CARLYLE REAL ESTATE LTD PARTNERSHIP XV, 10-K405, 1999-03-31

CARLYLE REAL ESTATE LTD PARTNERSHIP XV
10-K405, 1999-03-31
REAL ESTATE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year
ended December 31, 1998 Commission file no. 0-16111

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(Exact name of registrant as specified in its charter)

Illinois 36-3314827
(State of organization) (IRS Employer Identification No.)

900 North Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each Class which registered
- ------------------- -----------------------------

None None

Securities registered pursuant to Section 12(g) of the Act:

LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.

Documents incorporated by reference: None

<PAGE>

TABLE OF CONTENTS

Page
----
PART I

Item 1. Business. . . . . . . . . . . . . . . . . . . . 1

Item 2. Properties. . . . . . . . . . . . . . . . . . . 7

Item 3. Legal Proceedings . . . . . . . . . . . . . . . 9

Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . . 9

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and Related
Security Holder Matters . . . . . . . . . . . . 9

Item 6. Selected Financial Data . . . . . . . . . . . . 10

Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . 14

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . . . 24

Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . 25

Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . 68

PART III

Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 68

Item 11. Executive Compensation. . . . . . . . . . . . . 70

Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 72

Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 73

PART IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 73

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 77

<PAGE>

PART I

ITEM 1. BUSINESS

Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report. Capitalized
terms used herein, but not defined, have the same meanings as used in the
Notes.

The registrant, Carlyle Real Estate Limited Partnership-XV (the
"Partnership"), is a limited partnership formed in August of 1984 and
currently governed by the Revised Uniform Limited Partnership Act of the
State of Illinois to invest in income-producing commercial and residential
real property. On July 5, 1985, the Partnership commenced an offering to
the public of $250,000,000 (subject to increase by up to $250,000,000) in
Limited Partnership Interests and assignee interests therein ("Interests")
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (No. 2-95382). A total of 443,711.76 Interests were sold to the
public at $1,000 per Interest. The offering closed on July 31, 1986.
Subsequent to admittance to the Partnership, no holder of Interests
(hereinafter, a "Holder" or "Holders of Interests") has made any additional
capital contribution. The Holders of Interests of the Partnership share in
their portion of the benefits of ownership of the Partnership's real
property investments according to the number of Interests held.

The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title, leasehold estates and/or through
joint venture partnership interests. The Partnership's real property
investments are located throughout the nation and it has no real estate
investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate no later
than December 31, 2035. The Partnership is self-liquidating in nature. At
sale of a particular property, the net proceeds, if any, are generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. The Partnership currently expects that
the 900 Third Avenue, Piper Jaffray Tower and California Plaza investment
properties will be sold or disposed of during 1999, barring any unforeseen
economic developments. However, the Partnership may be unable to dispose
of the Piper Jaffray Tower prior to December 31, 1999. The Partnership
currently expects to retain its interests in Wells Fargo Center - South
Tower beyond 1999.

The Partnership has made the real property investments set forth in
the following table:

<PAGE>

SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1998,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. 900 Third Avenue
Building
New York,
New York. . . . . . 517,000 8/20/84 9% fee ownership of land and
sq.ft. improvements
n.r.a. (through joint venture
partnerships) (c)
2. Piper Jaffray Tower
Minneapolis,
Minnesota . . . . . 723,755 12/27/84 6% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)
3. RiverEdge Place
Building
Fulton County
(Atlanta),
Georgia . . . . . . 235,762 6/10/85 12/23/97 fee ownership of land and
sq.ft. improvements (d)
n.r.a.
4. Wells Fargo Center -
South Tower
Los Angeles,
California. . . . . 1,100,000 6/28/85 18% fee ownership of land and
sq.ft. (h) improvements (through a
n.r.a. joint venture partnership)
(c)
5. Villa Solana
Apartments
Laguna Hills,
California. . . . . 272 units 8/30/85 3/23/94 fee ownership of land and
improvements (through a
joint venture partnership)
6. Eastridge Mall
Casper, Wyoming . . 477,019 9/10/85 6/30/95 fee ownership of land and
sq.ft. improvements (through a
g.l.a. joint venture partnership)

<PAGE>

7. Woodland Hills
Apartments
DeKalb County
(Atlanta),
Georgia . . . . . . 228 units 9/30/85 5/22/96 fee ownership of land and
improvements (d)
8. Park at Countryside
Apartments
Port Orange
(Daytona Beach),
Florida . . . . . . 120 units 11/27/85 5/5/94 fee ownership of land and
improvements (through a
joint venture partnership)
9. 160 Spear Street
Building
San Francisco,
California. . . . . 267,000 11/27/85 1/25/96 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through a
joint venture partnership)
(c)(j)
10. 21900 Burbank
Boulevard
Building
Los Angeles
(Woodland Hills),
California . . . . 87,000 11/29/85 3/21/96 fee ownership of land and
sq.ft. improvements (j)
n.r.a.
11. 300 East Lombard
Building
Baltimore,
Maryland. . . . . . 232,000 11/29/85 9/30/91 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnerships)
12. Boatmen's Center
Kansas City,
Missouri. . . . . . 285,000 12/16/85 8/31/89 fee ownership of land and
sq.ft. improvements (through a
n.r.a. joint venture partnership)
(c)(e)

<PAGE>

SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1998,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
13. 125 Broad Street
Building
New York,
New York. . . . . . 1,336,000 12/31/85 11/15/94 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnerships)
(c)(i)
14. Owings Mills
Shopping Center
Owings Mills
(Baltimore County),
Maryland. . . . . . 325,000 12/31/85 6/30/93 fee ownership of land and
sq.ft. improvements (through joint
g.l.a. venture partnerships)
(c)(d)
15. 260 Franklin
Street Building
Boston,
Massachusetts . . . 348,901 5/21/86 1/2/98 fee ownership of land and
sq.ft. improvements (through a
n.r.a. joint venture partnership)
(c)(d)
16. 9701 Wilshire
Building
Beverly Hills,
California. . . . . 98,721 6/17/86 10/6/94 fee ownership of land and
sq.ft. improvements
n.r.a.
17. California Plaza
Walnut Creek,
California. . . . . 368,290 6/30/86 7% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
(c)(f)(g)
18. Dunwoody Crossing
Apartments
(Phase I, II,
and III)
DeKalb County
(Atlanta),
Georgia . . . . . . 810 units 9/18/86 5/7/96 fee ownership of land and
improvements (through joint
venture partnerships)
(c)(d)

<PAGE>

19. NewPark Mall
Newark
(Alameda County),
California. . . . . 423,748 12/2/86 11/18/98 fee ownership of land and
sq.ft. improvements (through joint
g.l.a. venture partnerships)
(c)(d)
20. Springbrook Shopping
Center
Bloomingdale
(Chicago),
Illinois. . . . . . 189,651 7/5/89 1/31/97 fee ownership of land and
sq.ft. improvements (j)
g.l.a.
21. Erie-McClurg
Parking Facility
Chicago, Illinois . 1,073 spaces 7/21/89 9/25/92 fee ownership of land and
improvements

<PAGE>

- ----------------
<FN>

(a) The computation of this percentage for properties held at
December 31, 1998 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.

