<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 0-14271
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2949474
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Seaport Plaza, New York, N.Y. 10292-0116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
Securities registered pursuant to Section 12(b) of the Act:
None
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(Title of class)
Securities registered pursuant to section 12(g) of the Act:
Depositary Units of Limited Partnership Interest
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(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 CK 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. [CK]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Unitholders for the year ended December 31,
1996 is incorporated by reference into Parts II and IV of this Annual Report on
Form 10-K
Amended and Restated Limited Partnership Agreement of Registrant, dated
February 11, 1985, included as part of the Registration Statement filed with the
Securities and Exchange Commission on February 14, 1985 pursuant to Rule 424(b)
of the Securities Act of 1934 (the ``Prospectus'') is incorporated by reference
into Part IV of this Annual Report on Form 10-K
Index to exhibits can be found on pages 10 through 12.
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CAUTIONARY STATEMENT FOR PURPOSES OF
THE ``SAFE HARBOR'' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Annual Report on Form 10-K, the words ``Believes''
``Anticipates,'' ``Expects'' and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this Annual Report on Form 10-K pursuant to the ``Safe Harbor'' provision of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially, including, but not limited to, those set forth in ``Management's
Discussion and Analysis of Financial Condition and Results of Operations.''
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Registrant undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
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PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 4
Item 2 Properties....................................................................... 5
Item 3 Legal Proceedings................................................................ 6
Item 4 Submission of Matters to a Vote of Unitholders................................... 6
PART II
Item 5 Market for Registrant's Units and Related Unitholder Matters..................... 6
Item 6 Selected Financial Data.......................................................... 7
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 7
Item 8 Financial Statements and Supplementary Data...................................... 7
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 7
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 7
Item 11 Executive Compensation........................................................... 10
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 10
Item 13 Certain Relationships and Related Transactions................................... 10
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Consolidated Financial Statements and Consolidated Financial Statement
Schedules...................................................................... 11
Exhibits......................................................................... 11
Reports on Form 8-K.............................................................. 13
SIGNATURES.................................................................................. 18
</TABLE>
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PART I
Item 1. Business
General
Prudential-Bache/Equitec Real Estate Partnership, a California Limited
Partnership (the ``Registrant''), was formed in June 1984 and will terminate on
December 31, 2009 unless terminated sooner under the provisions of the Amended
and Restated Limited Partnership Agreement (the ``Partnership Agreement''). The
Registrant was formed to invest in income-producing real estate with proceeds
raised from the initial sale of 68,795 depositary units (``Units''). On November
21, 1994, the General Partners approved a change in the Registrant's fiscal year
for financial reporting purposes from October 31 to December 31. A Form 10-Q for
the two months ended December 31, 1994 was filed to cover the transition period
resulting from this change. The Registrant's fiscal year for income tax purposes
continues to be December 31.
The Registrant is engaged solely in the business of real estate investment;
therefore, presentation of industry segment information is not applicable. For
information regarding the Registrant's properties (collectively, the
``Properties'' or individually, a ``Property''), see Item 2 Properties. For
information regarding the Registrant's operations, see Item 7 Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Registrant's Annual Report to Unitholders for the year ended
December 31, 1996 (``Registrant's Annual Report'') which is filed as an exhibit
hereto.
For the years ended December 31, 1996, December 31, 1995 and October 31,
1994, respectively, the following Properties' rental revenues exceeded 15% of
the Registrant's total revenue:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Montrose Office Park 40% 43% 46%
Poplar Towers 19% -- --
</TABLE>
For the year ended October 31, 1994, Intersolv, a tenant in the Montrose
Office Park property accounted for approximately 10% of the Registrant's total
revenue. Intersolv's lease expired in June 1995 and it vacated its space at that
time. Technical Resources, Inc., another tenant in the Montrose Office Park
property, on an annualized basis, would have accounted for approximately 10% of
the Registrant's total revenue for the year ended December 31, 1995 and did
account for approximately 10% of the Registrant's total revenue for the year
ended December 31, 1996.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
(``PBP''), and Glenborough Corporation (formerly Glenborough Realty Corporation)
and Robert Batinovich (together, ``Glenborough'') (collectively, the ``General
Partners'').
Glenborough replaced Equitec Financial Group, Inc. (``EFG'') as co-General
Partner of the Partnership on May 4, 1994 when EFG transferred its general
partner interest to Glenborough and withdrew and retired as general partner.
This substitution occurred as a result of the consent of a majority of interests
of the limited partners approving the transaction which was detailed in a proxy
statement dated December 1, 1993. PBP continues as co-General Partner.
Glenborough Corporation continues to receive fees and expense reimbursements in
the same amount that was provided in the property management agreement. See Note
E to the consolidated financial statements in the Registrant's Annual Report
which is filed as an exhibit hereto.
Competition
The General Partners and their affiliates have formed, and may continue to
form, various entities to engage in businesses which may be competitive with the
Registrant.
The Registrant faces active competition in all aspects of its business and
must compete with entities which own properties similar in type to those owned
by the Registrant. The ability of the Registrant to compete with these entities
depends on many factors, including the size, condition and specific location of
its facilities, and is affected by the competitive conditions of the real estate
market in general and the local
4
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markets in particular. Since each of the Registrant's Properties is located in
an area which contains numerous other properties which may be considered
competitive, the Registrant must compete on, among other factors, rental rates,
lease terms and amenities, including availability of parking and public
transportation.
Many of the factors affecting the ability of the Registrant to compete, and
therefore affecting its revenues and expenses, are beyond the Registrant's
control, such as oversupply of similar rental facilities as a result of
overbuilding, increases in unemployment, population shifts, levels of corporate
activity, reduced availability of permanent mortgage funds, changes in zoning
laws or changes in tenants' needs. Expenses such as local real estate taxes and
utilities are subject to change and, while the provisions of certain existing
leases may mitigate the impact of any increases in such expenses, such changes
may not be fully reflected in rental rate increases upon lease renewal or in
connection with the execution of new leases if market conditions are not
favorable. Alternatively, the lack of new construction, reduced unemployment and
stable or reduced tax and utility expenses, all beyond the control of the
Registrant, may have a favorable impact upon the operations of the Properties.
