SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 1996 Commission File Number 0-13545
JMB/245 PARK AVENUE ASSOCIATES, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3265541
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1960
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents Incorporated by Reference: Portions of the Private Placement
Memorandum of the Registrant dated May 7, 1984 are incorporated by
reference in Parts I and III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . 3
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . . . . 3
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . . . . 3
Item 6. Selected Financial Data. . . . . . . . . . . . . . 4
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . 6
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . . 9
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . 43
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . . 43
Item 11. Executive Compensation . . . . . . . . . . . . . . 45
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . 46
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . . 47
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . . 47
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 50
i
PART I
ITEM 1. BUSINESS
Unless the context indicates otherwise, all references to "Notes" are
to Notes to Consolidated Financial Statements of JMB/245 Park Avenue
Associates, Ltd. contained in this report. Capitalized terms used herein,
but not defined have the same meanings as used in the Notes.
The registrant, JMB/245 Park Avenue Associates, Ltd. (the
"Partnership"), is a limited partnership formed in 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois for the original purpose of acquiring and owning an approximate
48.25% interest in 245 Park Avenue Company, a New York general partnership,
("245 Park" or the "Joint Venture") which owned and operated an office
building located at 245 Park Avenue, New York, New York. The Partnership
was admitted to the Joint Venture through the purchase of one of the
existing unaffiliated joint venture partner's interests. The unaffiliated
venture partners (the "O&Y Partners") were affiliates of Olympia & York
Developments, Ltd. ("O&Y"). On May 7, 1984, the Partnership commenced a
private offering of $124,300,000 in Limited Partnership Interests (the
"Interests") pursuant to a Private Placement Memorandum (the "Private
Placement Memorandum") in accordance with Rules 501-503 and 506 of
Regulation D of the Securities Act of 1933. A total of 1,000 Interests
were sold at $124,300 per Interest (except for twenty interests which were
sold net of any selling commission) of which $10,500 per Interest was due
upon admission, with the remaining purchase price paid in annual
installments from 1985 through 1990. The offering closed on June 28, 1984.
The holders of Interests (herein after "Holders" or "Holders of Interests")
in the Partnership share in their portion of the benefits of ownership of
the Partnership's real property investment according to the number of
Interests held.
As a result of the well-publicized financial difficulties of the O&Y
partners, in October 1995 each of the O&Y partners and certain other O&Y
affiliates (but not the Joint Venture) filed for bankruptcy protection from
creditors under Chapter 11 of the United States Bankruptcy Code. During
1996, the O&Y partners and these certain other O&Y affiliates have
restructured their ownership interest in various office buildings,
including their interest in the 245 Park Avenue office building. In
connection with such restructuring, the Joint Venture filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code in April 1996 seeking
approval of a plan of reorganization by its creditors and the partners of
the Joint Venture, including the Partnership, and in August 1996, the Third
Amended Joint Plan of Reorganization and Disclosure Statement (the "Plan")
was filed with the Bankruptcy Court. The Plan was accepted by the various
classes of claims and equity holders and confirmed by the Court on
September 20, 1996. The Plan became effective on November 21, 1996
("Effective Date") upon completion of several additional steps. The
conditions to the Plan included, but were not limited to, the completion of
significant refinancing and capital transactions regarding 245 Park Avenue
as well as other properties. Pursuant to the terms of the Plan, the
Partnership owns (through a limited liability company of which the
Partnership is a 99% member) an approximate 5.56% general partner interest
in a newly formed partnership, World Financial Properties,L.P. ("WFP, LP").
The managing general partner of WFP, LP is an entity affiliated with
certain O&Y creditors and the proponents of the Plan and, subject to the
partnership agreement, has full authority to manage its affairs. WFP, LP's
principal assets are majority and controlling interests in the following
six office buildings:
PROPERTY AND LOCATION NET RENTABLE AREA
One World Financial Center 1,510,987 square feet
New York, New York
Two World Financial Center 2,581,228 square feet
New York, New York
Four World Financial Center 1,813,659 square feet
New York, New York
One Liberty Plaza 2,124,000 square feet
New York, New York
245 Park Avenue 1,617,779 square feet
New York, New York
53 State Street 1,120,162 square feet
Boston, Massachusetts
The Plan was conditioned upon refinancings of the first and junior
mortgage loans secured by 245 Park Avenue in the aggregate principal amount
of approximately $383,000,000. As previously reported, the first mortgage
loan matured January 1, 1994 and the junior mortgage loans matured on
October 1, 1994. The Joint Venture and the first mortgage lender continued
to negotiate a modification and extension of the first mortgage loan.
While negotiations with the first mortgage lender were taking place, such
lender refrained from taking any actions or exercising any of its remedies
as a result of the loan having matured on January 1, 1994, and the Joint
Venture continued to make monthly payments of principal and interest
through the Effective Date. The holder of the junior mortgage loans also
refrained from taking any action or exercising any of its remedies as a
result of the loans maturing on October 1, 1994, and the Joint Venture
continued to make, and the holder of the junior loans continued to accept,
monthly payments of interest through the Effective Date. On November 21,
1996, the first mortgage lender and junior mortgage lender modified and
extended the respective mortgage loans. The Partnership recognized
forgiveness of indebtedness of $9,486,508 as an extraordinary item related
to the restructuring of the junior mortgage loan in 1996 for default
interest which was forgiven
Although the Plan is effective, WFP, LP and the Partnership each have
a substantial amount of indebtedness remaining. If any of the buildings
are sold, any proceeds would be first applied to repayment of the mortgage
and other indebtedness of WFP, LP. In any event, any net proceeds obtained
by the Partnership would then be used to satisfy notes payable and accrued
interest to JMB Realty Corporation (aggregating approximately $62,253,000
at December 31, 1996). Only after such applications would any remaining
proceeds be available to be distributed to the Limited Partners. As a
result, it is unlikely that the Holders ever will receive any significant
portion of their original investment. However, in the event of a sale or
other disposition of the property (including a transfer to the lenders),
the Limited Partners would recognize substantial gain for Federal income
tax purposes (corresponding to all or most of their deficit capital
accounts for tax purposes). For certain Limited Partners, such taxable
gain may be largely offset by suspended passive activity losses. Each
Limited Partner's tax liability will depend on such Holder's own tax
situation.
The Partnership has no employees.
The terms of transactions between the Partnership and the General
Partners and their affiliates are set forth in Item 11 below and to the
Notes, to which reference is hereby made for a description of such
transactions.
ITEM 2. PROPERTIES
The Partnership owns an indirect interest in the properties referred
to under Item 1 above to which reference is hereby made for a description
of said properties.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1995 and 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were 886 record holders of Interests of
the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. The Interests
have not been registered under the Securities Act of 1933, as amended, or
(with certain exceptions) under state securities laws. Transfers of the
Interests must be made in compliance with applicable federal and state
securities laws and are subject to the restrictions on transfers set forth
in Article 14 (pages 15-17) of the Amended and Restated Agreement of
Limited Partnership of the Partnership, which is incorporated herein by
reference to Exhibit 99.1 to this annual report.
Reference is made to the Notes for a discussion of the restrictions on
the distributions (if any) to the Partnership from its real estate
investment.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . $ 47,854 100 200 76,233 401,534
============ ============ =========== =========== ===========
Operating earnings
(loss). . . . . . . . . . . $ (3,301,775) (3,289,214) (2,921,538) (7,135,919) (7,889,312)
Partnership's share of
income (loss) from
operations of uncon-
solidated venture . . . . . 479,647 (4,269,135) (2,919,865) 658,942 (5,487,591)
Venture partner's share
of venture operations . . . (5,036) -- -- -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss)
before extraordinary
items . . . . . . . . . . . (2,827,164) (7,558,349) (5,841,403) (6,476,977) (13,376,903)
Extraordinary item:
Partnership's share of
gain on forgiveness of
indebtedness. . . . . . . . 9,486,508 -- -- -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . . $ 6,659,344 (7,558,349) (5,841,403) (6,476,977) (13,376,903)
============ ============ =========== =========== ===========
Net earnings (loss)
per Interest (b):
Net operating
earnings (loss) . . . . . $ (2,657) (7,105) (5,490) (6,088) (12,574)
Extraordinary item . . . . 8,917 -- -- -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . . $ 6,260 (7,105) (5,490) (6,088) (12,574)
============ ============ =========== =========== ===========
Total assets . . . . . . . . $ 156,838 4,275 -- 420,811 6,357,370
============ ============ =========== =========== ===========
Bank obligations
and notes payable -
long-term (c) . . . . . . . $ 43,236,631 43,236,631 40,319,631 44,694,631 --
============ ============ =========== =========== ===========
<FN>
- ----------
(a) The above financial information should be read in conjunction with the consolidated financial
statements of the Partnership and the related notes appearing elsewhere in this report.
(b) The net earnings (loss) and cash distributions per Interest are based upon the number of Interests
outstanding at the end of each period (1,000).
(c) Such loans were classified as a current liability at December 31, 1992 due to their originally
scheduled maturity of October 1993. During 1993, these loans were extended through December 1998 and purchased by
an affiliate of the Corporate General Partner in 1995.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On May 7, 1984, the Partnership commenced a private offering of
$124,300,000 in Limited Partnership Interests pursuant to a Private
Placement Memorandum. A total of 1,000 Interests were sold at $124,300 per
Interest (except for twenty Interests which were sold net of any selling
commission) of which $10,500 per Interest was due upon admission, with the
remaining purchase price paid in annual installments from 1985 through 1990
(all of which have been received). The purchase price installments have
been utilized primarily for the payment of the Partnership's bank
borrowings and related interest.
