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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997 Commission File
----------------- Number: 0-13493
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-2833662
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(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
5 Cambridge Center, Cambridge, Massachusetts 02142
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 617-234-3000
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
Indicate by check mark whether 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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. / /
Registrant had no revenue for its most recent fiscal year.
No market for the Limited Partnership Units exists and therefore, a market value
for such Units cannot be determined.
Documents Incorporated by Reference
None
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PART I
Item 1. DESCRIPTION OF BUSINESS
GENERAL
Twelve AMH Associates Limited Partnership (the "Partnership") was
organized under the Massachusetts Uniform Limited Partnership Act on April 24,
1984. The general partners of the Partnership (the "General Partners") are Two
Winthrop Properties, Inc. ("Two Winthrop") and Linnaeus-Lexington Associates
Limited Partnership ("Linnaeus-Lexington"). Two Winthrop is a Massachusetts
corporation which is a wholly-owned subsidiary of First Winthrop Corporation
("First Winthrop"), a Delaware corporation, which in turn is controlled by
Winthrop Financial Associates, A Limited Partnership ("WFA"). Linnaeus-Lexington
is a Massachusetts limited partnership. The general partner of
Linnaeus-Lexington is WFA. Two Winthrop is the managing general partner of the
Partnership. See "Change in Control".
The Partnership was capitalized by contributions from partners. In
August 1984, upon completion of its offering, the Partnership sold 600 Units of
Limited Partnership Interest at an aggregate purchase price of $57,750,000
pursuant to Regulation D promulgated under the Securities Act of 1933. The
Partnership used the net proceeds from the offering, together with a line of
credit obtained from a major commercial bank for an interim loan which has been
repaid in full and a purchase money note from the seller, the Aetna Casualty and
Surety Company ("Aetna"), to acquire its 66.667% general partner interest in
Square 254 Limited Partnership ("Square 254") and to acquire, in 1988, a 66.67%
general partner interest in National Place Land Limited Partnership ("National
Land"). Square 254 and National Land are hereinafter collectively referred to as
the "Operating Partnerships." In addition, during the first quarter of 1998, the
Partnership, together with its partners in the Operating Partnerships, formed
The Shops LLC (see "The Retail Space" below) in which the Partnership holds a
66.67% member interest.
Square 254 is a District of Columbia limited partnership organized in
1979. The general partners of Square 254 are the Partnership, the Quadrangle
Development Corporation ("Quadrangle") and the Marriott Corporation
("Marriott"). Quadrangle is the managing general partner of Square 254. The
limited partners are Marriott and NP Limited Partnership, an affiliate of
Quadrangle. Quadrangle is the general partner of NP Limited Partnership and owns
approximately 77% of the partnership interests in NP Limited Partnership.
Quadrangle and Marriott are not affiliated with the Partnership, WFA or any of
its affiliates.
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National Land is a District of Columbia limited partnership organized
on August 8, 1988. The 66.67% general partner of National Land is the
Partnership. The limited partners are Quadrangle (16.665%) and Marriott
(16.665%).
The Shops LLC is a District of Columbia limited liability company. The
members of The Shops are the Partnership (66.67%), Quadrangle (16.665%) and
Marriott (16.665%).
The only business of the Partnership is investing as a general partner
in Square 254 and National Land and as a member of The Shops LLC.
The Partnership is currently in its operating phase and expects to
remain in this phase until April 1999 at which time the Partnership will
evaluate selling its investment or, assuming the existing loan can be extended
or refinanced, holding the investment longer than originally expected. In this
regard, Two Winthrop is currently negotiating with Quadrangle and Marriott to
amend the Partnership Agreements of the Operating Partnerships and the Limited
Liability Company Agreement of The Shops LLC to provide for a buy/sell right
among the entities which will enable the parties to cause a sale of the
Properties or acquire the other entities interest in the Operating Partnerships
and The Shops LLC. See Item 6 "Management's Discussion and Analysis or Plan of
Operation" for information relating to the Partnership's ability to satisfy its
loan obligations.
PROPERTIES OWNED BY THE OPERATING PARTNERSHIPS
1. Square 254
Square 254 developed and presently owns and operates a mix-use complex
know as "National Place," located at 1331 Pennsylvania Avenue, N.W., Washington,
D.C. National Place consists of: (i) the 772-room J.W. Marriott Hotel managed by
the Marriott Corporation, (ii) the 71,000 square feet of retail space which is
leased to and managed by The Rouse Company until April 1, 1998 at which time the
Lease will be assigned to The Shops LLC and management will transferred to an
affiliate of Quadrangle, (iii) 418,000 square feet of office space, (iv) a
leasehold interest in the 1,600-seat National Theatre leased on net basis to the
New National Theater Corporation, which in turn contracts with the Shubert
Organization to provide programming for the theater, and (v) the 400-car parking
garage managed by QuikPark, Inc. It is expected that effective April 1, 1998,
All-Right Parking, Inc. will be retained as the manager of the parking garage.
In addition, Square 254 leases from National Land pursuant to a ground lease
(the "Ground Lease") which expires in 2083, the land on which National Place is
located.
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The Hotel: The J. W. Marriott Hotel is a fifteen story, 772-room
hotel which opened in February 1984. Its special features include four
restaurants, in-house catering services, health club including an indoor
swimming pool, two ballrooms of 14,000 and 8,400 square feet, 10 function rooms
totaling 30,000 square feet, 18 hospitality suites, 2 Vice-Presidential suites,
and 2 Presidential suites. The following table sets forth the average occupancy
and room rate at the Hotel for the calendar years ended December 1997 and 1996:
December 31,
1997 1996
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Average Occupancy(%) 83.9 83.1
Average Room Rate($) 158 151
Revenue per
Available Room($) 133 125
Square 254 entered into a Management Agreement with Marriott pursuant
to which Marriott is acting as the exclusive agent to manage and operate the
hotel. The agreement has a term of 30 years and expires in February 2014.
Marriott may renew the agreement for four renewal terms of 10 years each and one
final renewal term through the expiration of the ground lease with National
Land. Marriott earns a management fee equal to 3% of gross revenues for central
office services and an incentive fee of 20% of the operating profit of the
hotel. For this purpose hotel operating profit is defined as the excess of gross
revenues over deductions including: (i) all normal costs of operation; (ii) the
3% of gross revenues central office services fee described above; (iii) a
reserve to cover replacements of the hotel's furniture, fixtures and equipment
and non-routine repairs and maintenance, which reserve is 5% of the hotel's
gross revenues with the balance limited at any time to 3.5% of gross revenues
for the immediately preceding three years; (iv) the hotel's pro rata share of
chain services; and (v) certain insurance costs and real estate taxes. However,
if, during the initial term of the agreement, the 80% share of the operating
profit that Square 254 is to receive is less than the Owner's Priority, defined
as 50% of Square 254's debt service on first mortgage financing, Square 254 is
to receive the portion of Marriott's 20% incentive fee needed to make up the
difference. This portion will be paid back to Marriott in subsequent years from
distributions to Square 254 in excess of the Owner's Priority. Neither Marriott
nor Square 254 may assign their rights and obligations under the agreement
without the approval of the other party except for certain small shops and
concessions in the hotel which Marriott may sublease. Square 254 may terminate
the agreement if (i) the operating profit that it receives in any two
consecutive fiscal years falls below the Owner's Priority or (ii) in any two
consecutive years during a
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renewal term, Square 254's rate of return on replacement costs is less than 120%
of the average annual yield for the three immediately preceding fiscal years on
20-year U.S. Treasury bonds and, in either case, Marriott does not advance the
difference to Square 254. If Square 254 decides to sell the hotel, it must
notify Marriott, which shall have the right to purchase the hotel on the same
terms as proposed to be offered to proposed buyers.
The Office Towers: The Office Towers are known as the North and
South Towers. The North Tower has 15 floors with an aggregate of approximately
350,000 square feet of net rentable office space. The South Tower has 6 floors
with an aggregate of approximately 60,000 square feet of net rentable office
space. There is a connecting access between the two towers at the fifth floor
level.
