SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 1998 Commission File 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 Part I of this Annual Report on Form 10-K.
<PAGE>
TABLE OF CONTENTS
Page
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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 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 10
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 40
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 40
Item 11. Executive Compensation . . . . . . . . . . . 42
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 44
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 45
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 45
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 48
i
<PAGE>
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, 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 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, 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 Brookfield
Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial
Properties, L.P. ("WFP, LP"). The managing general partner of BFP, 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. BFP, LP's principal assets are wholly-owned or
majority and controlling interests in the following seven office buildings:
<PAGE>
PROPERTY AND LOCATION NET RENTABLE AREA
One World Financial Center 1,510,987 square feet
New York, New York
Two World Financial Center 2,581,288 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
75 State Street 767,096 square feet
Boston, Massachusetts
(acquired 9/15/98)
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 its share of an extraordinary
item of the Joint Venture related to the restructuring of the mortgage
loans in 1996 for default interest which was forgiven.
As part of the restructuring, the Partnership received certain limited
rights with respect to BFP, LP, pursuant to a separate agreement ("JMB
Transaction Agreement") with BFP, LP. These include, among other things,
the right to receive one-third of the 245 Park Avenue property management
fees, subject to certain limitations, and the right, except under certain
circumstances, to prohibit (i) the sale of the 245 Park Avenue property
prior to January 2, 2000 and (ii) a reduction of the indebtedness secured
by the 245 Park Avenue property below a certain level prior to January 2,
2003.
BFP, 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 BFP, LP. In any event, any net proceeds obtained by the Partnership
would then be used to satisfy notes payable and deferred interest
(aggregating $69,009,231 at December 31, 1998) to JMB Realty Corporation
("JMB"). Only after such applications would any remaining proceeds be
available to be distributed to the Holders of Interests. As a result, it
is unlikely that the Holders of Interests ever will receive any significant
<PAGE>
portion of their original investment. However, it is expected that over
the remaining term of the Partnership, as a result of sale or other
disposition of the properties (including a transfer to the lenders), or of
the Partnership's interest in BFP, LP, the Holders of Interests will be
allocated substantial gain for Federal income tax purposes (corresponding
at a minimum to all or most of their deficit capital accounts for tax
purposes) without a significant amount of proceeds from such sale or
disposition. Such gain may be offset by suspended losses from prior years
(if any) that have been allocated to the Holders of Interests. The actual
tax liability of each Holder of Interests 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 in 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. Reference is also made to Notes 3 and 5 of the Notes
to the Consolidated Financial Statements of Brookfield Financial
Properties, L.P. included with this Report for a further description of the
properties and a discussion of the long-term debt secured by the
properties. The Partnership's interest in BFP, LP is pledged as collateral
for certain notes payable and deferred interest (aggregating $69,009,231 at
December 31, 1998) to JMB.
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
1997 and 1998.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1998, there were 882 record holders of the 999
outstanding 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.
The Partnership has not made any distributions since 1989. Reference
is made to the Notes and Item 7 for a discussion of the restrictions on the
distributions (if any) to the Partnership from its real estate investment.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1998 1997 1996 1995 1994
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 496,426 483,445 47,854 100 200
============ ============ =========== =========== ===========
Earnings (loss)
before extraordinary
item . . . . . . . . . . $ 2,906,029 2,617,872 (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) . . . $ 2,906,029 2,617,872 6,659,344 (7,558,349) (5,841,403)
============ ============ =========== =========== ===========
Net earnings (loss)
per Interest (b):
Earnings (loss)
before extraordinary
item . . . . . . . . . $ 2,734 2,461 (2,657) (7,105) (5,490)
Extraordinary item. . . -- -- 8,917 -- --
------------ ------------ ----------- ----------- -----------
Net earnings
(loss). . . . . . $ 2,734 2,461 6,260 (7,105) (5,490)
============ ============ =========== =========== ===========
Total assets. . . . . . . $ 734,338 372,955 156,838 4,275 --
============ ============ =========== =========== ===========
Bank obligations
and notes payable -
long-term. . . . . . . . $ -- (c) -- (c) 43,236,631 43,236,631 40,319,631
============ ============ =========== =========== ===========
<PAGE>
<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) per Interest are based upon the number of Interests outstanding at the end of
each period.
(c) Such loans are classified as a current liability at December 31, 1998 and 1997 due to their scheduled
maturity in December 1998. The Partnership is currently discussing with JMB possible resolutions related to the
scheduled maturity of the term loans.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Capitalized terms used but not defined in this Item 7 have the same
meanings as used in Item 1. Business or in the Notes.
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 had 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. 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
("JMB"), an affiliate of the Corporate General Partner, 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 accrued 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") were 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, 1998, 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 and advances
to pay operating costs of the Partnership. Interest accrues on these
advances at the annual rate of prime plus 1% (8.75% at December 31, 1998
and 9.5% at December 31, 1997). 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.
<PAGE>
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 was
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 were 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. No
payments of interest on the LIBOR Note have been made subsequent to
July 31, 1995. The scheduled maturity of the term loans was December 31,
1998. However, JMB has not pursued its remedies under these notes as a
result of the non-payment of interest under the LIBOR Note or the maturity
of these notes. The Partnership is currently discussing with JMB a
possible resolution related to the scheduled maturity of such term loan
notes. These loans and the demand loan payable to JMB are secured by the
Partnership's interest in BFP, LP and are subject to mandatory payment of
principal and interest out of any distributions received by the Partnership
from BFP, LP.
As a result of the 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, 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 Brookfield
Financial Properties, L.P. ("BFP, LP") formerly known as World Financial
Properties, L.P. ("WFP, LP"). The managing general partner of BFP, 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. BFP, LP's principal assets are wholly-owned or
majority and controlling interests in the seven office buildings located in
New York, New York and Boston, Massachusetts.