Since the Partnership has not been receiving operating cash flow
distributions from its original investment property, the Partnership
initially utilized its cash reserves to make the payments on the
Partnership's bank obligations. Effective with the first quarter of 1990,
the Partnership elected to suspend cash distributions to the Partners and
retain funds for its cash requirements. These reserves were exhausted, and
consequently, the Partnership was not able to pay the interest payment due
on the bank obligations for September 1993 in the approximate amount of
$223,000. In addition, the Partnership did not have adequate reserves to
pay a lump sum interest swap payment due February 1, 1994 in the amount of
$2,194,631. In this regard, the Partnership and its bank lender reached a
modification and extension agreement regarding the $50,000,000 term loans
that matured in October 1993. These term loans were secured by the
Partnership's interest in its real estate investment, and a guaranty by JMB
Realty Corporation, an affiliate of the Corporate General Partner ("JMB")
of $25,000,000 of the term loans. The terms of the modification and
extension generally provided for (i) an extension period through December
1998; (ii) interest payable currently on one-half of the principal amount
of the term loans at a rate related to the London Interbank Offer Rate
(LIBOR) while interest on the balance of the term loans accrues at an
annual rate of 2%; (iii) one-half of the original principal amount of the
term loans bearing interest at a rate related to LIBOR (the "LIBOR Note")
was subject to periodic amortization through payment of quarterly
installments of principal (principal in the amount of $2,500,000 per annum
in 1994 and $2,707,000 in 1995); and (iv) the past due lump sum interest
swap payment in the amount of $2,194,631 converted to a note payable due
December 1998 with interest accruing at an annual rate of 2%. In December
1993, approximately $5,647,000 was paid to the lenders under the term loans
(all of which was advanced on behalf of the Partnership by JMB), which
included a $5,000,000 principal paydown of the LIBOR Note and the interest
payable for the period September through December 1993. During the year
ended December 31, 1994, an additional amount of approximately $2,479,000
was paid to the lenders under the term loans which included a $1,251,000
principal paydown of the LIBOR Note and the interest payable for the period
January through December 1994. An additional $1,249,000 and two payments
of $729,000 each were paid in January through June 1995, respectively. All
payments of principal and interest made by JMB under its guaranty of the
$25,000,000 portion of the Partnership's term loans have been treated as
advances to the Partnership. As of December 31, 1996, JMB has advanced
approximately $12,376,000, evidenced by a demand note which reflects the
principal and interest payments made related to the loan modification
discussed above, advances to pay operating costs of the Partnership and
accrued and deferred interest on the demand note. Interest accrues on
these advances (and accrued and deferred interest thereon) at the annual
rate of prime (8.25% at December 31, 1996) plus 1%. The demand note
payable to JMB, which allows a maximum principal sum of a specified amount,
had been subordinate to payment of the LIBOR Note but is no longer
subordinated and is now secured by the Partnership's interest in its real
estate investment. Reference is made to the Notes for further information
concerning borrowings incurred by the Partnership.
In July 1995, JMB purchased from the lenders the term loans (including
the note representing the interest swap payment) and their security
interests in the related collateral, including the JMB guarantee, which has
been terminated. JMB continues to hold the notes for these loans generally
under the same terms and conditions that were in effect prior to the
purchase. However, no scheduled principal payments are required prior to
maturity of the LIBOR Note. Interest on the LIBOR Note accrues and is
payable monthly at a floating rate which, at the option of the Partnership,
is related to either LIBOR or the prime rate of Bank of America, Illinois.
No payments of interest on the LIBOR Note have been made subsequent to July
31, 1995. However, JMB has not given a notice of default under the LIBOR
Note. These loans and the demand loan payable to JMB are secured by the
Partnership's interest in its real estate investment and are subject to
mandatory prepayment of principal and interest out of any distributions
received by the Partnership from its real estate investment.
The O&Y partners had granted security interests in their interests in
245 Park to a syndicate of banks in order to secure certain loan
obligations of certain O&Y affiliates. In August 1992, the Partnership
received notice from the lead bank of the syndicate alleging that such O&Y
affiliates were in default under these loan obligations and directing that
all payments and distributions due to the O&Y partners from 245 Park be
delivered to the lead bank. According to published reports, an investor
group purchased participations in these obligations from the original
syndicate of banks. In September 1995, the holder of the loan obligations
issued a notice of sale for, among other things, the interests of the O&Y
partners in 245 Park in an effort to realize upon the collateral for the
loan obligations. In October, 1995, each of the O&Y partners, as well as
other O&Y affiliates, filed for protection from creditors under Chapter 11
of the United States Bankruptcy Code.
During 1996, the Third Amended Plan of Reorganization of the O&Y
partners interest became effective. Reference is made to the Notes for a
further description of the joint venture restructuring.
Although the Plan is effective, WFP, LP and the Partnership each have
a substantial amount of indebtedness remaining. If any of the buildings
are sold, any proceeds would be first applied to repayment of the mortgage
and other indebtedness of WFP, LP. In any event, any net proceeds obtained
by the Partnership would then be used to satisfy notes payable to JMB
Realty Corporation (aggregating approximately $62,253,000 at December 31,
1996). Only after such applications would any remaining proceeds be
available to be distributed to the Holders. As a result, it is unlikely
that the Holders ever will receive any significant portion of their
original investment. However, in the event of a sale or other disposition
of the property (including a transfer to the lenders), the Holders would
recognize substantial gain for Federal income tax purposes (corresponding
to all or most of their deficit capital accounts for tax purposes). For
certain Holders, such taxable gain may be largely offset by suspended
passive activity losses. Each Holder's tax liability will depend on such
Holders own tax situation.
The Partnership's liquidity and ability to continue as a going concern
is dependent upon additional advances from JMB under the demand note
discussed above as well as receipt of one-third of the property management
fees earned at the 245 Park Avenue property. Pursuant to the terms of the
JMB Transaction Agreement dated November 21, 1996, the Partnership is
entitled to receive one third of the monthly management fees earned at the
245 Park Avenue property through December 2001. Amounts received may not
be less than $400,000 or exceed $600,000 for any twelve month period and
may not be less than $2,300,000 over the term of the agreement. The
agreement further provided for the Partnership to receive reimbursements of
professional costs of $375,000 incurred in connection with the
Partnership's reorganization and restructuring of their interest in 245
Park, which amount was received in 1996.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and the demand note payable
to an affiliate at December 31, 1996 as compared to December 31, 1995 is
due to advances received from JMB under the demand note.
The increase in deferred interest payable to an affiliate as of
December 31, 1996 as compared to December 31, 1995 is due to the interest
accruals on certain of the term loans and the demand note payable to JMB.
The increase in interest and other income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 is primarily
related to other receivables of $47,194 which represents one third of the
property management fees for the 245 Park Avenue property for December 1996
which have been accrued pursuant to the terms of the JMB Transaction
Agreement described above.
The decrease in interest expense for the year ending December 31, 1996
compared to the year ended December 31, 1995 is due to a reduction of
interest rates during 1996 on the Partnership's variable rate notes
payable.
The increase in professional services and general and administrative
expenses for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 is primarily attributable to the legal fees and other
professional services in connection with the restructuring of 245 Park net
of any reimbursements. Pursuant to the Plan of Reorganization, the
Partnership received reimbursements of $375,000 for legal fees incurred
related to the restructuring of the Partnership's interest in 245 Park.
The decrease in Investment in unconsolidated venture, is primarily due
to the Partnership's share of gain on forgiveness of indebtedness
recognized by 245 Park related to the restructuring of the junior mortgage
loan in 1996 for default interest which was forgiven.
The Partnership's share of income from operations of unconsolidated
venture for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 is primarily due to recognition of termination fees of
approximately $13,000,000 related to certain tenants vacating 245 Park
during 1996 prior to the Effective Date. In addition, the Partnership's
share of income from operations is also due to a reduction in interest
expense on loans from the O&Y Partners and their affiliates. During 1996,
the joint venture ceased accruing interest on these loans when 245 Park
filed for bankruptcy protection. Subsequent to the Effective Date, the
Partnership's consolidated venture received an allocation of income of
approximately $500,000 related to operations of the restructured
unconsolidated venture which consisted of its proportionate share of
earnings of WFP, LP and the amortization of the underlying basis
difference. The increase in the Partnership's share of loss from
operations of unconsolidated venture for the year ended December 31, 1995
as compared to the year ended December 31, 1994 is primarily due to the
adjustment for the accrual of interest expense on 245 Park's mortgage loans
at default rates ranging from 11.88% to 18% per annum during 1995.
INFLATION
Due to the decrease in the levels of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
However, to the extent that inflation in future periods would have an
adverse impact on property operating expenses, the effect would generally
be offset by amounts recovered from tenants as many of the long-term leases
at the Partnership's commercial properties have escalation clauses covering
increases in the cost of operating the properties as well as real estate
taxes. Therefore, there should be little effect on operating earnings if
the properties remain substantially occupied.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is
inapplicable, not available or the information is presented in the
consolidated financial statements or related notes.
WORLD FINANCIAL PROPERTIES, L.P.
INDEX
Independent Auditors' Report
Consolidated Balance Sheet, December 31, 1996
Consolidated Statement of Operations, for the period November 21, 1996
through December 31, 1996
Consolidated Statement of Partners' Capital Accounts (Deficits),
for the period November 21, 1996 through December 31, 1996
Consolidated Statement of Cash Flows, for the period November 21,
1996 through December 31, 1996
Schedules not filed:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB/245 Park Avenue Associates, Ltd.:
We have audited the consolidated financial statements of JMB/245 Park
Avenue Associates, Ltd., a limited partnership (the "Partnership"), and
consolidated venture as listed in the accompanying index. These
consolidated financial statements are the responsibility of the General
Partners of the Partnership. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We did not
audit the financial statements of World Financial Properties, L.P. ("WFP,
LP"), partnership accounted for under the equity method of accounting. The
Partnership's equity in earnings from WFP, LP was $503,595 for the year
ended December 31, 1996. The financial statements of WFP, LP were audited
by other auditors whose report was furnished to us, and our opinion,
insofar as it relates to the amounts included for WFP, LP, is based solely
upon the report of the other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of the other
auditors provides a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JMB/245 Park
Avenue Associates, Ltd. and consolidated venture as of December 31, 1996
and 1995, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that JMB/245 Park Avenue Associates, Ltd. will continue as a going
concern. As described in the notes to the financial statements, the
Partnership has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability to
continue as a going concern. The General Partners' plans in regard to
these matters are also described in the notes to the financial statements.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 26, 1997
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,644 4,275
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,194 --
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 156,838 4,275
============ ===========
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,918 62,089
Deferred interest payable to an affiliate. . . . . . . . . . . . . . . . . 6,640,810 3,506,301
Demand note payable to affiliate . . . . . . . . . . . . . . . . . . . . . 12,375,591 12,029,591
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . 19,052,319 15,597,981
Notes payable to an affiliate - long-term. . . . . . . . . . . . . . . . . . 43,236,631 43,236,631
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 62,288,950 58,834,612