The Office Towers and common areas are managed by Quadrangle pursuant
to an agreement which is scheduled to expire on April 30, 1999. The agreement
provides for fees payable to Quadrangle of (i) 3% of gross receipts as a fee for
management of the office space and (ii) $100,000 per year increased by 25% of
the percentage increase in the CPI with January 1, 1984 as the base for
management of the common areas. The following table sets forth the average
occupancy, the average rent per square foot of the Officer Towers and the
effective rent per square foot after taking into consideration any free rent
periods or give-backs for the calendar years ended December 1997 and 1996:
December 31,
1997 1996
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Average Occupancy(%) 85 83
Average Rent
Per Square Foot ($) 33 38
Effective Rent($) 32 32
The Department of Justice ("DOJ") leases, in the aggregate,
approximately 43% of the leasable space at the Office Towers (office and storage
space of 170,088 square feet, in the aggregate). The leases with DOJ provide for
annual rent payments in the aggregate of $5,738,020 and terminate on May 14,
2000 with respect to 87,413 square feet and August 14, 2004 with respect to
82,675 square feet.
National Association of Manufacturers ("NAM") leases 10.5% of leasable
space at the Office Towers. NAM occupies the entire 6th floor (42,530 square
feet), and 2,305 square feet on the 12th floor, with aggregate annual lease
payments of $1,613,427, increasing annually with a lease termination date of
April 30, 2012.
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The Retail Space: The Shops at National Place is a three-story indoor
mall with 71,118 square feet of space, surrounding a central atrium, which is
interconnected to the retail space in the National Press Building. The space
beneath the National Press Building is not owned by Square 254. Effective April
1, 1998 management of the section owned by Square 254 will be transferred from
the Rouse Company, which is not affiliated with the Partnership or its General
Partners, to an affiliate of Quadrangle. In addition, The Rouse Company
assigned, and The Shops LLC assumed, the lease with respect to The Shops at
National Place. The lowest level of The Shops has both retail tenants and
restaurants. The middle level has primarily retail tenants. The upper level is a
food court with fast-food restaurants and large common seating areas. In
addition, The Shops connect with the Hotel lobby on the lowest level along an
arcade, where additional food and retail operations are located. In all, there
are approximately 50 merchants currently leasing the retail space.
The retail space is governed by a lease between Square 254 as Lessor
and effective April 1, 1998 The Shops LLC as Lessee. The original term of the
lease expires on May 15, 2014 with two options to extend (first option for 30
years and second option until the end of the ground lease). Payments to Square
254 under the lease are dependent on and a function of net cash flow from the
retail space. The Base Rent is $1,368,100 (or approximately $19.00 per square
foot). The Additional Rent $202,440 (or approximately $3 per square foot) is the
amount of the increase in the annual lease payment because the net cash flow
during the first two years of operation was below $18 per square foot. The
Percentage Rent is 67% of net cash flow in excess of the aggregate of the Base
Rent and the Additional Rent up to $30.56 per square foot plus 72% of net cash
flow in excess of $30.56 per square foot up to $37 per square foot and 63% of
net cash flow in excess of $37 per square foot. No Percentage Rent was paid to
Square 254 in 1997 or 1996. In addition any increase in rent under the ground
lease due to a redevelopment that materially changes the market area will raise
the fixed annual rent by 7% of such increase.
The National Theater: The National Theater is a seven-story structure
whose auditorium holds approximately 1,600 seats. It was built in 1885 with
substantial renovations in 1922 and 1984. The National Theater is leased on a
net basis to the New National Theater Corporation, which in turn contracts with
the Shubert Organization to provide programming for the theater.
Revenue received by Square 254 from the National Theater was $66,816
and $66,816 in 1997 and 1996, respectively.
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Square 254 entered into a lease with the New National Theatre
Corporation with an initial term of 35 years, plus renewal options extending
throughout the 99-year term of the ground lease. The lease commenced on December
29, 1980. Under the lease, Square 254 agreed to reconstruct and renovate the
National Theatre Building, and the New National Theatre Corporation (the
"Corporation") agreed to operate the National Theatre, primarily for the
production of live, non-media drama presentations. The Corporation has
contracted with the New York-based Shubert organization to provide established
Broadway shows. The Corporation pays annual base rent under the lease of
$100,000 plus $25,000 multiplied by the percentage increase in the Consumer
Price Index for the District of Columbia (the "CPI"). The Corporation has the
right to renew the lease for five ten-year terms and one fourteen-year term.
Rent during the first two renewal terms will consist of annual base rent of
$100,000 and additional rent equal to the greater of (a) $100,000 multiplied by
the percentage increase in the CPI for that year or (b) 1% of the increase in
the Corporation's gross receipts for that year over the annual average of gross
receipts for the preceding three years. Rent is to be renegotiated by the
parties after 55 years and decided by arbitration if necessary.
The Parking Garage: The Parking Garage is a 400-car, underground
parking facility consisting of five floors of underground parking garage
facilities, together with the first floor garage entrance, driveway and ramps
leading to the parking facility, containing approximately 143,662 square feet.
Square 254 received $379,836 and $404,288 in revenue from the Parking Garage for
the years ended December 31, 1997 and 1996, respectively.
The Parking Garage was leased to QuikPark, Inc. under a lease
until April 1, 1998 at which time All-Right Parking, Inc., an entity in which
Apollo (as hereinafter defined) holds an ownership interest, assumed the lease
and begin providing services at the parking garage. The rent payable under the
lease is equal to ninety-five percent of gross revenue (i.e. all receipts
other than D.C. Parking Tax). The operating expenses of the Parking Garage are
expenses of Square 254.
2. National Land
National Land was formed in 1988 for the purpose of purchasing the fee
interest in the Land and the National Theater Building (collectively, the "New
Properties") from the Pennsylvania Avenue Development Corporation ("PADC"). As a
result, National Land became the lessor under the Ground Lease and the Theater
Lease under which Square 254 is the Lessee.
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Square 254 signed a lease with the PADC on September 12, 1979 (the
"Ground Lease"). The commencement date for the land was September 12, 1979 and
for the National Theatre building was December 29, 1980. In August 1988,
National Land purchased the land and National Theatre building from PADC and
assumed the Ground Lease from PADC. The term of the lease is 99 years. At the
expiration of the lease, National Land will own the land and National Theatre
building. Square 254 pays annual rent of $2,100,000 to National Land. Square 254
is also obligated to pay Additional Ground Lease Rent consisting of (a) $600,000
of the first $3,150,000 of net cash flow pari passu with the distribution of
$2,550,000 to Square 254 and (b) 20% of all remaining net cash flow after
distribution to Square 254 of an amount equal to a 12% return upon Square 254's
equity in the property, if any, in excess of $15,000,000. Until there is an
appraisal (which is not expected to occur during the first fifteen years),
Square 254's equity will not be deemed to exceed $40,000,000. No additional
Ground Lease Rent was paid by Square 254 in 1997 or 1996.
Square 254 and National Land maintain property and liability insurance
on the properties and believes such coverage to be adequate.
PARTNERSHIP AGREEMENT AMENDMENT
In August 1995, the Managing General Partner amended Section 12.4 of
the Registrant's partnership agreement to clarify and remove any ambiguities
pertaining to the requirements for calling and voting at a meeting of Investor
Limited Partners, or taking action by written consent of partners in lieu
thereof. Such requirements include, among other matters, that any action by
written consent may be initiated only by the Managing General Partner or by
one or more Investor Limited Partners holding not less than 10% of the
outstanding Units.
COMPETITION
National Place is affected by and subject to the general competitive
conditions of the lodging industry and commercial real estate. In addition,
National Place is located in an area which contains numerous other properties
which may be considered competitive. The varying cycles of Congress (when in
session and when elections are held) cause fluctuations in the Washington D.C.
hotel market.
CHANGE IN CONTROL
On July 18, 1995 Londonderry Acquisition II Limited Partnership
("Londonderry II"), a Delaware limited partnership, an affiliate of Apollo Real
Estate Advisors, L.P. ("Apollo"),
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acquired, among other things, a general partner interest in W.L. Realty, L.P.
("W.L. Realty") and a sixty four percent (64%) limited partnership interest in
W.L. Realty. WFA also acquired the sole general partner interest of
Linnaeus-Hampshire. As a result of the foregoing acquisitions, Londonderry II is
the sole general partner of W.L. Realty which was, until October 27, 1997, the
sole, and currently is the managing, general partner of Linnaeus, and which in
turn is the sole general partner of WFA. As a result of the foregoing, effective
July 18, 1995, Londonderry II, an affiliate of Apollo, became the controlling
entity of the General Partners. In connection with the transfer of control, the
officers and directors of One Winthrop resigned and Londonderry II appointed new
officers and directors. See Item 9, "Directors and Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a) of the Exchange Act.
Employees
The Registrant does not have any employees. Services are performed for
the Partnership by the General Partners and agents retained by it. In addition,
the Partnership has retained Winthrop Financial Co., Inc., an affiliate of the
General Partners, to perform certain administrative services for the
Partnership, such as investor communications. See Item 12, "Certain
Relationships and Related Transactions."