BFP, 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 BFP, LP. In any event, any net proceeds obtained by the Partnership
would then be required to be used to satisfy notes payable and deferred
interest (aggregating $69,009,231 at December 31, 1998) to JMB. Only after
such applications would any remaining proceeds be available to be
distributed to the Holders of Interests. As a result, it is unlikely that
the Holders of Interests ever will receive any significant portion of their
original investment. However, it is expected that over the remaining term
of the Partnership, as a result of sale or other disposition of the
properties (including a transfer to the lenders), or of the Partnership's
interest in BFP, LP, the Holders of Interests will be allocated substantial
gain for Federal income tax purposes (corresponding at a minimum to all or
most of their deficit capital accounts for tax purposes) without a
significant amount of proceeds from such sale or disposition. Such gain
may be offset by suspended losses from prior years (if any) that have been
allocated to the Holders of Interests. The actual tax liability of each
Holder of Interests will depend on such Holder's own tax situation.
<PAGE>
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 Partnership's liquidity and ability to continue as a going concern
is dependent upon the successful resolution related to the scheduled
maturity date (December 31, 1998) of the term loans, the receipt of one-
third of the property management fees earned at the 245 Park Avenue
property and, if necessary, additional advances from JMB under the demand
loan. The Partnership is discussing with JMB a possible resolution related
to the term loan notes, which have a scheduled maturity of December 31,
1998.
RESULTS OF OPERATIONS
The increase in cash at December 31, 1998 as compared to December 31,
1997 is primarily due to receipt of one third of the monthly management
fees earned at the 245 Park Avenue property, a portion of which have been
used to fund Partnership operating expenses.
The increase in deferred interest payable to an affiliate as of
December 31, 1998 as compared to December 31, 1997 is due to the interest
accruals on the term loans and the demand note payable to JMB.
The increase in interest and other income for the years ended
December 31, 1998 and 1997 as compared to the year ended December 31, 1996
is primarily a result of income from the Partnership's share of the
property management fees from the 245 Park Avenue property. Pursuant to
the terms of the JMB Transaction Agreement described above, commencing in
November, 1996, the Partnership is entitled to one third of the monthly
property management fees earned at the 245 Park Avenue property.
The increase in interest expense for the year ended December 31, 1998
as compared to the year ended December 31, 1997 and the year ended
December 31, 1997 as compared to December 31, 1996 is primarily due to an
increase in the aggregate amounts outstanding on the Partnership's term
loans due to accrued interest, which is deferred and accrues additional
interest.
The decrease in professional services for the year ended December 31,
1998 as compared to the years ended December 31, 1997 and 1996 is primarily
attributable to the legal fees and other professional services in
connection with the restructuring of the Partnership's interest in 245
Park, net of any reimbursements. Pursuant to the Plan of Reorganization,
during 1996, the Partnership received reimbursements of $375,000 for legal
fees incurred related to the restructuring of the Partnership's interest in
245 Park.
The increase in Partnership's share of income (loss) from operations
of unconsolidated venture for the years ended December 31, 1998 and
December 31, 1997 compared to the year ended December 31, 1996 is due to
the restructuring of the Partnership's interest in 245 Park and refinancing
of the debt for certain of the properties owned by BFP, LP. Pursuant to
the restructuring, effective November 21, 1996, the Partnership's 46.5%
interest in 245 Park was exchanged for an approximate 5.56% interest in
BFP, LP, which has wholly-owned or majority and controlling interests in
the 245 Park Avenue office building and six other office buildings.
The Partnership's share of gain on forgiveness of indebtedness
recognized by 245 Park related to the restructuring of the junior mortgage
loans in 1996, for which default interest was forgiven.
<PAGE>
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.
YEAR 2000
The year 2000 problem is the result of computer programs being written
with two digits rather than four to define a year. Consequently, any
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations
including, among other things, an inability to process transactions or
engage in other normal business activities.
The Partnership uses the telephone, accounting, transfer agent and
other administrative systems, which include both hardware and software,
provided by affiliates of the Corporate General Partner and certain third
party vendors. Except as noted in the following sentence, the Partnership
or its affiliates have received representations to the effect that the
telephone, accounting, transfer agent and other administrative systems are
year 2000 compliant in all material respects. Both the hardware and
software for individual personal computers used in the Partnership's
administrative systems are expected to be tested for their year 2000
compliance during the summer of 1999.
In addition, the Partnership has received written representation from
BFP, LP that its computer systems and non-information technology systems
are or are being made year 2000 compliant in all material respects.
Certain of the building systems at some of BFP, LP's properties need minor
upgrading, which has been undertaken and is expected to be completed in the
near future.
The Partnership does not believe that the year 2000 problem presents
any material additional risks to its business, results of operations or
financial condition and has not developed, and does not intend to develop,
any contingency plans to address the year 2000 problem. Given its limited
operations, the Partnership believes that its accounting, transfer agent
and most of its other administrative systems functions could, if necessary,
be performed manually (i.e., without significant information technology)
for an extended period of time without a material increase in costs to the
Partnership. The Partnership has not incurred and does not expect to
incur, any material direct costs for year 2000 compliance.
The Partnership is relying on the representation of BFP, LP as to its
ability to be year 2000 compliant in all material respects. In the event
that such representation were incorrect, BFP, LP could experience various
operational difficulties, such as an inability to process transactions or
information relating to its properties and/or systems failures (such as
elevators, alarm and security systems) at its properties. Such operational
difficulties could result in remediation and other costs and expenses. If
such were to occur, there is no assurance that such costs and expenses
would not have a material adverse effect on the Partnership's investment in
BFP, LP.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has identified interest rate changes as a potential
market risk. Since the Partnership has certain notes payable that bear
interest at variable rates, an increase in interest rates would increase
the Partnership's cost of borrowings under these notes. Reference is made
to the Notes for further information concerning borrowings incurred by the
Partnership.
<PAGE>
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, 1998 and 1997
Consolidated Statements of Operations, years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows, years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
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.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
(FORMERLY WORLD FINANCIAL PROPERTIES, L.P.)
INDEX
Independent Auditors' Report
Consolidated Balance Sheet, December 31, 1998
Consolidated Statement of Operations, for the year ended
December 31, 1998
Consolidated Statement of Partners' Capital Accounts,
for the year ended December 31, 1998
Consolidated Statement of Cash Flows, for the year ended
December 31, 1998
Notes to Consolidated Financial Statements
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.