Investment in unconsolidated venture, at equity. . . . . . . . . . . . . . . 66,276,110 76,242,265
Venture partner's equity in venture. . . . . . . . . . . . . . . . . . . . . 5,036 --
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (480,000) (480,000)
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (12,713,838) (13,113,399)
------------ -----------
(13,192,838) (13,592,399)
------------ -----------
Limited partners (1,000 Interests):
Capital contributions, net of offering costs . . . . . . . . . . . . . 113,057,394 113,057,394
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (7,520,000) (7,520,000)
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (220,757,814) (227,017,597)
------------ -----------
(115,220,420) (121,480,203)
------------ -----------
Total partners' capital accounts (deficits). . . . . . . . . . . . (128,413,258) (135,072,602)
------------ -----------
$ 156,838 4,275
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Interest and other income. . . . . . . . . . . . . . . $ 47,854 100 200
------------ ------------ ------------
Expenses:
Interest . . . . . . . . . . . . . . . . . . . . . . . 3,134,509 3,154,676 2,853,447
Professional services. . . . . . . . . . . . . . . . . 129,720 96,059 31,676
General and administrative . . . . . . . . . . . . . . 85,400 38,579 36,615
------------ ------------ ------------
3,349,629 3,289,314 2,921,738
------------ ------------ ------------
Operating earnings (loss). . . . . . . . . . . . . . (3,301,775) (3,289,214) (2,921,538)
Partnership's share of income (loss)
from operations of unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . . . . 479,647 (4,269,135) (2,919,865)
Venture partner's share of venture
operations . . . . . . . . . . . . . . . . . . . . . . (5,036) -- --
------------ ------------ ------------
Net earnings (loss) before
extraordinary item . . . . . . . . . . . . . . . . (2,827,164) (7,558,349) (5,841,403)
Extraordinary item:
Partnership's share of gain on
forgiveness of indebtedness . . . . . . . . . . . . . 9,486,508 -- --
------------ ------------ ------------
Net earnings (loss). . . . . . . . . . . . . . . . . $ 6,659,344 (7,558,349) (5,841,403)
============ ============ ============
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . . . . . . . . $ (2,657) (7,105) (5,490)
Extraordinary item . . . . . . . . . . . . . . . . 8,917 -- --
------------ ------------ ------------
Net earnings (loss). . . . . . . . . . . . . . $ 6,260 (7,105) (5,490)
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits)
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (1,000 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ----------- ------------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficits)
Decem-
ber 31,
1993. . . . . $1,000 (12,309,414) (480,000) (12,788,414) 113,057,394 (214,421,830) (7,520,000) (108,884,436)
Net earnings
(loss). . . . -- (350,484) -- (350,484) -- (5,490,919) -- (5,490,919)
------ ----------- --------- ----------- ----------- ------------ ------------ ------------
Balance
(deficits)
Decem-
ber 31,
1994. . . . . 1,000 (12,659,898) (480,000) (13,138,898) 113,057,394 (219,912,749) (7,520,000) (114,375,355)
Net earnings
(loss). . . . -- (453,501) -- (453,501) -- (7,104,848) -- (7,104,848)
------ ----------- --------- ----------- ----------- ------------ ------------ ------------
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS (1,000 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ----------- ------------- ----------- ----------- ----------- ------------- ------------
Balance
(deficits)
Decem-
ber 31,
1995. . . . . 1,000 (13,113,399) (480,000) (13,592,399) 113,057,394 (227,017,597) (7,520,000) (121,480,203)
Net earnings
(loss). . . . -- 399,561 -- 399,561 -- 6,259,783 -- 6,259,783
------ ----------- --------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1996. . . . . $1,000 (12,713,838) (480,000) (13,192,838) 113,057,394 (220,757,814) (7,520,000) (115,220,420)
====== =========== ========= =========== =========== ============ =========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 6,659,344 (7,558,349) (5,841,403)
Items not requiring cash or cash equivalents:
Partnership's share of (income) loss from
operations of unconsolidated venture. . . . . . . (479,647) 4,269,135 2,919,865
Extraordinary item. . . . . . . . . . . . . . . . . (9,486,508) -- --
Venture partner's share of venture
operations. . . . . . . . . . . . . . . . . . . . 5,036 -- --
Changes in:
Other receivables . . . . . . . . . . . . . . . . . (47,194) -- --
Prepaid expenses. . . . . . . . . . . . . . . . . . -- -- 385,869
Accounts payable. . . . . . . . . . . . . . . . . . (26,171) 11,105 (22,559)
Accrued interest. . . . . . . . . . . . . . . . . . 3,134,509 2,141,885 1,239,416
----------- ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . (240,631) (1,136,224) (1,318,812)
----------- ----------- -----------
Cash flows from investing activities:
-- -- --
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on bank obligations payable . . . . -- (2,707,000) (1,251,000)
Fundings of demand note payable. . . . . . . . . . . . 346,000 3,847,499 2,534,870
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . 346,000 1,140,499 1,283,870
----------- ----------- -----------
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Net increase (decrease) in cash. . . . . . . . 105,369 4,275 (34,942)
Cash, beginning of year. . . . . . . . . . . . 4,275 -- 34,942
----------- ----------- -----------
Cash, end of year. . . . . . . . . . . . . . . $ 109,644 4,275 --
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . $ -- 1,065,109 1,228,162
Non-cash investing and financing activities. . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
JMB/245 Park Avenue Associates, Ltd ("JMB/245") holds, through a joint
venture, an equity investment in commercial office buildings located in New
York, New York and Boston, Massachusetts. Business activities consist of
rentals to a variety of commercial companies and the ultimate sale or
disposition of such real estate. The accompanying consolidated financial
statements include the accounts of the Partnership and its majority-owned
limited liability company, JMB/245 Park Avenue Holding Company, LLC,
("JMB/245 LLC") as of its formation date, November 12, 1996. The effect of
all transactions between the Partnership and its venture has been
eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interest in 245 Park Avenue Company ("245 Park" or the "Joint Venture")
through the effective date of the restructuring (November 21, 1996
("Effective Date")) and the Partnership's 5.56% interest in World Financial
Properties, L.P. ("WFP, LP") subsequent to the Effective Date. The results
of operations of the unconsolidated ventures prior to the Effective Date is
exclusive of approximately $12.7 million of contractual interest expense
not recorded and not paid by 245 Park due to the previously described
bankruptcy filing and in accordance with SOP 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code". Accordingly, the
financial statements do not include the accounts of the 245 Park or WFP,
L.P.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to reflect the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the venture as described above.
Such GAAP and consolidation adjustments are not recorded on the records of
the Partnership. The net effect of these items for the years ended
December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $ 156,838 (121,306,795) 4,275 (131,292,775)
Partners' capital
accounts (deficits):
General partners . . . . . . . . . . (13,192,838) (27,981,888) (13,592,399) (28,561,617)
Limited partners . . . . . . . . . . (115,220,420) (150,522,585) (121,480,203) (159,605,006)
Net earnings (losses):
General partners . . . . . . . . . . 399,561 579,729 (453,501) (1,100,774)
Limited partners . . . . . . . . . . 6,259,783 9,082,422 (7,104,848) (3,251,042)
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . . 6,260 9,082 (7,105) (3,251)
============ =========== ============= ============
</TABLE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of the
period (1,000). The above-noted deficit capital accounts will result,
through the duration of the Partnership, in net gain for financial
reporting and income tax purposes.
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 and its unconsolidated joint ventures adopted
Statement of Financial Accounting Standards No. 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. SFAS 121
requires that the Partnership and its unconsolidated joint ventures record
an impairment loss on its properties to be held for investment whenever
their carrying value cannot be fully recovered through estimated
undiscounted future cash flows from their operations and sale. The amount
of the impairment loss to be recognized would be the difference between the
property's carrying value and the property's estimated fair value. The
Partnership's policy is to consider a property to be held for sale or
disposition when the Partnership has committed to 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. Adjustments
for impairment loss for such properties (subsequent to the date of adoption
of SFAS 121) are made in each period as necessary to report these
properties at the lower of carrying value or fair value less costs to sell.
The adoption of SFAS 121 did not have any effect on the Partnership's and
its unconsolidated joint ventures' financial position, results of
operations or liquidity.
No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.
INVESTMENT IN UNCONSOLIDATED VENTURE
The Partnership acquired an interest in 245 Park, which owned a
46-story office building located at 245 Park Avenue, New York, New York.
The Partnership acquired its approximate 48.25% ownership interest in 245
Park for approximately $63,927,000 from an affiliate of the joint venture
partners. In addition to the Partnership, the other partners (the "O&Y
partners") of 245 Park included Olympia & York 245 Park Ave. Holding
Company, L.P., Olympia & York Equity Company, L.P., and Olympia & York 245
Corp., all of which were affiliates of Olympia & York Developments, Ltd.
("O&Y").
As a result of the well-publicized financial difficulties of the O&Y
partners, in October 1995 each of the O&Y partners and certain other O&Y
affiliates (but not the Joint Venture) filed for bankruptcy protection from
creditors under Chapter 11 of the United States Bankruptcy Code. During
1996, the O&Y partners and these certain other O&Y affiliates restructured
their ownership interest in various office buildings, including their
interest in the 245 Park Avenue office building. In connection with such
restructuring, 245 Park filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code in April 1996 seeking approval of a plan of
reorganization by its creditors and the partners of 245 Park, including the
Partnership, and in August 1996, the Third Amended Joint Plan of
Reorganization and Disclosure Statement (the "Plan") was filed with the
Bankruptcy Court. The Plan was accepted by the various classes of claims
and equity holders and confirmed by the Court on September 20, 1996. The
Plan became effective on November 21, 1996 ("Effective Date") upon
completion of several additional steps. The conditions to the Plan
included, but were not limited to, the completion of significant
refinancing and capital transactions regarding 245 Park Avenue as well as
other properties. Pursuant to the terms of the Plan, the Partnership owns
(through a limited liability company of which the Partnership is a 99%
member) an approximate 5.56% general partner interest in a newly formed
partnership, WFP, LP. The managing general partner of WFP, LP is an entity
affiliated with certain O&Y creditors and the proponents of the Plan. WFP,
LP's principal assets are majority and controlling interests in six office
buildings.
The Plan was conditioned upon refinancings of the first and junior
mortgage loans secured by 245 Park Avenue in the aggregate principal amount
of approximately $383,000,000. As previously reported, the first mortgage
loan matured January 1, 1994 and the junior mortgage loans matured on
October 1, 1994. 245 Park and the first mortgage lender continued to
negotiate a modification and extension of the first mortgage loan. While
negotiations with the first mortgage lender were taking place, such lender
refrained from taking any actions or exercising any of its remedies as a
result of the loan having matured on January 1, 1994, and 245 Park
continued to make monthly payments of principal and interest through the
Effective Date. The holder of the junior mortgage loans also refrained
from taking any action or exercising any of its remedies as a result of the
loans maturing on October 1, 1994, and 245 Park continued to make, and the
holder of the junior loans continued to accept, monthly payments of
interest through the Effective Date. On November 21, 1996, the first
mortgage lender and junior mortgage lender modified and extended the
respective mortgage loans. The Partnership recognized forgiveness of
indebtedness of $9,486,508 as an extraordinary item related to the
restructuring of the junior mortgage loan in 1996 for default interest
which was forgiven.
Although the Plan is effective, WFP, LP and the Partnership each have
a substantial amount of indebtedness remaining. If any of the buildings
are sold, any proceeds would be first applied to repayment of the mortgage
and other indebtedness of WFP, LP. In any event, any net proceeds obtained
by the Partnership would then be used to satisfy notes payable to JMB
Realty Corporation (aggregating approximately $62,253,000 at December 31,
1996). Only after such applications would any remaining proceeds be
available to be distributed to the Holders. As a result, it is unlikely
that the Holders ever will receive any significant portion of their
original investment. However, in the event of a sale or other disposition
of the property (including a transfer to the lenders), the Holders would
recognize substantial gain for Federal income tax purposes (corresponding
to all or most of their deficit capital accounts for tax purposes). For
certain Holders, such taxable gain may be largely offset by suspended
passive activity losses. Each Holder's tax liability will depend on such
Holders own tax situation.