(b) Reference is made to the Notes and to Schedule III filed with this
annual report for the current outstanding principal balances and a
description of the long-term mortgage indebtedness secured by the
Partnership's real property investments.

(c) Reference is made to the Notes for a description of the joint
venture partnership or partnerships through which the Partnership made this
real property investment.

(d) Reference is made to the Notes for a description of the sale of
the Partnership's interest in this property.

(e) Reference is made to the Notes for a description of the amount
still due to the Partnership regarding a 1990 settlement reached with the
former venture partners.

(f) Reference is made to Item 8 - Schedule III filed with this annual
report for further information concerning the real estate taxes and
depreciation.

(g) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.

(h) Reference is made to the Notes for a description of the
reorganization and restructuring of the Partnership's interest in this
investment property.

(i) The Partnership's interest in this property was assigned to an
affiliate of the Partnership's unaffiliated venture partner in November
1994. Reference is made to the Notes for a description of the sale of the
Partnership's interest in this investment property.

(j) Reference is made to the Notes for a description of the
disposition of this investment property.

</TABLE>

<PAGE>

The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned by affiliates of the General Partners or properties owned by venture
partners or their affiliates) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing
tenants. Additionally, the Partnership is in competition for new tenants
in markets where significant vacancies are present. Reference is made to
Item 7 below for a discussion of competitive conditions and future
renovation and capital improvement plans of the Partnership and certain of
its significant investment properties. Approximate occupancy levels for
the properties are in the table in Item 2 below to which reference is
hereby made. The Partnership maintains the suitability and competitiveness
of its properties in its markets primarily on the basis of effective rents,
tenant allowances and service provided to tenants. In the opinion of the
Corporate General Partner of the Partnership, all of the investment
properties held at December 31, 1998 are adequately insured. Although
there is earthquake insurance coverage for a portion of the value of the
Partnership's investment properties, the Corporate General Partner does not
believe that such coverage for the entire replacement cost of the
investment properties is available on economic terms.

On January 2, 1998, 260 Franklin, through a trust, transferred title
to the 260 Franklin Street Office building in consideration of a discharge
of the mortgage loan and payment of $200 in cash. In November 1998, the
Partnership sold (through the NewPark Associates venture) the NewPark Mall
to the unaffiliated venture partner. Reference is made to Item 7 and the
Notes for a further description of the above transactions.

Reference is made to the Notes for a schedule of minimum lease
payments to be received in each of the next five years, and in the
aggregate thereafter, under leases in effect at the Partnership's
consolidated property as of December 31, 1998.

The Partnership has no employees.

The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.

ITEM 2. PROPERTIES

The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to
under Item 1 above to which reference is hereby made for a description of
said properties.

The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1998 and 1997 for the Partnership's investment properties owned
during 1998:

<PAGE>

<TABLE>
<CAPTION>
1997 1998
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 900 Third Avenue Building
New York, New York. . . . Legal Services/
Detective Agency/
Insurance 98% 98% 97% 97% 97% 100% 99% 97%
2. Piper Jaffray Tower
Minneapolis, Minnesota. . Legal/Advertising/
Financial Services 99% 99% 93% 93% 93% 89% 89% 89%
3. Wells Fargo Center
- South Tower
Los Angeles,
California. . . . . . . . Business Informa-
tion Systems/
School District/
Legal Services 93% 90% 90% 90% 90% 90% 90% 85%
4. 260 Franklin Street
Building
Boston, Massachusetts . . Financial Services 96% 97% 98% 98% N/A N/A N/A N/A

5. California Plaza
Walnut Creek,
California. . . . . . . . Manufacturing/
Public Utility 90% 96% 96% 100% 100% 96% 96% 97%
6. NewPark Mall
Newark (Alameda County),
California. . . . . . . . Retail 76% 75% 76% 79% 77% 77% 77% N/A

<FN>
- --------------------
Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.

An "N/A" indicates that the property, or Partnership's interest in the property was sold or disposed of and
was not owned by the Partnership at the end of the quarter.

</TABLE>

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Partnership is not subject to any material pending legal
proceedings. Reference is made to the Notes for a discussion of certain
litigation involving the Partnership related to the 900 Third Avenue
investment property.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
the 1998 and 1997.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of December 31, 1998, there were 40,626 record Holders of the
443,580.65588 Interests outstanding in the Partnership. There is no public
market for Interests, and it is not anticipated that a public market for
Interests will develop. Upon request, the Corporate General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspect of the transaction, will be
subject to negotiation by the investor. There are certain conditions and
restrictions on the transfer of Interests, including, among other things,
the requirement that the substitution of a transferee of Interests as a
Limited Partner of the Partnership be subject to the written consent of the
Corporate General Partner, which may be granted or withheld in its sole and
absolute discretion. The rights of a transferee of Interests who does not
become a substituted Limited Partner will be limited to the rights to
receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Corporate General Partner
has been received by the Corporate General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses from operations of the
Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the Holder of the
Interests, without regard to the results of the Partnership's operations
during particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized Holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a Holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
Holder of the Interests as of the last day of the quarterly period with
respect to which such distribution is made.

Reference is made to the Notes for a discussion of the provisions of
the Partnership Agreement relating to cash distributions. Reference is
made to Item 6 below for a discussion of cash distributions made to the
Holders of Interests. The cash flows generated from operations by most of
the Partnership's investment properties are segregated or restricted as to
their use pursuant to or as a result of the mortgage loans secured by such
investment properties as more fully discussed in the Notes.

Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.

<PAGE>

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1998 1997 1996 1995 1994
------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . $ 11,459,393 24,349,848 28,496,327 45,415,094 53,107,469
============ ============ =========== =========== ===========
Earnings (loss) before
gains on sale or dispo-
sition of investment
properties. . . . . . . . $ (4,060,852) (2,888,815) (49,291,781) (19,930,715) (29,725,306)
Gain on liquidation of
investment in venture . . -- 269,147 -- -- --
Gains on sale or disposi-
tion of investment
properties (net of
venture partner's share
of $204,139 in 1996
and $823,609 in 1994)
and manager's incentive
fee of $1,730,016
in 1996 . . . . . . . . . 23,212,184 8,631,561 12,230,126 6,785,025 3,597,347
Gains on sale or disposi-
tion of interests
in unconsolidated
ventures. . . . . . . . . 10,744,678 568,625 435,060 856,751 31,743,006
------------ ------------ ----------- ----------- -----------
Earnings (loss) before
extraordinary items
and cumulative effect
of an accounting
change. . . . . . . . . . 29,896,010 6,580,518 (36,626,595) (12,288,939) 5,615,047
Extraordinary items. . . . 17,451,802 5,992,828 35,222,847 -- --
Cumulative effect of
an accounting change. . . -- -- (30,000,000) -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . $ 47,347,812 12,573,346 (31,403,748) (12,288,939) 5,615,047
============ ============ =========== =========== ===========

<PAGE>

1998 1997 1996 1995 1994
------------- ------------- ----------- ------------ ------------
Net earnings (loss)
per Interest:
Earnings (loss) before
gains on sale or dispo-
sition of investment
properties. . . . . . . $ (8.79) (6.25) (106.67) (43.12) (64.31)
Gain on liquidation
of investment in
venture . . . . . . . . -- .60 -- -- --
Net gains on sale
or disposition
of investment
properties. . . . . . . 51.81 19.26 27.29 17.05 8.03
Gains on sale or
disposition of
interests in uncon-
solidated ventures. . . 23.98 1.27 .97 -- 70.83
Extraordinary item . . . 38.95 13.37 78.61 -- --
Cumulative effect of
an accounting change. . -- -- (64.92) -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . $ 105.95 28.25 (64.72) (26.07) 14.55
============ ============ =========== =========== ===========

Total assets . . . . . . . $ 89,187,533 145,738,009 174,989,293 301,007,974 327,662,913
Long-term debt . . . . . . $118,190,463 109,972,972 102,089,968 108,528,346 246,148,319
Cash distributions
per Interest (b). . . . . $ 40.33 .83 26.37 8.09 5.00
============ ============ =========== =========== ===========

<FN>
- -------------

(a) The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.