<PAGE>
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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB/245 Park Avenue Associates, Ltd. and consolidated venture as of
December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting
principles.
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 is dependent upon the successful resolution related to the
scheduled maturity date (December 31, 1998) of the term loans due to JMB
Realty Corporation. This uncertainty and the fact that the Partnership has
a net capital deficiency 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 LLP
Chicago, Illinois
March 26, 1999
<PAGE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
------
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 695,066 318,105
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . 39,272 54,850
----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . $ 734,338 372,955
=========== ===========
<PAGE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1998 1997
------------ -----------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,346 34,271
Deferred interest payable to an affiliate . . . . . . . . . . . . . 13,397,009 9,946,217
Current portion of notes payable to an affiliate
and demand note payable to affiliate. . . . . . . . . . . . . . . 55,612,222 55,612,222
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 69,050,577 65,592,710
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 69,050,577 65,592,710
Investment in unconsolidated venture, at equity . . . . . . . . . . . 54,449,825 60,512,968
Venture partner's equity in venture . . . . . . . . . . . . . . . . . 123,293 62,663
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative cash distributions . . . . . . . . . . . . . . . . . (480,000) (480,000)
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . (12,382,404) (12,556,766)
------------ -----------
(12,861,404) (13,035,766)
------------ -----------
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 . . . . . . . . . . . . . . . . . . . . . (215,565,347) (218,297,014)
------------ -----------
(110,027,953) (112,759,620)
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . (122,889,357) (125,795,386)
------------ -----------
$ 734,338 372,955
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Interest and other income . . . . . . . . . . . . $ 496,426 483,445 47,854
------------ ------------ ------------
Expenses:
Interest. . . . . . . . . . . . . . . . . . . . . 3,450,792 3,305,407 3,134,509
Professional services . . . . . . . . . . . . . . 62,800 178,451 129,720
General and administrative. . . . . . . . . . . . 79,318 87,230 85,400
------------ ------------ ------------
3,592,910 3,571,088 3,349,629
------------ ------------ ------------
(3,096,484) (3,087,643) (3,301,775)
Partnership's share of income (loss)
from operations of unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . 6,063,143 5,763,142 479,647
Venture partner's share of venture
operations. . . . . . . . . . . . . . . . . . . . (60,630) (57,627) (5,036)
------------ ------------ ------------
Earnings (loss) before extraordinary item . . . 2,906,029 2,617,872 (2,827,164)
Extraordinary item:
Partnership's share of gain on
forgiveness of indebtedness. . . . . . . . . . . -- -- 9,486,508
------------ ------------ ------------
Net earnings (loss) . . . . . . . . . . . . . . $ 2,906,029 2,617,872 6,659,344
============ ============ ============
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before extraordinary item . . $ 2,734 2,461 (2,657)
Extraordinary item. . . . . . . . . . . . . . -- -- 8,917
------------ ------------ ------------
Net earnings (loss) . . . . . . . . . . . $ 2,734 2,461 6,260
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits)
Years Ended December 31, 1998, 1997 AND 1996
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ----------- ------------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficits)
Decem-
ber 31,
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)
Net earnings
(loss) . . . -- 157,072 -- 157,072 -- 2,460,800 -- 2,460,800
------ ----------- --------- ----------- ----------------------- ------------ ------------
<PAGE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ----------- ------------- ----------- ----------- ----------- ------------- ------------
Balance
(deficits)
Decem-
ber 31,
1997 . . . . 1,000 (12,556,766) (480,000) (13,035,766) 113,057,394(218,297,014) (7,520,000) (112,759,620)
Net earnings
(loss) . . . -- 174,362 -- 174,362 -- 2,731,667 -- 2,731,667
------ ----------- --------- ----------- ----------------------- ------------ ------------
Balance
(deficits)
Decem-
ber 31,
1998 . . . .$1,000 (12,382,404) (480,000) (12,861,404) 113,057,394 (215,565,347) (7,520,000) (110,027,953)
====== =========== ========= =========== =========== ============ =========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $ 2,906,029 2,617,872 6,659,344
Items not requiring cash or cash equivalents:
Partnership's share of (earnings) loss from
operations of unconsolidated venture . . . . (6,063,143) (5,763,142) (479,647)
Extraordinary item . . . . . . . . . . . . . . -- -- (9,486,508)
Venture partner's share of venture
operations . . . . . . . . . . . . . . . . . 60,630 57,627 5,036
Changes in:
Other receivables. . . . . . . . . . . . . . . 15,578 (7,656) (47,194)
Accounts payable . . . . . . . . . . . . . . . 7,075 (1,647) (26,171)
Deferred interest payable to an affiliate. . . 3,450,792 3,305,407 3,134,509
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 376,961 208,461 (240,631)
----------- ----------- -----------
Cash flows from investing activities:
-- -- --
----------- ----------- -----------
Cash flows from financing activities:
Fundings of demand note payable . . . . . . . . . -- -- 346,000
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . -- -- 346,000
----------- ----------- -----------
<PAGE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997 1996
----------- ----------- -----------
Net increase (decrease) in cash . . . . . 376,961 208,461 105,369
Cash, beginning of year . . . . . . . . . 318,105 109,644 4,275
----------- ----------- -----------
Cash, end of year . . . . . . . . . . . . $ 695,066 318,105 109,644
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . $ -- -- --
=========== =========== ===========
Non-cash investing and financing activities . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
As a result of the 1996 restructuring, JMB/245 Park Avenue Associates,
Ltd. (the "Partnership") owns (through a limited liability company of which
the Partnership is a 99% member, described below) an approximate 5.56%
general partner interest in Brookfield Financial Properties, L.P. ("BFP,
LP"), formerly known as World Financial Properties, L.P. ("WFP, LP"), a
joint venture that holds 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 21, 1996. Through November 21, 1996, the Partnership held an
approximate 48.25% interest in 245 Park Avenue Company ("245 Park" or the
"Joint Venture"), which owned the 245 Park Avenue office building in New
York, New York (see "Investment in Unconsolidated Venture" below). The
effect of all transactions between the Partnership and its consolidated
venture has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interest in 245 Park through the effective date of the restructuring
(November 21, 1996 ("Effective Date")) and the Partnership's 5.56% interest
in BFP, LP subsequent to the Effective Date. Accordingly, the financial
statements do not include the accounts of 245 Park or BFP, LP. The results
of operations of the unconsolidated venture prior to the Effective Date are
exclusive of approximately $12.7 million of contractual interest expense
not recorded and not paid by 245 Park due to its bankruptcy and in
accordance with SOP 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code".
