SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
June 30, 1999 Commission file number 0-15962
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)
Illinois 36-3256340
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . 17
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 23
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 3,155,060 6,875,849
Interest, rents and other receivables (net of allowance for
doubtful accounts of $96,419 and $72,746 at June 30,
1999 and December 31, 1998, respectively) . . . . . . . . . . . . . 338,922 685,990
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,707 25,860
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 390,266 352,268
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 3,894,955 7,939,967
------------ ------------
Investment property held for sale or disposition. . . . . . . . . . . . 34,370,218 34,434,318
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 10,537,300 5,068,160
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 829,130 856,169
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 560,276 570,862
------------ ------------
$ 50,191,879 48,869,476
============ ============
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 402,901 387,096
Accounts payable and other current liabilities. . . . . . . . . . . . 843,497 774,360
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 995,862 1,415,702
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 168,832 170,101
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . 557,134 545,000
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 2,968,226 3,292,259
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 21,019 19,919
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 6,186,995 5,958,542
Partnership's share of the maximum unfunded obligation under
the indemnification agreement . . . . . . . . . . . . . . . . . . . . 8,354,146 7,994,262
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 56,782,946 55,119,460
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 74,313,332 72,384,442
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (15,093,704) (15,069,445)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (1,817,374) (1,817,374)
------------ ------------
(16,910,078) (16,885,819)
------------ ------------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . . 351,746,836 351,746,836
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (296,744,815) (296,162,587)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (62,213,396) (62,213,396)
------------ ------------
(7,211,375) (6,629,147)
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . . . (24,121,453) (23,514,966)
------------ ------------
$ 50,191,879 48,869,476
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $2,107,610 2,035,137 4,531,946 4,493,410
Interest income . . . . . . . . . . . . . . . . 33,161 286,021 116,505 570,802
Other income. . . . . . . . . . . . . . . . . . -- -- -- 186,042
---------- ---------- ---------- ----------
2,140,771 2,321,158 4,648,451 5,250,254
---------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 1,460,407 1,465,397 2,922,233 2,936,588
Property operating expenses . . . . . . . . . . 968,951 1,100,777 1,953,778 2,119,865
Professional services . . . . . . . . . . . . . 149,302 75,836 633,532 361,312
Amortization of deferred expenses . . . . . . . 47,616 46,064 92,708 91,038
General and administrative. . . . . . . . . . . 191,859 87,596 390,025 297,788
---------- ---------- ---------- ----------
2,818,135 2,775,670 5,992,276 5,806,591
---------- ---------- ---------- ----------
(677,364) (454,512) (1,343,825) (556,337)
Partnership's share of the reduction of the
maximum unfunded obligation under the
indemnification agreement . . . . . . . . . . . 67,126 67,126 134,252 134,252
Partnership's share of operations of
unconsolidated ventures . . . . . . . . . . . . 537,340 478,071 603,086 276,221
---------- ---------- ---------- ----------
Earnings (loss) before gain on sale of
interest in unconsolidated venture. . . (72,898) 90,685 (606,487) (145,864)
Gain on sale of interest in unconsolidated
venture . . . . . . . . . . . . . . . . . . . . -- 2,633,169 -- 2,633,169
---------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . . $ (72,898) 2,723,854 (606,487) 2,487,305
========== ========== ========== ==========
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gain on sale
of interest in unconsolidated
venture . . . . . . . . . . . . . . . $ (.17) .22 (1.45) (.35)
Gain on sale of interest in
unconsolidated venture. . . . . . . . -- 6.50 -- 6.50
---------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . $ (.17) 6.72 (1.45) 6.15
========== ========== ========== ==========
Cash distributions per limited
partnership interest. . . . . . . . . . $ -- -- -- --
========== ========== ========== ==========
<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
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (606,487) 2,487,305
Items not requiring (providing) cash or cash equivalents:
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 92,708 91,038
Long-term debt - deferred accrued interest. . . . . . . . . . . . . . . 1,868,966 1,868,966
Partnership's share of the reduction of the maximum unfunded
obligation under the indemnification agreement. . . . . . . . . . . . (134,252) (134,252)
Partnership's share of operations of unconsolidated ventures. . . . . . (603,086) (276,221)
Gain on sale of interest in unconsolidated venture. . . . . . . . . . . -- (2,633,169)