The marketability of the Properties may also be affected (both positively and
negatively) by these factors as well as by changes in general or local economic
conditions including prevailing interest rates. Depending on market and economic
conditions, the Registrant may be required to retain ownership of its Properties
for periods longer than anticipated at acquisition or may need to sell or
refinance a Property during periods or under terms and conditions that are less
advantageous than would be the case if unfavorable economic or market conditions
did not exist.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. The General Partners receive compensation
and reimbursement of expenses in connection with such activities as described in
Section X of the Partnership Agreement. See Note E to the consolidated financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 2. Properties
As of December 31, 1996, the Registrant owns the following properties:
<TABLE>
<CAPTION>
Effective
Average Annual
Occupancy Rate at Rental Rate
December 31, Land Net Rentable Per Square
Location and Type 1996 (in acres) Square Footage Foot
- -------------------------------------- ------------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
Poplar Tower
Memphis, TN
Office building 93% 3.95 100,901 $11.15
Montrose Office Park
Rockville, MD
Office building complex 83% 18.42 187,131 $12.74
Totem Valley Business Center
Kirkland, WA
Industrial park 99% 10.40 121,645 $ 6.06
Gateway Plaza
Sacramento, CA
Office building 95% .87 49,700 $17.08
Park Plaza
Sacramento, CA
Office building 76% 1.37 70,113 $12.23
---------- --------------
35.01 529,490
---------- --------------
---------- --------------
</TABLE>
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The Registrant originally invested in seven properties. In May 1993, the
Registrant and the first mortgage holder of the 399 Market Street property
entered into an agreement related to a deed-in-lieu of foreclosure with regard
to the property, and the Registrant delivered to the mortgage holder the title
to the property. Ashby Industrial Center was sold on August 8, 1992 and one of
the eight buildings comprising Totem Valley Business Center was sold on
September 16, 1991.
The General Partners believe the Registrant's Properties are adequately
insured.
For information regarding the Registrant's investment in Properties and the
encumbrances to which the Properties are subject, see Note C to the consolidated
financial statements in the Registrant's Annual Report which is filed as an
exhibit hereto.
For additional information describing the Registrant's Properties, see
Supplementary Schedule III--Real Estate and Accumulated Depreciation on page 15
in Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Unitholders
None
PART II
Item 5. Market for Registrant's Units and Related Unitholder Matters
As of March 3, 1997, there were 5,173 holders of record owning 68,795 Units.
A significant secondary market for the Units has not developed, and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in Section IV of the Partnership Agreement limiting the
ability of a Unitholder to transfer Units. Consequently, holders of Units may
not be able to liquidate their investments in the event of an emergency or for
any other reason.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement; however, the Registrant has paid no distributions from
operations or otherwise since 1988. The amount, if any, to be distributed by the
Registrant from cash generated by operations in future quarters will be based on
the extent to which cash flow generated by the Properties, after tenant and
capital improvement costs, is sufficient to support such distributions. No
distributions from operations are anticipated in the foreseeable future.
Furthermore, it is unlikely that investors will be returned a significant
portion of their original investment upon the sale of the Registrant's remaining
Properties and ultimate dissolution of the Registrant. For discussion of other
factors that may affect future distributions, see Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 10 through 11
of the Registrant's Annual Report which is filed as an exhibit hereto.
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Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the consolidated financial statements of
the Registrant and the notes thereto on pages 2 through 9 of the Registrant's
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended November 1
December 31, through Year ended October 31,
----------------- December 31, ---------------------------
1996 1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
(in thousands except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Total revenue.......................... $ 6,414 $ 6,541 $ 1,125 $ 6,544 $ 6,841 $ 7,917
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Provision for loss on impairment of
assets............................... $ -- $ -- $ -- $ -- $ (250) $ (614)
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Gain (loss) on disposition of
property............................. $ 33 $ -- $ -- $ -- $ 338 $ (97)
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Net loss............................... $(1,138) $(1,032) $ (122) $ (794) $(1,898) $(3,820)
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Net loss per Unit...................... $(16.38) $(14.86) $ (1.76) $(11.43) $(27.31) $(54.97)
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Total assets........................... $33,346 $34,388 $ 35,737 $36,110 $37,402 $45,046
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Notes payable.......................... $26,650 $26,621 $ 26,862 $26,917 $27,328 $32,578
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
Total cash distributions............... $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------------ ------- ------- -------
------- ------- ------------ ------- ------- -------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 through 11 of the
Registrant's Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's Units are required to report their initial ownership of such Units
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and persons
who own greater than ten percent of the Registrant's Units are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the General Partners' directors and
executive officers and persons who own greater than ten percent of the
Registrant's Units or copies of the reports they have filed with the Securities
and Exchange Commission during and with respect to its most recent fiscal year.
7
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Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer,
Chairman of the Board of Directors and Director
Barbara J. Brooks Vice President--Finance and Chief Financial Officer
Eugene D. Burak Vice President and Chief Accounting Officer
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice
President of Prudential Securities Incorporated (``PSI''), an affiliate of PBP.
Mr. Lynch also serves in various capacities for other affiliated companies. Mr.
Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held several positions within PSI
since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management LLC, an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in numerous capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and/or executive officers
have indefinite terms.
Glenborough and Robert Batinovich
Robert Batinovich, age 60, was the President, Chief Executive Officer and
Chairman of Glenborough Corporation from its inception in 1978 until his
resignation effective January 10, 1996. On August 31, 1994, Mr. Batinovich was
elected Chairman, President and Chief Executive Officer of Glenborough Realty
Trust Incorporated (``GLB''), a newly created Real Estate Investment Trust,
which began trading on the New York Stock Exchange on January 31, 1996. He was a
member of the Public Utilities Commission from 1975 to January 1979 and served
as its President from January 1977 to January 1979. He is a member of the Board
of Directors of Farr Company, a publicly held company that manufactures
industrial filters. He has extensive real estate investment experience. Mr.
Batinovich's business background includes managing and owning manufacturing,
vending and service companies and a national bank.