ITEM 2. DESCRIPTION OF PROPERTIES
The Partnership owns no property other than its interest in Square 254
and NPLLP. The Operating Partnerships own no property other than the
properties, which are described under Item 1 above.
The annual realty taxes for the Properties in 1997 were $2,948,936.
ITEM 3. LEGAL PROCEEDINGS
To the Partnership's knowledge, there are no material pending legal
proceedings to which the Partnership is a party or of which any of its property
is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no public trading market for the Units. Trading in the Units
is infrequent and occurs solely through private transactions. In addition,
transfers of Units are subject to limitations contained in the Partnership's
partnership agreement, including a requirement that the General Partners consent
thereto which consent may be granted or withheld in the General Partners' sole
discretion. As of March 15, 1998, there were approximately 710 holders of 600
outstanding Units.
The Partnership's partnership agreement requires that Cash Flow (as
defined therein) be distributed to the partners in specified portions at
reasonable intervals during the fiscal year, but in any event not less often
than annually no later than 90 days after the end of the fiscal year. There are
no restrictions on the Partnership's present or future ability to make
distributions of Cash Flow. There have been no cash distributions paid or
accrued since the inception of the Partnership. It is not anticipated that the
Partnership will be able to make distributions to its Limited Partners, if at
all, prior to 1999.
The Operating Partnership made distributions to the partnership
totaling $1,832,785 and $3,163,926 in 1997 and 1996, respectively. Certain fees,
loans and interest due to affiliates were repaid from this distribution.
See "Item 6, Management's Discussion and Analysis or Plan of
Operation."
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Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain
forward-looking statements and involve risks and uncertainties (including
changing market conditions, competitive and regulatory matters, etc.) detailed
in the disclosure contained in this Form 10-KSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
Liquidity and Capital Resources
The Partnership's only assets consist of cash and its general
partnership interests in Square 254 and National Land and its company interest
in The Shops LLC. For 1998 there are no known trends, demands, commitments,
events or uncertainties that will result in the Partnership's liquidity
increasing or decreasing in any material way. Prior to 1996, the Partnership
received no cash distributions from the Operating Partnerships. As a result, the
Partnership had relied on loans from affiliates as its primary source of
liquidity. In order to satisfy its administrative and other expenses, affiliates
of the General Partner have made interest-free loans to the Partnership for
administrative expenses, an interest-bearing loan related to the Partnership's
interest in National Land and Winthrop Management has agreed to defer its fees.
As of December 31, 1997, all loans from the General Partner have been fully
repaid and the Partnership owed $2,800,000 to Winthrop Management for unpaid
asset management fees. In 1997 and 1996, the Operating Partnerships had
sufficient revenues to make distributions to the Partnership totaling $1,832,785
and $3,163,926, respectively. These distributions were used to satisfy certain
of the fees, loans and interest due on the affiliate loans. In January 1998, the
Partnership paid
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Winthrop's 1998 fee of $300,000 and reduced the $2,800,000 accrued management
fee balance at December 31, 1997 by $1,500,000. The balance of the distribution
was retained as Partnership reserves. Square 254 is not expected to make any
future distributions to the Partnership until December 1998, if any, depending
upon property operating results in 1998. The Partnership's current reserves are
expected to be sufficient to fund administrative expenses in the foreseeable
future. All future distributions to the Partnership from Square 254 will be used
to repay the unpaid asset management fee after payment of administrative
expenses of the Partnership.
In the future, the Partnership will continue to require cash to pay
management fees and general and administrative expenses and may require cash to
satisfy its obligation to fund any operating deficits of the Operating
Partnerships. The Partnership has made no commitments for capital expenditures
as of December 31, 1997. To the extent required, affiliated entities have agreed
to provide funds to the Partnership in an amount sufficient to satisfy the
Partnership's operating requirements through August 31, 1999.
Based on Square 254's budget for 1998, it is anticipated that Square
254 will generate positive cash flow from operations. However, at present, such
excess is budgeted for capital improvements and refinancing costs. To the extent
that cash from operations is not used for capital improvements or if Square 254
is unable to refinance its existing indebtedness, it is expected that Square 254
would be able to make a distribution to the Partnership for 1998. If such excess
is used, however, for capital improvements and/or refinancing costs, Square 254
will most likely not have sufficient funds to make a distribution to the
Partnership. The ability of Square 254 to generate sufficient cash flow with
which to make distributions to its partners is subject to many factors outside
the control of the Partnership. Accordingly, there can be no assurance that
Square 254 will continue to be able to make distributions to its partners.
In addition to the unpaid asset management fee described above, the
Partnership is obligated on the following loans:
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(a) In connection with the Partnership's acquisition of its interest in
Square 254, the Partnership obtained a non-recourse purchase money note payable
to Aetna in the principal amount of $22,000,000 (the "Aetna Loan"). The Aetna
Loan bears simple interest at 15% per annum and requires no current payments
until maturity in August 1999, at which time the lender is obligated to
refinance the Note if the Partnership is unable to obtain financing from another
source. The term of the refinancing shall be 10 years; the rate of the
refinancing shall be equal to the lender's then current rate for 10-year
permanent loans secured by first mortgage liens on collateral substantially
similar to the Partnership's investment. However, the Partnership may not be
able to satisfy the debt service for the refinanced loan. On December 31, 1997,
the outstanding balance of principal plus accrued interest on the Aetna Loan was
$66,000,000. In 1996, Aetna sold its loan to The Travelers Insurance Company.
(b) Aetna also provided the Partnership with a $20 million line of
credit (the "Aetna Line of Credit"), which expired in December 1989. The
Partnership used the Aetna Line of Credit to fund its requirement to contribute
its pro rata share of operating deficits incurred by Square 254. Borrowings
under the Aetna Line of Credit bear interest at the annual rate of 15.5% and
require no current payments until maturity in August 1999 at which time the
lender is obligated to refinance the Aetna Line of Credit if the Partnership is
unable to obtain financing from another source. The term of the refinancing
shall be 10 years; the rate of the refinancing shall be equal to the lender's
then current rate for 10-year permanent loans secured by first mortgage liens on
collateral substantially similar to the Partnership's investment. On December
31, 1997, the outstanding balance of principal and accrued interest on the Aetna
Line of Credit was $29,098,565. In 1996, Aetna sold its loan to The Travelers
Insurance Company.
(c) Two Winthrop loaned the Partnership $667,000 in August 1988 (the
"Winthrop Financial Loan") to fund the Partnership's acquisition of its general
partnership interest in National Land. In 1996 the loan plus accrued interest
was repaid in full.
Based on the Partnership's current and expected cash flows, the
Partnership will not have sufficient funds to
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satisfy the Purchase Money Note and Operating Deficit Notes that are scheduled
to mature on August 31, 1999. Accordingly, if the Partnership cannot refinance
or modify these notes on favorable terms, or sell its interest in the Operating
Partnerships for amounts sufficient to satisfy such indebtedness, the
Partnership may lose its interests in the Operating Partnerships through
foreclosure. The Managing General Partner has begun preliminary discussions with
The Travelers Insurance Company in an attempt to restructure these loans. As a
result, at this time it appears that investors in the Partnership will not
receive a return of a significant portion of their investment.
Square 254
Square 254 receives room revenues from the Hotel and rental revenues
from the other components of its property and is responsible for operating
expenses, administrative expenses, capital improvements and debt service
payments. Square 254 had positive cash flow prior to making a distribution to
partners for the year ended December 31, 1997 and 1996. Square 254 uses working
capital reserves as its primary source of liquidity. Square 254 had adequate
working capital reserves to fund its operations and other expenditures through
1997.
During 1997, the general partners of Square 254 made substantial
capital expenditures of $4,522,083. The majority of these expenditures were made
in connection with re-leasing a significant portion of the Office Towers and
renovation of meeting rooms at the Hotel. Such expenditures were funded from the
Operating Partnership's short-term investments and unrestricted cash reserves,
which together had a balance of $8,857,630 at December 31, 1997 as well as cash
generated from operation of Square 254. Each year, a portion of the gross
revenue of the Hotel (currently 5% of gross revenue) is added to the Hotel
replacement reserve account for the purpose of funding future capital
requirements of the Hotel. The Hotel replacement reserve account had a remaining
balance of $4,152,336 as of December 31, 1997. The general partners of Square
254 currently believe Square 254's short-term investments and unrestricted cash
reserves will be sufficient to fund Square 254's operations and capital
expenditures in the near future. However, the ability of Square 254 to fund
expenditures in the future will depend on Square 254's ability to achieve
certain levels of
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operation. If existing reserves and future operations are not sufficient to
support these expenditures, the general partners of Square 254 will evaluate the
necessity of making these expenditures against the ability of Square 254 to
obtain additional capital from outside lending sources and the willingness and
ability of the general partners of Square 254 to contribute additional capital.