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 347,068 6,718
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,153 16,682
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,998) (20,752)
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 10,586 (5,114)
Accounts payable and other current liabilities. . . . . . . . . . . . . 69,137 (459,677)
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,295 74,202
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,269) (1,171)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 12,134 25,420
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 1,100 550
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . 1,108,055 1,040,525
------------ -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . -- (31,322)
Refund of payment for capital improvements. . . . . . . . . . . . . . . . 64,100 --
Partnership's distributions from unconsolidated ventures. . . . . . . . . -- 607,097
Partnership's contributions to unconsolidated ventures. . . . . . . . . . (4,637,600) (38,992)
Cash proceeds from sale of interest in unconsolidated venture . . . . . . -- 4,726,981
Refund (payment) of deferred expenses, net. . . . . . . . . . . . . . . . (65,669) 84,062
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . (4,639,169) 5,347,826
------------ -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (189,675) (175,086)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . . (189,675) (175,086)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . (3,720,789) 6,213,265
Cash and cash equivalents, beginning of year. . . . . . . . . . . . 6,875,849 21,051,953
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . $ 3,155,060 27,265,218
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,054,536 1,068,793
============ ===========
Reduction in amounts due to affiliates. . . . . . . . . . . . . . . . . . $ (494,136) --
============ ===========
Reduction in Partnership's investment . . . . . . . . . . . . . . . . . . $ 494,136 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1998 which are
included in the Partnership's 1998 Annual Report on Form 10-K filed on
March 22, 1999 (File No. 0-15962) as certain footnote disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report. Capitalized terms used but
not defined in this quarterly report have the same meanings as in the
Partnership's 1998 Annual Report on Form 10-K.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS 121") as required in
the first quarter of 1996. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term or the Partnership has concluded that it may dispose of the property
by no longer funding operating deficits or debt service requirements of the
property thus allowing the lender to realize upon its security. In
accordance with SFAS 121, any properties identified as "held for sale or
disposition" are no longer depreciated. As of December 31, 1996, the
Partnership had committed to a plan to sell the Louis Joliet Mall
investment property, its last remaining consolidated property. The net
results of operations for the six months ended June 30, 1999 and 1998 for
the consolidated property classified as held for sale or disposition for
the past two years were income of $1,530,393 and $1,336,977, respectively.
The accompanying consolidated financial statements include earnings of
$603,086 and $276,221, as the Partnership's share of total property losses
of ($7,763,481) and ($7,639,007) for unconsolidated properties for the
three months ended June 30, 1999 and 1998, respectively, which are held for
sale or disposition or have been sold or disposed of during the past two
years.
Certain amounts in the 1998 financial statements have been
reclassified to conform with the 1999 presentation.
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees and certain of its officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investments. Fees, commissions and
other expenses required to be paid by the Partnership to the General
Partners and their affiliates as of June 30, 1999 and for the six months
ended June 30, 1999 and 1998 were as follows:
Unpaid at
June 30,
1999 1998 1999
-------- ------- -------------
Property management
and leasing fees . . . . . . $207,543 156,247 --
Insurance commissions . . . . 29,479 30,066 --
Reimbursement (at cost)
for out-of-pocket salary
and salary-related
expenses related to the
on-site and other costs
for the Partnership and
its investment properties. . 86,074 59,828 41,220
-------- ------- -------
$323,096 246,141 41,220
======== ======= =======
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. In June 1999, the obligations
to Carlyle Managers, Inc. and Carlyle Investors, Inc. were reduced by
approximately $230,000 and $264,000, respectively. As of June 30, 1999,
these obligations bore interest at 4.62% per annum. The obligations and
the cumulative interest accrued on these obligations totaled $954,642
(reflected in amounts due to affiliates in the accompanying financial
statements).
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 pursuant to a loan modification.
Such fees deferred by the affiliate were approximately $1,839,000 (of which
approximately $919,500 is the Partnership's share) at June 30, 1999. The
unconsolidated venture's obligation to the affiliate is not reflected in
the Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998.
Such deferred amounts does not bear interest and is expected to be paid in
future periods.