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 JMB/245 LLC as described above.
Such GAAP and consolidation adjustments are not recorded on the records of
the Partnership. The net effect of these items for the years ended
December 31, 1998 and 1997 is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1998 1997
------------------------------ ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 734,338 (119,978,577) 372,955 (121,182,633)
Partners' capital
accounts (deficits):
General partners. . . . . . . . . (12,861,404) (27,902,520) (13,035,766) (27,974,338)
Limited partners. . . . . . . . . (110,027,953) (149,279,160) (112,759,620) (150,404,312)
Net earnings (losses):
General partners. . . . . . . . . 174,362 71,818 157,072 7,550
Limited partners. . . . . . . . . 2,731,667 1,125,152 2,460,800 118,273
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . 2,734 1,125 2,461 118
============ =========== ============= ============
</TABLE>
<PAGE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of the
period. The above-noted deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and income
tax purposes.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only has general and limited partnership
interests, the Partnership will not experience any significant impact on
its consolidated financial statements.
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 venture 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 venture 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 venture's 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 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
<PAGE>
Chapter 11 of the United States Bankruptcy Code. During 1996, the O&Y
partners and these certain other O&Y affiliates restructured their
ownership interests 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 the 245 Park Avenue office
building 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, BFP, LP. The managing general partner of
BFP, LP is an entity affiliated with certain O&Y creditors and the
proponents of the Plan. BFP, LP's principal assets are wholly-owned or
majority and controlling interests in seven office buildings (including 245
Park Avenue office building).
The Plan was conditioned upon refinancings of the first and junior
mortgage loans secured by the 245 Park Avenue office building 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 mortgage loans in 1996 for default interest
which was forgiven.
BFP, 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 BFP, LP. In any event, any net proceeds obtained by the Partnership
would then be used to satisfy notes payable and accrued interest
(aggregating $69,009,231 at December 31, 1998) to JMB Realty Corporation
("JMB") which are secured by the Partnership's interest in BFP, LP. Only
after such applications would any remaining proceeds be available to be
distributed to the Holders of Interests. As a result, it is unlikely that
the Holders of Interests ever will receive any significant portion of their
original investment.
However, it is expected that over the remaining term of the
Partnership, as a result of sale or other disposition of the properties
(including a transfer to the lenders), or of the Partnership's interest in
BFP, LP, the Holders of Interests will be allocated substantial gain for
Federal income tax purposes (corresponding at a minimum to all or most of
their deficit capital accounts for tax purposes) without a significant
amount of proceeds from such sale or disposition. Such gain may be offset
by suspended losses from prior years (if any) that have been allocated to
the Holders of Interests. The actual tax liability of each Holder of
Interests will depend on such Holder's own tax situation.
<PAGE>
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 (current principal outstanding balance of $16,042,000 at
December 31, 1998 and 1997) 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 required 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 accrues 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% (8.75% at December 31, 1998
and 9.5% at December 31, 1997). As of December 31, 1998, 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 and advances to pay operating costs of the Partnership.
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
BFP, LP.
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 was
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 were required prior to
the scheduled 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. No payments of interest on the LIBOR Note have been made
subsequent to July 31, 1995. The scheduled maturity of the term loans was
December 31, 1998. However, JMB has not pursued any remedies under these
notes as a result of the non-payment of monthly interest under the LIBOR
Note or the maturity of the term loan notes in December 1998. The
Partnership is currently discussing with JMB possible resolutions related
to the scheduled maturity of such term loan notes. These loans and the
demand note payable to JMB are secured by the Partnership's interest in
BFP, LP and are subject to mandatory payment of principal and interest out
of any distributions received by the Partnership from BFP, LP. It
currently appears unlikely, however, that any significant operating
distributions will be received by the Partnership from BFP, LP due to the
level of indebtedness remaining on the properties owned by BFP, LP.
Accordingly, the Partnership's primary sources of capital to pay for
continuing operations are receipt of one-third of the property management
fees earned at the 245 Park Avenue property and, if necessary, additional
advances from JMB under the demand loan.
NOTES PAYABLE TO AN AFFILIATE
Notes payable to an affiliate consist of the following at December 31,
1998 and 1997:
1998 1997
----------- -----------
Note payable (term loan) bearing
interest at a variable rate related
to LIBOR (8.285% per annum at
December 31, 1998); secured by the
Partnership's interest in BFP, LP;
<PAGE>
1998 1997
----------- -----------
interest payable monthly; scheduled
maturity (discussed above)
December 1998. . . . . . . . . . . . $16,042,000 16,042,000
Note payable (term loan) bearing
interest at 2% per annum; secured
by the Partnership's interest in
BFP, LP; no payments until
December 1998 when the entire
principal amount and accrued
compounded interest were scheduled
to be due (as discussed above) . . . 25,000,000 25,000,000
Note payable (term loan)
bearing interest at 2% per
annum; secured by the
Partnership's interest in
BFP, LP; no payments until
December 1998 when the entire
principal amount and accrued
compounded interest were scheduled
to be due (as discussed above) . . . 2,194,631 2,194,631
Demand note payable bearing
interest at prime plus 1%
(8.75% per annum at December 31,
1998); advanced by JMB; maximum
principal sum of a specified
amount secured by the Partner-
ship's interest in BFP, LP . . . . . 12,375,591 12,375,591
----------- -----------
$55,612,222 55,612,222
=========== ===========
In addition, deferred and unpaid interest payable was $13,397,009 and
$9,946,217 as of December 31, 1998 and 1997, 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 Holders
of Interest 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 General Partners and Holders of Interests only after
the satisfaction of all Partnership liabilities.