Square 254 has two mortgage loans, both of which are secured by a first
mortgage on its assets. The debt maturity date is in 1999 with a balloon payment
in the aggregate of approximately $124 million. The aggregate mortgage balance
was $125,262,145 as of December 31, 1997. See, Item 7 "Financial Statements" ,
Note 4 for a description of the terms of these loans.
The Partnership believes that the Square 254 loans will be able to be
refinanced on or prior to maturity. The Partnership is currently pursuing, along
with Square 254's other two general partners, refinancing opportunities and
believes that the Square 254 loans will be refinanced prior to maturity.
However, if these loans are not extended, refinanced or satisfied, or the
property is not sold, it could be lost through foreclosure.
Under the terms of the Ground Lease, Square 254 was able to defer
certain amounts of its rent obligations. The deferred amount accrues interest at
12.4447% per annum. Interest and deferred rent is repaid monthly to the extent
Square 254 has sufficient cash flow. In each of 1997 and 1996, Square 254 made
payments on the deferred ground rent of principal and interest of $153,929. The
outstanding balance of deferred ground rent on December 31, 1997 was $842,910.
Square 254 is current in its obligation under the Ground Lease with respect to
payment due on the deferred ground rent.
National Land
National Land receives revenues solely from lease payment under the
Ground Lease and is responsible for debt service payments. In connection with
its acquisition of the Land, National Land obtained a loan in the original
principal amount of $43,101,900, which loan matures in 2018. As of December 31,
1997, the outstanding balance on this loan was $43,101,900. In addition, accrued
interest on this loan totaled $38,593,654 at December 31, 1997.
<PAGE>
See, Item 7, "Financial Statements", Note 4 for a description of the terms of
this loan.)
In order for National Land to sell its property or refinance the loan
encumbering the property, the consent of all of the general partners is
required.
Results of Operations
The Partnership's loss from operations increased from $8,205,951 for the
year ended December 31, 1996 to $8,932,690 for the year ended December 31, 1997.
This increase in loss from operations was due to an increase in interest expense
of $742,294 which was only partially offset by a decrease in related party
interest of $17,588. Interest expense increased due to increased principal and
accrued interest balance on the Partnership's outstanding loan. Related party
interest expense decreased due to the full satisfaction of an affiliate loan
made during 1996 as discussed above. All other items of revenue and expense
remained relatively constant.
The Operating Partnership's net loss decreased from $8,053,808 for the
year ended December 31, 1996 to $7,656,008 for the year ended December 31, 1997.
This decrease is attributable to increases in hotel operations and rental
operations which were only partially offset by an increase in interest expense.
Hotel operations revenue increased by $4,647,349 for the year ended December 31,
1997 as compared to December 31, 1996 as a result of slightly higher room
occupancy and average rental rate as well as increased food and beverage sales.
There was a corresponding increase in hotel operation expense of $3,869,165 for
such comparable periods due to increases in direct room and food costs,
insurance and sales costs. Rental operations revenue increased from $13,283,241
in 1996 to $13,500,344 in 1997 primarily as a result of an increase in office
rentals. Interest expense increased $568,887 in 1997 as compared to 1996 as a
result of an increase in interest expense from National Land. All other items of
revenue and expense remained relatively constant.
Year 2000
The Partnership is dependent upon Two Winthrop and the management agent
for management and administrative services. Two Winthrop and the managing agent
have
<PAGE>
completed an assessment and believe that their computer systems will function
properly with respect to dates in the year 2000 and thereafter (the "Year 2000
Issue"). Accordingly, it is not expected that the Partnership will incur any
material costs associated with, or be materially affected by, the Year 2000
Issue. With respect to the Operating Partnerships, the managing general partner
of the Operating Partnerships is currently evaluating the effect, if any, the
year 2000 will have on the Operating Partnerships' operations.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Partners of
Twelve AMH Associates Limited Partnership:
We have audited the accompanying balance sheets of Twelve AMH Associates Limited
Partnership (the "Partnership") as of December 31, 1997 and 1996, and the
related statements of operations, changes in partners' deficit and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these 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
management, 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 financial statements referred to above present fairly, in
all material respects, the financial position of Twelve AMH Associates Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. As discussed in Note 9 to the
financial statements, the Partnership's lack of liquid assets and uncertainty as
to its ultimate ability to repay the outstanding purchase money notes and notes
payable raise substantial doubt about the Partnership's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 9. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 26, 1998
16
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
ASSETS:
Deferred financing costs, net of accumulated
amortization of $44,442 and $41,109
respectively (Note 3) $ 5,558 $ 8,891
Cash and cash equivalents 2,012,003 1,043,786
----------- -----------
TOTAL ASSETS $ 2,017,561 $ 1,052,677
=========== ===========
LIABILITIES:
Purchase Money Note, net of
unamortized discount (Note 5) 58,597,428 52,002,242
Notes payable (Note 6) 9,873,978 9,873,978
Accrued interest on operating
deficit notes (Note 6) 19,224,587 17,672,864
Investments in Operating Partnerships
(Note 4) 7,581,600 243,620
Accrued expenses 17,492 15,010
Due to affiliate (Note 8) 2,800,000 3,300,000
----------- -----------
98,095,085 83,107,714
----------- -----------
PARTNERS' DEFICIT:
Limited partners - Units of Limited
Partnership Interest, $96,250 stated
value per unit; authorized, issued
and outstanding - 600 Units (94,590,468) (80,708,206)
General partners (1,487,056) (1,346,831)
----------- -----------
(96,077,524) (82,055,037)
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $2,017,561 $ 1,052,677
=========== ===========
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
EXPENSES:
Interest (Notes 5 and 6) $ 8,146,909 $ 7,404,615
Related party interest (Note 8) - 17,588
Amortization (Notes 2 and 3) 404,630 404,630
Related party management fee (Note 8) 300,000 300,000
Other 81,151 79,118
------------ ------------
8,932,690 8,205,951
------------ ------------
LOSS FROM OPERATIONS (8,932,690) (8,205,951)
INTEREST INCOME 14,433 3,726
EQUITY IN LOSSES OF
OPERATING PARTNERSHIPS
(Notes 2 and 4) (5,104,230) (5,369,406)
------------ ------------
NET LOSS (Note 1) $(14,022,487) $(13,571,631)
============ ============
NET LOSS ALLOCATED TO
GENERAL PARTNERS $ (140,225) $ (135,716)
============ ============
NET LOSS ALLOCATED TO
LIMITED PARTNERS $(13,882,262) $(13,435,915)
============ ============
NET LOSS PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (23,137) $ (22,393)
============ ============
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997 AND 1996
Limited General
Partners Partners Total
-------- -------- -----
Balance, December 31, 1995 $(67,272,291) $(1,211,115) $(68,483,406)
Net Loss (13,435,915) (135,716) (13,571,631)
------------ ----------- ------------
Balance, December 31, 1996 (80,708,206) (1,346,831) (82,055,037)
------------ ----------- ------------
Net Loss (13,882,262) (140,225) (14,022,487)
------------ ----------- ------------
Balance, December 31, 1997 $(94,590,468) $(1,487,056) $(96,077,524)
============ =========== ============
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Cash flows from operating activities:
Net loss $(14,022,487) $(13,571,631)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 3,699,484 2,957,852
Equity in losses of Operating Partnerships 5,104,230 5,369,406
Interest added to loan principal on
Purchase Money Note 3,300,000 3,300,000
Increase in accrued interest on operating
deficit notes 1,551,723 1,551,723
Increase/(decrease) in accrued expenses 2,482 (9,074)
Decrease in due to affiliates (500,000) (1,051,456)
------------ -----------
Net cash used in operating activities (864,568) (1,453,180)
------------ -----------
Cash flows from investing activities:
Distributions received from operating
partnership 1,832,785 3,163,926
------------ -----------
Net cash provided by investing activities 1,832,785 3,163,926
------------ -----------
Cash flows from financing activities:
Repayment of loan from affiliate - (667,000)
------------ -----------
Net cash used in financing activities - (667,000)
------------ -----------
Increase in cash and cash equivalents 968,217 1,043,746
Cash and cash equivalents, beginning
of the period 1,043,786 40
------------ -----------
Cash and cash equivalents, end of
the period $ 2,012,003 $ 1,043,786
============ ===========
Supplemental disclosure of cash flow
information
Cash paid for interest $ - $ 839,872
============ ===========
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. ORGANIZATION
Twelve AMH Associates Limited Partnership (the "Partnership") was organized as a
Massachusetts limited partnership under the Massachusetts Uniform Limited
Partnership Act on April 24, 1984, for the purpose of acquiring a 66.667%
general partnership interest in Square 254 Limited Partnership ("Square 254"), a
District of Columbia limited partnership organized in 1979. On August 31, 1984,
the Partnership acquired the interest in Square 254 from The Aetna Casualty and
Surety Company, a Connecticut corporation ("Aetna").