JMB/NYC
As a result of the 1996 restructuring, JMB/NYC has an indirect limited
partnership interest which, before taking into account significant
preferences to other partners, equals approximately 4.9% of the reorganized
and restructured ventures owning 237 Park and 1290 Avenue of the Americas
(the "Properties"). Neither O&Y nor any of its affiliates has any direct
or indirect continuing interest in the Properties. The new ownership
structure gives control of the Properties to an unaffiliated real estate
investment trust ("REIT"), 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
<PAGE>
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 non-
recourse purchase money notes made by JMB/NYC for its interests in the
Properties, which are secured by JMB/NYC's interests in the Properties and
had outstanding principal and accrued and deferred interest of
approximately $125,400,000 at June 30, 1999, mature on January 2, 2001. If
such REIT affiliate exercises such right to purchase, for the reasons
discussed below, it is unlikely that such purchase would result in any
significant distributions to the partners of the Partnership.
Additionally, at any time, JMB/NYC has the right to require such REIT
affiliate to purchase the interest of JMB/NYC in the Properties for the
same price at which such REIT affiliate can require JMB/NYC to sell such
interest as described above.
Pursuant to the indemnification agreement, the Affiliated Partners are
jointly and severally obligated to indemnify, through a date no later than
January 2, 2001, the REIT to the extent of $25 million to ensure their
compliance with the terms and conditions relating to JMB/NYC's indirect
limited partnership interest in the restructured and reorganized joint
ventures that own the Properties. The Affiliated Partners contributed
approximately $7.8 million (of which the Partnership's share was
approximately $3.9 million) to JMB/NYC which was deposited into an escrow
account as collateral for such indemnification. These funds have been
invested in stripped U.S. Government obligations with a maturity date of
February 15, 2001. The Partnership's share of the reduction of the maximum
unfunded obligation under the indemnification agreement recognized as
income, is a result of interest earned on amounts contributed by the
Partnership and held in escrow by JMB/NYC. Such income earned reduces the
Partnership's share of the maximum unfunded obligation under the
indemnification agreement, which is reflected as a liability in the
accompanying financial statements.
The provisions of the indemnification agreement generally prohibit the
Affiliated Partners from taking 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, the Partnership expects its share of the collateral
to be returned (including interest earned) at the termination of the
indemnification agreement.
During 1996, as a result of the adoption of the Plan, JMB/NYC
discontinued the application of the equity method of accounting for its
investments in unconsolidated ventures and reversed those previously
recognized losses from the unconsolidated ventures except for an amount
equal to the maximum obligation under the indemnification agreement of
$25,000,000. Also, the Partnership has discontinued the application of the
equity method of accounting for the indirect interests in the Properties
and additional losses from the investment 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 level of indebtedness remaining on the Properties, the
significant preference levels to other partners within the reorganized
joint ventures owning the Properties and the purchase money notes payable
by JMB/NYC, it is unlikely that JMB/NYC will receive any significant
distributions from the joint venture.
JMB/PIPER
Occupancy of the building at the end of the second quarter of 1999 was
89%.
<PAGE>
JMB/Piper had discussed an early renewal with PJI, which occupies
335,684 square feet or approximately 46% of the building's rentable square
feet, with a lease expiration date at May 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. The property manager is actively pursuing replacement tenants for
the PJI space; however, given the competitive nature of the downtown
Minneapolis market, it is unlikely that all of the PJI space can be
released quickly enough to generate enough cash flow to fund the required
debt service payments.
The property is subject to a mortgage loan in the original principal
amount of $100,000,000, of which approximately $95,741,000 is outstanding
as of June 30, 1999. The lender is essentially entitled to all operating
cash flow. During 1998, no excess cash flow was generated. However, the
lender has disputed certain amounts included in the calculation of cash
flow for the years 1997 and 1998. This resulted in JMB/Piper owing an
additional amount of cash flow (approximately $122,000) for 1997.
Additionally, JMB/Piper is in the process of requesting reimbursement from
the escrow account of excess capital costs (approximately $200,000)
incurred in 1998. Once such funds are received from the escrow account,
JMB/Piper will remit the additional amount owed for 1997 to the lender.