(b) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (loss) from the Partnership in
each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the
cash generated or distributed by the Partnership. Accordingly, cash distributions to the Holders of Interests
since the inception of the Partnership have not resulted in taxable income to such Holders of Interests and have
therefore represented a return of capital.

</TABLE>

<PAGE>

<TABLE>

SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1998

Property
- --------

California Plaza a) The occupancy rate of net rentable square feet ("NRF") and average base rent per square
foot as of December 31 for each of the last five years were as follows:

Avg. Annual
NRF Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ---------------
<S> <C> <C> <C> <C>

1994 . . . . . . 95% 17.79
1995 . . . . . . 90% 16.97
1996 . . . . . . 90% 13.21
1997 . . . . . . 100% 13.66
1998 . . . . . . 97% 15.24
<FN>
(1) Average annual base rent per square foot is based on NRF occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>

Maxis (1) 42,398 $ 545,047 11/2002 N/A

Liquid Air 54,974 $2,045,814 01/2001 N/A

(1) In June 1995, the venture entered into a seven year direct lease with Maxis for an
approximately 38,500 square foot space formerly occupied by Liquid Air. In addition, Liquid Air guaranteed the
obligations under the Maxis lease up to $1,500,000 through its original expiration date of January 2001. Liquid
Air paid the venture $3,740,000, of which $2,745,058 relates to future lost rents. Reference is made to the Notes
for a further description of the above transaction.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at Cal Plaza:

Annualized Percent of
Number of Approx. Total Base Rent Total 1998
Year Ending Expiring NRF of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>

1999 11 48,499 559,775 10.28%
2000 4 5,722 92,393 1.70%
2001 11 99,793 2,676,194 49.16%
2002 12 143,183 1,971,978 36.22%
2003 2 6,527 116,851 2.15%
2004 3 21,825 353,616 6.50%
2005 -- -- -- --
2006 2 32,704 474,456 8.71%
2007 -- -- -- --
2008 -- -- -- --
<FN>
(1) Excludes leases that expire in 1999 for which renewal leases or leases with
replacement tenants have been executed as of March 21, 1999.
</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

Capitalized terms used but not defined herein have the same meanings
as in the Notes. As a result of the public offering of Interests as
described in Item 1, the Partnership had approximately $385,000,000 (after
deducting selling expenses and other offering costs) with which to make
investments in income-producing commercial and residential real property,
to pay legal fees and other costs (including acquisition fees) related to
such investments and to satisfy working capital requirements. A portion of
the proceeds was utilized to acquire the properties described in Item 1
above.

The board of directors of JMB Realty Corporation ("JMB"), the
Corporate General Partner of the Partnership, has established a special
committee (the "Special Committee") consisting of certain directors of JMB
to deal with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offer for Interests and previously
retained Lehman Brothers Inc. through June 30, 1998 as financial advisor to
assist the Special Committee in evaluating and responding to potential
tender offers for Interests.

In March 1998, an unaffiliated third party made an unsolicited offer
to purchase up to 20,000 Interests at $30 per Interest. Such offer expired
at the end of April 1998. The Special Committee recommended against
acceptance of this offer on the basis that, among other things, the offer
price was inadequate. In September 1998, an unaffiliated third party made
an unsolicited offer to purchase up to 20,000 Interests at $15 per
Interest. Such offer expired in October 1998. As of the date of this
report, the Partnership is aware that 2% of the Interests have been
purchased by unaffiliated third parties who have made unsolicited offers
for Interests, either pursuant to such offers or through negotiated
purchases. It is possible that other offers for Interests may be made by
unaffiliated third parties in the future, although there is no assurance
that any other third party will commence an offer for Interests, the terms
of any such offer or whether any such offer, if made, will be consummated,
amended or withdrawn.

At December 31, 1998, the Partnership and its consolidated ventures
had cash and cash equivalents of approximately $27,000,000. Such funds and
certain escrowed amounts (which are restricted as to their use) were
available for the payment of the Partnership's share of leasing costs and
capital improvements for its investment properties as well as for future
distributions to partners, working capital requirements. In February 1999,
the Partnership made a sales distribution totalling $6,653,710 ($15 per
Interest) out of sale proceeds (primarily related to the sale of the
NewPark Mall). In addition, the General Partners and their affiliates have
previously deferred management and leasing fees payable to them in an
aggregate amount of approximately $2,653,000 (approximately $6 per
Interest) relating to the Partnership's investment properties, which amount
includes the Partnership's proportionate share of such fees for its
consolidated and unconsolidated entities. Such fees do not bear interest
and are expected to be paid in the future.

As discussed more fully below, in March 1999 JMB/900 settled various
claims and acquired the interests of the FDIC and the unaffiliated venture
partners in Progress Partners, which owns the 900 Third Avenue office
building, for $16,300,000, of which $13,800,000 was paid upon closing of
the various transactions. In connection with these transactions, the
Partnership contributed its proportionate share (approximately $9,200,000)
of the $13,800,000 to JMB/900.

<PAGE>

The Partnership and its consolidated venture have currently budgeted
in 1999 approximately $1,025,000 for tenant improvements and other capital
expenditures at the California Plaza building. The Partnership's share of
such items and its share of such similar items for Piper Jaffray Tower and
the 900 Third Avenue office building in 1999 are currently budgeted to be
approximately $1,404,000. Actual amounts expended in 1999 may vary
depending on a number of factors including actual leasing activity, results
of property operations, liquidity considerations and other market
conditions over the course of the year. All of the Partnership's
investment properties are restricted as to their use of excess cash flow by
escrow agreements negotiated pursuant to loan modifications. In such
regard, reference is made to the Partnership's property specific
discussions below and also to the Partnership's disclosure of certain
property lease expirations in Item 6. Due to the property specific
concerns discussed below, the Partnership currently considers only the 900
Third Avenue and California Plaza investment properties to be potential
significant sources of future cash generated from sales.

PIPER JAFFRAY TOWER

Occupancy of the building at the end of the fourth quarter of 1998 was
89%.

