciation expense . . . . . . . . . . . . . . . . -- -- 1,462,969
Disposals. . . . . . . . . . . . . . . . . . . . . . -- -- (23,239,153)
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . . $ 15,038,064 15,038,064 15,038,064
============ ============ ============

</TABLE>

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants during 1997
or 1998.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB as the Corporate General Partner, has responsibility for all aspects of
the Partnership's operations, subject to the requirement that purchases and
sales of real property must be approved by the Associate General Partner of
the Partnership, ABPP Associates, L.P., an Illinois limited partnership
with JMB as its sole general partner. The limited partners of the Associate
General Partner are generally officers, directors and affiliates of JMB or
its affiliates.

The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves and the determination
of the sources (i.e., offering proceeds, cash generated from operations or
sale proceeds) and uses of such reserves, the timing of expenditures and
the allocation of certain tax items under the Partnership Agreement, the
General Partners may have a conflict of interest with respect to such
determinations.

The names, positions held and length of service therein of the
directors and the executive and certain other officers of the Corporate
General Partner of the Partnership are as follows:

<PAGE>

SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------

Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Chief Executive Officer 8/01/93
Executive Vice President 1/02/87
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91

There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 2, 1999. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 2,
1999. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.

JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV")
and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"),
JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X ("JMB Income-X") and JMB Income Properties, Ltd.-XI ("JMB
Income-XI"). JMB is also the sole general partner of the associate general
partner of most of the foregoing partnerships. Most of the foregoing
directors and officers are also officers and/or directors of various
affiliated companies of JMB, including Arvida/JMB Managers, Inc. (the
general partner of Arvida/JMB Partners, L.P.). Most of such directors and
officers are also partners, directly or indirectly, of certain partnerships
which are associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-XI, Carlyle-XIII, Carlyle-XV, JMB
Income-VII, JMB Income-X, JMB Income-XI and Carlyle Income Plus-II.
Certain of such officers are also officers and the sole director of Carlyle
Managers, Inc., the general partner of JMB/NYC.

The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:

<PAGE>

Judd D. Malkin (age 61) is an individual general partner of JMB
Income-V. Mr. Malkin has been associated with JMB since October, 1969.
Mr. Malkin is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of Chisox
Corporation, which is the general partner of a limited partnership that
owns the Chicago White Sox Major League Baseball team, and CBLS, Inc.,
which is the general partner of the general partner of a limited
partnership that owns the Chicago Bulls National Basketball Association
team. He is a Certified Public Accountant.

Neil G. Bluhm (age 61) is an individual general partner of JMB
Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr.
Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors
real estate investment funds, and a director of Urban Shopping Centers,
Inc. He is a member of the Bar of the State of Illinois and a Certified
Public Accountant.

Burton E. Glazov (age 60) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois. Mr. Glazov is
currently retired.

Stuart C. Nathan (age 57) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.

A. Lee Sacks (age 65) has been associated with JMB since December,
1972. He is also President and a director of JMB Insurance Agency, Inc.

John G. Schreiber (age 52) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
which is engaged in the real estate investing business. He is also a
senior advisor and partner of Blackstone Real Estate Advisors L.P., an
affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a director
of Urban Shopping Centers, Inc., Host Marriott Corporation, The Brickman
Group, Ltd., which is engaged in the landscape maintenance business, and a
director of a number of investment companies advised by T. Rowe Price
Associates, Inc. and its affiliates and a trustee of Amli Residential
Property Trust. Mr. Schreiber holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.

H. Rigel Barber (age 50) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.

Glenn E. Emig (age 51) has been associated with JMB since December
1979. It is expected that Mr. Emig will leave his positions with JMB on or
about May 31, 1999 and his responsibilities will be taken over by various
other officers of JMB. Prior to becoming Executive Vice President of JMB
in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB
Institutional Realty Corporation. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business and is a
Certified Public Accountant.

Gary Nickele (age 46) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.

Gailen J. Hull (age 50) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.

Howard Kogen (age 63) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Holders of Interests, and a
share of profits or losses. Reference is made to the Notes for a
description of such transactions, distributions and allocations. In 1998
the General Partners received distributions of $501,038 and Corporate
General Partner received management fees of $835,063. The General Partners
received a share of Partnership income for tax purposes aggregating
$127,440 in 1998.