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, JMB/Piper will not be able to pay the required
debt service upon the expiration of PJI's lease in May 2000, as discussed
above. JMB/Piper will not commit additional capital to Piper unless, among
other things, it believes that upon sale of the property it will receive a
return of such funds and a reasonable rate of return thereon. If a funding
requirement arises and none of the Piper partners contribute the required
capital, the lender would likely take title to the property. Such
disposition of the property would result in JMB/Piper, and therefore the
Partnership, recognizing a significant amount of gain for financial
reporting and Federal income tax purposes with no corresponding
distributable proceeds.
As a result of a flood in 1997, the property incurred significant
repair costs in 1998. Piper completed such repairs and substantially all
of the balance (approximately $1,100,000) was reimbursed by the insurance
carrier in the second quarter of 1999. JMB/Piper made certain advances to
Piper for such costs, which were repaid upon reimbursement from the
insurance carrier. In 1999, JMB/Piper made additional advances for payment
of real estate taxes. At June 30, 1999, JMB/Piper was owed approximately
$350,000 related to such advance. This remaining amount was repaid in the
third quarter of 1999.
JMB/Piper, on behalf of Piper, had 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.
<PAGE>
JMB/900
Occupancy of this building at the end of the second quarter of 1999
was 100%.
Progress Partners had been negotiating with the building's major
tenant, Schulte, Roth & Zabel (139,948 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 1999, approximately $3,160,000 has been deposited into
escrow from net cash flow from property operations. The escrow balance at
June 30, 1999 was approximately $11,045,000.
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 certain claims against the
Venture Partners in the bankruptcy forum and sought to either foreclose on
or buy-out the interests of the Venture Partners in the venture, or to
otherwise dispose of those interests pursuant to a bankruptcy plan. The
Venture Partners asserted claims against the venture and JMB/900 including
claims for unpaid Guaranteed Payments in the purported amount of $36
million. JMB/900 denied that such claims were due and owing and contended
that, in any event, such claims were offset by PPI's failure to pay
interest in the aggregate amount of approximately $36 million on a $20
million loan to PPI. To the extent that JMB/900 would have been required
to make contributions to pay for any part of the purported claim for
Guaranteed Payments, a portion of the Guaranteed Payments actually paid may
have been allocated to other unsecured creditors of PPI and JRA and,
therefore, JMB/900 might not have received the full amount of the interest
due on the $20 million loan. However, JMB/900's contributions would have
created a preferred return level payable out of future net cash flow or net
sale or refinancing proceeds. Furthermore, JMB/900 took the position that
to the extent that it did not receive annual distributions equal to the
interest payable on the $20,000,000 loan, JMB/900's preferred return
deficiency would be increased by the amounts not received, but the Venture
Partners disputed this characterization.
In 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 900 Third Avenue Building, 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
<PAGE>
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 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.
In July 1999, JMB/900 entered into a contract to sell the 900 Third
Avenue Building to an unaffiliated third party. Such sale is expected to
close in the fourth quarter of 1999. A sale at the proposed terms would
result in a gain for both financial reporting and Federal income tax
purposes. However, the sale is subject to various conditions, including
the due diligence investigation of the prospective purchaser, and there can
be no assurance a sale of the property will occur or, if so, what the
terms, of any such sale will be.
As the venture has committed to a plan to sell or dispose of the
property, the 900 Third Avenue Building was classified as held for sale or
disposition as of July 1, 1998, and therefore, will not be subject to
continued depreciation beyond such date.
LOUIS JOLIET MALL
Occupancy of this mall at the end of the second quarter of 1999 was
80%.
The Partnership had negotiated a lease with a replacement operator for
General Cinema, Inc. (approximately 5% of the mall space). In connection
with the lease, the Partnership has agreed to contribute $700,000 to
reconfigure the current four screen cinema to a six screen cinema. An
amendment to the lease was negotiated pursuant to which the Partnership
agreed to contribute an additional $220,000 to pay for a portion of the
cost overruns incurred in connection with the reconfiguration. The cinema
opened in May 1999. Five other tenants have recently filed for protection
from creditors under chapter 11 of the Bankruptcy Code, and two of those
tenants (occupying approximately 8,900 square feet of space) have vacated
their space.
