SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
September 30, 2000 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. . . . . . . . . . . . . . . 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 24
Item 3. Defaults Upon Senior Securities. . . . . . . . . . 24
Item 5. Other Information. . . . . . . . . . . . . . . . . 25
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 26
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
------
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -----------
Current assets:
Cash and cash equivalents . . . . . $ 8,702,383 9,715,669
Interest, rents and other
receivables. . . . . . . . . . . . 58,207 73,526
------------ ------------
Total current assets. . . . . 8,760,590 9,789,195
------------ ------------
Investment in unconsolidated
ventures, at equity . . . . . . . . 893,062 27,067,099
Other assets. . . . . . . . . . . . . 210,375 210,375
------------ ------------
$ 9,864,027 37,066,669
============ ============
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -----------
Current liabilities:
Accounts payable and
other current liabilities. . . . . $ 38,389 61,922
------------ ------------
Total current liabilities . . 38,389 61,922
Investment in unconsolidated
ventures, at equity . . . . . . . . 7,658,880 8,445,543
Partnership's share of the
maximum unfunded obligation
under the indemnification
agreement . . . . . . . . . . . . . 4,317,682 4,451,884
Distributions received in
excess of recorded invest-
ment. . . . . . . . . . . . . . . . 1,322,572 1,322,572
Long-term debt, less
current portion . . . . . . . . . . 36,628,074 33,824,625
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . 49,965,597 48,106,546
Partners' capital accounts
(deficits):
General partners:
Capital contributions . . . . . . 1,000 1,000
Cumulative net earnings
(losses) . . . . . . . . . . . . (14,857,898) (14,796,986)
Cumulative cash distributions . . (2,117,798) (1,817,374)
------------ ------------
(16,974,696) (16,613,360)
------------ ------------
Limited partners:
Capital contributions,
net of offering costs. . . . . . 351,746,836 351,746,836
Cumulative net earnings
(losses) . . . . . . . . . . . . (273,397,432) (271,935,538)
Cumulative cash distributions . . (101,476,278) (74,237,815)
------------ ------------
(23,126,874) 5,573,483
------------ ------------
Total partners' capital
accounts (deficits) . . . . (40,101,570) (11,039,877)
------------ ------------
$ 9,864,027 37,066,669
============ ============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ -- 454,085 -- 4,986,031
Interest income . . . . . . . . . . . . . . . . 184,487 183,313 562,149 299,818
Other income. . . . . . . . . . . . . . . . . . -- -- 876,265 --
----------- ---------- ---------- ----------
184,487 637,398 1,438,414 5,285,849
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 934,483 1,103,806 2,803,449 4,026,039
Property operating expenses . . . . . . . . . . -- 603,774 -- 2,557,552
Professional services . . . . . . . . . . . . . 5,900 25,743 252,777 659,275
Amortization of deferred expenses . . . . . . . -- 15,707 -- 108,415
Management fees to Corporate General Partner. . 278,171 -- 500,707 --
General and administrative. . . . . . . . . . . 112,320 170,666 587,179 560,691
----------- ---------- ---------- ----------
1,330,874 1,919,696 4,144,112 7,911,972
----------- ---------- ---------- ----------
(1,146,387) (1,282,298) (2,705,698) (2,626,123)
Partnership's share of the reduction of the
maximum unfunded obligation under the
indemnification agreement . . . . . . . . . . . 44,734 67,126 134,202 201,378
Partnership's share of operations of
unconsolidated ventures . . . . . . . . . . . . (1,160,663) (1,860,286) (1,648,787) (1,257,200)
----------- ---------- ---------- ----------
Earnings (loss) before gain on sale of
investment property . . . . . . . . . . . (2,262,316) (3,075,458) (4,220,283) (3,681,945)
Gain on sale of investment property . . . . . . . -- 7,598,499 -- 7,598,499
----------- ---------- ---------- ----------
Earnings (loss) before extra-
ordinary item . . . . . . . . . . . . . . (2,262,316) 4,523,041 (4,220,283) 3,916,554
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
Extraordinary item - write-off of
unamortized deferred financing costs. . . . . . -- (111,008) -- (111,008)
Partnership's share of extraordinary
items from unconsolidated ventures. . . . . . . 2,697,477 -- 2,697,477 --
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . . . $ 435,161 4,412,033 (1,522,806) 3,805,546
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gain
on sale of investment property . . . . $ (4.43) (7.37) (9.12) (8.82)
Gain on sale of investment property. . . -- 18.77 -- 18.77
Extraordinary item . . . . . . . . . . . 5.47 (.27) 5.47 (.27)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . $ 1.04 11.13 (3.65) 9.68
=========== ========== ========== ==========
Cash distributions per limited
partnership interest. . . . . . . . . . . $ 10.00 -- 68.00 --
=========== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . $(1,522,806) 3,805,546
Items not requiring (providing)
cash or cash equivalents:
Amortization of deferred
expenses. . . . . . . . . . . . -- 108,415
Long-term debt - deferred
accrued interest. . . . . . . . 2,803,449 2,803,449
Partnership's share of the
reduction of the maximum
unfunded obligation under
the indemnification agreement . (134,202) (201,378)
Partnership's share of
operations of unconsolidated
ventures. . . . . . . . . . . . 1,648,787 1,257,200
Gain on sale of investment
property. . . . . . . . . . . . (2,697,477) (7,598,499)
Extraordinary item. . . . . . . . -- 111,008
Changes in:
Interest, rents and other
receivables . . . . . . . . . . 15,319 373,072
Prepaid expenses. . . . . . . . . -- 19,742
Escrow deposits . . . . . . . . . -- 352,268
Accrued rents receivable. . . . . -- 12,349
Accounts payable and other
current liabilities . . . . . . (23,533) (525,944)
Due to affiliates . . . . . . . . -- 93,359
Accrued interest. . . . . . . . . -- (170,101)
Accrued real estate taxes . . . . -- (545,000)
Tenant security deposits. . . . . -- (19,919)
------------ -----------
Net cash provided by
(used in) operating
activities. . . . . . . . 89,537 (124,433)
------------ -----------
Cash flows from investing
activities:
Additions to investment
properties. . . . . . . . . . . . -- (1,321,967)
Partnership's distributions
from unconsolidated ventures. . . 26,436,064 --
Partnership's contributions
to unconsolidated ventures. . . . -- (4,657,850)
Cash proceeds from sale of
investment property . . . . . . . -- 19,407,079
Payment of deferred expenses, net . -- (54,867)
------------ -----------
Net cash provided by
(used in) investing
activities. . . . . . . . 26,436,064 13,372,395
------------ -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999
----------- -----------
Cash flows from financing activities:
Principal payments on
long-term debt. . . . . . . . . . -- (222,033)
Distributions to General Partners . (300,424) --
Distributions to Limited Partners . (27,238,463) --