An affiliate of the Corporate General Partner provided property
management services during 1998 for Louis Joliet Mall. In 1998, such
affiliate earned property management and leasing fees amounting to $309,167
for such services, all of which were paid as of December 31, 1998. In
addition, an affiliate of the Corporate General Partner had managed the
Piper Jaffray Tower through November 1994. In conjunction with the August
1992 loan modification, the affiliated property manager agreed to defer
receipt of its property management fees through November 1994, which
aggregated $1,839,000 at December 31, 1998, of which the Partnership's
share is $919,500. As set forth in the Prospectus of the Partnership, the
Corporate General Partner must negotiate such agreements on terms no less
favorable to the Partnership than those customarily charged for similar
services in the relevant geographical area (but in no event at rates
greater than 6% of the gross income from a property), and such agreements
must be terminable by either party thereto, without penalty, upon 60 days'
notice. In December 1994 the affiliated property manager entered into an
agreement with an unaffiliated third party for the sub-management of the
900 Third Avenue building. Property management fees for this property were
$465,012 in 1998, all of which were paid to the sub-manager.

JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1998
aggregating $32,729 for insurance of certain of the real property
investments of the Partnership and for liability insurance for the
Partnership. Such commissions are at rates set by insurance companies for
the classes of coverage provided.

The General Partners of the Partnership or their affiliates may be
reimbursed or paid for their direct expenses or out-of-pocket expenses and
salary and salary-related expenses relating to the administration of the
Partnership and the operation of the Partnership's real property
investments. In 1998, the Corporate General Partner of the Partnership was
due reimbursement for such expenses in the amount of $117,424, of which
$24,324 was unpaid at December 31, 1998. Additionally, the General
Partners are also entitled to reimbursements for legal and accounting
services. Such costs for 1998 were $36,791, of which $8,661 was unpaid as
of December 31, 1998.

The Partnership had obligations to fund, on demand, $400,000 and
$400,000, to Carlyle Managers, Inc. and Carlyle Investors, Inc.,
respectively, of additional paid-in capital (reflected in amounts due to
affiliates in the accompanying consolidated financial statements). As of
December 31, 1998, these obligations bore interest at 5.35% per annum and
interest accrued on these obligations was $615,702.

<PAGE>

In March 1999, the Partnership entered into a contract to sell its
interest in Louis Joliet Mall to BRE/Louis Joliet LLC ("BRE/Louis Joliet").

In light of certain issues relating to one or more of the tenants at the
property, it is expected that a modification of the contract will be
required if the sale is to be completed. John G. Schreiber is (i) a
director of JMB Realty Corporation ("JMB"), which is the Corporate General
Partner of the Partnership, and (ii) a limited Partner in the Associate
General Partner of the Partnership. (JMB is also the general partner of
the Associate General Partner.) Mr. Schreiber and his family members,
directly or indirectly, own limited partnership interests in Blackstone
Real Estate Advisors, L.P. ("BREA") and certain of its affiliates, through
which Mr. Schreiber and his family members have an interest of up to
approximately 2% of the profits of BRE/Louis Joliet and may also invest in
BRE/Louis Joliet up to a specified percentage (generally not in excess of
2%) of the equity capital invested by BREA and its affiliates and will be
entitled to receive any profits from such investment in proportion to their
equity capital invested. Mr. Schreiber and his family members will also be
entitled to receive a portion (estimated at $74,000) of the acquisition fee
and a portion of asset management fees to be paid by BRE/Louis Joliet to
BREA if the transaction closes. The price and other terms of the contract
for the sale have been and, if modified, will continue to be determined by
arm's-length negotiation. The decision to enter into the contract on
behalf of the Partnership was made by JMB, which, as noted above, is the
Corporate General Partner (and the general partner of the Associate General
Partner) of the Partnership. Mr. Schreiber did not participate in JMB's
decision on behalf of the Partnership to enter into the contract, nor in
BRE/Louis Joliet's decision to enter into the contract. The sale is
subject to the satisfaction of various conditions, and there is no
assurance that the sale will be closed, or if closed, will be on the same
terms as currently provided.