Square 254 has developed and presently owns and operates a multiple use complex
known as "National Place", located at 1331 Pennsylvania Avenue, N.W., Washington
D.C. National Place consists of the 772-room J.W. Marriott Hotel, a retail area
containing 71,000 square feet, office towers containing 418,000 net rentable
square feet, a 400-car parking garage and the 1,600-seat National Theatre, which
is subleased to a not-for-profit organization. Square 254 leased the land on
which National Place is situated and the National Theatre Building on a long
term basis from the Pennsylvania Avenue Development Corporation through August
11, 1988, after which it has been leased from National Place Land Limited
Partnership as described below. The Partnership will terminate on December 31,
2090, or sooner, in accordance with the terms of the Partnership Agreement. The
general partners of the Partnership are Two Winthrop Properties, Inc. and
Linnaeus Lexington Associates Limited Partnership. The general partners of
Square 254 are Quadrangle Development Corporation, a Delaware corporation,
Marriott Corporation, a Delaware corporation, and the Partnership.
The general partners have contributed $20 in respect of their general
partnership interests in the Partnership. On August 31, 1984, the Partnership
admitted investor limited partners whom subscribed for a total of 600 Units,
representing capital contributions of $57,750,000. Pursuant to the terms of the
Partnership Agreement, profits or losses and cash distributions (after certain
priority distributions) are allocated 99% to the investor limited partners and
1% to the general partners, respectively. Profits or losses and cash
distributions resulting from the sale or refinancing of the Partnership's
interest in Square 254 will be allocated 70% to the investor limited partners
and 30% to the general partners after certain priority allocations to the
partners of amounts necessary to increase their capital balances to an amount
equal to their invested capital.
National Place Land Limited Partnership (the "Land Partnership" or "NPLLP") was
organized on August 8, 1988 to acquire and lease both the land underlying the
National Place complex (the "Land") and the National Theatre Building for an
aggregate purchase price of $43,101,900. As owners of the Land, The Land
Partnership partners became lessors under the 99-year lease of the Property (the
"Lease") to Square 254 described in the Confidential Memorandum dated June 11,
1984 (the "Confidential Memorandum"). Square 254, as lessee, remains obligated
under the Lease to pay rent to the Land Partnership, as lessor. The rent
payments under the Lease to the
21
<PAGE>
Land Partnership provide the cash flow which will service the acquisition debt
incurred by the Land Partnership in connection with the purchase of the Land.
The Partnership has a 66.67% general partnership interest in the Land
Partnership.
Each of the partners of NPLLP contributed to the capital of NPLLP its pro rata
share of the approximately $1,000,000 of expenses incurred in connection with
the purchase of the Land and the closing of the $43,101,900 loan from AEW Trust
#136, a trust funded by certain pension funds. As security for this loan, the
lender received a first priority deed of trust in the property of NPLLP. The
partners of NPLLP (including the Partnership) also pledged a portion of their
respective partnership interests in Square 254 to the lender. In addition, the
Partnership granted to Aetna a security interest in the Partnership's interest
in NPLLP. The Partnership's pro rata share of NPLLP's initial capitalization was
$667,000, which was loaned by Two Winthrop Properties, Inc. to the Partnership
at an interest rate of the then current rate for five year U.S. Treasury Notes
plus 250 basis points. This loan was repaid from the first available cash flow
from operations of the Partnership in 1996. Net profits and losses of NPLLP are
to be allocated among partners in proportion to their respective partnership
interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Financial Statements
The Partnership prepares its financial statements using the accrual basis of
accounting. The Partnership, as an investor partnership, accounts for its
investments in Square 254 and NPLLP (together, the "Operating Partnerships")
using the equity method of accounting. Under the equity method of accounting,
the investment cost (including amounts paid or accrued) is subsequently adjusted
by the Partnership's share of the Operating Partnerships' results of operations
and by distributions received. Costs relating to the acquisition and selection
of the investments in the Operating Partnerships are capitalized to the
investment account and amortized over forty years. Costs in excess of the
Partnership's initial basis in the net assets of Square 254 (approximately
$14,800,000) are also amortized over forty years. The accounting books and
records of the Operating Partnerships are maintained using the accrual basis of
accounting.
Cash and Cash Equivalents
Investments in a money market account are considered to be cash equivalents for
financial reporting purposes.
Deferred Financing Costs
Amortization of deferred financing costs is computed using the straight-line
method over the term of the Purchase Money Note.
22
<PAGE>
Income Taxes
No provision for income taxes is reflected in the accompanying financial
statements of the Partnership. Partners are required to report on their
individual tax return their allocable share of income, gains, losses, deductions
and credits of the Partnership.
Syndication Costs
Each investor limited partner's capital account has been reduced by the
partner's pro-rata share of syndication costs incurred by the Partnership.
Use of Estimates
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 income and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassification
Certain 1996 amounts have been reclassified to conform to the 1997 presentation.
3. DEFERRED FINANCING COSTS
The following is a summary of deferred financing costs at December 31, 1997 and
1996:
Amortization
Period 1997 1996
------------ --------- ---------
Financing fee, at cost 15 years $ 50,000 $ 50,000
Less: Accumulated amortization (44,442) (41,109)
--------- ---------
Unamortized costs $ 5,558 $ 8,891
========= =========
23
<PAGE>
4. INVESTMENTS IN OPERATING PARTNERSHIPS
The Partnership's Investments in the Operating Partnerships are summarized
as follows:
Square 254 NPLLP
---------- -----
Balance, December 31, 1995 $26,707,405 $(18,016,064)
Distribution from Operating Partnership (3,163,926) -
Amortization (401,629) -
Equity in losses of Operating Partnerships (1,482,581) (3,886,825)
----------- ------------
Balance, December 31, 1996 21,659,269 (21,902,889)
----------- ------------
Distribution from Operating Partnership (1,832,785) -
Amortization (400,965) -
Equity in losses of Operating Partnerships (774,525) (4,329,705)
----------- ------------
Balance, December 31, 1997 $18,650,994 $(26,232,594)
=========== ============
The condensed financial statements and condensed notes to financial
statements of the Operating Partnerships (presented on a combined
basis with all significant inter-partnership transactions
eliminated) are as follows:
CONDENSED BALANCE SHEETS
December 31, December 31,
1997 1996
------------ ------------
Assets
Rental property, net of accumulated
depreciation of $82,454,125 and
$74,392,882, respectively $120,069,960 $123,685,019
Land 39,123,872 39,123,872
Cash, cash equivalents and replacement
reserve 8,858,411 9,625,610
Accounts receivable, net of allowance
for doubtful accounts of $100,000 and
$100,000, respectively 3,620,575 3,029,051
Deferred costs, net of accumulated
amortization of $185,316 and
$166,146, respectively 405,798 424,968
Other assets 4,158,980 3,895,486
------------ ------------
Total Assets $176,237,596 $179,784,006
============ ============
24
<PAGE>
December 31, December 31,
1997 1996
------------ ------------
Liabilities and Partners' Deficit
Liabilities:
Notes payable $206,957,700 $201,315,227
Accounts payable 3,662,640 3,114,483
Other liabilities 325,974 407,006
------------ ------------
210,946,314 204,836,716
Partners' Deficit:
Twelve AMH Associates
Limited Partnership (17,624,741) (10,687,727)
Other partners (17,083,977) (14,364,983)
------------ ------------
Total Liabilities and Partners'
Deficit $176,237,596 $179,784,006
============ ============
CONDENSED STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------------
1997 1996
------------ ------------
Revenue:
Hotel operations $ 59,564,251 $ 54,916,902
Rental operations 13,030,113 12,777,117
Other 470,231 506,124
------------ ------------
73,064,595 68,200,143
------------ ------------
Expenses:
Hotel operations 48,385,795 44,516,630
Rental operations 8,972,990 8,953,515
Interest 23,352,693 22,783,806
Other 9,125 -
------------ ------------
80,720,603 76,253,951
------------ ------------
Net loss $ (7,656,008) $ (8,053,808)
============ ============
Net loss allocated to Twelve AMH
Associates Limited Partnership $ (5,104,230) $ (5,369,406)
============ ============
Net loss allocated to other partners $ (2,551,778) $ (2,684,402)
============ ============
25
<PAGE>
CONDENSED NOTES TO FINANCIAL STATEMENTS OF THE OPERATING
PARTNERSHIPS
A. Summary of Significant Accounting Policies
Rental Property
Square 254 and NPLLP review their long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
Rental property includes building costs, lease costs and furniture,
fixtures and equipment. Building costs are recorded at cost and are
composed of the J.W. Marriott Hotel and National Place. Depreciation is
computed using the straight-line method over 40 years commencing when the
component is placed in service. Depreciation and amortization expense
amounted to $8,156,312 and $7,697,341 for 1997 and 1996, respectively.