------------ -----------
Net cash provided by
(used in) financing
activities. . . . . . . . . (27,538,887) (222,033)
------------ -----------
Net increase (decrease)
in cash and cash equi-
valents . . . . . . . . . . (1,013,286) 13,025,929
Cash and cash equivalents,
beginning of year . . . . . 9,715,669 6,875,849
------------ -----------
Cash and cash equivalents,
end of period . . . . . . . $ 8,702,383 19,901,778
============ ===========
Supplemental disclosure of cash
flow information:
Cash paid for mortgage and
other interest. . . . . . . . . . $ -- 1,353,286
============ ===========
Net distribution in excess
of recorded investment. . . . . . $ -- (494,136)
============ ===========
See accompanying notes to financial statements.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1999 which are
included in the Partnership's 1999 Annual Report on Form 10-K filed on
March 24, 2000 (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 1999 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 and its ventures' policy is to
consider a property to be held for sale or disposition when the Partnership
or venture 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 or venture 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. The unconsolidated
venture's commitment to a plan for sale or disposal of the Piper Jaffray
Tower had, as of June 30, 1999, not resulted in a sale or disposition. As
a result, the unconsolidated venture made an adjustment to record
depreciation expense as of that date that would have been recognized had
the Piper Jaffray Tower not been considered "held for sale or disposition".
Further, the unconsolidated venture began to record depreciation expense
for this property commencing July 1, 1999. However, as discussed below,
due to the commencement by the mortgage lender to realize upon its security
in the property, the unconsolidated venture reclassified the property as
held for sale or disposition as of July 1, 2000.
The results of operations for the Louis Joliet Mall, which was
classified as held for sale or disposition as of December 31, 1996 and sold
in July 1999, was $1,209,556 for the nine months ended September 30, 1999.
In addition, the accompanying financial statements include for the
nine month periods ended September 30, 2000 and 1999 operations of
$1,048,690 and ($1,257,200), respectively, as the Partnership's share of
total property operations of $2,334,481 and ($914,138) of unconsolidated
properties which were classified as held for sale or disposition or sold in
the past two years.
Certain amounts in the 1999 financial statements have been
reclassified to conform with the 2000 presentation.
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees and certain of its officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investments. Fees, commissions and
other expenses required to be paid by the Partnership to the General
Partners and their affiliates as of September 30, 2000 and for the nine
months ended September 30, 2000 and 1999 were as follows:
Unpaid at
September 30,
2000 1999 2000
-------- ------- -------------
Property management and
leasing fees. . . . . . . . . . $ -- 267,324 --
Insurance commissions . . . . . . 15,429 31,315 --
Management fees to Corporate
General Partner . . . . . . . . 500,707 -- --
Reimbursement (at cost) for
out-of-pocket salary and
salary-related expenses and
other costs for the Partner-
ship and its investment
properties. . . . . . . . . . . 81,597 165,710 22,400
-------- ------- -------
$597,733 464,349 22,400
======== ======= =======
In connection with the distributions of cash flow from operations in
February and August 2000, the General Partners received distributions
aggregating approximately $134,000 and $167,000, respectively. The
Corporate General Partner also received management fees aggregating
approximately $223,000 and $278,000 (reflected in the table above) in
February and August 2000, respectively.
The Partnership had obligations, which bore interest ranging from
4.62% to 5.35% per annum in 1999, to fund, on demand, $400,000 and $400,000
to Carlyle Investors, Inc. and Carlyle Managers, Inc., respectively, of
additional paid-in capital. In 1999, these obligations, including all
unpaid accrued interest, aggregating approximately $1,340,000 were retired.
Such amounts are recorded as distributions received in excess of recorded
investment in the accompanying balance sheets.
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). However, in
conjunction with the default under the mortgage loan and the subsequent
appointment of the receiver for the Piper Jaffray Tower, the obligation to
pay such deferred fees was released. As a result, such amounts were
written off and are no longer reflected in the unconsolidated venture's
balance sheet at September 30, 2000.
JMB/NYC
As a result of the 1996 restructuring, JMB/NYC had an indirect limited
partnership interest which, before taking into account significant
preferences to other partners, equaled 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
retained any direct or indirect continuing interest in the Properties. The
<PAGE>
new ownership structure gave 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 had, under certain limited circumstances, through January 1, 2001
rights of consent regarding sale of the Properties or the consummation of
certain other transactions that would have significantly reduced
indebtedness of the Properties. In general, at any time on or after
January 2, 2001, an affiliate of the REIT had the right to purchase
JMB/NYC's interest in the Properties for an amount based on a formula
relating to the operations of the Properties (the "Formula Price"). In
addition, the purchase money note (discussed below) made by JMB/NYC for its
interests in the Properties, which had outstanding principal and accrued
and deferred interest of approximately $146,435,000, at September 30, 2000,
matures on January 2, 2001. If such REIT affiliate exercised such right to
purchase, it was unlikely that such purchase would have resulted in any
significant distributions to the partners of the Partnership.
Additionally, at any time, JMB/NYC had the right to require such REIT
affiliate to purchase the interest of JMB/NYC in the Properties for the
Formula Price.
During 1996, as a result of the adoption of the Plan, 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 to a limited partnership interest in
the joint ventures which owned the Properties 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 or partnership which own the
Properties subsequent to the Effective Date. Accordingly, the Partnership
discontinued the application of the equity method of accounting for the
indirect interests in the Properties and additional losses from the
investment in unconsolidated venture will not be recognized. Should the
unconsolidated venture subsequently report income, the Partnership will
resume applying the equity method on its share of such income only after
such income exceeds net losses not previously recognized.