The property is subject to a mortgage loan in the original principal
amount of $100,000,000, of which approximately $95,741,000 is outstanding
as of December 31, 1998. The lender is essentially entitled to all
operating cash flow. In addition to fixed interest on the mortgage notes
secured by the Piper Jaffray Tower, contingent interest is payable in
annual installments on April 1 computed at 50% of gross receipts, as
defined, for each fiscal year in excess of $15,200,000. No such contingent
interest was due for 1996, 1997 or 1998. In addition, to the extent the
investment property generates cash flow after payment of the fixed interest
on the mortgage, contingent interest, if any, leasing and capital costs,
and 25% of the ground rent, such amount will be paid to the lender as a
reduction of the principal balance of the mortgage loan. The excess cash
flow payments remitted to the lender for 1996 and 1997 totalled $741,627
and $385,523, respectively. During 1998, no such excess cash flow was
generated.

In addition, the mortgage loan provides that upon sale or refinancing,
the lender is entitled to prepayment fees as well as a significant level of
proceeds in excess of the then unpaid principal balance prior to
JMB/Piper's receipt of proceeds. While the loan modification provides
JMB/Piper with an opportunity to retain an ownership position in the
property, under the current terms of the modified debt, there must be
significant additional improvement in current market and property operating
conditions resulting in a substantial increase in the value of the property
before JMB/Piper can share in sale or refinancing proceeds. Currently,
Piper generates enough operating cash flow to meet the required debt
service payments. However, Piper may not be able to pay the required debt
service over the next several years as a result of the Popham Haik
("Popham") and Piper Jaffray, Inc. ("PJI") situations discussed below.
JMB/Piper will not commit additional capital to Piper unless, among other
things, it believes that upon sale of the property it will receive a return
of such funds and a reasonable rate of return thereon. If a funding
requirement arises and none of the Piper partners contribute the required
capital, the lender would likely take title to the property. Such
disposition of the property would result in JMB/Piper, and therefore the
Partnership, recognizing a significant amount of gain for financial
reporting and Federal income tax purposes with no corresponding
distributable proceeds.

During 1997, JMB/Piper, on behalf of Piper, explored refinancing
alternatives with the lender. Although JMB/Piper had intended to pursue
further discussions with the lender concerning possible refinancing and/or
loan modification alternatives, it currently appears unlikely that an
agreement with respect to such a transaction will be made.

<PAGE>

On a monthly basis, Piper deposits the property management fee into an
escrow account to be used (including interest earned thereon) for future
leasing costs to the extent cash flow is not sufficient to cover such
items. To date, no escrow funds have been required to be used for leasing
costs. At December 31, 1998, the balance of such escrow account totaled
approximately $5,441,000. The manager of the property (which was an
affiliate of the Corporate General Partner through November 1994) has
agreed to defer receipt of its management fee until a later date. As of
December 31, 1998, the manager has deferred approximately $4,445,000
($1,839,000 of which represents deferred fees due to affiliates through
November 1994, of which $919,500 is the Partnership's share) of management
fees.

During the third quarter of 1997, Popham informed Piper that effective
in November 1997, it would cease operations as Popham and consolidate with
another law firm, Hinshaw & Culberson ("Hinshaw"). In December 1997, Piper
signed a non-binding letter of intent with Hinshaw to lease 31,920 square
feet of the Popham space for a term of five years, commencing January 1,
1998, at a market rental rate which exceeded Popham's modified rate that
became effective in August 1997. Popham had paid its modified rent through
the end of 1997. Commencing in January 1998, Hinshaw began paying rent in
accordance with the letter of intent. In May 1998, Piper executed the
lease with Hinshaw in accordance with the letter of intent and Piper
terminated Popham's lease (for approximately 47,000 square feet) effective
December 31, 1997 with no further consideration.

Piper had discussed an early renewal with PJI which occupies 332,823
square feet or approximately 46% of the building's rentable square feet,
with a lease expiration date at March 31, 2000. Piper and PJI were unable
to come to terms and PJI announced that it would be moving to a new
building (to be built in Minneapolis) upon expiration of its existing lease
in 2000.

As a result of a flood in 1997, the property incurred significant
repair costs in 1998. Piper completed such repairs and the balance
(approximately $1,100,000) is expected to be reimbursed by the insurance
carrier in 1999. JMB/Piper made certain advances to Piper for such costs,
and expects to have the advances repaid upon reimbursement from the
insurance carrier.

As of September 30, 1997, the JMB/Piper venture has classified the
property as held for sale or disposition. The Property will therefore no
longer be subject to continued depreciation.

160 SPEAR STREET BUILDING

In January 1996, the Partnership, through the joint venture,
transferred title to the lender in full satisfaction of the loan secured by
the property. Reference is made to the Notes for a description of such
transfer.

JMB/125

In October 1995, the makers of the $5 million promissory note payable
to JMB/125 filed for protection from creditors under Chapter 11 of the
Bankruptcy Code. Pursuant to the bankruptcy reorganization of the makers
of the note, JMB/125, as an unsecured creditor, received limited
partnership interests and a convertible note interest in a reorganized
entity that has majority or controlling interests in six office buildings
in New York, New York and Boston, Massachusetts. The assigned value, as of
the bankruptcy confirmation date, of the interests and note received by
JMB/125 was approximately $400,000. The convertible note was fully
reserved due to the uncertainty of the realizable value of the note. In
June 1997, the convertible note receivable for $297,000 was collected on by

<PAGE>

JMB/125 resulting in the recognition of gain, of which the Partnership's
share was $174,654. In December 1998, the limited partnership interests
were sold back to the reorganized entity for $118,642 resulting in
recognition of gain, of which the Partnership's share was $81,612.
Reference is made to the Notes.

260 FRANKLIN

The long-term mortgage loan in the original principal amount of
approximately $75,000,000 plus accrued and deferred interest matured
January 1, 1996. 260 Franklin, as of such date, began submitting the net
operating cash flow of the property to the lender while seeking an
extension or refinancing of the loan. Concurrent with such lender
negotiations, 260 Franklin also began investigating market conditions to
determine whether conditions were favorable for selling the property.
However, it was determined that conditions were not favorable and the
property continued to be held as investment property. The joint venture
reached agreements with the lender for extensions of the mortgage loan
through January 1, 1997 and again through January 1, 1998. In addition to
substantially the same terms as were in effect prior to such extensions,
the agreement required that the property submit net operating cash flow of
the property to the lender. In addition, the lender indicated that it
would not extend the loan beyond January 1, 1998. 260 Franklin and the
Partnership believed that the value of the office building was less than
the mortgage loan, and the Partnership did not intend to expend any
additional funds of its own on the property. Accordingly, 260 Franklin
began negotiations with the lender and an unaffiliated third party
regarding the sale of the property to the unaffiliated third party. Due to
the lender negotiations described above, the property was classified as
held for sale or disposition as of July 1, 1997, and therefore, was not
subject to continued depreciation as of that date.