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The directors and executive officers of Glenborough Corporation and their
positions with regard to managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
<S> <C>
Andrew Batinovich Chief Executive Officer and Chairman of the Board
Robert E. Bailey Secretary and Corporate Counsel
Sandra L. Boyle President and Chief Operating Officer
June Gardner Director
Terri Garnick Chief Financial Officer
Judy Henrich Vice President
Wallace A. Krone, Jr. Director
</TABLE>
ANDREW BATINOVICH, age 38, was elected Chairman of the Board and Chief
Executive Officer of Glenborough Corporation on January 10, 1996. He has been
employed by Glenborough Corporation since 1983, and had functioned since 1987 as
Chief Operating Officer and Chief Financial Officer. Mr. Batinovich also serves
as Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Director of GLB. He holds a California real estate broker's license and is a
Member of the National Advisory Council of BOMA International. He received his
B.A. in International Finance from the American University in Paris. Prior to
joining Glenborough Corporation, Mr. Batinovich was a lending officer with the
International Banking Group and the Corporate Real Estate Division of Security
Pacific National Bank. He is the son of Robert Batinovich.
ROBERT E. BAILEY, age 35, joined Glenborough Corporation in 1989 as Associate
Counsel and was elected Secretary of Glenborough Corporation on May 15, 1995. He
is responsible for all landlord/tenant documentation, tenant litigation,
corporate and partnership matters and employment matters. In 1984, he received
his Bachelor of Arts degree from the University of California at Santa Barbara
and his Juris Doctor degree from Vermont Law School in 1987. From 1987 to 1989,
Mr. Bailey was an associate with the law firm of Pedder, Stover, Hesseltine &
Walker, where he specialized in business litigation. He is a member of the State
Bar of California.
SANDRA L. BOYLE, age 48, has been associated with Glenborough Corporation or
its associated entities since 1984 and has served as President and Chief
Operating Officer of Glenborough Corporation since January 10, 1996. She was
originally responsible for residential marketing, and her responsibilities were
gradually expanded to include residential leasing and management in 1985, and
commercial leasing and management in 1987. She was elected Vice President in
1989, and continues to supervise marketing, leasing, property management
operations and regional offices. Ms. Boyle also serves as a Senior Vice
President of GLB. Ms. Boyle holds a California real estate broker's license and
a CPM designation, and is a member of the National Advisory Council and Finance
Committee of BOMA International; and is on the Board of Directors of BOMA San
Francisco and BOMA California.
JUNE GARDNER, age 45, was elected a director of Glenborough Corporation on
January 10, 1996. She was associated with Glenborough Corporation from 1984
through 1995, as Senior Vice President and Corporate Controller with
responsibilities in the areas of corporate financial planning, reporting,
accounting and banking relationships. Before joining Glenborough Corporation,
Ms. Gardner was Assistant Vice President of JMB Realty Corporation from 1977 to
1984, with responsibilities in the areas of financial management and reporting.
TERRI GARNICK, age 36, has served as Chief Financial Officer of Glenborough
Corporation since January 10, 1996. She is also Senior Vice President, Chief
Accounting Officer and Treasurer of GLB. Ms. Garnick is responsible for property
management accounting, financial statements, audits, Securities and Exchange
Commission reporting, and tax returns. Prior to joining Glenborough Corporation
in 1989, Ms. Garnick was a controller at August Financial Corporation from 1986
to 1989 and was a Senior Accountant at
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Deloitte, Haskins and Sells from 1983 to 1986. She is a Certified Public
Accountant and has a Bachelor of Science degree from San Diego State University.
JUDY HENRICH, age 51, is a Vice President of Glenborough Corporation,
effective January 10, 1996 and is responsible for the coordination of all
broker-dealer and investor communications for partnerships managed by
Glenborough Corporation. Prior to joining Glenborough Corporation, Ms. Henrich
was associated with Rancon Financial Corporation from 1981 through early 1995,
and as Senior Vice President since 1985, with responsibilities similar to those
at Glenborough Corporation. Ms. Henrich also served as Executive Vice President
of Rancon Securities Corporation from 1988 to 1991, and thereafter as its Chief
Executive Officer. Prior to joining Rancon, Ms. Henrich was manager of public
relations and advertising for Kaiser Development Company, a diversified real
estate holding company.
WALLACE A. KRONE, JR., age 65, has been an entrepreneur in the restaurant
business since 1965, and owns a number of Burger King restaurants in the San
Francisco area. Mr. Krone has been associated with Glenborough Corporation since
1982 as an investor in one or more partnerships, and has been a member of the
board of directors of Glenborough Corporation since 1989.
Except as noted above, there are no family relationships among the foregoing
directors or executive officers.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partners for their
services. Certain officers and directors of the General Partners receive
compensation from the General Partners and their affiliates, not from the
Registrant, for services performed for various affiliated entities, which may
include services performed for the Registrant; however, the General Partners
believe that any compensation attributable to services performed for the
Registrant is immaterial. See Item 13 Certain Relationships and Related
Transactions for information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Glenborough Corporation's common stock is owned by Sandra L. Boyle, June
Gardner and Wallace A. Krone, Jr., each owning a one-third interest and all of
the preferred stock is owned by Glenborough Realty Trust Incorporated.
As of March 3, 1997, no director or executive officer of PBP owns directly or
beneficially any interest in the voting securities of PBP.
As of March 3, 1997, no director or executive officer of any of the General
Partners owns directly or beneficially any of the Units issued by the
Registrant.
As of March 3, 1997, no beneficial owner who is neither a director nor
executive officer of either of the General Partners beneficially owns more than
five percent (5%) of the outstanding Units issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the directors or officers of
the General Partners.
Reference is made to Note E to the consolidated financial statements in the
Registrant's Annual Report which is filed as an exhibit hereto, which identifies
the related parties and discusses the services provided by these parties and the
amounts paid or payable for their services.