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's real property investments. Fees,
commissions and other expenses required to be paid by the Partnership to
the General Partners and their affiliates as of December 31, 1998, 1997 and
1996 are as follows:
UNPAID AT
DECEMBER 31,
1998 1997 1996 1998
------- ------ ------ ------------
Insurance commissions . . $ 792 -- -- --
Reimbursement (at cost)
for legal services . . . 2,796 1,267 1,455 479
Reimbursement (at cost)
for accounting services. 2,056 1,521 750 562
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . -- 2,380 518 --
Reimbursement (at cost)
for out-of-pocket
expenses . . . . . . . . 14 -- 9,860 --
------- ------ ------ ------
$ 5,658 5,168 12,583 1,041
======= ====== ====== ======
Any reimbursable amounts currently payable to the General Partners and
their affiliates do not bear interest.
Reference is made to the Notes, "Investment in Unconsolidated Venture"
and "Notes Payable to an Affiliate" above 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 BFP, LP as of and for the years
ended December 31, 1998 and 1997:
1998 1997
----------- -----------
(000's) (000's)
Assets:
Commercial properties . . . . . . $ 3,122,191 2,514,362
Other assets. . . . . . . . . . . 149,979 115,771
----------- -----------
Total assets . . . . . . . . . $ 3,272,170 2,630,133
=========== ===========
Liabilities and Partners Capital:
Accounts payable and
other payables. . . . . . . . . $ 223,909 62,935
Long and short term debt. . . . . 2,352,825 1,935,461
Venture Partners' equity. . . . . 656,771 596,691
----------- -----------
Total liabilities. . . . . . . $ 3,233,505 2,595,087
=========== ===========
Partnership's capital. . . . . $ 38,665 35,046
=========== ===========
<PAGE>
1998 1997
----------- -----------
(000's) (000's)
Represented by:
Invested capital. . . . . . . . . $ 31,725 31,725
Cumulative distributions
and other . . . . . . . . . . . 24 13
Cumulative net earnings . . . . . 6,916 3,308
----------- -----------
$ 38,665 35,046
=========== ===========
Total income. . . . . . . . . . . . $ 451,441 405,993
Expenses. . . . . . . . . . . . . . 386,481 346,087
----------- -----------
Net income (loss) . . . . . . . . . $ 64,960 59,906
=========== ===========
Partnership's share:
Equity in earnings of BFP, LP . . $ 3,608 3,308
----------- -----------
$ 3,608 3,308
=========== ===========
The Partnership's capital in BFP, LP differs from its investment in
unconsolidated venture, primarily due to the adoption of fresh start
accounting by BFP, 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 BFP, LP on the Effective Date) over a period
not to exceed forty years. The amortization for the year ended
December 31, 1998 and the year ended December 31, 1997 was $2,455,143 and
$2,455,142, respectively. Such amounts may be written off sooner in the
event of the sale or disposition of the properties owned by BFP, LP or the
Partnership's interest in BFP, LP.
The total income, expenses and net income (loss) (inclusive of results
of operations for 245 Park through the Effective Date and BFP, LP
subsequent to the Effective Date) for the year ended December 31, 1996 were
$162,984,000, $137,932,000, and $25,052,000, respectively. Total income
and net income (loss) for the year ended December 31, 1996 includes an
extraordinary gain on forgiveness of indebtedness of $19,661,000 related to
the restructuring of 245 Park Avenue.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Brookfield Financial Properties, L.P.
New York, New York
We have audited the accompanying consolidated balance sheet of
Brookfield Financial Properties, L.P. (formerly World Financial Properties,
L.P.) (the Company) as of December 31, 1998, and the related consolidated
statements of operations, partners' capital and cash flows for the year
then ended. 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, the financial statements present fairly, in all
material respects, the financial position of Brookfield Financial
Properties, L.P. as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 5, 1999
<PAGE>
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(000's)
ASSETS
NOTE
Commercial properties . . . . . . 2a, 2b, 3 $ 3,122,191
Cash and cash equivalents
(including restricted cash and
cash equivalents of $67,623). . 2d 73,088
Accounts receivable . . . . . . . 34,004
Other assets. . . . . . . . . . . 9a 42,887
-----------
Total Assets. . . . . . . . . . . $ 3,272,170
===========
LIABILITIES AND PARTNERS' CAPITAL
Long term commercial property
debt. . . . . . . . . . . . . . 5, 9c $ 2,299,672
Short term debt . . . . . . . . . 6 53,153
Accounts payable and
other liabilities . . . . . . . 7, 10c 223,909
-----------
2,576,734
-----------
Partners' capital . . . . . . . . 1,4 695,436
-----------
Total Liabilities and
Partners' Capital . . . . . . . $ 3,272,170
===========
The accompanying notes are an integral part
of this financial statement.
<PAGE>
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(000's)
NOTE
REVENUES:
Rental income . . . . . . . . . . 2g,8 $ 432,581
Equity earnings from
joint venture . . . . . . . . . 3 8,823
Interest and other income . . . . 9b 10,037
----------
451,441
----------
EXPENSES:
Property operations . . . . . . . 148,040
Interest. . . . . . . . . . . . . 5,6,9c 172,592
Administrative and development. . 9,161
Depreciation and amortization . . 2b 56,688
----------
386,481
----------
NET INCOME. . . . . . . . . . . . $ 64,960
==========
The accompanying notes are an integral part
of this financial statement.
<PAGE>
<TABLE>
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998
(000's)
<CAPTION>
Units
Balance Transfered Balance
12/31/97 (Retired) Net Income 12/31/98
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
GENERAL PARTNERS
Brookfield Financial Properties, Inc.
(formerly World Financial
Properties, Inc.). . . . . . . . . . $ 6,341 $ 2 $ 653 $ 6,996
JMB 245 Park Avenue Holding
Company, LLC. . . . . . . . . . . . 35,046 11 3,608 38,665
LIMITED PARTNERS
Brookfield Properties Corporation:
Brookfield Properties Holdings Inc.