Lease costs include costs of tenant improvements, renovation of the
National Theatre and office space leasing costs. Such amounts are amortized
over the lesser of the term of the related lease or the life of the asset,
generally five to ten years, using the straight-line method.
Furniture, fixtures and equipment are recorded at cost. Depreciation is
computed based on the useful lives of the assets, generally five to ten
years, using the straight-line method.
Deferred Financing Costs
Costs incurred in obtaining permanent loan financing are amortized on a
straight-line basis over the term of the loans.
Revenue Recognition
Base rental revenue is reported for financial statement purposes using the
straight-line method over the terms of the respective leases. Square 254
records unbilled rent receivable representing the amount that straight-line
rental revenue exceeds rents collectible under the lease agreements.
Square 254 considers current information and events regarding the tenants'
ability to repay their obligations in determining if unbilled rent
receivable is ultimately collectible. The uncollectible portion of unbilled
receivables is charged to rental revenues in the period in which the
determination is made.
26
<PAGE>
Revenues from hotel operations are recorded when earned, in accordance with
accrual basis accounting.
Income Taxes
No provision has been included in the financial statements for federal
income taxes since income or loss of the Operating Partnerships is
required to be reported by the respective partners. The Operating
Partnerships are subject to local franchise taxes.
Certain items are treated differently for financial statement reporting and
tax return purposes.
Cash Equivalents
For financial statement purposes, the Operating Partnerships consider cash
in the hotel replacement reserve account and funds invested in money market
accounts (that have maturities of three months or less) to be cash
equivalents.
The hotel replacement reserve account is equal to 5 percent of the hotel's
gross revenues per year with the balance limited to 3.5 percent of gross
revenue for the preceding three years. The cash is not restricted.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Partnership to make estimates
and judgments that affect the reported amounts of assets and liabilities
and disclosures of contingencies at the date of the financial statements
and the revenues and expenses recognized during the reporting period.
Actual results could differ from those estimates.
Reclassification
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
27
<PAGE>
B. Notes Payable
The Aetna Life Insurance Company has provided permanent loan financing to
Square 254. The terms of the loans and balances outstanding are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
15-year permanent loan at 11 5/8% interest. Principal and interest
payments of $1,178,000 are due monthly based on a 38-year
amortization schedule. The loan is due July 1999 with a balloon
payment of approximately $114,400,000 plus accrued interest thereon.
The loan may be prepaid after July 1996 with a prepayment premium
of 3%. Such premium is reduced by 1% each year. $115,547,662 $116,208,875
15-year permanent loan at 13% interest. Principal and interest
payments of $109,200 are due monthly based on a 38-year amortization
schedule. The loan is due May 1999 with a balloon payment of
approximately $9,650,000 plus accrued interest thereon. The loan may
be prepaid after May 1996 with a prepayment premium of 3%. Such
premium is reduced by 1% each year. 9,714,483 9,758,817
------------ ------------
125,262,145 125,967,692
The above loans are secured by the building and tenant improvements.
There are no restrictive covenants or provisions on the loans. Square 254
has estimated the fair value of its notes payable at December 31, 1997 to
be $144,184,000 by discounting the future cash flows under the notes
payable using borrowing rates currently available to Square 254 for notes
with similar terms and maturities.
NPLLP has obtained long term financing from the AEW Trust #136 as
follows:
30-year permanent loan at 11% base interest and additional interest
based on NPLLP's net cash flow, as defined in the loan agreement.
Minimum monthly interest payments are $187,827. Any unpaid base
interest in excess of the minimum monthly interest payment will be
deferred and added to principal, up to a maximum principal
outstanding of $300,000,000. All unpaid principal and interest is due
in August 2018, including "shared appreciation interest," which is
based on the capitalized value of the land lease and on the lender's
required rate of return. The note is secured by NPLLP's interest in
the land lease. Also, NPLLP's partners have assigned portions of
their interests in Square 254 as additional collateral. 81,695,555 75,347,535
------------ ------------
$206,957,700 $201,315,227
============ ============
</TABLE>
In addition, the Partnership has collaterally assigned a portion of its interest
in Square 254 and all of its interest in NPLLP as additional collateral for a
note payable of NPLLP.
28
<PAGE>
C. Related Party Transactions
Square 254 has entered into a contract for hotel management services with
Marriott Corporation ("Marriott"), a general partner of the Operating
Partnerships, which has an initial term of 30 years commencing with the opening
date of the hotel and four 10-year renewal options. Under the terms of the
management agreement, Marriott will retain a fee equal to 20% of the operating
profit of the hotel subject to certain deferrals. This fee amounted to
$3,092,689 and $2,887,889 in 1997 and 1996, respectively. There were no deferred
fees as of December 31, 1997 and 1996. In addition, Marriott earns an amount
equal to 3 percent of gross revenues to cover costs and expenses incurred as
managing agent. This fee amounted to $1,786,926 and $1,647,507 in 1997 and 1996,
respectively. Total management fees earned by Marriott amounted to $4,879,615
and $4,535,396 in 1997 and 1996, respectively.
Square 254 has entered into a property management agreement with QDC Property
Management, Inc., a subsidiary of Quadrangle Development Corporation ("QDC"), a
general partner of the Operating Partnerships. Under the terms of the agreement,
the management company will be paid a fee equal to 3 percent of the gross
rentals from National Place office space but not less than $5,000 per month.
Additionally, for common area management services, QDC Property Management, Inc.
is to be paid an annual base fee of $100,000 with increases tied to the Consumer
Price Index. Management fees earned by QDC Property Management, Inc. amounted to
$404,405 and $408,006 for the years ended December 31, 1997 and 1996,
respectively.
Square 254 reimburses Quadrangle Management Corporation ("QMC") for certain
costs incurred by QMC on its behalf, such as engineering, janitorial, and
tenants services. Total reimbursable costs earned by QMC were $604,220 and
$633,550 in 1997 and 1996, respectively.
Square 254 entered into a garage management agreement with Quik Park, Inc., an
affiliate of QDC, which expires in 2004. Quik Park, Inc. earns a management fee
of 5 percent of gross garage revenue. Fees amounted to $85,456 and $82,618 for
1997 and 1996, respectively.
On September 12, 1979, Square 254 entered into a 99-year land lease agreement
with Pennsylvania Avenue Development Corporation ("PADC"), a wholly owned
subsidiary of the United States government. The lease was subsequently assumed
by NPLLP on August 11, 1988 in connection with the purchase of the leased land
and related deferred rent by NPLLP. The lease provides for a basic annual rent
of $2,100,000 payable in equal monthly installments and other rent deferrals
based on the Partnership's compliance with certain criteria stated in the lease.
The deferred portion accrues interest at 12.4447 percent, compounded monthly.
Payments on the deferred rent and accrued interest are payable to NPLLP in equal
monthly installments over a 36 year period which began in May 1984. Square 254
has the option to prepay any or all of the deferred rent or accrued interest
thereon.
Additionally, the lease provides for additional rental payments when net
cash flow, as defined in the lease agreement, is generated. No additional rent
was due for 1997 or 1996 since there was no net cash flow, as defined in the
lease agreement.
The effects of this lease have been eliminated for purposes of the condensed
financial statement information presented above.