The Partnership and its lender had reached a modification and
extension agreement regarding the former $50,000,000 term loans that
matured in October 1993. These term loans (described below) were secured
by the Partnership's interest in its real estate investment, and
$25,000,000 ($16,042,000 at December 31, 1996 and 1995) of the term loans
required interest only payments. The terms of the modification and
extension generally provided for (i) an extension period through December
1998; (ii) one-half of the principal amount of the term loans requires
interest to be paid currently at a rate related to either the London
Interbank Offer Rate (LIBOR) or the prime rate while interest on the
balance of the term loans will accrue at an annual rate of 2%; (iii) the
term loan bearing interest at a rate related to either LIBOR (the "LIBOR
Note") or the prime rate was subject to periodic amortization; and (iv) the
past due lump sum interest swap payment in the amount of $2,194,631 was
converted to a note payable due December 1998 with interest accruing at an
annual rate of 2%. Payments of principal and interest made by JMB under
its guaranty of the $25,000,000 portion of the Partnership's term loans
were treated as advances to the Partnership. Interest accrues on these
advances (and accrued and deferred interest thereon) at the annual rate of
prime plus 1% (9.25% at December 31, 1996). As of December 31, 1996, JMB
has advanced approximately $12,376,000, evidenced by a demand note, which
includes the principal and interest payments made related to the loan
modification discussed above, advances to pay operating costs of the
Partnership and accrued and deferred interest on the demand note. The
demand note payable to JMB, which allows a maximum principal sum of a
specified amount, had been subordinate to payment of the LIBOR Note but is
no longer subordinated and is now secured by the Partnership's interest in
its real estate investment.
In July 1995, JMB purchased from the lenders the term loans (including
the note representing the interest swap payment) and their security
interests in the related collateral, which included the JMB guarantee,
which has been terminated. JMB continues to hold the notes for these loans
generally under the same terms and conditions that were in effect prior to
the purchase. However, no scheduled principal and interest payments are
required prior to maturity of the LIBOR Note. Interest on the LIBOR Note
accrues and is payable monthly at a floating rate which, at the option of
the Partnership, is related to either LIBOR or the prime rate of Bank of
America, Illinois. No payments of interest on the LIBOR Note have been
made subsequent to July 31, 1995. These loans and the demand loan payable
to JMB are secured by the Partnership's interest in its real estate
investment and are subject to mandatory prepayment of principal and
interest out of any distributions received by the Partnership from its real
estate investment. It currently appears unlikely, however, that any
significant distributions will be received by the Partnership from its real
estate investment due to the level of indebtedness remaining on the
properties owned by WFP, LP. Accordingly, the Partnership's primary source
of capital to pay for continuing operations is continued advances from JMB
under the demand loan.
NOTES PAYABLE TO AN AFFILIATE
Notes payable to an affiliate consist of the following at December 31,
1996 and 1995:
1996 1995
----------- -----------
Notes payable (term loans)
bearing interest at a variable
rate related to LIBOR (8.125%
per annum at December 31, 1996);
secured by the Partnership's
interest in its real estate
investment; interest payable
monthly until December 1998
(principal in the amount of
$2,707,000 paid in 1995) when
the remaining amount is due; . . . . . . $16,042,000 16,042,000
Notes payable (term loans)
bearing interest at 2% per
annum; secured by the Partnership's
interest in its real estate
investment; no payments until
December 1998 when the entire
principal amount and accrued
compounded interest are due;. . . . . . . 25,000,000 25,000,000
1996 1995
----------- -----------
Notes payable (term loans)
bearing interest at 2% per
annum; secured by the
Partnership's interest in
its real estate investment;
no payments until December
1998 when the entire principal
amount and accrued compounded
interest are due; . . . . . . . . . . . . 2,194,631 2,194,631
Demand note payable bearing
interest at prime plus 1%
(9.25% per annum at December 31,
1996); advanced by JMB; maximum
principal sum of a specified
amount secured by the Partner-
ship's interest in its real
estate investment . . . . . . . . . . . . 12,375,592 12,029,591
----------- -----------
$55,612,223 55,266,222
=========== ===========
In addition, deferred interest payable was $6,640,810 and $3,506,301
as of December 31, 1996 and 1995, respectively.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are generally allocated 94% to
the Holders and 6% to the General Partners. Profits from the sale or other
disposition of all or substantially all of the Partnership's interest in
its real estate investment will be allocated to the General Partners in an
amount equal to the greater of 1% of such profits or any cash from the
proceeds of such sale or other disposition distributed to the General
Partners, plus an additional amount of such profits to eliminate deficits,
if any, in the General Partners' capital accounts. The remainder of such
profits will be allocated to the Holders. All losses from the sale of all
or substantially all of the Partnership's interest in its real estate
investment will be allocated 99% to the Holders and 1% to the General
Partners. All such profits or losses will be allocated among the Holders
in proportion to the number of Interests held.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. Distributions of "Distributable Cash"
(as defined) of the Partnership generally will be made 94% to the Limited
Partners and 6% to the General Partners. Distributions of "sale proceeds"
or "financing proceeds" (as defined) will be made first to the Holders in
an amount equal to their contributed capital, next to the General Partners
in an amount equal to their capital contributions, and the balance 70% to
the Holders and 30% to the General Partners. Distributions would be made
to the Partners only after the satisfaction of all Partnership liabilities.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1996, 1995 and 1994 are as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
------- ------ ------ ------------
Reimbursement (at cost)
for legal services. . . . . $ 1,455 3,892 3,707 1,455
Reimbursement (at cost)
for accounting
services. . . . . . . . . . 750 8,423 7,836 750
Reimbursement (at cost)
for portfolio manage-
ment services . . . . . . . 518 -- -- 518
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . . 9,860 1,817 -- --
------- ------ ------ ------
$12,583 14,132 11,543 2,723
======= ====== ====== ======
All above reimbursable amounts currently payable to the General
Partners and their affiliates do not bear interest.
Reference is made to the preceding Note for a discussion of certain
loans and notes payable by the Partnership to JMB and related collateral
held by JMB.
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary financial information for WFP, LP as of and for the period
ended December 31, 1996 (inclusive of results of operations from 245 Park
through the Effective Date and WFP, LP subsequent to the restructuring
date) and 245 Park as of and for the year ended December 31, 1995:
1996
------------
(000's)
Assets:
Commercial properties. . . . . . . . . . . . . . . . . $ 2,401,880
Other assets . . . . . . . . . . . . . . . . . . . . . 215,843
-----------
Total assets. . . . . . . . . . . . . . . . . . . . $ 2,617,723
===========
Liabilities and Partners Capital:
Accounts payable and other payables. . . . . . . . . . $ 69,547
Long term debt . . . . . . . . . . . . . . . . . . . . 1,983,566
Venture Partners equity. . . . . . . . . . . . . . . . 532,885
-----------
Total liabilities . . . . . . . . . . . . . . . . . $ 2,585,998
===========
Represented by:
Invested capital . . . . . . . . . . . . . . . . . . . $ 31,426
Cumulative distributions . . . . . . . . . . . . . . . --
Cumulative net earnings. . . . . . . . . . . . . . . . 299
-----------
$ 31,725
===========
Total income . . . . . . . . . . . . . . . . . . . . . . $ 162,984
Expenses applicable to operating loss. . . . . . . . . . 137,932
-----------
Net income (loss). . . . . . . . . . . . . . . . . . . . $ 25,052
===========
Partnership's share:
Gain on forgiveness of debt. . . . . . . . . . . . . . $ 9,487
Equity in earnings of 245 Park . . . . . . . . . . . . (24)
Equity in earnings of WFP, LP. . . . . . . . . . . . . 503
-----------
$ 9,966
===========
1995
------------
Current assets . . . . . . . . . . . . . . . . . . . . . $65,820,474
Current liabilities. . . . . . . . . . . . . . . . . . . (420,430,107)
------------
Working capital deficit. . . . . . . . . . . . (354,609,633)
------------
Investment property, net . . . . . . . . . . . . . . . . 363,852,639
Deferred expenses. . . . . . . . . . . . . . . . . . . . 11,645,555
Accrued rents receivable . . . . . . . . . . . . . . . . 25,269,713
Loans from affiliates. . . . . . . . . . . . . . . . . . (91,679,580)
Venture partners' equity . . . . . . . . . . . . . . . . (30,720,959)
------------
Partnership's capital (deficit) . . . . . . . . . . $(76,242,265)
============
Represented by:
Invested capital . . . . . . . . . . . . . . . . . . . $ 86,054,290
Cumulative distributions . . . . . . . . . . . . . . . (38,561,363)
Cumulative net earnings
losses. . . . . . . . . . . . . . . . . . . . . . . . (123,735,192)
------------
$(76,242,265)
============
Total income . . . . . . . . . . . . . . . . . . . . . . $100,360,354
Expenses applicable to operating loss. . . . . . . . . . 109,093,114
------------
Net income (loss). . . . . . . . . . . . . . . . . . . . $ (8,732,760)
============
Total income and net income (loss) for the year ended December 31,
1996 includes an extraordinary gain on forgiveness of indebtedness of
$19,661,157 related to the restructuring of 245 Park Avenue.
The total income, expenses and net earnings for the year ended
December 31, 1994 were $99,637,775, $105,900,547 and $6,262,772,
respectively.
The Partnership's capital (deficit) in WFP, LP differs from its
investment in unconsolidated venture, due to the adoption of fresh start
accounting by WFP, LP in connection with the restructuring, and the
resultant restatement of all of its assets and liabilities to reflect their
reorganization value. The Partnership is amortizing the difference between
its historical basis in 245 Park and its underlying equity (which was
transferred to the basis in WFP, LP on the Effective Date) over a period
not to exceed forty years. Such amounts may be written off sooner in the
event of the sale or disposition of the properties owned by WFP, LP or the
Partnership's interest in WFP, LP.
WORLD FINANCIAL PROPERTIES, L.P.
(A Delaware Limited Partnership)
INDEX
December 31, 1996
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Partners' Capital
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Partners of
World Financial Properties, L.P.
We have audited the accompanying consolidated balance sheet of World
Financial Properties, L.P. (the Company) as of December 31, 1996, and the
related consolidated statement of operations, partners' capital and cash
flows for the period November 21, 1996 (date of inception) through December
31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of World Financial Properties,
L.P. as of December 31, 1996, and the results of its operations and its
cash flows for the period then ended in conformity with generally accepted
accounting principles.
As discussed in Notes 1, 2, 9 and 10 to the consolidated financial
statements, World Financial Properties, L.P. was formed on November 21,
1996, pursuant to a Chapter 11 Plan filed with the U.S. Bankruptcy Court
for the Southern District of New York. The Company accounted for the
Reorganization as of November 21, 1996 and adopted "Fresh-Start
Accounting." Accordingly, the accompanying financial statements have been
prepared in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code."