10
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PART IV
<TABLE>
<CAPTION>
Page in
Annual Report
-------------
<S> <C> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Consolidated Financial Statements and Independent Auditors'
Report--Incorporated
by reference to the Registrant's Annual Report which is filed as an exhibit
hereto
Independent Auditors' Report 2
Consolidated Financial Statements:
Consolidated Statements of Financial Condition--December 31, 1996 and
December 31, 1995 3
Consolidated Statements of Operations--Years ended December 31, 1996 and
1995, November 1 through December 31, 1994, and the year ended October 31,
1994 4
Consolidated Statements of Changes in Partners' Capital--Years ended
December 31, 1996 and 1995, November 1 through December 31, 1994, and the
year ended October 31, 1994 4
Consolidated Statements of Cash Flows--Years ended December 31, 1996 and
1995, November 1 through December 31, 1994, and the year ended October 31,
1994 5
Notes to Consolidated Financial Statements 6
2. Consolidated Financial Statement Schedules and Independent Auditors' Report
on Schedules
Independent Auditors' Report on Schedules
Schedules:
II--Valuation and Qualifying Accounts and Reserves--Year ended December 31,
1996 and 1995 and the year ended October 31, 1994
III--Consolidated Real Estate and Accumulated Depreciation--At December 31,
1996
All other schedules have been omitted because they are not applicable or
the required information is included in the consolidated financial
statements and notes thereto.
3. Exhibits
Description:
3 and 4 Amended and Restated Limited Partnership Agreement of Registrant dated
February 11, 1985 (incorporated by reference to Amendment No. 1 to the
Registrant's Form S-11 Registration Statement filed on February 14, 1985)
and Amendment No. 1 thereto dated April 18, 1985 (incorporated by reference
to Form 8-A filed on February 28, 1986), as amended on March 25, 1994
(incorporated by reference to the Registrant's 1994 Annual Report filed on
Form 10-K)
3 and 4 Amended and Restated Agreement between General Partners dated December 28,
1990 (incorporated by reference to the Registrant's 1990 Annual Report
filed on Form 10-K)
</TABLE>
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<TABLE>
<S> <C> <C> <C>
10(a) Note Modification Agreement between Montrose Office Park Joint Venture (a
joint venture which is indirectly wholly-owned by the Registrant) and The
Variable Annuity Life Insurance Company (incorporated by reference to the
Registrant's 1991 Annual Report filed on Form 10-K)
10(b) Settlement Statement on Ashby Industrial Center dated August 6, 1992
(incorporated by reference to the Registrant's 1992 Annual Report filed on
Form 10-K)
10(c) Escrow Instruction on Sale of Ashby Industrial Center dated August 6, 1992
(incorporated by reference to the Registrant's 1992 Annual Report filed on
Form 10-K)
10(d) Agreement regarding Deed-in-Lieu of Foreclosure and Related Matters between
the Registrant and Fidelity Bank N.A. dated May 11, 1993 (incorporated by
reference to the Registrant's Quarterly Report for the period ended April
30, 1993 filed on Form 10-Q)
10(e) Loan Agreement by and among Registrant and Montrose Office Park Joint
Venture (a joint venture which is indirectly wholly-owned by the
Registrant), and Wells Fargo Bank, National Association, executed as of
December 13, 1996. (1)
10(f) Amended, Restated and Consolidated Promissory Note dated December 13, 1996
in the amount of $26,650,000.00 by and among Registrant and Montrose Office
Park Joint Venture and Wells Fargo Bank, National Association. (1)
10(g) Deed of Trust, With Absolute Assignment of Leases and Rents, Security
Agreement, Assignment of Equipment Leases, Assignment of Permits and
Fixture Filing dated December 13, 1996 by and among Registrant, American
Securities Company, a corporation and Wells Fargo Bank, National
Association relating to the property known as Park Plaza Professional
Center, 1303 J Street, Sacramento, Sacramento County, California and to the
property known as Gateway Executive Center, 801 12th Street, Sacramento,
Sacramento County, California. (1)
10(h) Deed of Trust, With Absolute Assignment of Leases and Rents, Security
Agreement, Assignment of Equipment Leases, Assignment of Permits and
Fixture Filing dated December 13, 1996 by and among Registrant, Chicago
Title Insurance Company, a Missouri corporation and Wells Fargo Bank,
National Association relating to the property known as Totem Valley
Business Center, 12800 N.E. 126th Place, Kirkland, King County, Washington.
(1)
10(i) Amended and Restated Deed of Trust, With Absolute Assignment of Leases and
Rents, Security Agreement, Assignment of Equipment Leases, Assignment of
Permits and Fixture Filing dated December 13, 1996 by and among Montrose
Office Park Joint Venture, Chicago Title Insurance Company,a Missouri
corporation and Wells Fargo Bank, National Association relating to the
property known as Montrose Office Park, 3200-3206 Tower Oaks Boulevard,
Rockville, Montgomery County, Maryland. (1)
10(j) Deed of Trust, With Absolute Assignment of Leases and Rents, Security
Agreement, Assignment of Equipment Leases, Assignment of Permits and
Fixture Filing dated December 13, 1996 by and among Registrant, J. Richard
Rossie, a resident of Shelby County, Tennessee and Wells Fargo Bank,
National Association relating to the property known as Poplar Towers, 6263
Poplar Avenue, Memphis, Tennessee. (1)
13 Registrant's Annual Report to Unitholders for the year ended December 31,
1996 (with the exception of the information and data incorporated by
reference in Items 7 and 8 of this Annual Report on Form 10-K, no other
information or data appearing in the Registrant's Annual Report is to be
deemed filed as part of this report)
27 Financial Data Schedule (filed herewith)
</TABLE>
12
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) Reports on Form 8-K
Registrant's Current Report on Form 8-K dated December 20, 1996, as filed
with the Securities and Exchange Commission on January 21, 1997 relating to
Item 5 regarding the refinancing of the mortgage loans on the Registrant's
properties.
</TABLE>
- ---------------
(1) Incorporated by reference to applicable exhibit included in Registrant's
Current Report on Form 8-K dated December 20, 1996
13
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Prudential-Bache/Equitec Real Estate Partnership
(a California limited partnership):
We have audited the consolidated financial statements of
Prudential-Bache/Equitec Real Estate Partnership (a California limited
partnership) as of December 31, 1996 and 1995, and for the years ended December
31, 1996 and 1995 and October 31, 1994, and the period November 1, 1994 through
December 31, 1994, and have issued our report thereon dated February 18, 1997;
such financial statements and report are included in your 1996 Annual Report and
are incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of Prudential-Bache/Equitec Real Estate
Partnership, listed in Item 14. These financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
San Francisco, California
February 18, 1997
14
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- --------------------------------------------------------------------------------
Allowance for Loss on Impairment of Assets
<TABLE>
<CAPTION>
Deduc-
tions-Amounts Balance at
Year ended Year ended Balance at Additions-Amounts written-off during end of
December 31, October 31, beginning of year reserved during year year year
- ------------ ----------- ----------------- -------------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
1996 $ 500,000 $ -- $ -- $ 500,000
1995* 500,000 -- -- 500,000
1994 500,000 -- -- 500,000
</TABLE>
* Includes the period November 1 through December 31, 1994.