29
<PAGE>
5. PURCHASE MONEY NOTE
In 1984, the Partnership acquired Aetna's 66.667% general partnership interest
in Square 254. The purchase price of $60,000,000 for the interest was evidenced
by a cash payment of $38,000,000 and a nonrecourse purchase money promissory
note ("Purchase Money Note") of $22,000,000. The Purchase Money Note is secured
by the Partnership's investment in Square 254 as well as a security interest in
the Partnership's interest in NPLLP. The Purchase Money Note bears simple
interest at a rate of 15% per annum, with all interest payable at maturity,
August 31, 1999. In the event that the Partnership wishes to refinance
outstanding principal and interest under the note at maturity and the
Partnership is unable to refinance with another financial institution on terms
then prevailing in the market, Aetna has agreed to refinance outstanding
principal and interest at prevailing market rates for a term of not less than 10
years. In accordance with generally accepted accounting principles, the
Partnership has discounted the Purchase Money Note at an imputed interest rate
of 12%, compounded monthly. The Purchase Money Note outstanding at December 31
is as follows:
1997 1996
---- ----
Purchase Money Note,
including accrued interest $ 66,000,000 $ 62,700,000
Less: Unamortized discount (7,402,572) (10,697,758)
------------ ------------
$ 58,597,428 $ 52,002,242
============ ============
In 1996, Aetna sold the Purchase Money Note to Travelers Insurance Company.
It is not practicable to estimate the fair value of the note due to the nature
of the instrument and the absence of quoted market prices for similar financial
instruments.
6. NOTES PAYABLE
The Partnership entered into an Operating Deficit Guarantee Agreement with Aetna
which required Aetna to lend to the Partnership an aggregate amount of up to
$20,000,000, as needed by the Partnership, which in turn contributed or loaned
such amounts to Square 254. The Partnership's ability to borrow under this
agreement expired on December 31, 1989. No contributions have been made since
1987 when the Partnership contributed $1,124,678 to fund Square 254's operating
deficits. Advances under the Operating Deficit Guarantee Agreement ("Operating
Deficit Notes") bear interest at the rate of 15.5% per annum and are due and
payable together with interest on or before August 31, 1999. In the event that
the Partnership wishes to refinance outstanding principal and interest under the
note at maturity and the Partnership is unable to refinance with another
financial institution on terms then prevailing in the market, Aetna has agreed
to refinance outstanding principal and interest at prevailing market rates for a
term of not less than 10 years. The outstanding balance of these advances was
$9,873,978 as of December 31, 1997 and 1996. The balance of the accrued interest
on these advances was $19,224,587 and $17,672,864 as of December 31, 1997 and
1996, respectively.
30
<PAGE>
In 1996, Aetna sold the Operating Deficit Notes to Travelers Insurance Company.
It is not practicable to estimate the fair value of the notes due to the nature
of the instruments and the absence of quoted market prices for similar financial
instruments.
7. TAXABLE LOSS
The Partnership's tax basis net loss for the years ended December 31, 1997 and
1996 differs from the net loss for financial reporting purposes primarily due to
differences in the recognition of depreciation and capitalized costs. A
reconciliation of net loss for financial reporting purposes to federal income
tax basis net loss for the years ended December 31, 1997 and 1996 follows:
1997 1996
------------ ------------
Net loss for financial
reporting purposes $(14,022,487) $(13,571,631)
Amortization of the
costs in excess of the Partnership's
initial basis in the net assets of
an operating partnership 370,046 370,046
Expenses accrued and
payable to related parties not
deductible until year of payment
for tax purposes (500,000) (100,000)
Interest expense on the Purchase Money
Note utilizing the simple interest
method for tax purposes 3,295,186 2,552,892
Non-deductible expenses for tax
Purposes 349 388
Amortization of costs (19,062) (19,062)
Equity in Operating Partnerships' financial
statement loss in excess of tax loss
(tax loss in excess of financial
statement loss) (686,333) 88,470
Depreciation of basis
adjustment under Section 708 of the
Internal Revenue Code (1,582,049) (1,898,459)
------------ ------------
Tax basis net loss $(13,144,350) $(12,577,356)
============ ============
Partners deficit account balances for federal income tax purposes were
$161,066,294 and $147,921,944 as of December 31, 1997 and 1996, respectively.
31
<PAGE>
8. TRANSACTIONS WITH AFFILIATES
The Partnership's transactions with the general partners and their affiliates
include the following:
o Expenses for 1997 and 1996 include an annual management fee of $300,000
earned by an affiliate of a general partner. Unpaid management fees
payable to this affiliate amounted to $2,800,000 and $3,300,000 at
December 31, 1997 and 1996, respectively. On January 15, 1998 the
Partnership made a payment of $1,800,000 to this affiliate that was
applied to the outstanding management fee payable.
o The Partnership obtained a loan from Two Winthrop Properties, Inc. for
$667,000 which was used to fund the Partnership's share of the initial
capitalization of NPLLP (see Note 1). The loan matured on September 1,
1993 and bore interest at 11.44%. Two Winthrop Properties, Inc. had
extended the maturity date to December 31, 1996. In 1996, the
Partnership repaid Two Winthrop Properties, Inc. all outstanding loan
principal and accrued interest. Total loan interest expense was $17,588
for the year ended December 31, 1996.
9. LIQUIDITY
During 1997 and 1996, the Partnership received $1,832,785 and $3,163,926,
respectively, of cash distributions from the Operating Partnerships. These funds
were used primarily to repay amounts that had been advanced from affiliates and
to pay management fees that had been earned by affiliates. Prior to 1996, the
Partnership relied on loans from affiliates as its primary source of liquidity.
The Partnership will continue to require cash to repay amounts due to
affiliates, pay management fees and general and administrative expenses, and may
require cash to satisfy its obligation to fund any operating deficits of the
Operating Partnerships. Any distributions made to the Partnership will be
applied first to satisfy the unpaid management fees. To the extent required,
affiliated entities have agreed to provide funds to the Partnership in an amount
sufficient to satisfy the Partnership's operating requirements through August
31, 1999.
Based on the Partnership's current and expected cash flows, the Partnership will
not have sufficient funds to satisfy the Purchase Money Note and Operating
Deficit Notes that are scheduled to mature on August 31, 1999. Accordingly, if
the Partnership cannot refinance or modify these notes on favorable terms, or
sell its interest in the Operating Partnerships for amounts sufficient to
satisfy the notes, the Partnership may lose its interests in the Operating
Partnerships through foreclosure. The Managing General Partner has begun
preliminary discussions with The Travelers Insurance Company in an attempt to
restructure these loans. As a result, at this time it appears that investors in
the Partnership will not receive a return of a significant portion of their
investment.
32
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
33
<PAGE>
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Partnership has no officers or directors. Two Winthrop manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. As
of March 1, 1998, the names of the directors and executive officers of Two
Winthrop and the position held by each of them, are as follows:
Has Served as
Position Held with the a Director or
Name and Age Managing General Partner Officer Since
- ------------ ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Edward Williams Chief Financial Officer 4-96
Vice President and
Treasurer
Peter Braverman Senior Vice President 1-96
Carolyn Tiffany Vice President and Clerk 10-95
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15,
1996. From June 1994 until January 1996, Mr. Ashner was a Director, President
and Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital
Corporation, a firm which has organized and administered real estate limited
partnerships.
Edward V. Williams, age 57, has been the Chief Financial Officer of WFA
since April 1996. From June 1991 through March 1996, Mr. Williams was Controller
of NPI and NPI Management. Prior to 1991, Mr. Williams held other real estate
related positions including Treasurer of Johnstown American Companies and Senior
Manager at Price Waterhouse.
Peter Braverman, age 46, has been a Senior Vice President of WFA since
January 1996. From June 1995 until January 1996, Mr. Braverman was a Vice
President of NPI and NPI Management. From June 1991 until March 1994, Mr.
Braverman was President of the Braverman Group, a firm specializing in
management consulting for the real estate and construction industries. From 1988
to 1991, Mr. Braverman was a Vice President and Assistant Secretary of
34
<PAGE>
Fischbach Corporation, a publicly traded, international real estate and
construction firm.
Carolyn Tiffany, age 31, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. From October 1995 to present
Ms. Tiffany has been a Vice President in the asset management and investor
relations departments of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners
81 Limited Partnership; Winthrop Residential Associates I, A Limited
Partnership; Winthrop Residential Associates II, A Limited Partnership; Winthrop
Residential Associates III, A Limited Partnership; 1626 New York Associates
Limited Partnership; 1999 Broadway Associates Limited Partnership; Nantucket
Island Associates Limited Partnership; One Financial Place Limited Partnership;
Presidential Associates I Limited Partnership; Riverside Park Associates Limited
Partnership; Springhill Lake Investors Limited Partnership; Winthrop California
Investors Limited Partnership; Winthrop Growth Investors I Limited Partnership;
Winthrop Interim Partners I, A Limited Partnership; Southeastern Income
Properties Limited Partnership; Southeastern Income Properties II Limited
Partnership; and Winthrop Miami Associates Limited Partnership.