DELOITTE & TOUCHE LLP
March 3,1997
WORLD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(000's)
ASSETS
NOTE
Commercial properties. . . . . . . . . . . . 1-4 $ 2,401,880
Joint ventures - commercial properties . . . 1-3 53,181
Cash and cash equivalents
(including restricted cash and
cash equivalents of $88,264) . . . . . . . 2d 110,866
Accounts receivable. . . . . . . . . . . . . 13,900
Other assets . . . . . . . . . . . . . . . . 8a 37,896
-----------
Total Assets . . . . . . . . . . . . . . . . $ 2,617,723
===========
LIABILITIES AND PARTNERS' CAPITAL
Long term debt . . . . . . . . . . . . . . . 4 $ 1,950,149
Unsecured long term debt . . . . . . . . . . 5 33,417
Accounts payable and other payables. . . . . 6 69,547
-----------
2,053,113
-----------
Commitments and contingencies. . . . . . . . 9 --
Partners' capital. . . . . . . . . . . . . . 1 564,610
-----------
Total Liabilities and
Partners' Capital. . . . . . . . . . . . . $ 2,617,723
===========
The accompanying notes are an integral part
of this financial statement.
WORLD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 21, 1996 THROUGH DECEMBER 31, 1996
(000's)
INCOME: NOTE
Rental income. . . . . . . . . . . . . . . . 7 $41,309
Income from joint ventures . . . . . . . . . 806
Interest and other income. . . . . . . . . . 703
-------
42,818
-------
EXPENSES:
Property operations. . . . . . . . . . . . . 14,045
Interest . . . . . . . . . . . . . . . . . . 4,5 17,519
General and administrative . . . . . . . . . 1,081
Depreciation and amortization. . . . . . . . 2b 4,847
-------
37,492
-------
NET INCOME . . . . . . . . . . . . . . . . . $ 5,326
=======
The accompanying notes are an integral part
of this financial statement.
<TABLE>
WORLD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD NOVEMBER 21, 1996 THROUGH DECEMBER 31, 1996
(000's)
<CAPTION>
Net Income for
the Period
Balance 11/21/96 - Balance
11/21/96 12/31/96 12/31/96
---------- -------------- ----------
<S> <C> <C> <C>
GENERAL PARTNERS
World Financial Properties, Inc. . . . . . . . . . $ 5,593 $ 53 $ 5,646
JMB 245 Park Avenue Holding
Company, LLC . . . . . . . . . . . . . . . . . . 31,426 299 31,725
LIMITED PARTNERS
Brookfield Properties Corporation:
Battery Park Holdings Inc. . . . . . . . . . . . 203,075 1,934 205,009
Olympia & York Tower B Company . . . . . . . . . 44,888 427 45,315
Canadian Imperial Bank of Commerce . . . . . . . . 115,154 1,097 116,251
WFP Holdings Limited Partnership . . . . . . . . . 19,193 183 19,376
Emerald LP Holdings, Inc.. . . . . . . . . . . . . 125,229 1,193 126,422
Other. . . . . . . . . . . . . . . . . . . . . . . 14,726 140 14,866
-------- ------- --------
$559,284 $ 5,326 $564,610
======== ======= ========
<FN>
The accompanying notes are an integral part
of this financial statement.
</TABLE>
WORLD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD NOVEMBER 21, 1996 TO DECEMBER 31, 1996
(000's)
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,326
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 4,847
Income from joint ventures . . . . . . . . . . . . . . . . . (806)
Accrued interest income. . . . . . . . . . . . . . . . . . . (12)
Accrued interest expense . . . . . . . . . . . . . . . . . . 9,185
Changes in other operating assets and liabilities:
Increase in accounts receivable. . . . . . . . . . . . . . (7,317)
Decrease in other assets . . . . . . . . . . . . . . . . . 7,537
Decrease in accounts payable and other payables. . . . . . (11,768)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . 6,992
----------
INVESTING ACTIVITIES:
Additions to commercial properties . . . . . . . . . . . . . . 4,697
Mortgages and long term receivables, net . . . . . . . . . . . 102
----------
NET CASH PROVIDED BY INVESTING ACTIVITIES. . . . . . . . 4,799
----------
FINANCING ACTIVITIES:
Advances to joint venturers. . . . . . . . . . . . . . . . . . (974)
Repayments of long term debt . . . . . . . . . . . . . . . . . (658)
----------
NET CASH USED BY FINANCING ACTIVITIES. . . . . . . . . . (1,632)
----------
Increase in cash and cash equivalents. . . . . . . . . . . . . 10,159
Cash and cash equivalents - beginning of period. . . . . . . . 100,707
----------
Cash and cash equivalents - end of period. . . . . . . . . . . $ 110,866
==========
The accompanying notes are an integral part
of this financial statement.
WORLD FINANCIAL PROPERTIES, L.P.
(A Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000's)
1. ORGANIZATION
World Financial Properties, L.P. (the Company) is a Delaware limited
partnership organized as of November 21, 1996 by and among World Financial
Properties, Inc., a Delaware corporation wholly owned by the Co-Proponents
(as defined below), as a general partner, JMB 245 Park Avenue Holding
Company, LLC (JMB), as a general partner, and Battery Park Holdings Inc.,
Olympia & York Tower B Company (both of which are subsidiaries of
Brookfield Properties Corporation and are collectively referred to as
BPHI), Canadian Imperial Bank of Commerce (CIBC), WFP Holdings Limited
Partnership (Dragon), Emerald LP Holdings, Inc. (Citibank) and various
other partners as limited partners. BPHI, CIBC, Dragon and Citibank are
collectively referred to as the Co-Proponents.
The Company was formed pursuant to the Third Amended Joint Plan of
Reorganization of Olympia & York Realty Corp., et.al. (the Plan) filed with
the U.S. Bankruptcy Court for the Southern District of New York (the
Bankruptcy Court). Olympia & York Realty Corp., et.al. comprised the
principal entities which formerly owned and operated real estate under the
name "The U.S. Operations of Olympia & York" (O&Y U.S.). The Plan was
confirmed by the Bankruptcy Court on September 21, 1996 and provided for,
among other things, the reorganization of certain O&Y (U.S.) companies as
newly organized companies, the settlements of various litigations, and the
settlement of various claims. Substantial consummation of the Plan
(Consummation) occurred on or about November 21, 1996.
The Company has accounted for the reorganization using "fresh-start
accounting", pursuant to the American Institute of Certified Public
Accountants Statement of Position No. 90-7, as of the Consummation date.
Accordingly, all assets and liabilities have been restated to reflect their
reorganization value (Reorganization Value), as defined pursuant to the
Order confirming the Plan, dated September 21, 1996, which approximates
fair value at the date of consummation. The reorganization value for real
estate assets was determined by management of the Company (Management)
based upon estimates and analyses provided to O&Y (U.S.) in connection with
the confirmation of the Plan by Ahern & Partners, financial and
restructuring advisor to O&Y (U.S.). These values formed the basis for the
financial information included in the Financial Appendix that was "Exhibit
B" to the Second Amended Disclosure Statement (Financial Information) filed
with the Bankruptcy Court in connection with the confirmation of the Plan.
Significant assumptions used to determine value included rental rates,
discount and capitalization rates and lease up periods. Amounts ultimately
realized by the Company from the operations or disposal of these properties
may vary significantly from the values presented as economic and market
factors change.
Assumptions used to estimate the value of the remaining assets and
liabilities included estimates of cash outlays for legal and various
closing costs, and interest rates. These values were also determined
pursuant to the Order confirming the Plan.
As disclosed below there were differences between the assets and
liabilities of the Company reflected in the Financial Information and the
actual results as of November 21, 1996. The result of those differences
included $64.4 million of swap costs as described in (a) below, and $22.7
million of net assets in excess of reorganization value, generally as
described in (b), (c) and (e) below. Management has not adjusted opening
capital but has shown the net of these two amounts as an increase in real
estate and investment in joint ventures. Had Management adjusted opening
capital for the $22.7 million, the Company's adjusted opening capital would
have been as follows:
- Adjusted Opening Capital $559,284
- Net Assets in Excess of Reorganization Value 22,700
--------
- Pro forma Opening Capital $581 984
========
<TABLE>
The differences between the Financial Information and the actual results are further detailed as below:
<CAPTION>
OPENING
FINANCIAL BALANCE
INFORMATION ADJUSTMENTS SHEET
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Real estate. . . . . . . . . . . . . . . . . . . . . . . . $2,368,189 $ 41,089 (a) $2,409,278
Investment in joint venture. . . . . . . . . . . . . . . . 45,434 5,967 51,401
Cash and restricted cash . . . . . . . . . . . . . . . . . 65,990 34,717 (b) 100,707
Other assets . . . . . . . . . . . . . . . . . . . . . . . 22,344 29,778 (c) 52,122
---------- -------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . $2,501,957 $111,551 $2,613,508
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Long-term debt . . . . . . . . . . . . . . . . . . . . . . $1,887,443 $ 63,053 (d) $1,950,496
Unsecured note payable . . . . . . . . . . . . . . . . . . 25,000 8,417 33,417
Accounts payable . . . . . . . . . . . . . . . . . . . . . 41,586 28,725 (e) 70,311
---------- -------- ----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . 1,954,029 100,195 2,054,224
---------- -------- ----------
Partners' Capital. . . . . . . . . . . . . . . . . . . . . 547,928 11,356 (f) 559,284
---------- -------- ----------
Total Liabilities and Partners' Capital. . . . . . . . . . $2,501,957 $111,551 $2,613,508
========== ======== ==========
</TABLE>
Significant adjustments are detailed as follows:
a. Real estate
In connection with the proposed refinancings of Towers B and D of
World Financial Center, the predecessors to the companies which own Towers
B and D, and certain of the Co-Proponents, on behalf of those companies,
entered into a series of "swap contracts" locking in certain interest rates
on portions of the proposed refinancings. Interest rate changes after the
contract dates produced changes in the market values of the swap contracts.
These contracts, which terminated with the closings of the refinancings,
resulted in an aggregate cost of $64.4 million to close the contracts. As
contemplated by the Plan and required by the agreements relating to these
refinancings, the Company was required to bear this cost. This cost was a
result of a decline in interest rates during the holding period, and is
being classified as adjustments to revenue producing real estate and
investment in joint ventures. Furthermore, real estate was reduced by
$22.7 million, which represented the net assets in excess of Reorganization
Value on Consummation.
b. Cash
The additional cash balances of the Company are the result of
additional proceeds from certain financings of $13.4 million, accruals for
closing costs paid after Consummation of $7.4 million, and net other of
$13.9 million, which is due primarily to reductions of closing costs.
c. Other assets
Included in other assets is $20 million relating to the Disputed
Assets, as discussed in (f) below.
d. Long term debt
Additional long term debt represents primarily additional borrowings
secured by Tower B which were achieved as a result of the decline in
interest rates. These borrowings were partially offset by the "swap" costs
as discussed in (a) above.
e. Accounts payable
Included in accounts payable is $12.7 million, which represents
reserves for claims as more fully discussed in Note 9(d), $7.4 million
accrued for closing costs which had been projected to be paid at
Consummation and net other of $8.6 million, which includes prepaid rent and
sundry other payables.
f. Partners' capital
Included in partners' capital is an adjustment of $8,417 relating to
additional unsecured notes payable issued, as more fully discussed in Note
5, offset by $20 million, relating to Olympia & York SF Holdings
Corporation and Miami Center Joint Venture (the Disputed Assets). Pursuant
to the Plan, Realty Corp. creditors, who principally are the Co-Proponents,
were issued Class B partnership units which will be converted into Class A
units upon resolution of the Disputed Assets. Pursuant to the Financial
Information, the Disputed Assets were assigned a net value of $28.6
million. Management believes that, conservatively, at least $20 million
will be converted to Class A units.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Principals of consolidation and accounting presentation
(i) The Company accounted for the reorganization using fresh start
accounting, therefore all assets and liabilities existing at November 21,
1996 were restated to reflect their reorganization value (see Note 1).
