<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, 1997
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
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Seaport Plaza, New York, N.Y. 10292-0128
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-3500
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
(Title of class)
Securities registered pursuant to section 12(g) of the Act:
Depositary Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(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,
1997 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.
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 4
Item 3 Legal Proceedings................................................................ 5
Item 4 Submission of Matters to a Vote of Unitholders................................... 5
PART II
Item 5 Market for Registrant's Units and Related Unitholder Matters..................... 5
Item 6 Selected Financial Data.......................................................... 6
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 6
Item 8 Financial Statements and Supplementary Data...................................... 6
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 6
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 6
Item 11 Executive Compensation........................................................... 9
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 9
Item 13 Certain Relationships and Related Transactions................................... 9
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Consolidated Financial Statements and Consolidated Financial Statement
Schedules...................................................................... 10
Exhibits......................................................................... 10
Reports on Form 8-K.............................................................. 12
SIGNATURES.................................................................................. 17
</TABLE>
2
<PAGE>
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'). The
Registrant's fiscal year for financial reporting and income tax purposes ends on
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, 1997 ('Registrant's Annual Report') which is filed as an exhibit
hereto.
The Registrant has entered into a Purchase Agreement (the 'Purchase
Agreement') with Glenborough Realty Trust Incorporated and a subsidiary
partnership, Glenborough Properties, L.P., (together, the 'Purchaser'), which
are affiliates of two of the Registrant's general partners, Glenborough
Corporation and Robert Batinovich. Pursuant to the Purchase Agreement, the
Registrant intends to sell to the Purchaser (the 'Sale') all of the Properties
of the Registrant for cash. The Purchase Agreement provides for a purchase price
equal to $43,520,000. This price will be reduced by certain credits to the
Purchaser, which, in addition to any credits for secured obligations which are
assumed by the Purchaser, could approximate $737,000 as of February 28, 1998,
if certain items of deferred maintenance at the Properties are not
completed prior to the closing of the Sale. As a result of
unforeseen delays in processing the Consent Solicitation
Statement with the Securities and Exchange Commission, the Registrant
determined that updates of the appraisals of the Properties should be
obtained and so notified the Purchaser. New appraisals are presently being
prepared for the Registrant's Properties. It is anticipated that further
negotiations with the Purchaser will take place to determine the amount to be
paid for the Registrant's Properties.
For the years ended December 31, 1997, December 31, 1996 and December 31,
1995, respectively, the following Properties' rental revenues exceeded 15% of
the Registrant's total operating revenue:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Montrose Office Park 44% 40% 43%
Poplar Towers 17% 19% --
</TABLE>
Technical Resources, Inc., a tenant in the Montrose Office Park property, on
an annualized basis, would have accounted for approximately 10% of the
Registrant's total operating revenue for the year ended December 31, 1995 and
did account for approximately 10% of the Registrant's total operating revenue
for the years ended December 31, 1996 and December 31, 1997.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
('PBP'), and Glenborough 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.
3
<PAGE>
<PAGE>
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 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, 1997, 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 1997 (in acres) Square Footage Foot
- -------------------------------------- ------------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
Poplar Tower
Memphis, TN
Office building 88% 3.95 100,901 $11.52
Montrose Office Park
Rockville, MD
Office building complex 100% 18.42 186,680 $15.91
Totem Valley Business Center
Kirkland, WA
Industrial park 99% 10.40 121,645 $ 6.46
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Effective
Average Annual
Occupancy Rate at Rental Rate
December 31, Land Net Rentable Per Square
Location and Type 1997 (in acres) Square Footage Foot
- -------------------------------------- ------------------ ---------- -------------- --------------
<S> <C> <C> <C> <C>
Gateway Plaza
Sacramento, CA
Office building 92% .87 50,558 $17.42
Park Plaza
Sacramento, CA
Office building 91% 1.37 70,113 $12.62
---------- --------------
35.01 529,897
---------- --------------
---------- --------------
</TABLE>
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 5, 1998, there were 5,016 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.