(formerly Battery Park Holdings Inc.) 255,686 78 26,335 282,099
Olympia & York Tower B Company. . . 50,097 15 5,154 55,266
Battery Park Partners (Note 1). . . -- 250,928 16,364 267,292
Canadian Imperial Bank of Commerce
(Note 1) . . . . . . . . . . . . . . 131,785 (134,994) 3,209 --
Emerald LP Holdings, Inc. (Note 1). . 143,394 (115,850) 8,765 36,309
Other . . . . . . . . . . . . . . . . 9,388 (1,451) 872 8,809
-------- ------- ------- --------
$631,737 $(1,261) $64,960 $695,436
======== ======= ======= ========
The aaccompanying notes are an integral part of this financial statement.
<PAGE>
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(000's)
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . $ 64,960
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization . . . . 56,688
Equity earnings from joint venture. . (8,823)
Accrued interest income . . . . . . . (110)
Accrued interest expense. . . . . . . 5,643
Increase in straight-line receivable. (38,900)
Changes in other operating assets
and liabilities:
Increase in accounts receivable . . (8,294)
Decrease in other assets. . . . . . 3,439
Increase in accounts payable
and other liabilities . . . . . . 4,147
---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . 78,750
---------
INVESTING ACTIVITIES:
Additions to commercial properties. . . (342,368)
Distributions from joint ventures . . . 1,976
Purchase venture interest in commercial
property . . . . . . . . . . . . . . . (132,858)
Other assets, net . . . . . . . . . . . 14,731
---------
NET CASH USED BY
INVESTING ACTIVITIES. . . . . . (458,519)
---------
FINANCING ACTIVITIES:
Equity units retired. . . . . . . . . . (1,261)
Additions to long term debt . . . . . . 220,000
Additions to short term debt. . . . . . 225,263
Addition of other liabilities . . . . . 164,000
Loss on termination of swap agreement . (3,160)
Repayments of short term debt . . . . . (181,219)
Repayments of long term debt. . . . . . (27,711)
---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES. . . . . . 395,912
---------
Increase in cash and cash equivalents . 16,143
Cash and cash equivalents
- beginning of year . . . . . . . . . 56,945
---------
Cash and cash equivalents
- end of year . . . . . . . . . . . . $ 73,088
=========
The accompanying notes are an integral part
of this financial statement.
<PAGE>
BROOKFIELD FINANCIAL PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000's)
1. ORGANIZATION
Brookfield Financial Properties, L.P. (formerly World Financial
Properties, L.P.) (the Company) is a Delaware limited partnership organized
as of November 21, 1996 by and among Brookfield Financial Properties, Inc.
(formerly 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
Brookfield Properties Holdings, Inc. (formerly known as 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. BPHI acquired
the interests of Dragon in 1997 and, through a subsidiary entity, Battery
Park Partners, acquired the CIBC interests on March 31, 1998 and a
significant portion of the Citibank interests on June 25, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Principals of consolidation and accounting presentation
(i) 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.
(ii) 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. Amortization of tenant
improvements and other leasing costs is provided on the straight-line
method over the terms of the related leases.
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 principally represents amounts
which are subject to certain loan agreements.
<PAGE>
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 noncancellable term of
the respective leases, and are recorded as adjustments to rental income.
<PAGE>
3. COMMERCIAL PROPERTIES
Description
The Company, through its subsidiaries and joint venture, is primarily
involved in the operation of commercial real estate located in New York
City and Boston 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 CIBC, a
major tenant in Tower A, who holds a 26% partnership interest. At
December 31, 1998, the property is 99% leased.
(ii) WORLD FINANCIAL CENTER - TOWER B, NEW YORK, NEW YORK
Tower B is a 45-story commercial office building which was
completed in 1988 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
holding 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, 1998, the property is 99% 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, 1998, the property is 92% 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.
Through March 31, 1998, the building was owned in a limited partnership
with an affiliate of Nomura, Babcock & Brown (NBB), with each partner
having a 50% interest. On April 1, 1998, the company acquired NBB's 50%
partner interest increasing its ownership interest to 100%. At December
31, 1998, the property is 99% leased.
(vii) 75 STATE STREET, BOSTON, MASSACHUSETTS
75 State Street is a 31-story commercial office building which
the company acquired on September 15, 1998. The property was completed in
1989 and contains 767,096 rentable square feet of office and retail space
and 235,000 square feet of parking space. At December 31, 1998, the
property is 99% leased.
<PAGE>
Included in Commercial Properties at December 31, 1998 are
consolidated commercial properties of $2,973 million, a joint venture
investment of $66 million, and straight-line rent receivables of $83
million.
CONSOLIDATED COMMERCIAL PROPERTIES:
The Company's consolidated commercial properties at December 31, 1998
are as follows:
Land . . . . . . . . . . . . $ 406,561
Buildings and improvements . 2,677,419
----------
3,083,980
Accumulated depreciation
and amortization. . . . . . (110,993)
----------
Total. . . . . . . . . . . . $ 2,972,987
==========
JOINT VENTURE - COMMERCIAL PROPERTY:
The condensed balance sheet and condensed statement of operations of
Tower D, in which the Company has a joint venture investment, at and for
the year ended December 31, 1998 is a follows:
ASSETS
Commercial property . . . . . $644,198
Other assets. . . . . . . . . 44,946
--------
Total assets. . . . . . . . . $689,144
========
LIABILITIES
Long term debt. . . . . . . . $434,346
Accounts payable and other. . 5,128
--------
Total liabilities . . . . . . 439,474
--------
PARTNERS' CAPITAL
Brookfield Financial Properties,
L.P.. . . . . . . . . . . . 65,887
Co-venturer . . . . . . . . . 183,783
--------
249,670
--------
Total liabilities and
partners' capital . . . . . $689,144
========
Revenues. . . . . . . . . . . . $ 81,081
Operating expenses. . . . . . . (50,500)
Depreciation and amortization . (13,442)
--------
Net income. . . . . . . . . . $ 17,139
========
<PAGE>
4. PARTNERS' CAPITAL
During 1998, the Company acquired 234 partnership units which were
subsequently retired.