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, (the "Purchaser"). In light of issues
concerning one or more of the tenants discussed above, the Purchaser
terminated the sale contract. The Partnership was able to negotiate an
amended sale contract and on July 30, 1999 sold the property to the
Purchaser. The purchase price of the property was $45,400,000. A portion
of the purchase price was the assumption of the mortgage loan
(approximately $25,200,000) by the Purchaser at the closing of the sale.
The Partnership received cash at closing (net of closing costs and before
prorations) of approximately $19,400,000. The Partnership expects to
recognize a gain of approximately $7,700,000 and $22,200,000 for financial
reporting purposes and Federal income tax purposes in 1999, respectively.
In addition, in connection with the sale of the property and as is
customary in such transactions, the Partnership has agreed to certain
representations, warranties and covenants with a stipulated survival period
which expires on January 30, 2000. Although it is not expected, the
Partnership may ultimately have some liability under such representations,
warranties and covenants, which is limited to actual damages and shall in
no event exceed $1,500,000 in the aggregate.
<PAGE>
As the Partnership had committed to a plan to sell or dispose of the
property, Louis Joliet Mall was classified as held for sale or disposition
as of December 31, 1996, and therefore has not been subject to continued
depreciation beyond such date for financial reporting purposes.
WELLS FARGO CENTER
The mortgage note secured by the property (with a balance of
approximately $169,200,000 as of June 30, 1999), as extended, matures
September, 2003. All excess cash flow is being escrowed for future tenant
improvements and principal payments. In addition, upon sale or refinancing
of the property subsequent to September 1, 1999, the mortgage loan requires
payment of participation interest (as defined) of any excess proceeds.
A promissory note secured by the Partnership's interest in the joint
venture, which has an adjusted principal balance of approximately
$21,988,000, and accrued interest of approximately $9,968,000 at June 30,
1999 is due September 2003. The note accrues interest at 17% per annum.
The loan requires payments of cash flow distributed by the venture from
either property operations or sales proceeds as well as a portion of the
property management fee paid to the venture partner. The loan is secured
solely by the Partnership's interest in the joint venture.
Due to the significant level of indebtedness, it is unlikely that the
Partnership will receive any significant future proceeds from operations,
sale or refinancing. The disposition of the Partnership's ownership
interest in the property is therefore expected to result in a gain for
Federal income tax purposes with no corresponding distributable proceeds.
The Partnership has decided not to commit any significant additional
amounts to the property.
Due to the restructuring of the Partnership's interest in Wells Fargo
Center - South Tower in 1996, 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. The
Partnership has no future funding obligation 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.
1090 VERMONT
The Partnership had been marketing the property for sale (on behalf of
the Venture). On November 26, 1997, the Partnership obtained a non-binding
letter of intent to sell the property to an unaffiliated third party.
Pursuant to the 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 joint 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 in 1998 of $4,650,000. The Partnership has no future
liability for any representations, warranties and covenants as a result of
the sale.
<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. The sale price did not generate a
level of distributable proceeds where the joint venture would have been
entitled to a share. However, the joint venture was not given an
opportunity to purchase the property on the same terms for which it was
sold. 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 judgment and dismissed the lawsuit. The
joint venture has appealed such dismissal. There is no assurance that the
litigation will ultimately be successful or that the Partnership will
ultimately realize any amounts (or avoid any payments) with respect
thereto. During the quarter, the joint venture reached an agreement in
principle with the lender to settle the lawsuit. If such agreement in
principle is finalized, the Partnership will not be liable for the former
lender's legal fees. There can be no assurance that this settlement will
be consummated on these or any other terms. In addition, the former lender
has filed a claim and received an order against the joint venture for legal
fees expended in the litigation. The joint venture and the former lender
agreed to cap the fee award and the joint venture then posted a bond on
that amount. If the joint venture's appeal is successful, it will have no
obligation for the former lender's legal fees. 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.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/Piper, JMB/Piper II and
JMB/900 for the six months ended June 30, 1999 and 1998 are as follows:
1999 1998
----------- ----------
Total income from properties
(unconsolidated). . . . . . . . . . . $21,604,142 21,903,757
=========== ==========
Operating loss of ventures. . . . . . . $ 7,763,481 8,137,491
=========== ==========
Partnership's share of
operating profit (loss) . . . . . . . $ 603,086 68,804
=========== ==========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 1999
and for the three and six months ended June 30, 1999 and 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes (the "Notes") to the accompanying
consolidated financial statements for additional information concerning
certain of the Partnership's investment properties.