However, the Registrant has entered into a Purchase Agreement to sell all of its
Properties for cash. If the Purchase Agreement is consummated, distributions of
the net proceeds and the remaining assets will be made to Unitholders.
Furthermore, it is unlikely that investors will be returned a significant
portion of their original investment upon the Sale of the Registrant's
Properties and ultimate dissolution of the Registrant.
5
<PAGE>
<PAGE>
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 Year ended
December 31, through October 31,
------------------------------------- December 31, ---------------------
1997 1996 1995 1994(1) 1994 1993
- -----------------------------------------------------------------------------------------------------------
(in thousands except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Total revenue................ $ 7,171 $ 6,414 $ 6,541 $ 1,125 $ 6,544 $ 6,841
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Provision for loss on
impairment of
assets..................... $ -- $ -- $ -- $ -- $ -- $ (250)
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Gain on disposition of
investments................ $ 82 $ 33 $ -- $ -- $ -- $ 338
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Net loss..................... $ (1,144) $(1,138) $ (1,032) $ (122) $ (794) $(1,898)
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Net loss per Unit............ $ (16.47) $(16.38) $ (14.86) $ (1.76) $(11.43) $(27.31)
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Total assets................. $ 32,621 $33,346 $ 34,388 $ 35,737 $36,110 $37,402
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Notes payable................ $ 26,650 $26,650 $ 26,621 $ 26,862 $26,917 $27,328
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
Total cash distributions..... $ -- $ -- $ -- $ -- $ -- $ --
------------ ------- ------------ ------------ ------- -----------
------------ ------- ------------ ------------ ------- -----------
</TABLE>
(1) In November 1994, the General Partners approved a change in the Registrant's
fiscal year for financial reporting purposes from October 31 to December 31.
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
6
<PAGE>
<PAGE>
copies of the reports they have filed with the Securities and Exchange
Commission during and with respect to its most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
Name Position
Brian J. Martin 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
BRIAN J. MARTIN, age 47, 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. Martin also
serves in various capacities for other affiliated companies. Mr. Martin joined
PSI in 1980. Mr. Martin is a member of the Pennsylvania Bar.
BARBARA J. BROOKS, age 49, 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 52, 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 54, 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 55, 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 47, is a Director of PBP. She is a Senior Vice President
and Deputy General Counsel of PSI and supervises nonlitigation legal work for
PSI. She joined PSI's Law Department in 1983; presently, she also serves in
numerous capacities for other affiliated companies.
Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director of Prudential-Bache Properties,
Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected
President, Chief Executive Officer, Chairman of the Board of Directors and
Director of Prudential-Bache Properties, Inc.
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 61, 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 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
7
<PAGE>
<PAGE>
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.
The directors and executive officers of Glenborough Corporation and their
positions with regard to managing the Registrant are as follows:
Name Position
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
Terri Garnick Chief Financial Officer
Kathleen Williams Vice President
June Gardner Director
Laurence N. Walker Director
ANDREW BATINOVICH, age 39, 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
President, Chief Operating 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 36, 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 49, 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 an Executive 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.
TERRI GARNICK, age 37, 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 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.
8
<PAGE>
<PAGE>
KATHLEEN WILLIAMS, age 49, has been Vice President, Multifamily Housing since
July 1996. She is responsible for management of the Company's multifamily units.
Ms. Williams has seventeen years experience in property management and
previously served eight years as Northern California Regional Manager for Maxim
Property Management in Redwood City, California; and for five years as Asset and
Property Manager for Trammell Crow Company in Dallas, Texas. She has a B.A. in
Foreign Language/Communications from North Texas State University.
JUNE GARDNER, age 46, 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.
LAURENCE N. WALKER, age 65, was elected a director of Glenborough Inland Realty
Corporation (merged into Glenborough Corporation on June 30, 1997) on January
10, 1996. He has been a member of the California State Bar since 1963, and is an
attorney specializing in in real estate law. Mr. Walker has been a director of
Glenborough Corporation related entities since 1985.