5. LONG TERM DEBT
Long term debt of $2,253.9 million at December 31, 1998 carries a
weighted average interest rate of 7.3% and is secured by mortgages and
other security interests which are collateralized by consolidated
commercial properties. Total interest paid on long term debt obligations
for the year ended December 31, 1998 aggregated $157.3 million. The
scheduled repayments of long term debt at December 31, 1998 are as follows:
Years ending December 31,
1999. . . . . . . . . $ 53,292
2000. . . . . . . . . 66,766
2001. . . . . . . . . 78,436
2002. . . . . . . . . 79,302
2003. . . . . . . . . 71,325
Thereafter. . . . . . 1,904,781
----------
$2,253,902
==========
In addition, included in long term debt is $45.8 million of
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 Brookfield Financial Properties, L.P.
and which matures in 2014. The Note carries a face amount of $150 million
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%.
6. SHORT TERM DEBT
Pursuant to a demand note, the Company has a $53.2 million loan
outstanding from Brysons International Bank, Ltd. ("Brysons"), an affiliate
of BPHI. The note accrues interest at a rate equal to LIBOR plus 2.00%,
and is payable on March 31, 1999. Interest accrued through December 31,
1998 aggregated $0.7 million. Furthermore, during the year the company had
received additional loans from Brysons and another affiliate, which were
subsequently repaid during the year. Total interest expense paid on short
term debt for the year ended December 31, 1998 aggregated $9.0 million.
7. ACCOUNTS PAYABLE AND OTHER PAYABLES
Included in accounts payable and other liabilities is $3.5 million
payable to the City and State of New York relating to a tax settlement
agreement between the Company's predecessors 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%. Total interest expense paid on this obligation and other
payables for the year ended December 31, 1998 aggregated $0.7 million.
8. 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 $63.6
million for the period ended December 31, 1998.
<PAGE>
The following is a schedule of minimum future rental income under
noncancellable operating leases during the next five years and thereafter
presented on a straight-line basis.
Years ending December 31,
1999. . . . . . . . . $ 394,851
2000. . . . . . . . . 388,332
2001. . . . . . . . . 379,207
2002. . . . . . . . . 372,281
2003. . . . . . . . . 330,798
Thereafter. . . . . . 2,008,830
----------
Total future minimum rentals. . . . . . $3,874,299
==========
9. OTHER RELATED PARTY TRANSACTIONS
a. Included in other assets is a note receivable from the BPHI in the
amount of $1.4 million. This note bears interest at 9% and is due in 2001.
b. Brookfield Financial Properties, L.P. performs management services
for certain of its properties and certain affiliates pursuant to separate
agreements. For the year ended December 31, 1998, $9.1 million in fees was
earned, of which $7.8 million has been eliminated within these financial
statements.
c. Included in long term debt is a $25 million note due to Brysons
International Bank, Ltd., which bears interest at 9.5% payable quarterly.
The principal balance of the note is due in full on September 16, 2003.
Interest paid during the year aggregated $0.6 million.
10. 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,
1999. . . . . . . . . $ 11,215
2000. . . . . . . . . 11,215
2001. . . . . . . . . 11,215
2002. . . . . . . . . 11,215
2003. . . . . . . . . 11,215
Thereafter. . . . . . 706,810
--------
$762,885
========
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. SF was part of a group of entities which had
comprised the U.S. Operations of Olympia & York (O&Y (U.S.)). O&Y (U.S.)
was reorganized pursuant to a Chapter 11 bankruptcy plan (the Plan)
pursuant to which the Company succeeded as the principal holder of the
assets of O&Y (U.S.). 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.).
<PAGE>
Pursuant to a settlement agreement dated September 10, 1996 between
Coopers and O&Y (U.S.), all claims were settled with the exception of 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 $25
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. Pursuant to an agreement entered into on December 24, 1998, the
Company admitted Noranda Properties, LLC (Noranda), an affiliate of BPHI as
a 33% partner in WFP Tower B Holding Co. L.P. (B Holding). B Holding holds
the 99% limited partnership interest in the partnership which holds the
leasehold interest in Tower B. Pursuant to the agreement Noranda has the
option until April 1, 1999 to have the Company redeem its interest in
exchange for the return of its $164,000,000 contribution. To date, this
option has not been exercised. Therefore, as of December 31, 1998, no gain
or loss has been recognized as a result of the transaction.
11 SUBSEQUENT EVENT
On February 17, 1999, World Financial Properties, L.P. changed its
name to "Brookfield Financial Properties, L.P."
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
1997 and 1998.
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 JMB
Investment Holdings - I, Inc., a Delaware corporation, the outstanding
shares of stock of which are owned 25% by Northbrook Corporation, a
Delaware corporation, and 75% by JMB Realty Corporation, a Delaware
corporation ("JMB"). Substantially all of the outstanding shares of stock
of Northbrook Corporation are owned by JMB 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 BFP, LP or of all or substantially all of the 245
Park Avenue office building, unless required by the terms of the BFP, 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 limited partners of
the Associate General Partner are generally officers, directors and
affiliates of JMB or its affiliates and an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership by affiliates of the General
Partners. In general, such services are to be provided on terms no less
favorable to the Partnership than could be obtained from independent third
parties and are otherwise subject to conditions and restrictions contained
in the Partnership Agreement. The Partnership Agreement permits the
General Partners and their affiliates to provide services to, and otherwise
deal and do business with, persons who may be engaged in transactions with
the Partnership, and permits the Partnership to borrow from, purchase goods
and services from, and otherwise to do business with, persons doing
business with the General Partners or their affiliates. The General
Partners and their affiliates may be in competition with the Partnership
under certain circumstances, including, for tenants for properties and/or
for the sale of properties. Because the timing and amount of cash
distributions and profits and losses of the Partnership may be affected by
various determinations by the General Partners under the Partnership
Agreement, including whether and when to sell (or consent to the sale of)
investment property, the establishment and maintenance of reasonable
reserves, the timing of expenditures and the allocation of certain tax
items under the Partnership Agreement, the General Partners may have a
conflict of interest with respect to such determinations.