The board of directors of JMB Realty Corporation ("JMB") the Managing
General Partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offer.
During 1998, some of the Holders of Interests received unsolicited
offers from unaffiliated third parties to purchase less than 5% 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. These offers have expired. In May 1999, an unaffiliated third
party made an unsolicited offer to purchase less than 5% of the Interests
at $25 per Interest. The Special Committee recommended against acceptance
of this offer on the basis that among other things, the offer price was
inadequate. The unaffiliated third party has renewed such offer, and it is
currently scheduled to expire in August 1999. As of the date of this
report, the Partnership is aware that approximately 1.64% of the Interests
in the Partnership have been purchased by all 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 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 June 30, 1999, the Partnership had cash and cash equivalents of
approximately $3,155,000 and certain escrowed amounts held by the
Partnership's unconsolidated ventures (which are restricted as to their use
as discussed below). Such funds are available for the payment of the
Partnership's share of leasing costs and capital improvements of its
investment properties and working capital requirements.
As discussed 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 to JMB/900 to effect these transactions.
The Partnership negotiated a lease with a replacement operator for
General Cinema, Inc. (approximately 5% of the mall space). In connection
with the lease, the Partnership has agreed to contribute $700,000 to
reconfigure the current four screen cinema to a six screen cinema and
subsequently agreed to contribute an additional $220,000 to pay for a
portion of the cost overruns incurred in connection with the
reconfiguration. The cinema opened in May 1999. Five other tenants have
recently filed for protection from creditors under chapter 11 of the
Bankruptcy Code, and two of those tenants (occupying approximately 8,900
square feet of space) have vacated their space.
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 (the "Purchaser"). In light of issues
concerning one or more of the tenants discussed above, the Purchaser
terminated the sale contract. The Partnership was able to negotiate an
amended sale contract and on July 30, 1999 sold the property to the
Purchaser. The purchase price of the property was $45,400,000. A portion
<PAGE>
of the purchase price was the assumption of the mortgage loan
(approximately $25,200,000) by the Purchaser at the closing of the sale.
The Partnership received cash at closing (net of closing costs and before
prorations) of approximately $19,400,000. As part of the prorations at
closing, the Purchaser received a credit for the unpaid amount
(approximately $497,000) that the Partnership agreed to contribute to
reconfigure the cinema. The Partnership expects to recognize a gain of
approximately $7,700,000 and $22,200,000 for financial reporting purposes
and Federal income tax purposes in 1999, respectively. In addition, in
connection with the sale of the property and as is customary in such
transactions, the Partnership has agreed to certain representations,
warranties and covenants with stipulated survival period which expires on
January 30, 2000. Although it is not expected, the Partnership may
ultimately have some liability under such representations, warranties and
covenants, which is limited to actual damages and shall in no event exceed
$1,500,000 in the aggregate.
The Partnership had budgeted at June 30, 1999 approximately $1,324,000
for tenant improvements and other capital expenditures including the
outstanding amounts that the Partnership has agreed to contribute to
reconfigure the four screen cinema at the Louis Joliet Mall to a six screen
cinema prior to the sale of the property. Such items and the Partnership's
share of such similar items for the JMB/900 and JMB/Piper unconsolidated
ventures in 1999 is currently budgeted to be approximately $2,292,000.
Actual amounts expended in 1999 may vary depending upon a number of factors
including actual leasing activity, results of property operations,
liquidity considerations and market conditions over the course of the year
and whether and when properties are sold.
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 and certain escrowed funds and the sale of the 900
Third Avenue Office Building. The 900 Third Avenue, Piper Jaffray and
Wells Fargo Center - South Tower investment properties are restricted as to
their use of excess cash flows by escrow agreements negotiated pursuant to
loan modifications. Amounts held in escrow for a particular property may
be used for payment of tenant improvements and possibly other expenses
related to the particular property. Due to property specific concerns
discussed in the Notes to the accompanying consolidated financial
statements, the Partnership currently considers only 900 Third Avenue to be
a potential significant source of future cash generated from sales.