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, Frank Austin and Laurence N. Walker and all of the preferred stock is
owned by Glenborough Realty Trust Incorporated.
As of March 5, 1998, no director or executive officer of PBP owns directly or
beneficially any interest in the voting securities of PBP.
As of March 5, 1998, 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 5, 1998, 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.
9
<PAGE>
<PAGE>
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, 1997 and
December 31, 1996 3
Consolidated Statements of Operations--Years ended December 31, 1997, 1996
and 1995 4
Consolidated Statements of Changes in Partners' Capital--Years ended
December 31, 1997, 1996 and 1995 4
Consolidated Statements of Cash Flows--Years ended December 31, 1997, 1996
and 1995 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,
1997, 1996 and 1995
III--Consolidated Real Estate and Accumulated Depreciation--At December 31,
1997
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:
2 Consent Solicitation Statement dated January 23, 1998 (incorporated by
reference to Amendment No. 3 to Preliminary Proxy Statement on Schedule 14A
and Amendment No. 3 to Preliminary Proxy Statement on Schedule 13E-3 both
filed with the Securities and Exchange Commission on January 23, 1998.
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>
10
<PAGE>
<PAGE>
<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)
10(k) Purchase Agreement, dated as of Effective Date, by and among Registrant and
Glenborough Realty Trust Incorporated and Glenborough Properties, L.P.(2)
10(l) Amendment to Purchase Agreement dated December 19, 1997 by and among
Registrant and Glenborough Realty Trust Incorporated and Glenborough
Properties, L.P.(2)
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
13 Registrant's Annual Report to Unitholders for the year ended December 31,
1997 (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)
(b) Reports on Form 8-K--None
</TABLE>
- ---------------
(1) Incorporated by reference to applicable exhibit included in Registrant's
Current Report on Form 8-K dated December 20, 1996
(2) Incorporated by reference to Amendment No. 3 to Preliminary Proxy Statement
on Schedule 14A as filed with the Securities and Exchange Commission on January
23, 1998.
12
<PAGE>
<PAGE>
Deloitte & Touche LLP (LOGO)
50 Fremont Street
San Francisco, California 94105-2230
Telephone: (415) 247-4000
Facsimile: (415) 247-4329
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, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997 and have issued our report thereon dated
February 27, 1998; such financial statements and report are included in your
1997 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 consolidated financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
February 27, 1998
13
<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 Balance at Additions-Amounts written-off during end of
December 31, beginning of year reserved during year year year
- ------------ ----------------- -------------------- ------------------ ----------
<S> <C> <C> <C> <C>
1997 $ 500,000 $ -- $ -- $ 500,000
1996 500,000 -- -- 500,000
1995 500,000 -- -- 500,000
</TABLE>
14
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
SCHEDULE III--CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(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 $ 1,618 $ 1,678 $ 6,546 $ 8,224
Montrose Office Park
Rockville, MD
Office building
complex -- 5,918 15,766 3,024 5,918 18,790 24,708
Totem Valley
Business Center
Kirkland, WA
Industrial park -- 2,666 5,265 (442) 2,083 5,406 7,489
Gateway and Park
Plaza
Sacramento, CA
Office buildings -- 1,163 9,075 1,785 1,163 10,860 12,023
Note Payable 26,650
------------ ------- ------------- ------------- ------- ------------ ---------
Totals $ 26,650 $11,425 $35,034 $ 5,985 $10,842 $ 41,602 $ 52,444
------------ ------- ------------- ------------- ------- ------------ ---------
------------ ------- ------------- ------------- ------- ------------ ---------
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 $ 4,551 1974 5/01/86 30 years
Montrose Office Park
Rockville, MD
Office building 3 to
complex 8,438 1980-83 8/11/86 30 years
Totem Valley
Business Center
Kirkland, WA 3 to
Industrial park 2,773 1983-86 3/13/87 30 years
Gateway and Park
Plaza
Sacramento, CA 3 to
Office buildings 5,867 1982 6/15/87 30 years
Note Payable
-----------
Totals $21,629
-----------
-----------
</TABLE>
15
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
NOTES TO SCHEDULE III
(in thousands)
December 31, 1997
NOTE A--RECONCILIATION SUMMARY OF TRANSACTIONS--REAL ESTATE
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 51,387 $ 50,605 $ 50,013
Additions during period 1,057 810 592
------------ ------------ ------------
52,444 51,415 50,605
Cost of land conveyed -- (28) --
------------ ------------ ------------
Balance at end of period $ 52,444 $ 51,387 $ 50,605
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The allowance for loss on impairment for the above assets is $500 at December
31, 1997. 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, 1997 was $51,033.