15
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
SCHEDULE III--CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Initial cost to
Registrant
-------------------------
Buildings Gross amount at which carried
and Net costs at close of period
improve- capitalized --------------------------------------
ments, (disposed) Buildings,
Encumbrances furniture subsequent to furniture
Description (C) Land and fixtures acquisition Land and fixtures Total (A)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------- ------------ ------- ------------- ------------- ------- ------------ ---------
Poplar Tower
Memphis, TN
Office building $ -- $ 1,678 $ 4,928 $ 1,348 $ 1,678 $ 6,276 $ 7,954
Montrose Office Park
Rockville, MD
Office building
complex -- 5,918 15,766 2,416 5,918 18,182 24,100
Totem Valley
Business Center
Kirkland, WA
Industrial park -- 2,666 5,265 (518) 2,083 5,330 7,413
Gateway and Park
Plaza
Sacramento, CA
Office buildings -- 1,163 9,075 1,682 1,163 10,757 11,920
Note Payable 26,650
------------ ------- ------------- ------------- ------- ------------ ---------
Totals $ 26,650 $11,425 $35,034 $ 4,928 $10,842 $ 40,545 $ 51,387
------------ ------- ------------- ------------- ------- ------------ ---------
------------ ------- ------------- ------------- ------- ------------ ---------
See notes to Schedule III on the following page.
<CAPTION>
Life on
which
depreciation
in the latest
Accumulated statement of
depreciation Date of Date operations is
Description (B) construction acquired computed
<S> <C> <C> <C> <C>
- ---------------------- ----------- ------------ ---------- -------------
Poplar Tower
Memphis, TN 3 to
Office building $ 4,256 1974 5/01/86 30 years
Montrose Office Park
Rockville, MD
Office building 3 to
complex 7,559 1980-83 8/11/86 30 years
Totem Valley
Business Center
Kirkland, WA 3 to
Industrial park 2,522 1983-86 3/13/87 30 years
Gateway and Park
Plaza
Sacramento, CA 3 to
Office buildings 5,297 1982 6/15/87 30 years
Note Payable
-----------
Totals $19,634
-----------
-----------
</TABLE>
16
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
NOTES TO SCHEDULE III
(in thousands)
December 31, 1996
NOTE A--RECONCILIATION SUMMARY OF TRANSACTIONS--REAL ESTATE
<TABLE>
<CAPTION>
November 1
Year ended Year ended through Year ended
December 31, December 31, December 31, October 31,
1996 1995 1994 1994
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 50,605 $ 50,013 $ 49,983 $49,647
Additions during period 810 592 30 336
------------ ------------ ------------ -----------
51,415 50,605 50,013 49,983
Cost of land conveyed (28) -- -- --
------------ ------------ ------------ -----------
Balance at end of period $ 51,387 $ 50,605 $ 50,013 $49,983
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
The allowance for loss on impairment for the above assets is $500 at December
31, 1996. See Note C to the consolidated financial statements in the
Registrant's Annual Report which is filed as an exhibit hereto.
The aggregate cost of land, buildings, and furniture and fixtures for Federal
income tax purposes for the tax year ended December 31, 1996 was $49,976.
NOTE B--RECONCILIATION SUMMARY OF TRANSACTIONS--ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
November 1
Year ended Year ended through Year ended
December 31, December 31, December 31, October 31,
1996 1995 1994 1994
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 17,905 $ 16,177 $ 15,889 $14,253
Additions during period 1,729 1,728 288 1,636
------------ ------------ ------------ -----------
Balance at end of period $ 19,634 $ 17,905 $ 16,177 $15,889
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
NOTE C--ENCUMBRANCES
The note payable is secured by Deeds of Trust on each of the respective
properties and by security interests in the respective property's leases and
rents, and equipment and fixtures contained therein.
17
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Prudential-Bache/Equitec Real Estate
Partnership,
A California Limited Partnership
By: Prudential-Bache Properties, Inc.,
A Delaware corporation, Managing General Partner
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President and Chief Accounting Officer
By: Glenborough Corporation
General Partner
By: /s/ Andrew Batinovich Date: March 27, 1997
----------------------------------------
Andrew Batinovich
Chief Executive Officer and Chairman of
the Board of Directors
By: Robert Batinovich
General Partner
By: /s/ Robert Batinovich Date: March 27, 1997
----------------------------------------
Robert Batinovich
General Partner
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 (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.,
A Delaware corporation, Managing General Partner
By: /s/ Thomas F. Lynch, III Date: March 27, 1997
----------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
----------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 27, 1997
----------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 27, 1997
----------------------------------------
Nathalie P. Maio
Director
18
<PAGE>
By: Glenborough Corporation and Robert
Batinovich
General Partners
By: /s/ Robert Batinovich Date: March 27, 1997
----------------------------------------
Robert Batinovich
Individually
By: /s/ Andrew Batinovich Date: March 27, 1997
----------------------------------------
Andrew Batinovich
Chief Executive Officer and Chairman of
the Board of Directors
By: /s/ June Gardner Date: March 27, 1997
----------------------------------------
June Gardner
Director
By: /s/ Terri Garnick Date: March 27, 1997
----------------------------------------
Terri Garnick
Chief Financial Officer
19
<PAGE>
1996 ANNUAL REPORT
<PAGE>
1996
- --------------------------------------------
Prudential-Bache/Equitec Annual
Real Estate Partnership Report
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
Message to our Unitholders:
1
<PAGE>
Deloitte &
Touche LLP
--------------------------------------------------------
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4329
INDEPENDENT AUDITORS' REPORT
Prudential-Bache/Equitec Real Estate Partnership
(a California limited partnership):
We have audited the accompanying consolidated statements of financial condition
of Prudential-Bache/Equitec Real Estate Partnership (a California limited
partnership) as of December 31, 1996 and 1995 and the related
consolidated statements of operations, changes in partners' capital and
cash flows for the years ended December 31, 1996 and 1995 and October 31, 1994,