Effective January 1, 1998, 260 Franklin entered into a loan
modification agreement with the lender in which the lender waived accrued
unpaid interest owed for the period prior to January 1, 1998, which was
approximately $17,200,000. On January 2, 1998, 260 Franklin through a
trust disposed of the land, building and related improvements of the 260
Franklin Street Building. 260 Franklin transferred title to the land,
building and improvements, and all other assets and liabilities related to
the property in consideration of a discharge of the mortgage loan and
receipt of $200 in cash. 260 Franklin recognized in 1998 gains in the
aggregate of approximately $23,200,000, in part as a result of previous
impairment losses recognized by 260 Franklin in 1996 aggregating
$17,400,000, and an extraordinary gain on discharge of indebtedness of
approximately $17,500,000 for financial reporting purposes, all of which is
included in the consolidated financial statements of the Partnership. In
addition, 260 Franklin recognized a gain of approximately $24,400,000 for
Federal income tax purposes, of which the Partnership's share was
approximately $17,000,000, with no distributable proceeds. 260 Franklin
and the Partnership have no future liability for any representations,
warranties or covenants to the purchaser as a result of the disposal of the
property. Reference is made to the Notes.

900 THIRD AVENUE BUILDING

Occupancy of this building at the end of the fourth quarter of 1998
was 97%.

Progress Partners had been negotiating with the building's major
tenant, Schulte, Roth & Zabel (120,991 square feet with a lease expiration
date of May 31, 2000), for an early renewal and expansion of its lease.
However, in the second quarter of 1998, the tenant informed Progress
Partners of its intent to vacate all of its space upon the expiration of
its current lease.

<PAGE>

Pursuant to the extension of the mortgage loan, net cash flow (as
defined) is paid into an escrow account controlled by the lender. The
escrow account, including interest earned thereon, will be used by Progress
Partners for payment of property taxes and releasing costs associated with
leases which expire in 1999 and 2000 (approximately 50% of the building
including the Schulte, Roth & Zabel lease discussed above). The remaining
proceeds in this escrow plus interest earned thereon, if any, will be
released to Progress Partners once 90% of such space has been renewed or
released. During 1998, approximately $10,262,000 has been deposited into
escrow from net cash flow from property operations. Additionally,
approximately $5,149,000 has been withdrawn from the escrow account for
payment of real estate taxes in 1998.

In July 1998, JMB/900 entered into an agreement with the Venture
Partners and a judgment creditor of JRA and PPI (such judgment creditor,
JRA and PPI are hereinafter collectively referred to as the "Progress
Parties") to resolve outstanding claims. The agreement was subject to
occurrence of various terms and conditions, which failed to occur. In a
further effort to resolve outstanding claims and to place JMB/900 in a
position to control and market the property, JMB/900 entered into a
settlement agreement with the Progress Parties effective as of March 17,
1999 ("Settlement Agreement"). The Settlement Agreement generally provides
for the settlement and release of all claims and causes of action by and
against JMB/900 and the Progress Parties related to or arising from the
joint venture relationship or the property including, without limitation,
any claims by the Venture Partners to Guaranteed Payments and any claims by
Progress Partners for capital contributions from JMB/900. Under the
Settlement Agreement and related transactions, JMB/900 and an affiliate
acquired all of the right, title and interest of the Progress Parties in
the property, Progress Partners and PC-900 and resolved all outstanding
litigation in exchange for a total payment of $16.0 million, $13.5 million
of which was paid at closing of the Settlement Agreement with the remaining
$2.5 million to be paid upon the earlier of (i) closing of a sale of the
property by Progress Partners or (ii) January 3, 2000. In a related
agreement and for the payment of $300,000 and the release of various
claims, the litigation and claims by and between the FDIC and JMB/900 were
resolved and dismissed. As part of the settlement, the limited partnership
interests in PC-900 in Progress Partners were assigned to 14-15 Office
Associates, L.P. ("Office Associates"), in which JMB/900 owns a 99% limited
partnership interest. P-C 900's interest in Progress Partners was then
transferred to JMB/900 and Office Associates, which are now the sole
remaining partners in Progress Partners. Amendments to the joint venture
agreement of Progress Partners were made to effectuate the terms of the
settlement and the substitution of partners.

WELLS FARGO CENTER - SOUTH TOWER

The Wells Fargo Center ("South Tower") operates in the downtown Los
Angeles office market, which has been extremely competitive over the last
several years. The Partnership expects that the competitive market
conditions in Southern California will have an adverse affect on the
building through lower effective rental rates achieved on re-leasing of
existing space which expires or is given back over the next several years.
In addition, new leases are expected to require substantial expenditures
for lease commissions and tenant improvements prior to occupancy. This
anticipated decline in rental rates, the anticipated increase in re-leasing
time and the costs upon releasing will result in a decrease in cash flow
from operations over the next several years.

During 1996, the Partnership, the joint venture, and the lenders
reached an agreement to modify the mortgage note and the promissory note
secured by the Partnership's interest in the property. In conjunction with
the note modifications, Maguire/Thomas Partners - South Tower LLC was
converted to a limited liability company with members' interests in the
same ratio as the prior venture ownership interests. The conversion of the

<PAGE>

Partnership's interest to a member's interest in a limited liability
company eliminates any potential additional obligation of the Partnership
in the future to provide additional funds under the previous joint venture
agreement. As a result, previously recognized losses of $10,620,944 have
been reversed and the Partnership's 1998 and 1997 shares of income for
financial reporting purposes (approximately $464,000 and $286,000,
respectively) have not been recognized as such amounts are not considered
realizable. Since the terms of the modified mortgage note and the amended
and restated promissory note make it unlikely that the Partnership would
recover any incremental investment, the Partnership has decided not to
commit any significant additional amounts to the property. Reference is
made to the Notes for a further description of these events.

RIVEREDGE PLACE BUILDING

On December 23, 1997, the Partnership sold the land and related
improvements of the RiverEdge Place office building for $26,600,000 (before
selling costs and retirement of indebtedness of approximately $23,000,000).

Reference is made to the Notes for a further description of such
transaction.

21900 BURBANK BUILDING

In March 1996, the lender realized upon its security and took title to
the property in full satisfaction of the loan secured by the property.
Reference is made to the Notes for a further description of such transfer.

NEWPARK ASSOCIATES

Pursuant to a liquidation agreement dated November 13, 1998, the
Partnership, its affiliated venture partner and its unaffiliated venture
partner dissolved NewPark Associates and distributed all of its assets to
the partners. On November 18, 1998, the Partnership and its affiliated
venture partner sold their interests in the net assets of the NewPark Mall
to the unaffiliated joint venture partner for $16,000,000 of which the
Partnership's share was $14,400,000. As a result of the sale, the
Partnership recognized a gain for financial reporting purposes of
approximately $7,656,000 in 1998, in part as a result of previous
impairment loss recognized by the Partnership of $3,870,000. The
Partnership recognized a gain on sale of approximately $4,781,000 for
Federal income tax purposes in 1998. Reference is made to the Notes.

CALIFORNIA PLAZA

The Partnership modified the loan secured by the property on
December 22, 1993. As more fully discussed in the Notes, the loan
modification reduced the pay rate of monthly interest only payments to 8%
per annum, effective February 1993, extended the loan maturity date to
January 1, 2000, and requires the net cash flow of the property to be
escrowed (as defined) with a portion to be used to fund a reserve account.
The venture also funded $500,000 into the reserve account as required by
the modification agreement. This reserve account (including interest
earned thereon) is to be used to fund future costs, including tenant
improvements, leasing commissions and capital improvements, approved by the
lender (none used as of December 31, 1998). The property has been
classified as held for sale or disposition as of December 31, 1996, and
therefore, has not been subject to continued depreciation. The mortgage
loan secured by the property matures on January 1, 2000. As discussed
below, the Partnership currently expects that the property will be sold
during 1999. In the event such sale does not occur during 1999, the joint
venture that owns the property expects to seek an extension or refinancing
of the loan.