The Partnership is permitted to engage in various transactions
involving the General Partners and their affiliates, as described in
Item 10.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.

(b) The Corporate General Partner, its officers and directors and the Associate General Partner beneficially
own the following Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests and Assignee
Interests therein JMB Realty Corporation 5 Interests (1) Less than 1%
indirectly

Limited Partnership
Interests and Assignee
Interests therein Corporate General Partner, 18.48473 Interests (1) (2) (3) Less than 1%
its officers and
directors and the
Associate General
Partner as a group

<FN>

(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB, as its
indirect majority shareholder, is deemed to have shared voting and investment power.

(2) Includes 11.92207 Interests owned by two officers for which each such officer has sole investment and
voting power as to such Interests so owned.

(3) Includes 1.56266 Interests owned by an estate for which an officer acts as co-executor and is deemed to
have shared voting and investment power.

No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.

Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.

(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent data
result in a change in control of the Partnership.

</TABLE>

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements (See Index to Financial Statements
filed with this annual report).

(2) Exhibits.

3-A.* Amended and Restated Agreement of Limited
Partnership.

3-B.* Assignment Agreement by and among the
Partnership, the General Partners and the Initial Limited Partner.

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 hereby incorporated by reference to
Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-15962)
dated March 21, 1997.

4-A. Long-term debt documents relating to the
refinancing of the first mortgage loan secured by the 1090 Vermont office
building in Washington, D.C. are hereby incorporated by reference to the
Partnership's Report on Form 10-K (File No. 0-15962) dated March 27, 1995.

4-B. Long-term debt documents relating to the
September 1995 refinancing of the first and second mortgage loans secured
by the Louis Joliet Mall are hereby incorporated by reference to the
Partnership's Report on Form 10-Q (File No. 0-15962) dated November 9,
1995.

4-C. Documents relating to the modification and
extension of the mortgage loan secured by Wells Fargo-South Tower is hereby
incorporated by reference to the Partnership's Report for December 31, 1996
on Form 10-K (File No. 0-15962) dated March 21, 1997.

4-D. Amended and restated promissory note between
Wells Fargo Bank and the Partnership is hereby incorporated by reference to
the Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-
15962) dated March 21, 1997.

4-E. Loan modification agreement of Wells Fargo
Bank is hereby incorporated by reference to the Partnership's Report for
December 31, 1996 on Form 10-K (File No. 0-15962) dated March 21, 1997.

<PAGE>

10-A. 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-B. 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-C. 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-D. 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-E. Second Amended and Restated Articles of
Partnership of JMB/NYC Office Building Associates, L.P. 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-F. 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-G. 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-H. $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-I. $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.

<PAGE>

10-J. Lockbox and forbearance agreements related to
the mortgage note secured by the Wells Fargo Building, 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-K. 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, is hereby incorporated by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-15962)
dated May 11, 1995.

10-L. 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, is hereby incorporated by reference
to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-
15962) dated May 11, 1995.

10-M. Agreement of Conversion of 1290 Associates
into 1290 Associates, L.L.C. dated October 10, 1995 among JMB/NYC Office
Building Associates, L.P., an Illinois limited partnership, O&Y Equity
Company, L.P., a Delaware limited partnership and O&Y NY Building Corp., a
Delaware corporation, is hereby incorporated by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-15962)
dated March 25, 1996.

10-N. Agreement of Conversion of 237 Park Avenue
Associates into 237 Park Avenue Associates, L.L.C., dated October 10, 1995
among JMB/NYC Office Building Associates, L.P., an Illinois limited
partnership, O&Y Equity Company, L.P., a Delaware limited partnership and
O&Y NY Building Corp., a Delaware corporation, is hereby incorporated by
reference to the Partnership's Report for December 31, 1995 on Form 10-K
(File No. 0-15962) dated March 25, 1996.

10-O. Trustee's Deed of Sale dated March 27, 1996
relating to the conveyance of title and interest in Wilshire Bundy Plaza to
Teachers Insurance and Annuity Association of America (Grantee) by Chicago
Title Company (Trustee) for Carlyle Real Estate Limited Partnership - XIV
(Trustor) is incorporated herein by reference to the Partnership's Report
for March 31, 1996 on Form 10-Q (File No. 0-15962) dated May 10, 1996.