(ii) The consolidated financial statements include the accounts of
the Company and all of its subsidiaries, as well as joint ventures and
partnerships which the Company controls, after elimination of intercompany
accounts and transactions.
(iii) The Company accounts for its investments in joint ventures and
partnerships in which it does not have the controlling interest on the
equity method.
b. Depreciation and amortization
Depreciation of office buildings and improvements is provided on the
straight-line method over the estimated lives of the buildings which
Management has estimated to be 40-50 years from Consummation. Amortization
of lease incentive costs, including tenant improvements, is provided on the
straight-line method over the terms of the related leases. These charges
are reflected as reductions of rental income.
c. Income taxes
The Company, as a partnership, is not subject to Federal, state and
city income taxes, with the exception of certain corporate subsidiaries.
Accordingly, the Company makes no provision for income taxes in its
financial statements except for the aforementioned corporate subsidiaries,
where income taxes are provided as required. The Company's taxable income
or loss, excluding the taxable income or loss of the corporate
subsidiaries, is reportable by the partners.
d. Cash
For financial reporting purposes, the Company considers all highly
liquid investments that have original maturities of three months or less,
to be cash equivalents.
Restricted cash and cash equivalents represents amounts of $68.7
million which are subject to certain loan agreements, as well as amounts of
$19.6 million which have been reserved for Bankruptcy Claim resolution (see
Note 9d).
e. Financial instruments
Statement of Financial Accounting Standards No. 107 "Disclosures About
Fair Value of Financial Instruments" requires disclosures of fair values of
financial instruments for which it is practicable to estimate that value.
Based on available market information, the Company estimates that the fair
value of its financial assets and liabilities approximates their carrying
value.
f. Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
g. Rental income
Rental income from leases providing for periodic increases in base
rent is recognized on a straight-line basis over the noncancelable term of
the respective leases, and are recorded as adjustments to rental income.
3. COMMERCIAL PROPERTIES
Description
The Company, through its subsidiaries and joint ventures, is primarily
involved in the operation of commercial real estate located in New York
City and whose tenants are principally large financial and professional
service institutions. The properties owned by the Company, in whole or in
part, are as follows:
(i) WORLD FINANCIAL CENTER - TOWER A, NEW YORK, NEW YORK
Tower A is a 40-story commercial office building which was
completed in 1985 and has a net rentable area of 1,510,987 square feet. The
property is owned in a general partnership with an affiliate of Oppenheimer
Group, Inc., a major tenant in Tower A, who holds a 26% partnership
interest. At December 31, 1996 the property is 98% leased.
(ii) WORLD FINANCIAL CENTER - TOWER B, NEW YORK, NEW YORK
Tower B is a 45-story commercial office building which was
completed in 1985 and has a net rentable area of 2,581,288 square feet. The
property is currently 99% leased, on a net basis, to an affiliate of
Merrill Lynch & Co. (Merrill).
(iii) WORLD FINANCIAL CENTER - TOWER D, NEW YORK, NEW YORK
Tower D is a 34-story commercial office building which was
completed in 1987 and has a net rentable area of 1,813,659 square feet. The
property is 99% leased, on a net basis, to an affiliate of Merrill. The
property is owned in a general partnership with Merrill, with the Company
owning a 51% interest and Merrill holding a 49% interest.
(iv) ONE LIBERTY PLAZA, NEW YORK, NEW YORK
One Liberty Plaza is a 53-story commercial office building
which was completed in 1971 and has a net rentable area of 2,124,000 square
feet. At December 31, 1996 the property is 87% leased.
(v) 245 PARK AVENUE, NEW YORK, NEW YORK
245 Park Avenue is a 45-story commercial office building which
was completed in 1970 and has a net rentable area of 1,617,779 square feet.
At December 31, 1996 the property is 89% leased.
(vi) 53 STATE STREET, BOSTON, MASSACHUSETTS
53 State Street is a 40-story commercial office building which
was completed in 1985 and has a net rentable area of 1,120,162 square feet.
The building is owned in a limited partnership with an affiliate of Nomura,
Babcock & Brown (NBB), with each partner having a 50% interest. An
affiliate of NBB has also provided financing for the building. The
financing, which is due in 1998, is secured by a mortgage and a pledge of
the Company's interest in the building. Based upon current market
conditions, the Company's equity in the property is less than the debt it
secures. Therefore, at December 31, 1996 the Company is reflecting its
equity interest in the property at $0. At December 31, 1996, the property
is 99% leased.
CONSOLIDATED COMMERCIAL PROPERTIES:
The Company's commercial properties at December 31, 1996 consist of
operating office buildings as summarized as follows:
Land. . . . . . . . . . . . . . . $ 348,179
Buildings and improvements. . . . 2,058,532
----------
2,406,711
Accumulated depreciation
and amortization . . . . . . . . (4,831)
----------
Total commercial properties . . . $ 2,401,880
===========
JOINT VENTURES - COMMERCIAL PROPERTIES:
The combined condensed balance sheets and combined condensed
statements of operations of joint venture partnerships at and for the 40-
day period to December 31, 1996 are as follows:
53 STATE
TOWER D STREET TOTAL
---------- -------- --------
ASSETS
Commercial properties. . . . . . $671,034 $183,777 $854,811
Other assets . . . . . . . . . . 6,770 1,672 8,442
-------- -------- --------
Total assets . . . . . . . . . . $677,804 $185,449 $863,253
======== ======== ========
LIABILITIES
Long term debt . . . . . . . . . $434,346 $145,000 $579,346
Accounts payable and other . . . 2,967 2,560 5,527
-------- -------- --------
Total liabilities. . . . . . . . 437,313 147,560 584,873
-------- -------- --------
CAPITAL
World Financial Properties,
L.P. . . . . . . . . . . . . . 52,207 974 53,181
Co-venturer . . . . . . . . . . 188,284 36,915 225,199
-------- -------- --------
240,491 37,889 278,380
-------- -------- --------
Total liabilities and
partners' capital. . . . . . . $677,804 $185,449 $863,253
======== ======== ========
Revenues . . . . . . . . . . . . . $ 8,777 $ 4,935 $ 13,712
Operating expenses . . . . . . . . (5,583) (3,303) (8,886)
Depreciation and amortization. . . (1,473) (507) (1,980)
-------- -------- --------
Net income . . . . . . . . . . . $ 1,721 $ 1,125 $ 2,846
======== ======== ========
4. LONG TERM DEBT
Long term debt of $1,911.8 million at December 31, 1996 carries a
weighted average interest rate of 7.84% and is secured by mortgages and
other security interests which are collateralized by commercial properties.
Total interest paid for the 40-day period to December 31, 1996 aggregated
$8.3 million. The scheduled repayments of long term debt at December 31,
1996 are as follows:
Years ending December 31,
1997. . . . . . . . . . $ 11,725
1998. . . . . . . . . . 26,741
1999. . . . . . . . . . 49,774
2000. . . . . . . . . . 61,001
2001. . . . . . . . . . 72,534
Thereafter. . . . . . . 1,690,072
----------
$1,911,847
==========
In addition, included in long term debt is subordinated long term debt
which represents the net carrying value of a non-interest bearing
promissory note (the Note) payable by WFP Tower B Co., L. P. (the Obligor),
a subsidiary of World Financial Properties, L.P. and which matures in 2014.
The Note carries a face amount of $150 million (the Maturity Amount) and is
convertible by the Obligor at maturity into a 25% interest in Tower B,
provided that the fair market value of Tower B, taking into account the
then outstanding principal indebtedness secured by the leasehold interest
in Tower B, is at least $600 million. The carrying amount represents the
current value of the Note based upon the estimated residual value of the
building discounted at 9.5%.
5. UNSECURED NOTE PAYABLE
On Consummation, each holder of an Allowed Unaffiliated Unsecured
Claim against the Consolidated Devco entities, all as defined in the Plan,
was distributed on account of such claim a partnership unit of the Company
representing 2.29% of such claim and a convertible note (the Note) in the
principal amount of 5.71% of such claim. The Notes mature in 2004 and bear
interest at 8% for the first two years and 9% thereafter. Interest is paid
quarterly in arrears.
The Company has the right to redeem the Notes, as a whole or in part,
at any time prior to November 21, 1998, subject to and pursuant to the
terms of the Indenture at a redemption price equal to the then outstanding
principal amount plus accrued interest. Furthermore, the holder of a Note
is entitled at its option to convert the Note into a partnership unit of
the Company. The conversion will be at the initial conversion price,
subject to adjustment as defined in the Indenture.
Included in the principal amount of the Notes outstanding is a Note in
the amount of $12,749,000 issued to World Financial Properties, L.P., as
agent, on account of certain disputed claims under the Plan. Pursuant to
the Plan, as such disputed claims get resolved, Notes in amounts
corresponding to the disputed claims will be distributed from such escrow
to either the claimant or, to the extent the Company is successful in
defense of the claim, to the Co-Proponents. Notes issued to the Co-
Proponents will then be contributed to the Company in exchange for
additional partnership units in the Company, in accordance with the Plan.
6. ACCOUNTS PAYABLE AND OTHER PAYABLES
Included in accounts payable and other payables is $11.9 million due
to the City and State of New York relating to a tax settlement agreement
between O&Y (U.S.) and the City and State of New York in connection with
the settlement of amounts due for corporate taxes. This balance is payable
in semi-annual installments through 2000, with interest at 9%.
7. RENTALS UNDER OPERATING LEASES
Rental revenues are derived from the leasing of space in the Buildings
to commercial and retail tenants. The leases are for fixed terms of varying
length and generally provide for annual rentals and expense escalations to
be paid in monthly installments. Rental income includes additional rentals
for operating expense reimbursements and escalations amounting to $6.9
million for the period ended December 31, 1996.
The following is a schedule of minimum future rental income under
noncancelable operating leases during the next five years and thereafter
presented on a straight-line basis.
Years ending December 31,
1997. . . . . . . . . . $ 300,702
1998. . . . . . . . . . 289,547
1999. . . . . . . . . . 285,770
2000. . . . . . . . . . 281,800
2001. . . . . . . . . . 279,657
Thereafter. . . . . . . 1,997,937
----------
Total future minimum rentals . . . . . . . . $3,435,413
==========
8. RELATED PARTY TRANSACTIONS
a. Included in other assets is a note receivable from the Co-
Proponents in the amount of $1.2 million. This note bears interest at 9%
and is due in 2001.
b. World Financial Properties, L.P. performs management services for
certain of its properties and certain affiliates pursuant to separate
agreements. For the 40-day period ended December 31, 1996, $1.3 million in
fees were earned, of which $1 million has been eliminated within this
financial statement.