Pursuant to the indemnification agreement, the Affiliated Partners
were jointly and severally obligated to indemnify 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 owned 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. Due to the Restructuring discussed
below, during 1999 the maximum potential obligation was reduced to
approximately $14.3 million and a portion of the collateral was released to
JMB/NYC. 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 for JMB/NYC. Interest 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 (as amended in
connection with the Restructuring discussed below) generally prohibit the
Affiliated Partners from taking actions that could have an adverse effect
on the exercise of the purchase rights by the REIT affiliate discussed
below or on a sale or certain other transactions involving a direct or
indirect interest in 1290 Avenue of the Americas unless such transaction
requires JMB/NYC's consent. 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 remaining collateral to
be returned (including interest earned) after the termination of the
indemnification agreement.
<PAGE>
In November 1999, a transaction (the "Restructuring") closed pursuant
to which, among other things, JMB/NYC's interests in 237 Park Avenue ("237
Park") and 1290 Avenue of the Americas ("1290 Avenue of the Americas") were
restructured. Under the Restructuring, the partnership that owns 237 Park
was converted to a limited liability company ("237 Park LLC"). The
membership interest in 237 Park LLC owned by 237/1290 Upper Tier
Associates, L.P. (the "Upper Tier Partnership"), in which JMB/NYC is a
limited partner with a 99% interest, was contributed to a partnership (the
"237 Partnership") that acquired the other membership interests in 237 Park
LLC from the REIT and one of its affiliates. In exchange for the interest
in 237 Park LLC, the Upper Tier Partnership received a limited partnership
interest in the 237 Partnership having a fair market value (determined in
accordance with the partnership agreement of the 237 Partnership) of
approximately $500,000. (JMB/NYC's total investment in the 237 Partnership
is significantly less than 1% of the 237 Partnership.) The 237 Partnership
owns a portfolio of investments in addition to 237 Park. JMB/NYC has the
right, during the month of July of each calendar year commencing with 2001,
to cause a sale of the interest in the 237 Partnership for a price equal to
the greater of the fair market value of such interest (determined in
accordance with the partnership agreement of the 237 Partnership) and a
specified amount, of which JMB/NYC's share would be $500,000. In addition,
the general partner of the 237 Partnership has the right, during the month
of January of each calendar year commencing with 2002, to purchase the
interest in the 237 Partnership for a price equal to the greater of the
fair market value of such interest (determined as described above) and a
specified amount, of which JMB/NYC's share would be $650,000.
Although under the terms of the Restructuring JMB/NYC is not able to
cause a sale of the interest in the 237 Partnership prior to 2001, the
earliest date on which such interest may be purchased at the election of
the general partner of the 237 Partnership is January 2002. In the absence
of JMB/NYC's earlier election to cause a sale of its interest in the 237
Partnership, this extends by a year (to January 2002 from January 2001) the
date on which JMB/NYC's indirect interest in 237 Park was previously
subject to purchase at the election of an affiliate of the REIT.
JMB/NYC's indirect interest through the Upper Tier Partnership in the
partnership (the "1290 Partnership") that owns 1290 Avenue of the Americas
was also modified, although the REIT continues to own the controlling
interest in the property. In general, the REIT has the right to sell 1290
Avenue of the Americas or the REIT's interest in the 1290 Partnership or
permit a sale of more than 51% of the stock in the REIT, during the period
January 1, 2000 through February 28, 2001, provided that JMB/NYC receives
the greater of (i) an amount based on a formula relating to the operations
of the property (the "1290 Formula Price") and (ii) $4,500,000. Although
the REIT is able to cause a sale of the entire property one year earlier
than previously, which would result in the Partnership's (and the Holders
of Interests') recognition of income for Federal income tax purposes from
such a transaction, JMB/NYC would be entitled to receive a minimum
specified amount (determined as described above) in connection with such
sale. An affiliate of the REIT also has the right, during the month of
March of each calendar year commencing with 2001, to purchase JMB/NYC's
indirect interest in the 1290 Partnership for the greater of (x) the 1290
Formula Price and (y) $1,400,000. In addition, JMB/NYC has the right,
during the month of September of each calendar year commencing with 2001,
to require an affiliate of the REIT to purchase JMB/NYC's indirect interest
in the 1290 Partnership for the greater of (1) the 1290 Formula Price, and
(2) $1,000,000. The REIT has stated that it does not intend to sell the
1290 Avenues of Americas property prior to March 2001 and that it does
intend to purchase JMB/NYC's indirect interest in the 1290 Partnership in
March 2001.
<PAGE>
A portion of the purchase price for JMB/NYC's indirect interest in the
1290 Avenue of the Americas and 237 Park Avenue office buildings is
represented by a certain promissory note (the "Purchase Note") bearing
interest at 12-3/4% per annum. The Purchase Note is secured by JMB/NYC's
indirect interest in the 1290 Partnership and the 237 Partnership and is
non-recourse to JMB/NYC. Prior to maturity, the Purchase Note requires
payment of principal and interest out of distributions made to JMB/NYC from
the 1290 Partnership and the 237 Partnership. 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 Note at maturity. The outstanding principal and
accrued and deferred interest on the Purchase Note at September 30, 2000,
was approximately $146,435,000.
In December 1999, the Partnership and the other Affiliated Partners
advanced a total of approximately $425,000 (of which the Partnership
advanced approximately $210,000) to the limited partners of JMB/NYC, which
was used to acquire a $5,425,000 tranche of the Purchase Note and the
related security agreement for the collateralization of such tranche. As a
result of this purchase, such limited partners, as creditors of JMB/NYC,
are entitled to receive up to $5,425,000 in proceeds otherwise payable to
JMB/NYC in respect of its indirect interest in the 1290 Partnership or the
237 Partnership. Such amounts received by the limited partners will be
distributed to the Affiliated Partners in proportion to their respective
advances made to purchase the tranche (i.e., 50% to the Partnership and 50%
in the aggregate to the other Affiliated Partners). In connection with
their purchase of the $5,425,000 tranche of the Purchase Note, the limited
partners of JMB/NYC agreed with the holder of the Purchase Note that in the
event JMB/NYC has not repaid all amounts due and owing under the Purchase
Note within one year after its maturity, the holder will take the
appropriate steps necessary to foreclose upon and obtain JMB/NYC's interest
in the Upper Tier Partnership in lieu of seeking any other damages.