NOTE B--RECONCILIATION SUMMARY OF TRANSACTIONS--ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 19,634 $ 17,905 $ 16,177
Additions during period 1,995 1,729 1,728
------------ ------------ ------------
Balance at end of period $ 21,629 $ 19,634 $ 17,905
------------ ------------ ------------
------------ ------------ ------------
</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.
16
<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 30, 1998
----------------------------------------
Eugene D. Burak
Vice President and Chief Accounting Officer
By: Glenborough Corporation
General Partner
By: /s/ Andrew Batinovich Date: March 30, 1998
----------------------------------------
Andrew Batinovich
Chief Executive Officer and Chairman of
the Board of Directors
By: Robert Batinovich
General Partner
By: /s/ Robert Batinovich Date: March 30, 1998
----------------------------------------
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/ Brian J. Martin Date: March 30, 1998
----------------------------------------
Brian J. Martin
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 30, 1998
----------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: /s/ Eugene D. Burak Date: March 30, 1998
----------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 30, 1998
----------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 30, 1998
----------------------------------------
Nathalie P. Maio
Director
17
<PAGE>
By: Glenborough Corporation and Robert Batinovich
General Partners
By: /s/ Robert Batinovich Date: March 30, 1998
----------------------------------------
Robert Batinovich
Individually
By: /s/ Andrew Batinovich Date: March 30, 1998
----------------------------------------
Andrew Batinovich
Chief Executive Officer and Chairman of
the Board of Directors
By: /s/ Terri Garnick Date: March 30, 1998
----------------------------------------
Terri Garnick
Chief Financial Officer
By: /s/ June Gardner Date: March 30, 1998
----------------------------------------
June Gardner
Director
By: /s/ Laurence N. Walker Date: March 27, 1998
----------------------------------------
Laurence N. Walker
Director
18
<PAGE>
1997
- --------------------------------------------------------------------------------
Prudential-Bache/Equitec Annual
Real Estate Partnership Report
<PAGE>
1997 ANNUAL REPORT
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
1
<PAGE>
Deloitte & Touche LLP (LOGO)
50 Fremont Street
San Francisco, California 94105-2230
Telephone: (415) 247-4000
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, 1997 and 1996 and the related consolidated
statements of operations, changes in partners' capital and cash flows for each
of the three years in the period ended December 31, 1997. 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, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of
Prudential-Bache/Equitec Real Estate Partnership at December 31, 1997 and 1996
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
February 27, 1998
(March 2, 1998 as to Note C)
2
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
(in thousands)
ASSETS
Investment in property:
Land $ 10,842 $ 10,842
Buildings, improvements and equipment 41,602 40,545
Less: Accumulated depreciation (21,629) (19,634)
Allowance for loss on impairment of assets (500) (500)
------------ ------------
Net investment in property 30,315 31,253
Cash and cash equivalents 1,106 697
Prepaid expenses and other assets, net 1,200 1,396
------------ ------------
Total assets $ 32,621 $ 33,346
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Note payable $ 26,650 $ 26,650
Due to affiliates 715 705
Accounts payable and accrued liabilities 664 266
Security deposits and deferred revenue 346 335
Real estate taxes payable 57 57
------------ ------------
Total liabilities 28,432 28,013
------------ ------------
Partners' capital
Unitholders (68,795 depositary units issued and outstanding) 4,454 5,587
General partners (265) (254)
------------ ------------
Total partners' capital 4,189 5,333
------------ ------------
Total liabilities and partners' capital $ 32,621 $ 33,346
------------ ------------
------------ ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1997 1996 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
(in thousands,
except per depositary unit
amounts)
REVENUES
Operating $ 6,719 $ 5,987 $ 5,982
Recovery of expenses 370 394 559