9. COMMITMENTS AND CONTINGENCIES
a. The Company is obligated under various ground leases expiring
between 2069 and 2077. The following is a schedule of the future minimum
rental payments under these leases.
Years ending December 31,
1997. . . . . . . . . . $ 10,310
1998. . . . . . . . . . 10,310
1999. . . . . . . . . . 10,310
2000. . . . . . . . . . 10,310
2001. . . . . . . . . . 10,310
Thereafter. . . . . . . 696,387
--------
$747,937
========
b. A wholly-owned, consolidated corporate subsidiary of the Company
is currently involved in litigation (the SF Litigation) with Coopers &
Lybrand OYDL Inc. (Coopers) in connection with an action filed by Coopers
against Olympia & York Realty Corp. and Olympia & York SF Holdings
Corporation (collectively SF) in 1993. This action, which is pending in an
Ontario, Canada court, arose in connection with a claim by Coopers to
reinstate indebtedness (approximately $332 million) between SF Holdings and
Olympia & York Developments Ltd. (OYDL). In connection with this action
Coopers had filed with the Bankruptcy court various claims against SF.
These claims were filed along with various other claims by Coopers against
SF and certain of the entities which comprised O&Y (U.S.).
Pursuant to a settlement agreement (Settlement Agreement) dated
September 10, 1996 between Coopers and O&Y (U.S.), Coopers agreed to
withdraw all claims in exchange for a $50 million Allowed Unaffiliated
Unsecured Claim and the right to pursue the SF Litigation. In connection
with the SF litigation, the parties agreed to escrow the assets of SF
Holdings (the Disputed SF Assets) pending the outcome of the litigation.
These assets consist of cash totaling approximately $21 million, part of
which is subject to certain security interests which are expected to be
released in connection with the Plan.
While the ultimate resolution of the SF Litigation cannot be assured,
Management believes that it will ultimately be successful in defending
these actions, and the Disputed SF Assets will be released to the Company.
c. Through Olympia & York Florida Equity Corp., a wholly-owned
subsidiary which is currently a debtor-in-possession in a Chapter 11 case
pending in the U.S. Bankruptcy Court for the Southern District of New York,
the Company has a 50% interest in Miami Center Joint Venture (MCJV), a
joint venture formed in 1981 to own and develop certain land in Miami,
Florida. MCJV is currently a debtor in a Chapter 11 case pending in the
same Bankruptcy Court. The other 50% interest in MCJV was held by Theodore
Gould but, pursuant to a confirmed Chapter 11 plan of reorganization for
Mr. Gould's business, all of his rights and interests in MCJV were
transferred to a liquidating trustee. Based upon advances made by O&Y
(U.S.) to MCJV to the ownership of which the Company has succeeded, the
Company currently expects to receive ultimately substantially all of MCJV's
equity upon the final disposition of MCJV's Chapter 11 case. However,
there is no assurance as to the timing or the nature of the ultimate
resolution of MCJV's Chapter 11 case.
d. On Consummation of the Plan, various claims were outstanding for
which the Company was obligated to reserve amounts (cash, debt and
partnership units in the Company) pending settlement of these claims, At
December 31, 1996 the Company had reserves of $19.6 million in cash, and
$12.7 million in debt and 1107 partnership units.
The Company is in the process of resolving these claims and believes
that reserves against these deposits are adequate to cover any amounts
which will ultimately be transferred to any of the claimants.
10. HISTORICAL BALANCE SHEET
As contained in the Financial Information, the following summarizes
the adjustments of the historical financial statements of O&Y (U.S.) to the
opening balance sheet, as included in footnote 1. (Presented in $millions)
<TABLE>
<CAPTION>
U.S. Operating
Operations and Transferred
Olympia Restructuring to World
& York Activity(a) Combined Financial
as of 1/1/96 - Total Properties, Disputed Liquidating
12/31/95 11/21/96 11/21/96 L.P. Assets Corp.
-------- ------------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Commercial Real Estate . . . $2,592 $ 258 (b) $2,850 $2,368 $17 $465
Investment in
Joint Ventures . . . . . . -- 45 45 45 -- --
Cash and Equivalents . . . . 212 (73) 139 66 22 51
Other Assets . . . . . . . . 609 (501) 108 23 -- 85
------ ------- ------ ------ --- ----
Total Assets . . . . . . . . $3,413 $ (271) $3,142 $2,502 $39 $601
====== ======= ====== ====== === ====
LIABILITIES
Debt . . . . . . . . . . . . $4,933 $(2,396) (c) $2,537 $1,887 $-- $650
Accounts Payable and
Other Liabilities. . . . . 94 (67) 27 67 10 (49)
------ ------- ------ ------ --- ----
Total Liabilities. . . . . . 5,027 (2,463) 2,564 1,954 $10 601
Capital (Deficit). . . . . . (1,614) 2,192 (b)(c) 578 548 29 --
------ ------- ------ ------ --- ----
Total Liabilities
and Capital . . . . . . . . $3,413 $ (271) $3,142 $2,502 $39 $601
====== ======= ====== ====== === ====
<FN>
- ------------
(a) Includes deconsolidation of joint ventures which were consolidated in the Financial Information.
(b) Reflects adjustments to record commercial properties at Reorganization Value less distributions of
certain properties to debt holders.
(c) Reflects adjustments relating to the discharge of debt of approximately $300 million and the conversion
of debt to capital.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
1995 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership, JMB Park Avenue,
Inc., an Illinois corporation, is a wholly-owned subsidiary of Northbrook
Corporation, a Delaware corporation, substantially all of the outstanding
shares of stock of which are owned by JMB Realty Corporation ("JMB"), a
Delaware corporation, and certain of its officers, directors, members of
their families and their affiliates. Substantially all of the shares of
JMB are owned by its officers, directors, members of their families and
their affiliates. The Corporate General Partner has responsibility for all
aspects of the Partnership's operations, subject to the requirement that
the sale of all or substantially all of the Partnership's interest in WFP,
LP or of all or substantially all of the 245 Park Avenue office building,
unless required by the terms of the WFP, LP, venture agreement must be
approved by the Associate General Partner of the Partnership, Park
Associates, L.P., an Illinois limited partnership with JMB Park Avenue,
Inc. as the sole general partner. The Associate General Partner shall be
directed by a majority in interest of its limited partners (who are
generally officers, directors and affiliates of JMB or its affiliates) as
to whether to provide its approval of any such sale. Various relationships
of the Partnership to the Corporate General Partner and its affiliates are
described under the caption "Conflicts of Interest" at pages 35-36 of the
Private Placement Memorandum, which description is incorporated herein by
reference to Exhibit 99.1 to this annual report.
The director and the executive and certain other officers of the
Corporate General Partner of the Partnership are as follows:
NAME OFFICE
- ---- ------
Judd D. Malkin Chairman
Neil G. Bluhm Vice President
Gary Nickele Vice President and General Counsel
Stuart C. Nathan President and Director
H. Rigel Barber Vice President
Gailen J. Hull Vice President
There is no family relationship among any of the foregoing director or
officers. The foregoing director has been elected to serve a one-year term
until the annual meeting of the Corporate General Partner to be held on
June 7, 1997. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1997. All of the foregoing officers have served in the capacities
indicated since the date of incorporation of the Corporate General Partner
on March 26, 1984 with the exception that Stuart C. Nathan, who was a Vice
President, was elected Director on December 18, 1990 and President on
August 8, 1993, and Gary Nickele was elected Vice President and General
Counsel on December 18, 1990. There are no arrangements or understandings
between or among any of said director or officers and any other person
pursuant to which any director or officer was elected as such.
The Corporate General Partner is an affiliate of JMB. JMB is the
corporate general partner of Carlyle Real Estate Limited Partnership-VII
("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage
Partners, Ltd.-IV ("Mortgage Partners IV"), Carlyle Income Plus, Ltd
("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income
Plus-II") and managing general partner of JMB Income Properties, Ltd.-IV
("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB
Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-
VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB
Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties,
Ltd.-XII ("JMB Income-XII"), and JMB Income Properties, Ltd.-XIII ("JMB
Income-XIII"). JMB is also the sole general partner of the associate
general partner of most of the foregoing partnerships.
The foregoing director and officers are also officers and/or directors
of various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB
Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II
("Arvida-II")) and Income Growth Managers, Inc. (the corporate general
partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such
officers and the director are also partners, directly or indirectly, of
certain partnerships which are associate general partners in the following
real estate limited partnerships: the Partnership, Carlyle-VII,
Carlyle-IX, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle XV,
Carlyle-XVI, Carlyle-XVII,JMB Income-VI, JMB Income-VII, JMB Income-X, JMB
Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage
Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 59) is Chairman and a director of JMB. He is also
an individual general partner of JMB Income-IV and JMB Income-V. Mr.
Malkin has been associated with JMB since October, 1969. Mr. Malkin is a
director of Urban Shopping Centers, Inc. ("USC, Inc.), an affiliate of JMB
that is a real estate investment trust in the business of owning, managing
and developing shopping centers. He is a Certified Public Accountant.
Neil G. Bluhm (age 59) is President and a director of JMB. He is also
an individual general partner of JMB Income-IV and JMB Income-V. Mr. Bluhm
has been associated with JMB since August, 1970. Mr. Bluhm is a director
of USC, Inc. He is a member of the Bar of the State of Illinois and a
Certified Public Accountant.
Gary Nickele (age 44) is Executive Vice President and General Counsel
of JMB. Mr. Nickele has been associated with JMB since February 1984. He
is a member of the Bar of the State of Illinois.
Stuart C. Nathan (age 55) is Executive Vice President and a director
of JMB. Mr. Nathan has been associated with JMB since July, 1972. Mr.
Nathan is also a director of Sportmart Inc., a retailer of sporting goods.
He is a member of the Bar of the State of Illinois.
H. Rigel Barber (age 47) is Chief Executive Officer of JMB. Mr.
Barber has been associated with JMB since March, 1982. He is a member of
the Bar of the State of Illinois.
Gailen J. Hull (age 48) is Senior Vice President of JMB. Mr. Hull has
been associated with JMB since March, 1982. He holds a Masters degree in
Business Administration from Northern Illinois University and is a
Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners
are entitled to receive a share of cash distributions, when and as cash
distributions are made to the Holders of Interests, and a share of profits
or losses as described in the Notes. No such cash distributions were paid
to the General Partners in 1996, 1995 or 1993. The General Partners were
allocated aggregate losses for tax purposes of $579,729 from the
Partnership in 1996. Such losses may benefit the General Partners (or the
partners thereof) to the extent that such losses may be offset against
taxable income from the Partnership or other sources.