Also in December 1999, JMB/NYC was entitled to receive refinancing
proceeds, as defined, of approximately $446,000 in respect of its indirect
interest in the 1290 Partnership as a result of a refinancing of the
mortgage note secured by the 1290 Avenue of Americas office building.
These proceeds were used by JMB/NYC to make a payment of approximately
$443,000 on the Purchase Note tranche held by its limited partners. It is
expected that the limited partners will repay the Partnership's $210,000
advance in 2000.
In connection with the Restructuring, approximately $4,460,000 in face
amount at maturity of U.S. Treasury securities held as collateral for the
indemnification obligations of the Affiliated Partners was released from
escrow and returned to the Affiliated Partners. The remaining face amount
of the securities will be held as collateral for the indemnification
obligations of the Affiliated Partners relating to 1290 Avenue of the
Americas generally until 90 days after the earlier of the sale of 1290
Avenue of the Americas and the sale of JMB/NYC's indirect interest in the
1290 Partnership. The Partnership expects its share of the remaining
collateral, including interest earned thereon, to be returned after the
termination of the indemnification obligations.
Due to, among other things, the level of indebtedness on 1290 Avenue
of the Americas, the Purchase Note payable by JMB/NYC, the significant
preference levels to other partners within the 1290 Partnership and the
purchase rights with respect to JMB/NYC's indirect interests in the 1290
Partnership and the 237 Partnership, it is unlikely that JMB/NYC will make
any significant distributions to the Partnership.
JMB/PIPER
Occupancy of the building at the end of the third quarter of 2000 was
65%.
<PAGE>
As expected, U.S. Bancorp Piper Jaffray Inc. ("PJI"), which occupied
335,684 square feet or approximately 46% of the building's rentable square
feet vacated the majority of its space (approximately 222,000 square feet)
and moved to a recently completed office tower upon expiration of its lease
on May 31, 2000. However, PJI extended a portion of its former space
(approximately 114,000 square feet) through May 31, 2002, although the new
rental rates, while at market rates, are significantly less than rental
rates under the previous PJI lease. Additionally, Piper has executed new
long-term leases representing an additional approximately 130,000 square
feet. The property manager has been actively pursuing replacement tenants
for the balance of the PJI space; however, given the extremely competitive
nature of the downtown Minneapolis market due to a significant amount of
new office construction, not all of the PJI space was released quickly
enough to generate sufficient cash flow to fund the required debt service
payments. As a result, Piper has not made the required debt service
payments under the mortgage loan since June 1, 2000, and is in monetary
default under such loan. Such default led to the appointment of a receiver
and a foreclosure sale of the property as described below.
The mortgage loan had an original principal amount of $100,000,000.
Prior to the default, the lender is essentially entitled to all operating
cash flow (as defined) in excess of fixed interest and certain other costs.
During 1999, no such cash flow was generated.
On a monthly basis, Piper was required to deposit the property
management fee into an escrow account to be used (including interest earned
thereon) for future leasing costs to the extent cash flow was not
sufficient to cover such items or to be applied to the outstanding loan
balance in the event of a default. Prior to the execution of the
stipulation agreement (discussed below), approximately $339,000
representing property management fees was deposited and approximately
$970,000 was withdrawn from the escrow account for certain leasing costs in
2000. The escrow balance as of July 20, 2000 was approximately $5,146,000.
Such balance was applied to the outstanding principal balance of the loan
on July 20, 2000, as a result of the default. The manager of the property
(which was an affiliate of the Corporate General Partner through November
1994) had agreed to defer receipt of its management fee and receive the
payment thereof out of the amount available from the escrow account. As of
July 20, 2000, the manager had deferred approximately $5,395,000
($1,839,000 of which represented deferred fees due to an affiliate of the
Corporate General Partner through November 1994) of management fees.
However, in conjunction with the appointment of the receiver at the
property and the application of the funds in the escrow account to the
outstanding loan balance, obligation to pay the deferred fees was released.
As a result, such fees were written off in the third quarter of 2000.
JMB/Piper, on behalf of Piper, had been negotiating with the lender to
transfer title to the property through a deed in lieu of foreclosure.
JMB/Piper and the lender were unable to reach an agreement related to such
a transaction. Consequently, and as a result of the monetary default
discussed above, the lender began legal proceedings to realize upon its
security in the building. In consideration for, among other things, Piper
and all of its constituent partners (collectively, the "Defendants") being
released under the loan documents upon the expiration of the redemption
period for foreclosure on the property and for payment of the Defendants'
fees in connection with the transaction, within certain limitations, the
Defendants executed a stipulation agreement consenting to a foreclosure
sale of the property, including the fee interest in the land underlying the
building. On July 20, 2000, the Court approved the stipulation and
appointed a receiver on behalf of the lender. On September 26, 2000, a
sheriff's sale of the property occurred at which the lender received a
sheriff's certificate of sale, subject to redemption of the property at any
time within six months from the date of such sale. JMB/Piper currently
expects that title to the land and building will transfer to the lender
sometime in mid-2001. Such transfer would result in Piper, JMB/Piper, and
<PAGE>
the Partnership, realizing a significant amount of gain for both financial
reporting and Federal income tax purposes in 2001, the year of expected
disposition, with no distributable proceeds from such disposition.
However, there can be no assurance that such disposition will be completed
within the time frame currently anticipated.
As JMB/Piper has committed to a plan to sell or dispose of the
property, JMB/Piper has reclassified the Piper Jaffray Tower as held for
sale or disposition as of July 1, 2000, and therefore, it is not subject to
continued depreciation beyond such date for financial reporting purposes.