<PAGE>

10-P. Disclosure Statement for the Second Amended
Joint Plan of Reorganization of 237 Park Avenue Associates, L.L.C. and 1290
Associates, L.L.C. dated August 9, 1996, is hereby incorporated by
reference to the Partnership's Report for September 30, 1996 on Form 10-Q
(File No. 0-15962) dated November 8, 1996.

10-Q. Purchase Agreement as amended including
exhibits thereto, dated August 29, 1996 between Mariners Pointe Associates,
Ltd. and Mariners Pointe L.L.C. is hereby incorporated by reference to the
Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-15962)
dated March 21, 1997.

10-R. Documents relating to the operating agreement
of Maguire Thomas Partners-South Tower, L.L.C. are hereby incorporated by
reference to the Partnership's Report for December 31, 1996 on Form 10-K
(File No. 0-15962) dated March 21, 1997.

10-S. Consent of Director of Carlyle-XIV Managers,
Inc. (known as Carlyle Managers, Inc.) dated October 31, 1996 is hereby
incorporated by reference to the Partnership's Report for December 31, 1996
on Form 10-K (File No. 0-15962) dated March 21, 1997.

10-T. Consent of Director of Carlyle-XIII, Managers,
Inc. (known as Carlyle Investors, Inc.) dated October 31, 1996 is hereby
incorporated by reference to the Partnership's Report for December 31, 1996
on Form 10-K (File No. 0-15962) dated March 21, 1997.

10-U. Allonge to demand note between Carlyle Real
Estate Limited Partnership-XIV and Carlyle Managers, Inc. dated October 31,
1996 is hereby incorporated by reference to the Partnership's Report for
December 31, 1996 on Form 10-K (File No. 0-15962) dated March 21, 1997.

10-V. Allonge to demand note between Carlyle Real
Estate Limited Partnership-XIV and Carlyle Investors, Inc., dated October
31, 1996 is hereby incorporated by reference to the Partnership's Report
for December 31, 1996 on Form 10-K (File No. 0-15962) dated March 21, 1997.

10-W. Indemnification agreement between Property
Partners, L.P., Carlyle-XIII Associates, L.P. and Carlyle-XIV Associates,
L.P. dated as of October 10, 1996 is hereby incorporated by reference to
the Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-
15962) dated March 21, 1997.

10-X. Agreement of Limited Partnership of 237/1290
Lower Tier Associates, L.P. dated as of October 10, 1996 is hereby
incorporated by reference to the Partnership's Report for December 31, 1996
on Form 10-K (File No. 0-15962) dated March 21, 1997.

<PAGE>

10-Y. Amended and Restated Limited Partnership
Agreement of 237/1290 Upper Tier Associates, L.P. dated as of October 10,
1996 is hereby incorporated by reference to the Partnership's Report for
December 31, 1996 on Form 10-K (File No. 0-15962) dated March 21, 1997.

10-Z. Purchase Agreement between Carlyle Real Estate
Partnership - XIV and The John Ackridge Company dated as of May 29, 1998,
is hereby incorporated by reference to the Partnership's Report for June
30, 1998 on Form 10-Q (File No. 0-15962) dated August 12, 1998.

10-AA. First Amendment to Amended and Restated
Agreement of Limited Partnership of 1090 Vermont Avenue, N.W. Associates
Limited Partnership dated as of May 29, 1998, is hereby incorporated by
reference to the Partnership's Report for June 30, 1998 on Form 10-Q (File
No. 0-15962) dated August 12, 1998.

21. List of Subsidiaries.

24. Powers of Attorney.

27. Financial Data Schedule.
- --------------

* Previously filed as Exhibits 3-B, 3-C and 10-H to the Partnership's
Report for December 31, 1992 on Form 10-K of the Securities Exchange Act
(File No. 0-15962) filed on March 30, 1993 and hereby incorporated herein
by reference.

Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commission upon request.

(b) No reports on Form 8-K were filed since the beginning of the
last quarter of the period covered by this report.