Gain on disposition of investments 82 33 --
------- ------- -------
7,171 6,414 6,541
------- ------- -------
EXPENSES
Property operating 2,628 2,873 2,813
Interest 2,471 2,429 2,411
Depreciation and amortization 2,600 2,025 1,965
General and administrative 616 225 384
------- ------- -------
8,315 7,552 7,573
------- ------- -------
Net loss $(1,144) $(1,138) $(1,032)
------- ------- -------
------- ------- -------
ALLOCATION OF NET LOSS
Unitholders $(1,133) $(1,127) $(1,022)
------- ------- -------
------- ------- -------
General partners $ (11) $ (11) $ (10)
------- ------- -------
------- ------- -------
Net loss per depositary unit $(16.47) $(16.38) $(14.86)
------- ------- -------
------- ------- -------
- -----------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL
UNITHOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
(in thousands)
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
Net loss (1,133) (11) (1,144)
----------- -------- -------
Partners' capital (deficit)--December 31, 1997 $ 4,454 $ (265) $ 4,189
----------- -------- -------
----------- -------- -------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------------------
1997 1996 1995
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,144) $ (1,138) $(1,032)
------- -------- -------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 2,600 2,025 1,965
Lease concessions-effective rents 18 72 69
Gain on disposition of investments (82) (33) --
Leasing commissions paid (405) (271) (260)
Changes in:
Prepaid expenses and other assets 15 196 (145)
Due to affiliates 10 5 (7)
Accounts payable and accrued liabilities 398 (25) (2)
Security deposits and deferred revenue 11 103 (30)
Real estate taxes payable -- (16) (37)
------- -------- -------
Total adjustments 2,565 2,056 1,553
------- -------- -------
Net cash provided by operating activities 1,421 918 521
------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Building and tenant improvements (1,057) (810) (592)
Proceeds from disposition of investments 140 61 --
------- -------- -------
Net cash used in investing activities (917) (749) (592)
------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan refinancing -- 26,650 --
Principal payments on notes -- (26,621) (241)
Loan fees (95) (307) --
------- -------- -------
Net cash used in financing activities (95) (278) (241)
------- -------- -------
Net increase (decrease) in cash and cash equivalents 409 (109) (312)
Cash and cash equivalents at beginning of period 697 806 1,118
------- -------- -------
Cash and cash equivalents at end of period $ 1,106 $ 697 $ 806
------- -------- -------
------- -------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 2,338 $ 2,409 $ 2,546
------- -------- -------
------- -------- -------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
5
<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 and Robert Batinovich (together, 'Glenborough') (collectively, the
'General Partners'). At December 31, 1997, the Partnership owned five
properties.
The Partnership has entered into a Purchase Agreement (the 'Purchase
Agreement') with Glenborough Realty Trust Incorporated and a subsidiary
partnership, Glenborough Properties, L.P., (together, the 'Purchaser'), which
are affiliates of two of the Partnership's general partners, Glenborough
Corporation and Robert Batinovich. Pursuant to the Purchase Agreement, the
Partnership intends to sell to the Purchaser (the 'Sale') all of the Properties
of the Partnership for cash. The Purchase Agreement provides for a purchase
price equal to $43,520,000. This price will be reduced by certain credits to the
Purchaser, which, in addition to any credits for secured obligations which are
assumed by the Purchaser, could approximate $737,000 as of February 28, 1998,
if certain items of deferred maintenance at the Properties are
not completed prior to the closing of the Sale. As a result
of unforeseen delays in processing the Consent Solicitation Statement
with the Securities and Exchange Commission, the Partnership
determined that updates of the appraisals of the Properties should
be obtained and so notified the Purchaser. New appraisals are presently being
prepared for the Partnership's Properties. It is anticipated that further
negotiations with the Purchaser will take place to determine the amount to be
paid for the Partnership's Properties.