JMB/900
Pursuant to the extension of the mortgage loan and prior to the sale
of the property in November 1999, net cash flow (as defined) was paid into
an escrow account controlled by the lender. The escrow account, including
interest earned thereon, was to be used by Progress Partners for payment of
property taxes and releasing costs associated with leases which were to
expire in 1999 and 2000 (approximately 50% of the building including the
Schulte, Roth & Zabel lease). During 1999, prior to the sale of the
property, approximately $7,934,000 had been deposited into escrow from net
cash flow from property operations. The escrow balance at closing of the
property sale was approximately $16,083,000. Such escrow was released to
Progress Partners upon the sale of the property as discussed below.
In July 1998, JMB/900 entered into an agreement with two of its
venture partners in Progress Partners and a judgment creditor of those
venture partners (such judgment creditor and the venture partners are
hereinafter collectively referred to as the "Progress Parties") to resolve
outstanding claims against each other. The agreement was subject to
occurrence of various terms and conditions, which failed to occur. In a
further effort to resolve their 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 provided 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. 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 paid upon the sale of the property, as discussed below. In a
related agreement and for the payment of $300,000 and the release of
various claims, certain 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 became 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.
On November 2, 1999, JMB/900, through Progress Partners, sold the
property for approximately $163,000,000 to an unaffiliated third party.
Upon closing, Progress Partners received cash from the sale of
approximately $62,300,000 (net of closing costs but before prorations).
The cash received was also net of the repayment of the mortgage loan
secured by the property of approximately $87,000,000, a prepayment penalty
of approximately $5,800,000 and the final payment to the Progress Parties
pursuant to the Settlement Agreement of approximately $2,500,000. As a
result of this sale, Progress Partners recognized a gain of approximately
$54,000,000 and $77,000,000 for financial reporting and Federal income tax
<PAGE>
purposes, respectively. The Partnership's share of such items was
approximately $18,100,000 and $25,600,000, respectively. As is customary
in such transactions, Progress Partners agreed to certain representations,
warranties and covenants with a stipulated survival period, which expired
on September 15, 2000. As required by the sale agreement, Progress
Partners had placed $2,000,000 into an escrow account for such
representations, warranties, covenants and certain other costs. As a
result of a claim made by the buyer under the sale contract, in September
2000, Progress Partners received approximately $1,800,000 as a return of a
portion of such amounts placed in escrow, plus interest earned thereon.
Progress Partners currently expects that it will receive approximately one-
half of the remaining amount once such claim has been settled.
In February 2000, the Partnership received a distribution of
approximately $26,400,000 from JMB/900 representing the Partnership's share
of distributable sales proceeds and cash flow generated from the operations
of Progress Partners.
As Progress Partners had 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, has not been subject to
continued depreciation beyond such date for financial reporting purposes.
LOUIS JOLIET MALL
On July 30, 1999, the Partnership consummated the sale of the Louis
Joliet Mall to BRE/Louis Joliet LLC ("BRE"). The purchase price of the
property was $45,400,000. A portion of the purchase price included the
assumption of the mortgage loan (approximately $25,200,000) by BRE 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 recognized a gain of approximately $7,600,000 and $22,000,000
for financial reporting purposes and Federal income tax purposes,
respectively. In addition, in connection with the sale of the property and
as is customary in such transactions, the Partnership agreed to certain
representations, warranties and covenants with a stipulated survival period
of January 30, 2000, which expired with no liability to the Partnership.
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 had 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 $178,000,000 as of September 30, 2000), 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 limited
liability company that owns the property, which has an adjusted principal
balance of approximately $21,988,000, and accrued interest of approximately
$14,640,000 at September 30, 2000, is due September 2003. The note accrues
interest at 17% per annum and requires payments of cash flow distributed by
the limited liability company from either property operations or sales
proceeds as well as a portion of the property management fee paid to the
unaffiliated member in the limited liability company. The loan is
nonrecourse and secured solely by the Partnership's interest in the limited
liability company.
<PAGE>
The Partnership is currently exploring the disposition of its interest
in the limited liability company prior to the maturity of the loans. At
maturity of the loans, it is not anticipated that further modifications or
extensions can be obtained. This would likely result in a lender taking
title to the property or the Partnership's interest in the limited
liability company. In either event, the Partnership would no longer have
an ownership interest in the property, which would result in a significant
amount of taxable income to the Partnership for Federal income tax purposes
with no corresponding distributable proceeds. Since the terms of the
modified mortgage note and the promissory note secured by the Partnership's
interest in the limited liability company make it highly unlikely that the
Partnership would recover any incremental investment, 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.
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 on the same terms for which
it was sold. As previously reported, the 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 appealed the dismissal. During the second quarter of
1999, the joint venture reached an agreement in principle with the lender
to settle the lawsuit. In February 2000, the settlement was finalized and
the former lender paid $1,400,000 to the joint venture in resolution of the
dispute. Simultaneously, the joint venture paid to its limited partners
$27,000 in settlement of any of their potential claims related to the
matter. The Partnership's share of the settlement proceeds and cash held
at the joint venture was approximately $876,000, which the Partnership
received in the second quarter of 2000.
<PAGE>
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/Piper, JMB/Piper II and
JMB/900 for the nine months ended September 30, 2000 and 1999 are as
follows:
2000 1999
----------- ----------
Total income from properties
(unconsolidated). . . . . . . . . . . $13,981,019 32,049,387
=========== ==========
Operating profit (loss) of ventures . . $ 2,334,481 (914,138)
=========== ==========
Partnership's share of
operating profit (loss) . . . . . . . $ 1,048,690 (1,257,200)
=========== ==========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
2000 and for the three and nine months ended September 30, 2000 and 1999.
<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.
At September 30, 2000, the Partnership had cash and cash equivalents
of approximately $8,702,000. Such funds were available for working capital
requirements and potential future distributions to the General Partners and
Holders of Interests. The Wells Fargo Center - South Tower investment
property is restricted as to the use of excess cash flows by an escrow
agreement negotiated pursuant to a loan modification. Amounts held in
escrow may be used for payment of tenant improvements and other expenses
related to the property. As discussed in more detail in the Notes, a
receiver has been appointed for the Piper Jaffray Tower on behalf of the
mortgage lender, and cash flow generated by the property is under the
control of the receiver. Due to property specific concerns discussed in
the Notes, the Partnership does not consider its remaining investment
properties to be potential sources of future cash generated from sales or
operations.