and the period November 1, 1994 through December 31, 1994. 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 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 statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Prudential-Bache/Equitec Real
Estate Partnership at December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years ended December 31, 1996 and 1995 and
October 31, 1994, and the period November 1, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Francisco, California
February 18, 1997
- -----------------
Deloitte Touche
Tohmatsu
International
- -----------------
2
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
ASSETS
Investment in property:
Land $ 10,842 $ 10,870
Buildings, improvements and equipment 40,545 39,735
Less: Accumulated depreciation (19,634) (17,905)
Allowance for loss on impairment of assets (500) (500)
------------ ------------
Net investment in property 31,253 32,200
Cash and cash equivalents 697 806
Prepaid expenses and other assets, net 1,396 1,382
------------ ------------
Total assets $ 33,346 $ 34,388
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Notes payable $ 26,650 $ 26,621
Due to affiliates 705 700
Accounts payable and accrued liabilities 266 291
Security deposits and deferred revenue 335 232
Real estate taxes payable 57 73
------------ ------------
Total liabilities 28,013 27,917
------------ ------------
Partners' capital
Unitholders (68,795 depositary units issued and outstanding) 5,587 6,714
General partners (254) (243)
------------ ------------
Total partners' capital 5,333 6,471
------------ ------------
Total liabilities and partners' capital $ 33,346 $ 34,388
------------ ------------
------------ ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended November 1
December 31, through Year ended
------------------- December 31, October 31,
1996 1995 1994 1994
- --------------------------------------------------------------------------------------------------------
(in thousands,
except per depositary unit amounts)
<S> <C> <C> <C> <C>
REVENUES
Operating $ 5,987 $ 5,982 $1,039 $ 5,997
Recovery of expenses 394 559 86 547
Gain on land conveyance 33 -- -- --
------- ------- ------------ -----------
6,414 6,541 1,125 6,544
------- ------- ------------ -----------
EXPENSES
Property operating 2,873 2,813 472 2,711
Interest 2,429 2,411 391 2,364
Depreciation and amortization 2,025 1,965 328 1,883
General and administrative 225 384 56 380
------- ------- ------------ -----------
7,552 7,573 1,247 7,338
------- ------- ------------ -----------
Net loss $(1,138) $(1,032) $ (122) $ (794)
------- ------- ------------ -----------
------- ------- ------------ -----------
ALLOCATION OF NET LOSS
Unitholders $(1,127) $(1,022) $ (121) $ (786)
------- ------- ------------ -----------
------- ------- ------------ -----------
General partners $ (11) $ (10) $ (1) $ (8)
------- ------- ------------ -----------
------- ------- ------------ -----------
Net loss per depositary unit $(16.38) $(14.86) $(1.76) $(11.43)
------- ------- ------------ -----------
------- ------- ------------ -----------
- --------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL
UNITHOLDERS PARTNERS TOTAL
- ---------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Partners' capital (deficit)--October 31, 1993 $ 8,643 $ (224) $ 8,419
Net loss (786) (8) (794)
----------- -------- -------
Partners' capital (deficit)--October 31, 1994 7,857 (232) 7,625
Net loss (121) (1) (122)
----------- -------- -------
Partners' capital (deficit)--December 31, 1994 7,736 (233) 7,503
Net loss (1,022) (10) (1,032)
----------- -------- -------
Partners' capital (deficit)--December 31, 1995 6,714 (243) 6,471
Net loss (1,127) (11) (1,138)
----------- -------- -------
Partners' capital (deficit)--December 31, 1996 $ 5,587 $ (254) $ 5,333
----------- -------- -------
----------- -------- -------
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended November 1
December 31, through Year ended
-------------------- December 31, October 31,
1996 1995 1994 1994
- --------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,138) $(1,032) $ (122) $ (794)
-------- ------- ------------ -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,025 1,965 328 1,883
Lease concessions-effective rents 72 69 13 138
Bad debt expense 1 -- -- 18
Gain on land conveyance (33) -- -- --
Leasing commissions paid (271) (260) (18) (125)
Changes in:
Prepaid expenses and other assets 195 (145) (21) (122)
Due to affiliates 5 (7) 10 42
Accounts payable and accrued liabilities (25) (2) (208) (16)
Security deposits and deferred revenue 103 (30) 2 (21)
Real estate taxes payable (16) (37) -- (92)
-------- ------- ------------ -----------
Total adjustments 2,056 1,553 106 1,705
-------- ------- ------------ -----------
Net cash provided by (used in) operating
activities 918 521 (16) 911
-------- ------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Building and tenant improvements (810) (592) (30) (336)
Proceeds from land conveyance 61 -- -- --
-------- ------- ------------ -----------
Net cash used in investing activities (749) (592) (30) (336)
-------- ------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan refinancing 26,650 -- -- --
Principal payments on notes (26,621) (241) (55) (411)
Loan fees (307) -- -- --
-------- ------- ------------ -----------
Net cash used in financing activities (278) (241) (55) (411)
-------- ------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents (109) (312) (101) 164
Cash and cash equivalents at beginning of
period 806 1,118 1,219 1,055
-------- ------- ------------ -----------
Cash and cash equivalents at end of period $ 697 $ 806 $1,118 $ 1,219
-------- ------- ------------ -----------
-------- ------- ------------ -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 2,409 $ 2,546 $ 533 $ 2,369
-------- ------- ------------ -----------
-------- ------- ------------ -----------
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. General
Prudential-Bache/Equitec Real Estate Partnership, A California Limited
Partnership (the ``Partnership''), was formed on June 19, 1984 and will
terminate on December 31, 2009 unless ended sooner under the provisions of the
Amended and Restated Limited Partnership Agreement (the ``Partnership
Agreement''). The Partnership was formed for the purpose of purchasing, holding,
operating, leasing and selling various real properties. The general partners of
the Partnership are Prudential-Bache Properties, Inc. (``PBP'') and Glenborough
Corporation (formerly Glenborough Realty Corporation) and Robert Batinovich
(together, ``Glenborough'') (collectively, the ``General Partners''). At
December 31, 1996, the Partnership owned five properties.