Except as indicated above, neither the Partnership nor Two Winthrop has
any significant employees within the meaning of Item 401(b) of Regulation S-B.
There are no family relationships among the officers and directors of Two
Winthrop.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in the Partnership that failed to file
on a timely basis, as disclosed in the above Forms, reports required by section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
35
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Registrant is not required to and did not pay any compensation to the
officers or directors of the Managing General Partner. The Managing General
Partner does not presently pay any compensation to any of its officers and
directors (See Item 12, "Certain Relationships and Related Transactions").
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
Two Winthrop and Linnaeus own all the outstanding general partnership
interests in the Partnership. As general partners, they are entitled in the
aggregate to 1% of the Partnership's net income or loss for tax purposes, and,
after certain priority distributions, 1% of cash flow. In addition, after
certain priority allocations to the partners of amounts necessary to increase
their capital balances to an amount equal to their invested capital, the General
Partners are entitled to 30% of the proceeds of a capital transaction in
connection with the liquidation or termination of the Partnership. No other
person or group is known by the Partnership to be the beneficial owner of more
than 5% of the outstanding partnership interests as of March 15, 1998.
The Partnership is a limited partnership and has issued Units of
limited partnership interest. The Units are not voting securities, except that
the consent of the Limited Partners is required to approve or disapprove certain
transactions, including the removal of a General Partner, certain amendments to
the Partnership Agreement, the dissolution of the Partnership or the sale of all
or substantially all of the assets of the Partnership. No person or group is
known by the Partnership to be the beneficial owner of more than 5% of the
outstanding Units.
(b) Security Ownership of Management.
None of the officers, directors or partners the General Partners
beneficially own any Units as of the date hereof.
(c) Changes in Control.
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.
36
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others
Pursuant to the terms of the Partnership Agreement, the General
Partners and their affiliates are entitled to receive certain cash distributions
and allocations of taxable income or loss from the Partnership. In addition, the
General Partners and their affiliates are entitled to various fees in connection
with the offering and the operations of the Partnership.
The following table sets forth the amounts of fees, commissions and
cash distributions which the Partnership paid to or accrued for the account of
the General Partners and their affiliates for the years ended December 31, 1997
and 1996:
Entity Compensation 1997 1996
- ------ ------------ ---- ----
Winthrop Financial Partnership $800,000(1) $400,000(2)
Co., Inc. Management Fee
(1) Includes $500,000 of past management fees which had been accrued.
(2) Includes $100,000 of past management fees which had been accrued.
In 1988, Two Winthrop loaned the Partnership $667,000 to provide the
necessary funds to pay the Partnership's initial capital contribution to
National Land. This loan was paid in full in April 1996.
From 1984 through 1995, Winthrop Financial Co., Inc. agreed to the
Partnership's deferral, on an interest-free basis, of the payment of an annual
partnership management fee for administrative and investor services in the
amount of $300,000. In 1996, Winthrop Financial Co., Inc. received its $300,000
current fee and $100,000 of its accrued fees. In 1997, Winthrop Financial Co.,
Inc. received its $300,000 current fee and $500,000 of its accrued fees.
Since 1992, First Winthrop Corporation has made interest-free advances
to the Partnership to fund administrative costs. These advances totaled $39,111
in 1995, and at December 31, 1995 the total amount of advances outstanding was
$129,172. These interest free advances were repaid in full in February 1996.
Total management fees earned by Marriott and paid by Square 254 for
managing and operating the J. W. Marriott Hotel, amounted to $4,879,615 and
$4,535,396 in 1997 and 1996, respectively. Total management fees earned by
Quadrangle and paid by Square 254 for managing the Office Towers and common area
amounted to $404,405 and $408,006 for the years ended December 31, 1997 and
1996, respectively. Effective October 22, 1994, QuikPark, Inc., an affiliate of
Quadrangle, assumed management of the garage and earned fees of $85,456 and
$82,618 in 1997 and 1996,
37
<PAGE>
respectively, which amounts were paid by Square 254 for managing and operating
the parking garage. All transactions described are on the same terms as would
have been obtained from unrelated third parties.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The Exhibits listed on the accompanying Index to
Exhibits are filed as part of this Annual Report and
incorporated in this Annual Report as set forth in said
Index.
(b) Reports on Form 8-K - None
38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TWELVE AMH ASSOCIATES LIMITED
PARTNERSHIP
By: Two Winthrop Properties, Inc.
Managing General Partner
By: /s/ Michael L. Ashner
-------------------------------
Michael Ashner
Chief Executive Officer
Date: April 8, 1998
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.
Signature/Name Title Date
- -------------- ----- ----
/s/ Michael Ashner Chief Executive April 8, 1998
- ---------------------- Officer and Director
Michael Ashner
/s/ Edward V. Williams Chief Financial April 8, 1998
- ---------------------- Officer
Edward V. Williams
39
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Page
- ----------- -------- ----
3(a) Form of Amended and Restated Limited Partnership Agreement of
the Partnership (incorporated by reference to Exhibit 3 to the
Partnership's Registration Statement on Form 10 dated April
30, 1985, as thereafter amended)
3(b) Certificate of Limited Partnership of National Place Land
Limited Partnership dated August 2, 1988 (incorporated by
reference to Exhibit 3(h) to the Partnership's Annual Report
on Form 10-K for the year ended December
31, 1988)
3(c) Agreement of Limited Partnership of National Place Land
Limited Partnership dated August 8, 1988 (incorporated by
reference to Exhibit 3(c) to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1988)
3(d) Amendment to Amended and Restated Limited Partnership Agreement of
the Partnership dated August 23, 1995 incorporated by reference to
the Partnership's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 6, 1995.
4 See Exhibit 3 above
10(a) Form of Amended and Restated Limited Partnership Agreement of
Square 254 Limited Partnership (incorporated by reference to
Exhibit 10(a) to the Registration Statement)
(b) Leasing Agreement dated as of March 3, 1984 between Square 254
Limited Partnership and Quadrangle Development Corporation
(incorporated by reference to Exhibit 10(b) to the
Registration Statement)
(c) Management Agreement dated as of June 6, 1984 between Square
254 Limited Partnership and Quadrangle Development Corporation
(incorporated by reference to Exhibit 10(c) to the
Registration Statement)
40
<PAGE>
(d) Garage Lease dated June 6, 1984 between Square 254 Limited
Partnership and Quickpark, Inc. (incorporated by reference to
Exhibit 10(d) to the Registration Statement)
(e) Pennsylvania Avenue Hotel Management Agreement dated as of
July 23, 1984 between Square 254 Limited Partnership and
Marriott Corporation (incorporated by reference to Exhibit
10(e) to the Registration Statement)
10(f) Lease dated September 12, 1979 between Pennsylvania Avenue
Development Corporation ("PADC") and Square 254 Limited
(incorporated by reference to Exhibit 10(f) to the
Registration Statement)
(g) Lease dated April 24, 1984 between Square 254 Limited
Partnership and The Rouse Company of the District of Columbia
(incorporated by reference to Exhibit 10(g) to the
Registration Statement)
(h) Pennsylvania Avenue Technical Services
Agreement between Square 254 Limited
Partnership and the Marriott Corporation
(incorporated by reference to Exhibit 10(h)
to the Registration Statement)
(i) Credit and Security Agreement dated
August 31, 1984 between Citibank, N.A.
and the Partnership (incorporated by
reference to Exhibit 10(i) to the Registration
Statement)
(j) Sublease dated May 26, 1982 by and between Square 254 Limited
Partnership and New National Theatre Corporation incorporated
by reference to Exhibit 10(j) to the Registration Statement)
(k) Inducement Agreement dated as of August 2,
1984 by and between Financial Guaranty
Associates, Inc., the Partnership, Two
Winthrop Properties, Linnaeus Lexington
Associates Limited Partnership and Winthrop
Financial Co., Inc. (incorporated by
reference to Exhibit 10(k) to the Registration
Statement)
27 Financial Data Schedule
41
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from audited
financial statements for the twelve month period ending December 31, 1997 and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,012,003
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,017,561
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (96,077,524)
<TOTAL-LIABILITY-AND-EQUITY> 2,017,561
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 785,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,146,909
<INCOME-PRETAX> (14,022,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,022,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,022,487)
<EPS-PRIMARY> (23,137.10)
<EPS-DILUTED> (23,137.10)
</TABLE>