The Partnership had budgeted in 2000 approximately $2,848,000 (of
which approximately $691,000 has been incurred as of September 30, 2000)
for its share of tenant improvements and other capital expenditures at the
Piper Jaffray Tower. However, as a result of the stipulation agreement
(discussed below), the Partnership has no funding obligations for these
items. The receiver appointed for the property has assumed responsibility
for payment of the costs and expenses of the property out of the cash flow
generated from its operations. The Partnership has not budgeted any
amounts, and has no funding obligations for its other remaining investment
properties.
In February 2000, the Partnership received a distribution of
approximately $26,400,000 from JMB/900 representing the Partnership's share
of distributable sales proceeds and cash flow generated from the operations
of Progress Partners.
In February 2000, the Partnership made a distribution of sales
proceeds related to the sales of the 900 Third Avenue office building and
the Louis Joliet Mall to the Holders of Interests of approximately
$20,040,000 ($50 per interest) and approximately $3,200,000 ($8 per
interest) of previously undistributed cash flow generated primarily from
the 900 Third Avenue office building. Accordingly, the General Partners
were entitled to a distribution of cash flow from operations of
approximately $134,000. In connection with such operational cash flow
distribution, the Corporate General Partner also received a management fee
of approximately $223,000. Additionally, the Partnership made a
distribution of cash flow from operations of approximately $4,006,000 ($10
per interest) to the Holders of Interests and $167,000 to the General
Partners in August 2000. The General Partners received a management fee of
approximately $278,000 in connection with the August 2000 distribution.
As previously reported, the joint venture that had owned the Yerba
Buena office building 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 appealed the
dismissal. During the second quarter of 1999, the joint venture reached an
agreement in principle with the lender to settle the lawsuit. In February
2000, the settlement was finalized and the former lender paid $1,400,000 to
the joint venture in resolution of the dispute. Simultaneously, the joint
venture paid to its limited partners $27,000 in settlement of any of their
potential claims related to the matter. The Partnership's share of the
settlement proceeds and cash held at the joint venture is approximately
$876,000, which the Partnership received in the second quarter of 2000.
<PAGE>
In connection with the sale of the 900 Third Avenue Building in
November 1999, Progress Partners agreed to certain representations,
warranties and covenants with a stipulated survival period, which expired
on September 15, 2000. As required by the sale agreement, Progress
Partners had placed $2,000,000 into an escrow account for such
representations, warranties, covenants and certain other costs. As a
result of a claim made by the buyer under the sale contract, in September
2000, Progress Partners received approximately $1,800,000 as a return of a
portion of such amounts placed in escrow, plus interest earned thereon.
Progress Partners currently expects that it will receive approximately one-
half of the remaining amount once such claim has been settled.
In November 1999, a transaction (the "Restructuring") closed pursuant
to which, among other things, JMB/NYC's interests in 237 Park Avenue ("237
Park") and 1290 Avenue of the Americas ("1290 Avenue of the Americas") were
restructured. Under the Restructuring, the partnership that owns 237 Park
was converted to a limited liability company ("237 Park LLC"). The
membership interest in 237 Park LLC owned by 237/1290 Upper Tier
Associates, L.P. (the "Upper Tier Partnership"), in which JMB/NYC is a
limited partner with a 99% interest, was contributed to a partnership (the
"237 Partnership") that acquired the other membership interests in 237 Park
LLC from the REIT and one of its affiliates. In exchange for the interest
in 237 Park LLC, the Upper Tier Partnership received a limited partnership
interest in the 237 Partnership having a fair market value (determined in
accordance with the partnership agreement of the 237 Partnership) of
approximately $500,000. (JMB/NYC's total investment in the 237 Partnership
is significantly less than 1% of the 237 Partnership.) The 237 Partnership
owns a portfolio of investments in addition to 237 Park. JMB/NYC has the
right, during the month of July of each calendar year commencing with 2001,
to cause a sale of the interest in the 237 Partnership for a price equal to
the greater of the fair market value of such interest (determined in
accordance with the partnership agreement of the 237 Partnership) and a
specified amount, of which JMB/NYC's share would be $500,000. In addition,
the general partner of the 237 Partnership has the right, during the month
of January of each calendar year commencing with 2002, to purchase the
interest in the 237 Partnership for a price equal to the greater of the
fair market value of such interest (determined as described above) and a
specified amount, of which JMB/NYC's share would be $650,000.
Although under the terms of the Restructuring JMB/NYC is not able to
cause a sale of the interest in the 237 Partnership prior to 2001, the
earliest date on which such interest may be purchased at the election of
the general partner of the 237 Partnership is January 2002. In the absence
of JMB/NYC's earlier election to cause a sale of its interest in the 237
Partnership, this extends by a year (to January 2002 from January 2001) the
date on which JMB/NYC's indirect interest in 237 Park was previously
subject to purchase at the election of an affiliate of the REIT.
JMB/NYC's indirect interest through the Upper Tier Partnership in the
partnership (the "1290 Partnership") that owns 1290 Avenue of the Americas
was also modified, although the REIT continues to own the controlling
interest in the property. In general, the REIT has the right to sell 1290
Avenue of the Americas or the REIT's interest in the 1290 Partnership or
permit a sale of more than 51% of the stock in the REIT, during the period
January 1, 2000 through February 28, 2001, provided that JMB/NYC receives
the greater of (i) an amount based on a formula relating to the operations
of the property (the "1290 Formula Price") and (ii) $4,500,000. Although
the REIT is able to cause a sale of the entire property one year earlier
than previously, which would result in the Partnership's (and the Holders
of Interests') recognition of income for Federal income tax purposes from
such a transaction, JMB/NYC would be entitled to receive a minimum
specified amount (determined as described above) in connection with such
sale. An affiliate of the REIT also has the right, during the month of
March of each calendar year commencing with 2001, to purchase JMB/NYC's
indirect interest in the 1290 Partnership for the greater of (x) the 1290
<PAGE>
Formula Price and (y) $1,400,000. In addition, JMB/NYC has the right,
during the month of September of each calendar year commencing with 2001,
to require an affiliate of the REIT to purchase JMB/NYC's indirect interest
in the 1290 Partnership for the greater of (1) the 1290 Formula Price, and
(2) $1,000,000. The REIT has stated that it does not intend to sell the
1290 Avenues of Americas property prior to March 2001 and that it does
intend to purchase JMB/NYC's indirect interest in the 1290 Partnership in
March 2001.