The 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
<PAGE>
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
August 10, 1999. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on August
10, 1999. 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 foregoing director and officers are also officers and/or directors
of JMB. JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV
("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"),
and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and managing
general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB
Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X ("JMB Income-X"), and JMB Income Properties, Ltd.-XI ("JMB
Income-XI"). JMB is also the sole general partner of the associate general
partner of most of the foregoing partnerships.
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). 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-XI, Carlyle-XIII,
Carlyle-XIV, Carlyle-XV, JMB Income-VII, JMB Income-X, JMB Income-XI, and
Carlyle Income Plus-II.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership
includes the following:
Judd D. Malkin (age 61) is Chairman and a director of JMB and its
Chief Financial Officer. He is also an individual general partner of JMB
Income-V. Mr. Malkin has been associated with JMB since October, 1969.
Mr. Malkin is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of Chisox
Corporation, which is the general partner of a limited partnership that
owns the Chicago White Sox Major League Baseball team, and CBLS, Inc.,
which is the general partner of the general partner of a limited
partnership that owns the Chicago Bulls National Basketball Association
team. He is a Certified Public Accountant.
Neil G. Bluhm (age 61) is President and a director of JMB. He is also
an individual general partner of JMB Income-V. Mr. Bluhm has been
associated with JMB since August, 1970. Mr. Bluhm is also a principal of
Walton Street Capital, L.L.C., which sponsors real estate investment funds,
and a director of Urban Shopping Centers, Inc. He is a member of the Bar
of the State of Illinois and a Certified Public Accountant.
Gary Nickele (age 46) 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 57) is Executive Vice President and a director
of JMB. Mr. Nathan has been associated with JMB since July, 1972. He is a
member of the Bar of the State of Illinois.
<PAGE>
H. Rigel Barber (age 50) is Executive Vice President and 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 50) 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 1998, 1997 or 1996. The General Partners were
allocated aggregate earnings for tax purposes of $71,818 from the
Partnership in 1998.
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.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1998
aggregating $792 in connection with the provision of liability insurance
coverage for the Partnership. Such commissions are at rates set by
insurance companies for the classes of coverage involved.
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 investments. In 1998, the General Partners of the
Partnership and its affiliates received $14 of reimbursements for such out-
of-pocket expenses.
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
1998, an affiliate of the General Partners was entitled to reimbursements
for such expense in the amount of $4,852, of which $1,041 was unpaid at
December 31, 1998.
As of December 31, 1998, JMB has advanced $12,375,592, evidenced by a
demand note, which relates primarily to principal and interest payments
made on the LIBOR Note (one of the term loan notes discussed below) 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 and bears interest at the prime rate
plus 1% per annum, which accrues and is deferred. The demand note is
secured by the Partnership's interest in BFP, LP. The amount of interest
accrued and deferred on the demand note for 1998 and in the aggregate
through December 31, 1998 is $1,173,876 and $5,191,518, 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 was
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 were 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
<PAGE>
these notes for the year ended December 1998 and in the aggregate through
December 31, 1998, is $2,276,916 and $8,205,491, respectively. The term
loan notes have a scheduled maturity of December 31, 1998. JMB has not
pursued its remedies under these notes. The Partnership is discussing with
JMB possible resolutions related to the scheduled maturity of the term loan
notes. Reference is made to the Notes for a further discussion of the
demand and term loan notes.
<PAGE>
</TABLE>
<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 beneficially
own the following Interests of the Partnership.
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership Neil G. Bluhm 24 Interests (1) 2.4%
Interests indirectly
Limited Partnership Judd D. Malkin 24 Interests (1) 2.4%
Interests indirectly
Limited Partnership Corporate General 26 Interests 2.6%
Interests Partner, its (1)(2)(3)
officers and director
and the Associate
General Partner
as a group
<FN>
(1) Includes 24 Interests owned by an investment partnership of which Messrs. Bluhm and Malkin are the
managing general partners and have shared investment and voting power with respect to such Interests.
(2) Includes one Interest owned by an officer for which he has sole investment and voting power.
(3) Includes one Interest owned by an estate for which an officer acts as co-executor and for which such
officer is deemed to have shared investment and voting power.
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10, 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.
<PAGE>
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 9, 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 9, 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 9, 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 9, 1995.
10-A. 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-B. 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-C. 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-D. 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.
10-E. Consent and Substitution of Collateral dated
November 21, 1996 is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1997 on Form 10-Q (File No. 0-13545)
filed on May 9, 1997.
21. List of Subsidiaries of the Partnership.
27. Financial Data Schedule
<PAGE>
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
Partnership's 10-K Report for December 31, 1994, (File No. 0-13545) filed
on March 27, 1995.
(b) No report on Form 8-K has been filed since the beginning of the
last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 1998 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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 22, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc.
Corporate General Partner
STUART C. NATHAN
By: Stuart C. Nathan, President and Director
Principal Executive Officer
Date: March 22, 1999
JUDD D. MALKIN
By: Judd D. Malkin, Chairman
Principal Financial Officer
Date: March 22, 1999
GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
Date: March 22, 1999
<PAGE>
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. Third Amended Joint Plan of Reorganiza-
tion dated September 12, 1996 Yes
<PAGE>
10-B. Limited Liability Company Agreement of
JMB 245 Park Avenue Holding Company, LLC
dated as of November 12, 1996. Yes
10-C. Amended and Restated Agreement of
Limited Partnership of World Financial
Properties dated as of November 21, 1996 Yes
10-D. JMB Transaction Agreement dated as of
November 21, 1996 Yes
10-E. Consent and Substitution of Collateral
dated 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 Brookfield Financial
Properties, L.P. formerly known as World Financial Properties, L.P.
Brookfield 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, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 695,066
<SECURITIES> 0
<RECEIVABLES> 39,272
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 734,338
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 734,338
<CURRENT-LIABILITIES> 69,050,577
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (122,889,357)
<TOTAL-LIABILITY-AND-EQUITY> 734,338
<SALES> 0
<TOTAL-REVENUES> 496,426
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,450,792
<INCOME-PRETAX> (3,096,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,906,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,906,029
<EPS-PRIMARY> 2,734
<EPS-DILUTED> 2,734
</TABLE>