SPRINGBROOK SHOPPING CENTER

As a result of the non-payment of debt service, the lender realized
upon its security and took title to the property in January 1997 in full
satisfaction of the loan secured by the property. Reference is made to the
Notes for a further description of such transaction.

<PAGE>

WOODLAND HILLS APARTMENTS

On May 22, 1996, the Partnership sold the Woodland Hills apartment
complex to an unaffiliated third party for $12,225,000 (before selling
costs and retirement of indebtedness of approximately $8,175,000).
Reference is made to the Notes for a further description of such event.

VILLAGES NORTHEAST

On May 7, 1996, the Partnership, through a joint venture, sold the
Dunwoody Crossing Phases I, II and III apartment complex to an unaffiliated
third party for $47,000,000 (before selling costs and retirement of
indebtedness of approximately $30,900,000). Reference is made to the Notes
for a further description of such event.

GENERAL

Certain of the Partnership's investments have been made through joint
ventures. There are certain risks associated with the Partnership's
investments made through joint ventures, including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.

The borrowings of the Partnership and its ventures consist of separate
non-recourse mortgage loans secured by the investment properties and
individually are not obligations of the entire investment portfolio.
However, for any particular investment property that is incurring deficits
or for which the existing financing has matured, the Partnership or its
ventures may seek a modification or refinancing of existing indebtedness
and, in the absence of a satisfactory debt modification or refinancing, may
decide, in light of the then existing and expected future market conditions
for such investment property, not to commit additional funds to such
investment property. This would likely result in the Partnership no longer
having an ownership interest in such property and would generally result in
net gain to the Partnership for financial reporting and Federal income tax
purposes with no corresponding distributable proceeds.

In February 1998, the Partnership made a distribution to the Holders
of Interests of $4,436,037 ($10 per Interest) of previously undistributed
sale proceeds along with sale proceeds from the sale of the RiverEdge Place
building. In September 1998, the Partnership made a distribution of
$13,307,420 ($30 per Interest) to the Holders of Interests representing
sale proceeds ($7 per Interest) from collection of the purchase price note
received in the sale of Owings Mills Shopping Center in 1993 and previously
undistributed operational cash flow ($23 per Interest). The General
Partners received a distribution from operational cash flow of $425,098 and
a management fee to the Corporate General Partner of $708,497. In February
1999, the Partnership made a distribution of $6,653,710 ($15 per Interest)
to the Holders of Interests representing sale proceeds from the sale of
NewPark Mall.

Although the Partnership expects to distribute sales proceeds from the
sale of the 900 Third Avenue and California Plaza investment properties,
aggregate distributions of sale and refinancing proceeds received by
Holders of Interests over the entire term of the Partnership will be
substantially less than one-fourth of their original investment. However,
in connection with sales or other dispositions (including transfers to
lenders) of properties (or interests therein) owned by the Partnership or
its joint ventures, the Holders of Interests will be allocated gain for
Federal income tax purposes, regardless of whether any proceeds are
distributable from such sales or other dispositions. In particular, the
Piper Jaffray Tower and Wells Fargo Center (South Tower) investment
properties continue to suffer from the effects of the high levels of debt

<PAGE>

secured by each property and provide no cash flow to the Partnership.
While loan and joint venture modifications have been obtained that enable
the Partnership to retain an ownership interest in these properties, it is
currently unlikely under existing arrangements that the Partnership will
receive significant proceeds from operations or sales of these properties.
However, upon disposition, the Partnership, and therefore, the Holders of
Interests will recognize a significant amount of taxable income with no
distributable proceeds. For certain Holders of Interests, such taxable
gain may be offset by their suspended passive activity losses (if any).
Each Holder's tax consequences will depend on such Holder's own tax
situation.

Due to the real estate conditions over the past several years, the
Partnership has held its remaining investment properties longer than
originally anticipated in an effort to maximize the return of their
investment to the Holders of Interests. The Partnership currently expects
that the 900 Third Avenue, Piper Jaffray Tower and California Plaza
investment properties will be sold or disposed of during 1999, barring any
unforeseen economic developments. However, the Partnership may be unable
to dispose of the Piper Jaffray Tower prior to December 31, 1999. The
Partnership currently expects to retain its interest in Wells Fargo Center
- - South Tower beyond 1999.

RESULTS OF OPERATIONS

Significant fluctuations in the accompanying consolidated financial
statements are due to the sales of the 260 Franklin Street Building in
January 1998, the RiverEdge Place office building in December 1997, and the
Dunwoody Crossings and Woodland Hills apartment complexes in 1996 and the
respective lenders obtaining legal title to the Springbrook Shopping Center
in 1997 and the 160 Spear Street and 21900 Burbank buildings in 1996.

The increase in interest, rents and other receivables at December 31,
1998 as compared to December 31, 1997 is primarily due to advances to
JMB/Piper made in 1998, for payments of repairs for flood damage which are
expected to be repaid from insurance proceeds in 1999.

The increase in current portion of note receivable and long-term
portion of note receivable at December 31, 1998 as compared to December 31,
1997 is due to the promissory note received at California Plaza as
described in the notes.

The increase in escrow deposits and restricted securities at
December 31, 1998 as compared to December 31, 1997 is due to the continued
escrow of excess cash flow pursuant to the loan modification at the Cal
Plaza Office building.

The decrease in other restricted securities at December 31, 1998 as
compared to December 31, 1997 is due to the remittance of cumulative cash
flow from the RiverEdge Place office building to the property's lender in
payment of deferred interest in conjunction with the sale of the property
in 1997.

The decrease in investment in unconsolidated ventures, at equity at
December 31, 1998 as compared to December 31, 1997 is primarily due to the
liquidation of the NewPark joint venture and sale of the Partnership's
interest in NewPark Mall to the unaffiliated joint venture partner in
November 1998.

The decrease in accounts payable at December 31, 1998 as compared to
December 31, 1997 is primarily due to a pro rata portion of the management
and leasing fees payable by 260 Franklin Street Associates reclassed to the
Partnership's venture partner (Carlyle - XVI) upon disposition of the 260
Franklin Street building in January 1998.

<PAGE>

The decrease in deferred income at December 31, 1998 as compared to
December 31, 1997 is due to the amortization of a lease amendment fee which
is being recognized as income over the remaining term of the tenant's
original lease at the Cal Plaza Office Building.

The increase in long-term debt, less current portion at December 31,
1998 as compared to December 31, 1997 is primarily due to the accumulation
of deferred accrued interest related to the promissory note secured by the
Partnership's interest in the Wells Fargo - South Tower joint venture.

The increase in other income for the year ended December 31, 1998 as
compared to the same periods in 1997 and 1996 is primarily due to a
collection of demand notes related to the 21900 Burbank Boulevard Building.