A portion of the purchase price for JMB/NYC's indirect interest in the
1290 Avenue of the Americas and 237 Park Avenue office buildings is
represented by a certain promissory note (the "Purchase Note") bearing
interest at 12-3/4% per annum. The Purchase Note is secured by JMB/NYC's
indirect interest in the 1290 Partnership and the 237 Partnership and is
non-recourse to JMB/NYC. Prior to maturity, the Purchase Note requires
payment of principal and interest out of distributions made to JMB/NYC from
the 1290 Partnership and the 237 Partnership. 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 Note at maturity. The outstanding principal and
accrued and deferred interest on the Purchase Note at September 30, 2000,
was approximately $146,435,000.
In December 1999, the Partnership and the other Affiliated Partners
advanced a total of approximately $425,000 (of which the Partnership
advanced approximately $210,000) to the limited partners of JMB/NYC, which
was used to acquire a $5,425,000 tranche of the Purchase Note and the
related security agreement for the collateralization of such tranche. As a
result of this purchase, such limited partners, as creditors of JMB/NYC,
are entitled to receive up to $5,425,000 in proceeds otherwise payable to
JMB/NYC in respect of its indirect interest in the 1290 Partnership or the
237 Partnership. Such amounts received by the limited partners will be
distributed to the Affiliated Partners in proportion to their respective
advances made to purchase the tranche (i.e., 50% to the Partnership and 50%
in the aggregate to the other Affiliated Partners). In connection with
their purchase of the $5,425,000 tranche of the Purchase Note, the limited
partners of JMB/NYC agreed with the holder of the Purchase Note that in the
event JMB/NYC has not repaid all amounts due and owing under the Purchase
Note within one year after its maturity, the holder will take the
appropriate steps necessary to foreclose upon and obtain JMB/NYC's interest
in the Upper Tier Partnership in lieu of seeking any other damages.
Also in December 1999, JMB/NYC was entitled to receive refinancing
proceeds, as defined, of approximately $446,000 in respect of its indirect
interest in the 1290 Partnership as a result of a refinancing of the
mortgage note secured by the 1290 Avenue of Americas office building.
These proceeds were used by JMB/NYC to make a payment of approximately
$443,000 on the Purchase Note tranche held by its limited partners. It is
expected that the limited partners will repay the Partnership's $210,000
advance in 2000.
In connection with the Restructuring, approximately $4,460,000 in face
amount at maturity of U.S. Treasury securities held as collateral for the
indemnification obligations of the Affiliated Partners was released from
escrow and returned to the Affiliated Partners. The remaining face amount
of the securities will be held as collateral for the indemnification
obligations for the Affiliated Partners relating to 1290 Avenue of the
Americas generally until 90 days after the earlier of the sale of 1290
Avenue of the Americas and the sale of JMB/NYC's indirect interest in the
1290 Partnership. The Partnership expects its share of the remaining
collateral, including interest earned thereon, to be returned after the
termination of the indemnification obligations.
<PAGE>
As discussed in the Notes, JMB/Piper, on behalf of Piper, had been
negotiating with the lender to transfer title to the property through a
deed in lieu of foreclosure. JMB/Piper and the lender were unable to reach
an agreement related to such a transaction. Consequently, and as a result
of the monetary default discussed above, the lender began legal proceedings
to realize upon its security in the building. In consideration for, among
other things, Piper and all of its constituent partners (collectively, the
"Defendants") being released under the loan documents upon the expiration
of the redemption period for foreclosure on the property and for payment of
the Defendants' fees in connection with the transaction, within certain
limitations, the Defendants executed a stipulation agreement consenting to
a foreclosure sale of the property, including the fee interest in the land
underlying the building. On July 20, 2000, the Court approved the
stipulation and appointed a receiver on behalf of the lender. On September
26, 2000, a sheriff's sale of the property occurred at which the lender
received a sheriff's certificate of sale, subject to redemption of the
property at any time within six months from the date of such sale.
JMB/Piper currently expects that title to the land and building will
transfer to the lender sometime in mid-2001. Such transfer would result in
Piper, JMB/Piper, and the Partnership, realizing a significant amount of
gain for both financial reporting and Federal income tax purposes in 2001,
the year of expected disposition, with no distributable proceeds from such
disposition. However, there can be no assurance that such disposition will
be completed within the time frame currently anticipated.
As discussed in the Notes, the Partnership is currently exploring the
disposition of its interest in the limited liability company which owns the
Wells Fargo Center - South Tower prior to the maturity in 2003 of the loans
secured by the property or the Partnership's interest in the limited
liability company. At maturity of the loans, it is not anticipated that
further modifications or extensions can be obtained. This would likely
result in a lender taking title to the property or the Partnership's
interest in the limited liability company. In either event, the
Partnership would no longer have an ownership interest in the property,
which would result in a significant amount of taxable income to the
Partnership for Federal income tax purposes with no corresponding
distributable proceeds.
The Partnership's and its ventures' 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
indebtedness. The Partnership does not intend to commit any significant
additional funds to either the Wells Fargo Center - South Tower or the
Piper Jaffray Tower.
Although the Partnership expects to make minimal future cash
distributions, aggregate distributions received by Holders of Interest over
the entire term of the Partnership will be approximately 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 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 have high levels of debt secured by each property and
generally 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 unlikely that the
Partnership will receive any substantial proceeds from operations or sales
of these properties. However, upon disposition of each of these properties
or the Partnership's interest therein, the Partnership, and therefore the
Holders of Interests, will recognize a substantial amount of taxable income
with little or 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.
<PAGE>
RESULTS OF OPERATIONS
Significant variances between periods are primarily due to the sale of
the Louis Joliet Mall on July 30, 1999 and the 900 Third Office Building on
November 2, 1999.