Glenborough replaced Equitec Financial Group, Inc. (``EFG'') as co-General
Partner of the Partnership on May 4, 1994 when EFG transferred its general
partner interest to Glenborough and withdrew and retired as general partner.
This substitution occurred as a result of the consent of a majority of interests
of the limited partners approving the transaction which was detailed in a proxy
statement dated December 1, 1993. PBP continues as co-General Partner.
Glenborough Corporation, continues to receive fees and expense reimbursements in
the same amount that was provided in the property management agreement (see Note
E).
B. Summary of Significant Accounting Policies
Basis of accounting principles
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Partnership's fiscal year for financial reporting purposes now ends on
December 31. On November 21, 1994, the General Partners approved a change in the
Partnership's fiscal year for financial reporting purposes from October 31 to
December 31.
The consolidated financial statements of the Partnership include the accounts
of Montrose Office Park Limited Partnership, in which the Partnership owns a
100% interest.
Investment in property
Statement of Financial Accounting Standards (``SFAS'') No. 121, ``Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,'' was adopted by the Partnership as of January 1, 1995. Under SFAS No. 121,
impairment for properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it should be recorded at the lower of its carrying value or its
estimated fair value. For properties that are held for sale, SFAS No. 121 states
that they should be reported at the lower of carrying amount or estimated fair
value less cost to sell. The implementation of SFAS No. 121 did not affect the
Partnership's results of operations or financial position for the year ended
December 31, 1995.
Prior to 1995, property investments were carried at the lower of depreciated
cost or estimated amounts recoverable through future operations and ultimate
disposition of the property. A provision for loss on impairment of assets would
be recorded when estimated amounts recoverable through future operations and
ultimate disposition of the property on an undiscounted basis were below
depreciated cost.
Property investments are depreciated or amortized using the straight-line
method over their estimated economic lives which range from 3 to 30 years
depending on property type.
6
<PAGE>
<PAGE>
Cash and cash equivalents
Cash and cash equivalents include money market funds whose cost approximates
market value.
Other assets
Other assets consist primarily of loan fees, lease concessions, and lease
commissions. Loan fees are capitalized and amortized on a straight-line basis
over the terms of the respective loans. Lease concessions and lease commissions
are deferred and amortized over the terms of the respective leases.
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Partnership may be subject to other
state and local taxes in jurisdictions in which it operates.
The following is a reconciliation of net loss for financial reporting
purposes with net loss for tax reporting purposes.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
(in thousands)
Net loss, financial statement basis $(1,138) $(1,032) $(819)
Rental concessions recorded for books not tax -- (120) --
Book depreciation in excess of tax depreciation 481 475 338
------- ------- -----
Net loss, tax basis $ (657) $ (677) $(481)
------- ------- -----
------- ------- -----
</TABLE>
Profit and loss allocations/distributions
For financial and tax reporting purposes, net profits or losses are allocated
99% to the Unitholders and 1% to the General Partners.
No distributions have been paid since 1988.
C. Investment in Property and Notes Payable
The Partnership's properties, net of accumulated depreciation, and the
related debt at December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
Investment Notes Payable
------------------- -------------------
Property 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Montrose Office Park, Rockville, MD $16,541 $16,786 $ -- $13,055
Gateway and Park Plaza, Sacramento, CA 6,623 7,104 -- 6,439
Totem Valley Business Center, Kirkland, WA 4,891 5,074 -- 3,645
Poplar Tower, Memphis, TN 3,698 3,736 -- 3,482
Less: allowance for loss on impairment of assets (500) (500) -- --
Note payable -- -- 26,650 --
------- ------- ------- -------
$31,253 $32,200 $26,650 $26,621
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
During 1996, a small parcel of land was conveyed to a local jurisdiction to
be used for a road project at the Totem Valley property for proceeds of
approximately $61,000 resulting in a gain of approximately $33,000.
Loans held on two of the Partnership's properties, Poplar Towers and Montrose
Office Park matured on October 1, 1996 and December 31, 1996, respectively. As a
result, the Partnership, on December 20, 1996, pursuant to a loan agreement
dated December 13, 1996 with Wells Fargo Bank, N.A. (``WFB''), consolidated and
refinanced all of the existing loans on the five properties owned by the
Partnership (the ``Loan''). WFB held mortgages on the Partnership's three
remaining properties Totem Valley, Gateway and Park Plaza.
7
<PAGE>
<PAGE>
The Loan from WFB is in the amount of $26,650,000 (which approximates the
total amount of the individual loans on each of the five properties). The Loan
will mature on December 9, 1997 and bears interest at LIBOR + 3.5% reset
monthly. The Loan is secured by Deeds of Trust on each of the respective
properties and by security interests in the respective property's leases and
rents, and equipment and fixtures contained therein. The Partnership has the
ability to refinance the loan at maturity based on the current appraised values
on the underlying properties.
D. Lease Agreements
The provisions of the leases generally require tenants to pay for their
proportionate share of increases in building operating costs and property tax
increases. Future minimum rental receipts due under the noncancellable operating
leases with tenants are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, (in thousands)
- ---------------- --------------
<S> <C>
1997 $ 6,169
1998 5,499
1999 4,187
2000 2,578
2001 1,551
Thereafter 4,178
--------------
Total $ 24,162
--------------
--------------
</TABLE>
For the years ended December 31, 1996, December 31, 1995 and October 31,
1994, respectively, the following properties' rental revenues exceeded 15% of
the Partnership's total revenue:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Montrose Office Park 40% 43% 46%
Poplar Towers 19 -- --
</TABLE>
During the year ended December 31, 1996, Technical Resources, Inc., a tenant
in the Montrose Office Park property, did account for approximately 10% of the
Partnership's total revenue and, on an annualized basis, had its new lease
covered the entire year, would have accounted for approximately 10% of the
Partnership's total revenue for the year ended December 31, 1995. During the
year ended October 31, 1994, Intersolv, a tenant in the Montrose Office Park
property, accounted for approximately 10% of the Partnership's total revenue.