The decrease in depreciation expense for the year ended December 31,
1998 as compared to the same periods in 1997 and 1996 is due to the sales
and dispositions discussed above, as well as all consolidated properties
being classified as held for sale or disposition, and therefore, no longer
being subject to continued depreciation.

The decrease in professional services for the year ended December 31,
1998 as compared to the same periods in 1997 and 1996 is primarily due to
outsourcing costs and expenses related to unsolicited offers for Interests
in 1996.

The increase in management fees to Corporate General Partner for the
year ended December 31, 1998 as compared to the same periods in 1997 and
1996 is due to the Partnership's payment of a distribution from operational
cash flow in 1998, a portion of which is earned by the Corporate General
Partner as a partnership management fee.

The provision for value impairment in 1996 relates to reductions in
the carrying values of the Cal Plaza property ($7,200,000), 260 Franklin
Street Building ($17,400,000), and Springbrook Shopping Center
($1,400,000).

The restructuring fees in 1996 are due to the restructuring of the
Partnership's investment in the South Tower venture as discussed in the
Notes.

The decrease in the Partnership's share of income (loss) from
operations of unconsolidated ventures at December 31, 1998 as compared to
December 31, 1997 and the increase at December 31, 1997 as compared to
December 31, 1996 is primarily due to the reversal of a portion of the
accrued contingent interest related to the mortgage loan at the Piper
Jaffray investment property in 1997 due to its expected uncollectibility.

The increase in the venture partner's share of venture operations for
the year ended December 31, 1998 as compared to the same periods in 1997
and 1996 is primarily due to the venture partner's proportionate share of
management and leasing fees payable by 260 Franklin Street Associates
allocated to the venture partner upon disposition of the property in 1998.

The gain on liquidation of investment in venture for the year ended
December 31, 1997 represents gain recognized after the liquidation of the
Partnership's interest in Villages Northeast Associates.

The gain on sale or disposition of investment property for the year
ended December 31, 1998 relates to the recognition of gain from the sale of
the 260 Franklin Street Building. The gain on sale or disposition of
investment properties of $8,631,561 for the year ended December 31, 1997
relates to the recognition of gain from the sale of the RiverEdge Place
building in 1997. The gain on sale of $12,230,126 for the year ended
December 31, 1996 relates to the recognition of gain from the sale of the
Woodland Hills and Dunwoody apartment complexes of $1,749,814 and
$10,480,312, respectively, in 1996.

<PAGE>

The gain on sale of interests in unconsolidated ventures for the year
ended December 31, 1998 relates to the recognition of $7,656,304 gain from
the liquidation of the NewPark joint venture and the sale through
JMB/NewPark of the Partnership's interest in NewPark Mall, recognition of
$3,006,762 deferred gain from the sale of JMB/Owing's interest in the
Owings Mills Limited Partnership and recognition of $81,612 of previously
deferred gain from collection of principal on the note receivable relating
to the investment in 125 Broad. The gain on sale of interests in
unconsolidated ventures for the year ended December 31, 1997 relates to the
recognition of $393,971 of deferred gain from the sale of JMB/Owing's
interest in the Owings Mills Limited Partnership in June 1993 and
recognition of $174,654 of previously deferred gain from collection of
principal on the note receivable relating to the investment in 125 Broad.
The gain on sale of interests in unconsolidated ventures for the years
ended December 31, 1996 relates to the recognition of $435,060 of deferred
gain from the sale of JMB/Owing's interest in the Owings Mills Limited
Partnership in June 1993.

The extraordinary items - prepayment penalties and deferred mortgage
expense for the year ended December 31, 1996 results from the costs
incurred and the write-off of deferred mortgage fees on the early
extinguishment of debt on the Woodland Hills and Dunwoody Crossing mortgage
notes payable in 1996.

The extraordinary item - gain on forgiveness of indebtedness of
$17,451,802 for the year ended December 31, 1998 represents the interest
waived by the lender pursuant to a loan modification agreement for the debt
secured by the 260 Franklin Street building in January 1998. The
extraordinary item - gain on forgiveness of indebtedness of $5,992,828 for
the year ended December 31, 1997 represents the retirement of the mortgage
note on the Springbrook Shopping Center ($3,433,368) in full satisfaction
upon transfer of title to the respective lender, and the forgiveness of
debt by the lender on the sale of the RiverEdge building ($2,559,460). The
extraordinary item - gain on forgiveness of indebtedness of $35,780,656 for
the year ended December 31, 1996 represents the 1996 retirement of the
mortgage notes on the 160 Spear Street ($31,158,453) and 21900 Burbank
Buildings ($4,622,203) in full satisfaction upon transfer of title to the
properties to respective lenders.

The cumulative effect of an accounting change of $30,000,000
represents provisions in 1996 to record value impairment on the 160 Spear
Street ($26,000,000) and 21900 Burbank Buildings ($4,000,000) in compliance
with SFAS 121.

INFLATION

Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.

However, to the extent that inflation in future periods would have an
adverse impact on property operating expenses, the effect would generally
be offset by amounts recovered from tenants as many of the long-term leases
at the Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on net
operating earnings if the properties remain substantially occupied.

YEAR 2000

The year 2000 problem is the result of computer programs being written
with two digits rather than four to define a year. Consequently, any
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations
including, among other things, an inability to process transactions or
engage in other normal business activities.

<PAGE>

The Partnership uses the telephone, accounting, transfer agent and
other administrative systems, which include both hardware and software,
provided by affiliates of the Corporate General Partner and certain third
party vendors. Except as noted in the following sentence, the Partnership
or its affiliates have received representations to the effect that the
telephone, accounting, transfer agent and other administrative systems are
year 2000 compliant in all material respects. Both the hardware and
software for individual personal computers used in the Partnership's
administrative systems are expected to be tested for their year 2000
compliance during the summer of 1999.

In addition, the Partnership has received written representation from
the property managers for the 900 Third Avenue, Piper Jaffray Tower and
California Plaza properties that the building systems (e.g., elevator,
alarm, security and HVAC systems) are or are being made year 2000 compliant
in all material respects. Certain of the building systems at these
properties need minor upgrading, which is expected to be completed in the
near future without incurring material expense. In addition, the
Partnership currently expects that these properties will be sold during
1999 with possible exception of Piper Jaffray Tower. The Partnership does
not currently know the extent to which the Wells Fargo Center - South Tower
or the respective joint venture that owns this property is year 2000
compliant.

The Partnership does not believe that the year 2000 problem presents
any material additional risks to its business, results of operations or
financial condition and has not developed, and does not intent to develop,
any contingency plans to address the year 2000 problem. Given its limited
operations, the Partnership believes that its accounting, transfer agent
and most of its other administrative systems functions could, if necessary,
be performed manually (i.e., without significant information technology)
for an extended period of time without a material increase in costs to the
Partnership. The Partnership has not incurred and does not expect to
incur, any material direct costs for year 2000 compliance.