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 of the properties have been
classified by the Partnership or its ventures as held for sale or
disposition, and therefore, will no longer be subject to continued
depreciation. As discussed below, the joint venture that owns the 900
Third Avenue Building has entered into a contract to sell that property.
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 Piper Jaffray Tower and Wells Fargo
Center - South Tower beyond 1999.
Although the Partnership expects that it will be able to distribute
proceeds from the sale of the 900 Third Avenue investment property,
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
<PAGE>
cash flow to the Partnership. While loan and joint venture modifications
have been obtained which enable the Partnership to retain an ownership
interest in these properties, it is currently unlikely under existing
arrangements that the Partnership will receive significant proceeds from
operations or sales of these properties. However, upon disposition of
these investment properties, the Partnership, and therefore the Holders of
Interest will recognize a 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.
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 900 Third Avenue Building, 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 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.
In July 1999, JMB/900 entered into a contract to sell the 900 Third
Avenue office building to an unaffiliated third party. Such sale is
scheduled to close in the fourth quarter of 1999. A sale at the proposed
terms would result in a gain for both financial reporting and Federal
income tax purposes. The sale is subject to various conditions, including
the due diligence investigation of the prospective purchaser, and there is
no assurance that a sale of the property will occur or, if so, what the
terms of such sale will be.
RESULTS OF OPERATIONS
The decrease in interest, rents and other receivables at June 30, 1999
as compared to December 31, 1998 is primarily due to the repayment of
certain advances related to the flood damage at the Piper Jaffray Tower.
The increase in the investment in unconsolidated ventures, at equity
at June 30, 1999 as compared to December 31, 1998 is primarily due to
contributions made to JMB/900 to purchase the interests of the FDIC and the
unaffiliated venture partners in Progress Partners.
The increase in accounts payable and other current liabilities at
June 30, 1999 as compared to December 31, 1998 is primarily due to the
timing of payment for certain expenses incurred by the Partnership
including legal fees related to the Yerba Buena litigation.
<PAGE>
The decrease in interest income for the three and six months ended
June 30, 1999 as compared to the same period in 1998 is primarily due to a
lower cash balance available for investment due to distributions to the
General Partners and Holders of Interests in 1998.
The decrease in other income for the six months ended June 30, 1999 as
compared to the same period in 1998 is primarily due to the receipt of
proceeds from the sale in 1998 of stock obtained in the settlement of
claims against a tenant in bankruptcy related to the Partnership's interest
in the Old Orchard venture (sold in August 1993).
The increase in professional fees for the three and six months ended
June 30, 1999 as compared to the same period in 1998 is primarily due to
the Partnership's share of legal fees for the Yerba Buena litigation.
The increase in Partnership's share of operations of unconsolidated
ventures for the three and six months ended June 30, 1999 as compared to
the same period in 1998 is primarily due to the decrease in the assessed
value of the Piper Jaffray Tower, which resulted in lower real estate tax
expense being incurred by the property, and additional income allocated to
the Partnership as a result of JMB/900 purchasing the interests of the FDIC
and unaffiliated venture partners in Progress Partners.
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. In addition, other date-
sensitive electronic devices could experience various operational
difficulties as a result of not being year 2000 compliant.
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.
The property managers for 900 Third Avenue and Piper Jaffray Tower
have conducted assessments of various aspects of these properties'
respective operating systems in regard to their year 2000 compliance. In
general, such assessments were performed through written inquiries to third
party vendors and service personnel for these properties and, to some
extent, testing of some of the components at certain of these properties.
Based upon the information received from the property managers., the
Partnership believes that the major operating systems for these properties,
including HVAC controls, elevators and alarm and safety systems, are or
will be year 2000 compliant in all material respects. Certain of the
operating systems at these properties require upgrading, which has been
undertaken and completed, or will be undertaken and completed in the near
future, without the incurrence of material expense. The Partnership does
not have information concerning the extent to which the Wells Fargo Center-
South Tower is year 2000 compliant. The Partnership has requested such
information but has not yet received a response from the property manager.