Certain expenses, relating to lease commissions, lease concessions and loan
fees, have been deferred, although previously paid, and are amortized over the
terms of the respective leases or loans (see Note B below). At the closing of
the Sale, the remaining amount of these deferred items would be expensed. As of
December 31, 1997, the amount of such deferred items approximates $1,000,000.
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 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
The Partnership's investment in property is held for use and is recorded at
depreciated cost absent any impairment loss. If a property is determined to be
impaired, it is recorded at the lower of its carrying value or its estimated
fair value. 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.
Cash and cash equivalents
Cash and cash equivalents include money market funds whose cost approximates
market value.
6
<PAGE>
<PAGE>
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,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(in thousands)
Net loss, financial reporting basis $(1,144) $(1,138) $(1,032)
Rental concessions recorded for books not tax -- (120)
Book depreciation in excess of tax depreciation 722 481 475
------- ------- -------
Net loss, income tax basis $ (422) $ (657) $ (677)
------- ------- -------
------- ------- -------
</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 Note Payable
The Partnership's properties, net of accumulated depreciation, and the
related debt at December 31, 1997 and 1996 were:
<TABLE>
<CAPTION>
Investment Note Payable
------------------- -------------------
Property 1997 1996 1997 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
(in thousands)
Montrose Office Park, Rockville, MD $16,270 $16,541 $ -- $ --
Gateway and Park Plaza, Sacramento, CA 6,156 6,623 -- --
Totem Valley Business Center, Kirkland, WA 4,716 4,891 -- --
Poplar Tower, Memphis, TN 3,673 3,698 -- --
Less: allowance for loss on impairment of assets (500) (500) -- --
Note payable -- -- 26,650 26,650
------- ------- ------- -------
$30,315 $31,253 $26,650 $26,650
------- ------- ------- -------
------- ------- ------- -------
</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 $61,000
resulting in a gain of $33,000.
Notes 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 note agreement
dated December 13, 1996 with Wells Fargo Bank, N.A. ('WFB'), consolidated and
refinanced all of the existing notes on the five properties owned by the
Partnership (the 'Note'). WFB held notes on the Partnership's three remaining
properties Totem Valley, Gateway and Park Plaza.
The Note from WFB is in the amount of $26,650,000 (which approximates the
total amount of the individual notes on each of the five properties). The Note
bears interest at LIBOR + 3.5% (i.e., 9.5% at December 31, 1997) reset monthly
and matured on December 9, 1997. On December 9, 1997, the Partnership entered
into a modification agreement with WFB pursuant to which WFB agreed to extend
the maturity date of the Note until March 9, 1998. On March 2, 1998, the
Partnership entered into a second modification
7
<PAGE>
<PAGE>
agreement with WFB pursuant to which WFB agreed to extend the maturity date of
the Note until April 30, 1998. The Note 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.
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>
1998 $ 6,997
1999 5,937
2000 4,302
2001 2,880
2002 1,619
Thereafter 5,104
--------------
Total $ 26,839
--------------
--------------
</TABLE>
For the years ended December 31, 1997, December 31, 1996, December 31, 1995,
respectively, the following properties' rental revenues exceeded 15% of the
Partnership's total operating revenue:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Montrose Office Park 44% 40% 43%
Poplar Towers 17 19 --
</TABLE>
During the years ended December 31, 1997 and December 31, 1996, Technical
Resources, Inc., a tenant in the Montrose Office Park property, accounted for
approximately 10% of the Partnership's total operating 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 operating revenue for
the year ended December 31, 1995.