8
<PAGE>
<PAGE>
E. Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; property management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
November 1,
Year ended through Year ended
December 31, December 31, October 31,
1996 1995 1994 1994
- -----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
PBP and affiliates
General and administrative $ 60 $112 $ 10 $ 136
----- ----- ------ -----------
Glenborough Corporation and affiliates
Property management fee and expenses 634 663 103 212
Leasing commissions 131 136 18 31
----- ----- ------ -----------
765 799 121 243
----- ----- ------ -----------
$825 $911 $131 $ 379
----- ----- ------ -----------
----- ----- ------ -----------
</TABLE>
- ---------------
PBP is not being paid on a current basis for general and administrative
expenses other than printing costs. During the year ended December 31, 1996, PBP
was reimbursed approximately $48,000, which was applied to prior years' general
and administrative expenses due. At December 31, 1996 and 1995, the total
liability outstanding to PBP was approximately $705,000 and $700,000,
respectively.
The Partnership maintains an investment account with the Prudential
Institutional Liquidity Portfolio Fund, an affiliate of PBP, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Partnership Agreement.
Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 180
depositary units at December 31, 1996.
9
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
All of the Partnership's properties generated cash flow from operations after
debt service during the year ended December 31, 1996.
During the year ended December 31, 1996, the Partnership incurred
approximately $810,000 for building and tenant improvements primarily at the
Montrose Office Park, Totem Valley, Park Plaza, and Poplar Towers properties. Of
this amount, approximately $525,000 was expended at Montrose Office Park
primarily for build out of space for new tenants. In order to keep the
Partnership's properties competitive, building and tenant improvements will
continue to be required. Building and tenant improvements for 1997 are currently
budgeted for approximately the same amount as 1996.
The Partnership had cash of approximately $697,000 at December 31, 1996. PBP
is not being reimbursed for its general and administrative expenses (other than
printing) on a current basis. During the year ended December 31, 1996, PBP was
reimbursed approximately $48,000, which was applied to prior years' general and
administrative expenses due. At December 31, 1996, the total liability
outstanding (including printing) was approximately $705,000. Cash on hand plus
any cash generated from operations may not be sufficient to fund building and
tenant improvements and to pay deferred general and administrative expenses.
The Partnership in December 1996 consolidated and refinanced all of the
existing loans on the five properties. The new loan in the amount of $26,650,000
will mature in December 1997 and is secured by all of the properties.
The General Partners continue to evaluate all of the properties' prospects
for eventual sale. It is unlikely that investors will be returned a significant
portion of their original investment upon the sale of the properties and
ultimate dissolution of the Partnership.
Results of Operations
1996 versus 1995
The Partnership's net loss increased by approximately $106,000 for the year
ended December 31, 1996 as compared to 1995 for the reasons discussed below.
Property operating revenue increased by approximately $5,000 for the year
ended December 31, 1996 as compared to 1995 as increases at the Totem Valley,
Gateway, Park Plaza and Poplar Tower properties were more than offset by a
decrease at Montrose Office Park due to a major tenant's lease expiring in May
1996. The increase and decreases in operating revenue were primarily the result
of corresponding changes in average occupancies.
Recovery of expenses decreased by approximately $165,000 for the year ended
December 31, 1996 as compared to 1995 primarily due to lower tenant recoveries
at the Montrose property as a result of a major tenant's lease expiring in May
1996, partially offset by increases in expense recoveries at the Totem Valley
property.
Property operating expenses increased by approximately $60,000 for the year
ended December 31, 1996 as compared to 1995 due primarily to increased utility
expenses, building management fees and salaries at Poplar Towers.
Depreciation and amortization increased by approximately $60,000 for the year
ended December 31, 1996 as compared to 1995 due to increased building and tenant
improvement additions.
General and administrative expenses decreased by approximately $159,000 for
the year ended December 31, 1996 as compared to 1995 primarily due to appraisal
fees recorded in 1995.
1995 versus 1994
The Partnership's net loss increased by approximately $238,000 for the year
ended December 31, 1995 as compared to the year ended October 31, 1994 (``fiscal
1994'') for the reasons discussed below.
Operating revenues decreased by approximately $15,000 for the year ended
December 31, 1995 as compared to fiscal year 1994 as increases at the Totem
Valley, Gateway, and Poplar Tower properties were
10
<PAGE>
<PAGE>
more than offset by decreases at the Park Plaza and Montrose properties. The
increases and decreases in operating revenue were primarily the result of
corresponding changes in average occupancies.
Recovery of expenses increased by approximately $12,000 for the year ended
December 31, 1995 as compared to fiscal 1994 primarily due to greater tenant
work order recoveries at the Montrose property offset by decreases in various
other expense recoveries at all of the properties.
Property operating expenses increased by approximately $102,000 during the
year ended December 31, 1995 as compared to fiscal 1994 due primarily to
increased tenant work order costs and increased utilities expenses.
Depreciation and amortization increased by approximately $82,000 during the
year ended December 31, 1995 as compared to fiscal 1994 due to increased
building and tenant improvement additions.
Interest expense increased by approximately $47,000 during the year ended
December 31, 1995 as compared to fiscal 1994 because of increases in interest
rates on variable rate notes.
11
<PAGE>
<PAGE>
OTHER INFORMATION
The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential-Bache/Equitec Real Estate Partnership
P.O. Box 2016
Peck Slip Station
New York, N.Y. 10272-2016
12
<PAGE>
<PAGE>
P.O. Box 2016
BULK RATE
Peck Slip Station
U.S. POSTAGE
New York, NY 10272
PAID
Automatic Mail
PBEQ86/170368
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Equitec Real Estate
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000757191
<NAME> P-B Equitec Real Estate
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 12-Mos
<CASH> 697,000
<SECURITIES> 0
<RECEIVABLES> 1,396,000
<ALLOWANCES> 500,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 51,387,000
<TOTAL-ASSETS> 19,634,000
<CURRENT-LIABILITIES> 33,346,000
<BONDS> 1,363,000
0
0
<COMMON> 0
<OTHER-SE> 5,333,000
<TOTAL-LIABILITY-AND-EQUITY> 33,346,000
<SALES> 0
<TOTAL-REVENUES> 6,414,000
<CGS> 0
<TOTAL-COSTS> 5,123,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,429,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,138,000)
<EPS-PRIMARY> (16.38)
<EPS-DILUTED> 0
</TABLE>