The Partnership is permitted to engage in various transactions
involving affiliates of the Corporate General Partner of the Partnership,
as described under the captions "Compensation, Fees and Other Payments" at
pages 19-21, and "Management" at pages 31-38 of the Private Placement
Memorandum, which descriptions are hereby incorporated herein by reference
to Exhibit 99.1 to this annual report. Various relationships of the
Partnership to the Corporate General Partner (and its director and
officers) and its affiliates are also set forth above in Item 10.
The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses and out-of-pocket expenses relating to
the administration of the Partnership and operation of the Partnership's
real property investment. For 1996, an affiliate of the General Partners
was entitled to reimbursements for such expenses in the amount of $9,860,
all of which was paid at December 31, 1996.
The General Partners and their affiliates are entitled to
reimbursements of salary and salary related expenses for legal, accounting
and certain other services. Such reimbursements will not exceed the lesser
of the actual cost of such services or the amount which the Partnership
would be required to pay independent parties for comparable services. For
1996, an affiliate of the General Partners was entitled to reimbursements
for such expense in the amount of $2,723, all of which was unpaid at
December 31, 1996.
As of December 31, 1996, JMB has advanced approximately $12,375,000,
evidenced by a demand note, which relates primarily to principal and
interest payments made on the LIBOR Note since the closing of the term loan
modification and funding of Partnership operating expenses. The demand
note payable to JMB allows a maximum principal sum of a specified amount,
bears interest at prime plus 1% per annum, which accrues and is deferred.
The demand note is secured by the Partnership's interest in its investment
in real estate. The amount of interest accrued and deferred on the demand
note for 1996 and in the aggregate through December 31, 1996 is $1,150,120
and $2,832,851, respectively. In July 1995, JMB purchased from the lenders
the term loans to the Partnership and their security interest in the
related collateral, which included the Partnership's interest in real
estate and the JMB guarantee, which has been terminated. JMB continues to
hold these notes generally under the same terms and conditions that were in
effect prior to the purchase. However, no scheduled principal payments are
required on any of these notes prior to maturity. No payments of interest
have been made on any of the notes since July 1995. The amount of interest
accrued and deferred or unpaid on these notes for the year ended December
1996 and in the aggregate through December 31, 1996, is $1,984,389 and
$3,807,959, respectively. Reference is made to the Notes for a further
discussion of these notes.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner, its officers and director and the Associate General Partner own the
following Interests of the Partnership.
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership Neil G. Bluhm 22 Interests (1) 2.2%
Interests indirectly
Limited Partnership Judd D. Malkin 24 Interests (1)(2) 2.4%
Interests indirectly
Limited Partnership Corporate General 25 Interests 2.5%
Interests Partner, its (1)(2)
officers and director
and the Associate
General Partner
as a group
<FN>
(1) Includes 22 Interests owned by investment partnerships of which Messrs. Bluhm and Malkin are the
managing general partners and have shared investment and voting power with respect to said Interests.
(2) Includes two Interests owned by investment partnerships of which Mr. Malkin is the managing general
partner and has sole investment and voting power with respect to said Interests.
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10, 11 and 12 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
(1) Financial Statements (See Index to Financial Statements and
Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership
of the Partnership is hereby incorporated by reference to Exhibit 3 to the
Partnership's Form 10-K Report for December 31, 1992 (File No. 0-13545)
filed on March 19, 1993.
3-B. Amendment to the Amended and Restated Agreement of
Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between
JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is
hereby incorporated by reference to Exhibit 3-B to the Partnership's Form
10-Q Report for March 31, 1995 (File No. 0-13545) filed May 11, 1995.
4-A. Loan agreement dated June 27, 1984 between JMB/245
Park Avenue Associates and Continental Illinois National Bank and Trust
Company of Chicago is hereby incorporated by reference to Exhibit 4-B to
the Partnership's Registration Statement on Form 10 (as amended) of the
Securities Exchange Act of 1934 (File No. 0-13545) filed on April 29, 1985.
4-B. $16,042,000 Second Amended and Restated Promissory
Note and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation are hereby incorporated herein by
reference to Exhibit 4-U to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-C. $25,000,000 Second Amended and Restated Promissory
Note and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation, are hereby incorporated herein by
reference to Exhibit 4-V to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-D. $2,194,631.25 Amended and Restated Promissory Note
and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation, are hereby incorporated herein by
reference to Exhibit 4-W to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-E. Amended and Restated Demand Note dated August 1, 1995
between JMB/245 Park Avenue Associates and JMB Realty Corporation, are
hereby incorporated herein by reference to Exhibit 4-X to the Partnership's
Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on
November 13, 1995.
4-F. Fourth Amendment to Loan Documents dated August 1,
1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty
Corporation detailing amendments to the term loans, are hereby incorporated
herein by reference to Exhibit 4-Y to the Partnership's Form 10-Q Report
for September 30, 1995, (File No. 0-13545) filed on November 13, 1995.
4-G. Consent Agreement dated December 29, 1983 from
JMB/245 Park Avenue Associates to Continental Illinois Bank of Chicago
(Continental) detailing the transactions for which the Partnership would
obtain Continental's consent, are hereby incorporated herein by reference
to Exhibit 4-Z to the Partnership's Form 10-Q Report for September 30,
1995, (File No. 0-13545) filed on November 13, 1995.
4-H. Third Amended and Restated Security Agreement dated
August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty
Corporation, are hereby incorporated herein by reference to Exhibit 4-AA to
the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-
13545) filed on November 13, 1995.
10-A. Loan Transaction Agreement dated September 7, 1989
between O & Y Equity Company, L.P. and JMB/245 Park Avenue Associates,
Ltd., is hereby incorporated herein by reference to the Partnership's
report for March 31, 1996 on Form 10-Q (File No. 0-13545) filed on May 10,
1996.
10-B. Third Amended Joint Plan of Reorganization dated
September 12, 1996 is hereby incorporated herein by reference to the
Partnership's report for September 31, 1996 on Form 10-Q (File No. 0-13545)
filed on November 8, 1996.
10-C. Limited Liability Company Agreement of JMB 245 Park
Avenue Holding Company, LLC dated as of November 12, 1996 is hereby
incorporated by reference to the Partnership's Report for November 21, 1996
on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-D. Amended and Restated Agreement of Limited Partnership
of World Financial Properties, L.P. dated as of November 21, 1996 is hereby
incorporated by reference to the Partnership's Report for November 21, 1996
on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-E. JMB Transaction Agreement dated as of November 21,
1996 is hereby incorporated by reference to the Partnership's Report for
November 21, 1996 on Form 8-K (File No. 0-13545) filed on December 6, 1996.
21. List of Subsidiaries of the Partnership.
27. Financial Data Schedule
99.1. Pages 19-21; and 31-38 from the Partnership's Private
Place Memorandum dated May 7, 1984 and Article 14 (pages 15-17) of the
Partnership's Amended and Restated Agreement of Limited Partnership are
hereby incorporated herein by reference to Exhibit 99.1 to the Partnerships
10-K Report for December 31, 1994, (File No. 0-13545) filed on March 27,
1995.
(b) The following report has been filed since the beginning of the
last quarter of the period covered by this report.
The Partnership's Report on Form 8-K for November 21, 1996
(File No. 0-13545) describing the completion of the restructuring of
JMB/245 Park Avenue Associates, Ltd. interest in the Joint Venture. No
financial statements were required to be filed therewith.
No annual report or proxy material for the fiscal year 1996 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc.
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc.
Corporate General Partner
STUART C. NATHAN
By: Stuart C. Nathan, President and Director
Principal Executive Officer
Date: March 21, 1997
JUDD D. MALKIN
By: Judd D. Malkin, Chairman
Principal Financial Officer
Date: March 21, 1997
GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
Date: March 21, 1997
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE
-------------
3-A. Amended and Restated Agreement of
Limited Partnership of the
Partnership. Yes
3-B. Amendment to the Amended Limited
Partnership Agreement of Partnership
of JMB/245 Park Avenue Associates, Ltd. Yes
4-A. Loan agreement dated June 27,
1984 between JMB/245 Park Avenue
Associates and Continental Illinois
National Bank and Trust Company of
Chicago. Yes
4-B. $16,042,000 Second Amended and
Restated Promissory Note and
related documents dated August 1,
1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation Yes
4-C. $25,000,000 Second Amended and
Restated Promissory Note and
related documents dated August 1,
1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation Yes
4-D. $2,194,631.25 Amended and Restated
Promissory Note and related documents
dated August 1, 1995 between
JMB/245 Park Avenue Associates and
JMB Realty Corporation Yes
4-E. Amended and Restated Demand Note
dated August 1, 1995 between JMB/245
Park Avenue Associates and JMB Realty
Corporation Yes
4-F. Fourth Amendment to Loan Documents
dated August 1, 1995 between JMB/245
Park Avenue Associates, Ltd. and
JMB Realty Corporation Yes
4-G. Consent Agreement dated December 29,
1983 from JMB/245 Park Avenue Associates
to Continental Illinois Bank of
Chicago (Continental) Yes
4-H. Third Amended and Restated Security
Agreement dated August 1, 1995 between
JMB/245 Park Avenue Associates, Ltd.
and JMB Realty Corporation Yes
10-A. Loan Transaction Agreement dated
September 7, 1989 between O & Y Equity
Company, L.P. and JMB/245 Park Avenue
Associates, Ltd. Yes
10-B. Third Amended Joint Plan of Reorganiza-
tion dated September 12, 1996 Yes
10-C. Limited Liability Company Agreement of
JMB 245 Park Avenue Holding Company, LLC
dated as of November 12, 1996. Yes
10-D. Amended and Restated Agreement of
Limited Partnership of World Financial
Properties dated as of November 21, 1996 Yes
10-E. JMB Transaction Agreement dated as of
November 21, 1996 Yes
21. List of Subsidiaries of the Partnership. No
27. Financial Data Schedule No
99.1. Pages 19-21; 31-38; and 55-57 from the
Partnership's Private Place Memorandum
dated May 7, 1984 and Article 14
(pages 15-17) of the Partnership's
Amended and Restated Agreement of
Limited Partnership Yes
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a member of JMB/245 Park Avenue Holding Company,
L.L.C., a Delaware limited liability company, which owns a general
partnership interest of approximately 5.56% in World Financial Properties,
L.P. World Financial Properties owns interests in several properties as a
result of the reorganized and restructured ventures formerly owned or
controlled by the O&Y Partners of their affiliates. The Partnership was a
partner in 245 Park Avenue Company, a New York general partnership which
held title to a building known as the 245 Park Avenue Building located at
245 Park Avenue, New York, New York.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 109,644
<SECURITIES> 0
<RECEIVABLES> 47,194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 156,838
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 19,052,319
<BONDS> 43,236,631
<COMMON> 0
0
0
<OTHER-SE> (128,413,258)
<TOTAL-LIABILITY-AND-EQUITY> 156,838
<SALES> 0
<TOTAL-REVENUES> 47,854
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 215,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,134,509
<INCOME-PRETAX> (3,301,775)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,827,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 9,486,508
<CHANGES> 0
<NET-INCOME> 6,659,344
<EPS-PRIMARY> 6,260
<EPS-DILUTED> 6,260
</TABLE>