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>
Year ended December 31,
-------------------------
1997 1996 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
(in thousands)
PBP and affiliates
General and administrative $124 $ 60 $112
----- ----- -----
Glenborough Corporation and affiliates
Property management fee and expenses 686 634 663
Leasing commissions 119 131 136
----- ----- -----
805 765 799
----- ----- -----
$929 $825 $911
----- ----- -----
----- ----- -----
</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, 1997, PBP
was reimbursed $100,000, which was applied to prior years' general and
administrative expenses due. At December 31, 1997 and 1996, the total liability
outstanding to PBP was $715,000 and $705,000, 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, 1997.
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, 1997.
During the year ended December 31, 1997, the Partnership incurred $1,057,000
for building and tenant improvements primarily at the Montrose Office Park and
Poplar Towers properties. Of this amount, $609,000 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 1998 are currently
budgeted for approximately $900,000.
The Partnership had cash of $1,106,000 at December 31, 1997. PBP is not being
reimbursed for its general and administrative expenses (other than printing) on
a current basis. During the year ended December 31, 1997, PBP was reimbursed
$100,000, which was applied to prior years' general and administrative expenses
due. At December 31, 1997, the total liability outstanding (including printing)
was $715,000. 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 notes on the five properties. The new Note in the amount of $26,650,000
is secured by all of the properties and matured in December 1997. The
Partnership entered into a modification agreement with the lender in December
1997, pursuant to which the lender agreed to extend the maturity date of the
Note until March 9, 1998. On March 2, 1998, the Partnership entered into a
second modification agreement with WFB pursuant to which WFB agreed to extend
the maturity date of the Note until April 30, 1998.
The Partnership has entered into a Purchase Agreement to sell all of its
Properties for cash. (See Note A to Financial Statements.) 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
1997 versus 1996
The Partnership's net loss increased by only $6,000 for the year ended
December 31, 1997 as compared to 1996 for the reasons discussed below.
Property operating revenue increased by $732,000 for the year ended December
31, 1997 as compared to 1996 primarily due to an increase at Montrose Office
Park in the amount of $587,000 as a result of increased occupancy in addition to
moderate increases in revenues at the Partnership's other properties.
The Partnership recorded a gain of $82,000 from the disposition of an
investment in a captive insurance company for the year ended December 31, 1997.
Property operating expenses decreased by $245,000 for the year ended December
31, 1997 as compared to 1996 due primarily to decreases at Montrose Office Park,
Poplar Towers, and Park Plaza.
Depreciation and amortization increased by $575,000 for the year ended
December 31, 1997 as compared to 1996 primarily due to the amortization of loan
fees relating to the mortgage refinancing in addition to an increase in
depreciation as a result of increased building and tenant improvement additions.
General and administrative expenses increased by $391,000 for the year ended
December 31, 1997 as compared to 1996 primarily due to professional fees
incurred in connection with the Partnership preparing a consent solicitation
statement to the Unitholders in connection with the proposed sale of the
Partnership's Properties.
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
10
<PAGE>
<PAGE>
more than offset by a decrease at Montrose Office Park due to a major tenant's
lease expiring in May 1996. The increase and decrease 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 during 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 during the
year ended December 31, 1996 as compared to 1995 due to increased building and
tenant improvements.
General and administrative expenses decreased by approximately $159,000 for
the year ended December 31, 1996 as compared to 1995 in part due to appraisal
fees recorded in 1995.
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>
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-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Dec-31-1997
<PERIOD-TYPE> 12-Mos
<CASH> 1,106,000
<SECURITIES> 0
<RECEIVABLES> 1,200,000
<ALLOWANCES> 500,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,444,000
<DEPRECIATION> 21,629,000
<TOTAL-ASSETS> 32,621,000
<CURRENT-LIABILITIES> 1,782,000
<BONDS> 26,650,000
0
0
<COMMON> 0
<OTHER-SE> 4,189,000
<TOTAL-LIABILITY-AND-EQUITY> 32,621,000
<SALES> 0
<TOTAL-REVENUES> 7,171,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,844,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,471,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,144,000)
<EPS-PRIMARY> (16.47)
<EPS-DILUTED> 0
</TABLE>