However, the Partnership does not believe that it is obligated for year
2000 compliance for the Wells Fargo Center-South Tower.
<PAGE>
The Partnership has not inquired of the joint ventures that own 237
Park Avenue and 1290 Avenue of the Americas as to the status of their year
2000 compliance. Although the year 2000 problem may or may not present
various risks for such joint ventures, the Partnership does not believe
these risks, to the extent they may exist, present any material additional
risks to the Partnership's business, results of operations or financial
condition. As discussed in the Notes, JMB/NYC has discontinued the equity
method of accounting for its interests in the joint ventures that own these
properties. Moreover, for the reasons discussed elsewhere in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, JMB/NYC does not expect to receive any significant
distributions in the future from such joint ventures, and the Partnership
does not believe that any year 2000 compliance costs incurred by such joint
ventures will have any material effect on the Partnership's indirect
investment in such joint venture. The Partnership and JMB/NYC have no
involvement in or authority over the general operations or management of
such joint ventures or the development of their contingency plans, if any,
for the year 2000 problem, and neither then Partnership nor JMB/NYC is
obligated to contribute any funds to pay for any year 2000 compliance costs
of such joint ventures.
The Partnership 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 information obtained and
representations made by the property managers, as well as the
representations made by third party vendors and service personnel, for 900
Third Avenue and Piper Jaffray Tower regarding the ability of those
properties to be year 2000 compliant in all material respects. The
Partnership is also relying on the assessments made by the property
managers of the third party vendors and service personnel to be contacted
in regard to those properties' year 2000 compliance. 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 in the event such
property is not sold during 1999.
<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties owned during 1999.
<CAPTION>
1998 1999
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. 237 Park Avenue Building
New York, New York . . . . . * * * * * *
2. 1290 Avenue of the
Americas Building
New York, New York . . . . . * * * * * *
3. Piper Jaffray Tower
Minneapolis, Minnesota . . . 91% 89% 89% 89% 89% 89%
4. 900 Third Avenue Building
New York, New York . . . . . 97% 100% 99% 97% 100% 100%
5. Wells Fargo Center
South Tower
Los Angeles, California. . . 90% 90% 90% 85% 86% 86%
6. Louis Joliet Mall
Joliet, Illinois . . . . . . 83% 83% 84% 84% 82% 80%
<FN>
- ----------------
An "*" indicates that the joint venture which owns the property was restructured, and therefore, such
information is not meaningful for the Partnership. Reference is made to the Notes for further information
regarding the reorganized and restructured ventures.
An "N/A" indicates that the property, or the Partnership's interest in the property was sold or was not owned
by the Partnership at the end of the period.
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A.* Amended and Restated Agreement of Limited
Partnership.
3-B.* Assignment Agreement by and among the Partnership,
the General Partners and the Initial Limited Partner.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between ABPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is incorporated herein by reference to the
Partnership's Report for September 30, 1996 on Form 10-Q (File No. 0-15962)
dated November 8, 1996.
27. Financial Data Schedule.
- --------------
* Previously filed as Exhibits 3-B, 3-C and 10-H to the
Partnership's Report for December 31, 1992 on Form 10-K of the Securities
Exchange Act (File No. 0-15962) filed on March 30, 1993 and hereby
incorporated herein by reference.
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 13, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,155,060
<SECURITIES> 0
<RECEIVABLES> 739,895
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,894,955
<PP&E> 34,370,218
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,191,879
<CURRENT-LIABILITIES> 2,968,226
<BONDS> 56,782,946
<COMMON> 0
0
0
<OTHER-SE> (24,121,453)
<TOTAL-LIABILITY-AND-EQUITY> 50,191,879
<SALES> 4,531,946
<TOTAL-REVENUES> 4,648,451
<CGS> 0
<TOTAL-COSTS> 2,046,486
<OTHER-EXPENSES> 1,023,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,922,233
<INCOME-PRETAX> (1,343,825)
<INCOME-TAX> 0
<INCOME-CONTINUING> (606,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (606,487)
<EPS-BASIC> (1.45)
<EPS-DILUTED> (1.45)
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