The decrease in the investment in unconsolidated ventures, at equity
at September 30, 2000 as compared to December 31, 1999 is primarily due to
a distribution of cash of approximately $26,400,000 from JMB/900 to the
Partnership in February 2000.
The decrease in accounts payable at September 30, 2000 as compared to
December 31, 1999 is primarily due to the timing of payment for certain of
the administrative expenses of the Partnership.
The decrease in the liability investment in unconsolidated ventures,
at equity at September 30, 2000 as compared to December 31, 1999 and the
increase in Partnership's share of extraordinary items from unconsolidated
ventures for the three and nine months ended September 30, 2000 as compared
to the same periods in 1999 is primarily due to the write off of certain
deferred management fees upon the appointment of the receiver at the Piper
Jaffray Tower.
The increase in long-term debt at September 30, 2000 as compared to
December 31, 1999 is primarily due to the interest accrual on the
promissory note secured by the Partnership's interest in the limited
liability company that owns the Wells Fargo Center - South Tower.
The increase in interest income for the nine months ended
September 30, 2000 as compared to the same period in 1999 is primarily due
to temporary investment of the cash received from JMB/900. Portions of
such funds were distributed to the General Partners and Holders of
Interests in late February 2000 and August 2000.
The other income for the nine months ended September 30, 2000 is the
result of the Partnership's share of the proceeds from settlement of the
Yerba Buena litigation, as discussed above. Reference is made to the Notes
in the accompanying consolidated financial statements for a further
discussion of such transaction.
The decrease in professional services for the nine months ended
September 30, 2000 as compared to the same period in 1999 is primarily due
to the joint venture reaching an agreement in principle for the settlement
of the Yerba Buena litigation during the second quarter of 1999, which
resulted in reduced legal fees thereafter. The settlement was completed in
February 2000.
The increase in management fees to Corporate General Partner for the
three and nine months ended September 30, 2000 as compared to the same
periods in 1999 is due to the distributions of cash flow from operations to
the General Partners and the Holders of Interest in February and August
2000. The management fee is based upon a percentage of the distributions
of cash flow from operations.
The increase in general and administrative expenses for the nine
months ended September 30, 2000 as compared to the same period in 1999 is
primarily due to the payment by the Partnership for state income taxes owed
as a result of the sale of the Louis Joliet Mall in July 1999.
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 for JMB/NYC. The lower amounts of such reduction for the
three and nine months ended September 30, 2000, compared to the same
periods of 1999 are primarily due to the release of a portion of the funds
held in escrow in connection with the Restructuring in 1999 and a
corresponding reduction in the amount of interest earned on the lower
escrow balance during 2000.
<PAGE>
The decrease in Partnership's share of operations of unconsolidated
ventures for the nine months ended September 30, 2000 as compared to the
same period in 1999 is primarily due to lower income generated by the Piper
Jaffray Tower as a result of the decrease in occupancy. The increase in
Partnership's share of operations of unconsolidated ventures for the three
months ended September 30, 2000 as compared to the same period in 1999 is
primarily due to the cessation of the recording of depreciation from July
1, 2000 as a result of the property being reclassified as held for sale or
disposition as of that date.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 20, 2000, an action entitled TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA V. 222 SOUTH NINTH STREET LIMITED PARTNERSHIP, OB
JOINT VENTURE, JMB/PIPER JAFFRAY TOWER ASSOCIATES, CARLYLE REAL ESTATE
LIMITED PARTNERSHIP-XIV, JMB/PIPER JAFFRAY TOWER ASSOCIATES II, CAMPBELL-
MITHUN-ESTY, L.L.C., U.S. BANCORP PIPER JAFFRAY INC. JMB REALTY
CORPORATION, OB JOINT VENTURE II AND LHDL REALTY LIMITED PARTNERSHIP was
initiated in and an order for judgement entered by Minnesota District Court
of Hennepin County, Minnesota. In the proceeding, Teachers Insurance and
Annuity Association of America ("Teachers"), as the holder of the mortgage
note secured by the Piper Jaffray Tower, sought the enforcement of its
security interest and the appointment of a receiver for the benefit of the
lender to take exclusive possession, control and operation of the property.
Due to a substantial amount of space vacated by a major tenant at the
expiration of its lease in May 2000, the property owning venture has not
made all of the scheduled debt service payments on the mortgage note since
June 1, 2000. In consideration for, among other things, being released
under the mortgage loan documents upon the expiration of the redemption
period for foreclosure on the property and for payment of their fees in
connection with the transaction, within certain limitations, the defendants
listed above executed a stipulation consenting to the foreclosure sale of
the property. In July 2000, the Court approved the stipulation agreement,
granted Teachers' application and entered an order for a receiver to take
exclusive possession, control and operation of the property. Accordingly,
the receiver has control of the property and its operations. In September
2000, a sheriff's sale of the property was held, and the lender was granted
certain rights to the title of the property in 2001. Title to the property
is currently expected to be transferred to Teachers or its designee in
2001. However, there can be no assurance that the lender will take title
to the property or that such disposition will be completed within the time
frame currently anticipated.
The Partnership is not subject to any other material legal
proceedings.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The joint venture that owns the Piper Jaffray Tower has not made all
of the scheduled debt service payments on the mortgage note secured by the
property since June 1, 2000. As of September 30, 2000 aggregate amounts
due to the lender were approximately $100,154,000, including certain
default interest. Reference is made to the subsection entitled "JMB/Piper"
in the Notes to the Financial Statements filed with this report for a
further discussion of the default under the mortgage loan secured by the
Piper Jaffray Tower, which discussion is hereby incorporated by reference.
<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 2000.
<CAPTION>
1999 2000
------------------------------------- ------------------------------
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 . . . 89% 89% 89% 91% 92% 65% 65%
4. Wells Fargo Center
South Tower
Los Angeles, California. . . * * * * * * *
<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.
</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.
10(a). Stipulation Agreement, dated July 20, 2000 between
Teachers Insurance and Annuity Association of America (Plaintiff) and 222
S. Ninth Street Limited Partnership, et al. (Defendants) is hereby filed
herewith.
27. Financial Data Schedule.
--------------
* Previously filed as Exhibits 3-B and 3-C, respectively, 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 were filed during the period covered
by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 10, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 10, 2000