No annual report for the year 1998 or proxy material has been sent
to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV

By: JMB Realty Corporation
Corporate General Partner

GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 22, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: JMB Realty Corporation
Corporate General Partner

JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 22, 1999

NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 22, 1999

H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 22, 1999

GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 22, 1999

GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 22, 1999

A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 22, 1999

STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 22, 1999

*By: GAILEN J. HULL, Pursuant to a Power of Attorney

GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 22, 1999

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV

EXHIBIT INDEX

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----

3-A. Amended and Restated Agreement of
Limited Partnership Yes

3-B. Assignment Agreement by and among
the Partnership, the General Partners
and the Initial Limited Partners Yes

4-A. Long-term debt documents relating
to the refinancing of the first
mortgage loan secured by the
1090 Vermont Office Building
in Washington, D.C. Yes

4-C. Documents relating to the modification
and extension of the mortgage loan
secured by Wells Fargo-South Tower Yes

4-D. Amended and restated promissory note
of Wells Fargo Bank Yes

4-E. Loan modification agreement of
Wells Fargo Bank Yes

10-A -
10-C. Acquisition Documents are hereby
incorporated herein by reference Yes

10-D. Agreement of Limited Partnership
of Carlyle-XIV Associates, L.P. Yes

10-E. Second Amended and Restated Articles
of Partnership of JMB/NYC Office
Building Associates, L.P. Yes

10-F. Documents relating to the sale by
the Partnership of its interest
in the Old Orchard Venture Yes

10-G. Amended and Restated Certificate
of Incorporation of Carlyle-XII
Managers, Inc. (known as Carlyle
Managers, Inc.) Yes

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV

EXHIBIT INDEX - CONTINUED

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
10-H. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Managers, Inc. Yes

10-I. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Investors, Inc. Yes

10-J. Lockbox and forbearance agreements
related to the mortgage note secured
by the Wells Fargo Building. Yes

10-K. 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. Yes

10-L. 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. Yes

10-M. Agreement of Conversion of 1290
Associates, L.L.C. dated October 10,
1995 Yes

10-N. Agreement of Conversion of 237 Park
Avenue Associates into 237 Park
Avenue Associates, L.L.C. dated
October 10, 1995 Yes

10-P. Disclosure Statement for the Second
Amended Joint Plan of
Reorganization of 237 Park Avenue
Associates, L.L.C. and 1290 Associates,
L.L.C. dated August 9, 1996 Yes

10-Q. Purchase Agreement as amended including
exhibits thereto, dated August 29,
1996 between Mariners Pointe Associates,
Ltd. and Mariners Pointe, L.L.C. Yes

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV

EXHIBIT INDEX - CONTINUED

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----

10-R. Documents relating to the operating
agreement of Maguire Thomas Partners-
South Tower, L.L.C.

10-S. Consent of Director of Carlyle-XIV
Managers, Inc. (known as Carlyle
Managers, Inc.) dated October 31,
1996 Yes

10-T. Consent of Director of Carlyle-XIII,
Managers, Inc. (known as Carlyle
Investors, Inc.) dated October 31,
1996 Yes

10-U. Allonge to demand note between
Carlyle Real Estate Limited
Partnership-XIV and Carlyle Managers,
Inc. dated October 31, 1996 Yes

10-V. Allonge to demand note between
Carlyle Real Estate Limited
Partnership-XIV and Carlyle
Investors, Inc., dated
October 31, 1996 Yes

10-W. Indemnification agreement between
Property Partners, L.P., Carlyle-XIII
Associates, L.P. and Carlyle-XIV
Associates, L.P. dated as of
October 10, 1996 Yes

10-X. Agreement of Limited Partnership of
237/1290 Lower Tier Associates, L.P.
dated as of October 10, 1996 Yes

10-Y. Amended and Restated Limited Partnership
Agreement of 237/1290 Upper Tier
Associates, L.P. dated as of
October 10, 1996 Yes

10-Z. Purchase Agreement between
Carlyle Real Estate Partnership-XIV
and John Ackridge Company dated
May 29, 1998 Yes

10-AA. First Amendment and Restated Agreement
of Limited Partnership of 1090 Vermont
Avenue, N.W. Associates Limited
Partnership dated as of May 29, 1998 Yes

21. List of Subsidiaries No

24. Powers of Attorney No

27. Financial Data Schedule No

EXHIBIT 21

LIST OF SUBSIDIARIES

The Partnership is a partner of the following joint ventures: 1090
Vermont Ave., N.W. Associates Limited Partnership, a limited partnership,
which holds title to the 1090 Vermont Avenue Building in Washington, D.C.,
prior to the sale of the Partnership's interest in the venture in May 1998;
Mariners Pointe Associates, a limited partnership, which holds title to the
Mariners Pointe Apartments in Stockton, California until its sale in
October 1996; Carlyle-XIV Associates, L.P., an Illinois limited partnership
which is a partner of JMB/NYC Office Building Associates, L.P., an Illinois
limited partnership, which has an indirect limited partnership interest
which equals approximately 4.9% of the reorganized and restructured
ventures owning 237 Park Avenue and 1290 Avenue of the Americas (the
"Properties"). The new ownership structure gives control of the Properties
to a newly-organized real estate investment trust which is owned primarily
by holders of the first mortgage debt which encumbered the Properties prior
to the bankruptcy. Prior to the restructuring, JMB/NYC was a member or
partner in (i) 237 Park Avenue Associates, L.L.C., a New York limited
liability company, (formerly 237 Park Avenue Associates, a New York general
partnership) which holds title to the 237 Park Avenue Building, (ii) 1290
Associates, L.L.C., a New York limited liability company, (formerly 1290
Associates, a New York general partnership) which holds title to the 1290
Avenue of the Americas Building, (all of these office buildings are in New
York, New York). JMB/Piper Jaffray Tower Associates, a general
partnership, which is a partner in (i) OB Joint Venture II, a general
partnership, which is a partner of 222 South Ninth Street Limited
Partnership, a limited partnership, which holds title to the Piper Jaffray
Tower office building in Minneapolis, Minnesota, and (ii) OB Joint Venture,
a general partnership, which holds title to the land underlying the Piper
Jaffray Tower office building; JMB/Piper Jaffray Tower Associates II, a
general partnership, which also is a partner in OB Joint Venture, a general
partnership, which holds title to the land underlying the Piper Jaffray
Tower office building; 900 3rd Avenue Associates, a general partnership,
which is a partner of Progress Partners, a general partnership, which holds
title to 900 Third Avenue Building located in New York, New York; Maguire
Thomas Partners-South Tower, a limited liability company, which holds title
to Wells Fargo Center-IBM Tower located in Los Angeles, California; Old
Orchard Associates a general partnership which recently held an interest in
the Old Orchard Shopping Center in Skokie (Chicago), Illinois. Generally,
the developer of the property is a partner in the joint ventures, however,
the partners in the JMB/NYC Office Building Associates, L.P. JMB/Piper
Jaffray Tower Associates, JMB/Piper Jaffray Tower Associates II, 900 3rd
Avenue Associates and Orchard Associates are affiliates of the General
Partners of the Partnership. Reference is made to the Notes for a
description of the terms of such joint venture partnerships. The
Partnership is a 40% shareholder in Carlyle Managers, Inc. and a 40%
shareholder in Carlyle Investors, Inc., both of which are Illinois
corporations.

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XIV, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1998, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1999.

H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer

GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer

The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1998,
and any and all amendments thereto, the 30th day of January, 1999.

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1999.

NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm

JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin

A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks

STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner

The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998

<CASH> 6,875,849
<SECURITIES> 0
<RECEIVABLES> 1,064,118
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,939,967
<PP&E> 34,434,318
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,869,476
<CURRENT-LIABILITIES> 3,292,259
<BONDS> 55,119,460
<COMMON> 0
0
0
<OTHER-SE> (23,514,966)
<TOTAL-LIABILITY-AND-EQUITY> 48,869,476
<SALES> 8,617,055
<TOTAL-REVENUES> 9,772,720
<CGS> 0
<TOTAL-COSTS> 4,476,321
<OTHER-EXPENSES> 2,295,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,866,362
<INCOME-PRETAX> (2,865,657)
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<INCOME-CONTINUING> (1,838,405)
<DISCONTINUED> 2,594,828
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<CHANGES> 0
<NET-INCOME> 756,423
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<EPS-DILUTED> 2.01

</TABLE>