The Partnership is relying on the representation of the property
managers for 900 Third Avenue, Piper Jaffray Tower and California Plaza
regarding the ability of those properties to be year 2000 compliant in all
material respects. In the event that the Partnership's investment
properties are not year 2000 compliant in all material respects, the
relevant investment property or properties could experience various
operational difficulties, such as possible systems failures. Such
operational difficulties could result in remediation and, under certain
circumstances, possibly other costs and expenses. If such were to occur,
there is no assurance that such costs and expenses would not, under certain
circumstances, have a material adverse effect on the Partnership or its
investment in 900 Third Avenue, Piper Jaffray Tower and/or California Plaza
in the event such properties are not sold during 1999.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership has identified interest rate changes as a potential
market risk. However, as the Partnership's long-term debt bears interest
at fixed rates, the Partnership does not believe that it is exposed to
market risk relating to interest rate changes, except at the California
Plaza property as discussed above.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

INDEX

Independent Auditors' Report

Consolidated Balance Sheets, December 31, 1998 and 1997

Consolidated Statements of Operations, years ended December 31,
1998, 1997 and 1996

Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1998, 1997 and 1996

Consolidated Statements of Cash Flows, years ended December 31,
1998, 1997 and 1996

Notes to Consolidated Financial Statements

SCHEDULE
--------

Consolidated Real Estate and Accumulated Depreciation III

Schedules not filed:

All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV:

We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XV (a limited partnership) and Consolidated
Ventures as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Carlyle Real Estate Limited Partnership - XV and Consolidated Ventures at
December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.

KPMG LLP

Chicago, Illinois
March 29, 1999

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 AND 1997

ASSETS
------
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 26,998,190 24,992,726
Interest, rents and other receivables . . . . . . . . . . . . . . . . 787,105 466,396
Current portion of note receivable . . . . . . . . . . . . . . . . . . 63,741 --
Escrow deposits and restricted securities. . . . . . . . . . . . . . . 2,384,098 1,884,326
Other restricted securities. . . . . . . . . . . . . . . . . . . . . . -- 131,318
------------ ------------

Total current assets . . . . . . . . . . . . . . . . . . . . . 30,233,134 27,474,766
------------ ------------

Properties held for sale or disposition . . . . . . . . . . . . . . . 46,193,322 95,606,312
------------ ------------
Investment in unconsolidated ventures,
at equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,734,036 16,908,786
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116,015 2,016,887
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . 1,729,398 3,731,258
Long-term portion of note receivable . . . . . . . . . . . . . . . . . . 181,628 --
------------ ------------

$ 89,187,533 145,738,009
============ ============

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------

1998 1997
------------ -----------
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . $ -- 92,117,086
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,322,676 3,169,406
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . -- 639,533
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . 639,554 639,554
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 2,962,230 96,565,579

Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 303,287 385,888
Investment in unconsolidated ventures, at equity . . . . . . . . . . . . 6,108,130 5,800,180
Deferred income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532,623 1,024,276
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,429 361,129
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . 118,190,463 109,972,972
------------ ------------
Commitments and contingencies

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 128,527,162 214,110,024

Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . (19,637,903) (19,989,556)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . (1,445,867) (1,020,769)
------------ ------------
(21,063,770) (20,990,325)
------------ ------------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------

1998 1997
------------ -----------

Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . 384,978,681 384,978,681
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . (343,289,185) (390,285,344)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . (59,965,355) (42,075,027)
------------ ------------
(18,275,859) (47,381,690)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . (39,339,629) (68,372,015)
------------ ------------
$ 89,187,533 145,738,009
============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 9,443,662 22,998,137 26,916,089
Interest income. . . . . . . . . . . . . . . . . . . 1,134,194 1,351,711 1,580,238
Other income . . . . . . . . . . . . . . . . . . . . 881,537 -- --
------------ ----------- -----------
11,459,393 24,349,848 28,496,327
------------ ----------- -----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . 12,673,336 23,284,811 23,796,808
Depreciation . . . . . . . . . . . . . . . . . . . . -- 1,187,772 5,413,953
Property operating expenses. . . . . . . . . . . . . 3,655,197 10,749,263 13,420,306
Professional services. . . . . . . . . . . . . . . . 425,684 529,143 901,930
Amortization of deferred expenses. . . . . . . . . . 502,570 673,032 877,359
Management fees to corporate general partner . . . . 708,497 -- --
General and administrative . . . . . . . . . . . . . 945,715 806,787 759,295
Provisions for value impairment. . . . . . . . . . . -- -- 26,000,000
Restructuring fees . . . . . . . . . . . . . . . . . -- -- 11,589,974
------------ ----------- -----------
18,910,999 37,230,808 82,759,625
------------ ----------- -----------
(7,451,606) (12,880,960) (54,263,298)
Partnership's share of income (loss) from
operations of unconsolidated ventures
(including income from restructuring
of $10,664,944 in 1996). . . . . . . . . . . . . . . 2,976,512 9,992,145 5,056,608
Venture partners' share of ventures' operations. . . . 414,242 -- (85,091)
------------ ----------- -----------
Earnings (loss) before gains on sale
or disposition of investment
properties . . . . . . . . . . . . . . . . (4,060,852) (2,888,815) (49,291,781)

Gain on liquidation of investment in venture . . . . . -- 269,147 --
Gains on sale or disposition of investment
properties, net of venture partner's share
of gain of $204,139 in 1996 and manager's
incentive fee of $1,730,016 in 1996. . . . . . . . . 23,212,184 8,631,561 12,230,126
Gains on sale of interests in unconsolidated
ventures . . . . . . . . . . . . . . . . . . . . . . 10,744,678 568,625 435,060
------------ ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1998 1997 1996
------------- ------------ ------------
Earnings (loss) before extra-
ordinary items and cumulative
effect of an accounting change . . . . . . 29,896,010 6,580,518 (36,626,595)

Extraordinary items:
Prepayment penalties and deferred mortgage
expense on retirement of long-term debt,
net of venture partner's share of
$175,004 . . . . . . . . . . . . . . . . . . . . . -- -- (557,809)
Gain on forgiveness of indebtedness. . . . . . . . . 17,451,802 5,992,828 35,780,656
Cumulative effect of an accounting change. . . . . . . -- -- (30,000,000)
------------ ----------- -----------
Net earnings (loss). . . . . . . . . . . . . $ 47,347,812 12,573,346 (31,403,748)
============ =========== ===========

Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gains on sale
or disposition of investment
properties . . . . . . . . . . . . . . $ (8.79) (6.25) (106.67)
Gain on liquidation of investment
in venture . . . . . . . . . . . . . . -- .60 --
Net gains on sale or disposition of
investment properties. . . . . . . . . 51.81 19.26 27.29
Gains on sale or disposition of
interests in unconsolidated
ventures . . . . . . . . . . . . . . . 23.98 1.27 .97
Extraordinary items. . . . . . . . . . . 38.95 13.37 78.61
Cumulative effect of an accounting
change . . . . . . . . . . . . . . . . -- -- (64.92)
------------ ----------- -----------
$ 105.95 28.25 (64.72)
============ =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
----------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit)
Decem-
ber 31,
1995. . . .$20,000 (17,335,834) (908,722) (18,224,556) 384,978,681 (374,108,664) (30,006,608) (19,136,591)

Net earnings
(loss). . . -- (2,692,791) -- (2,692,791) -- (28,710,957) -- (28,710,957)
Cash distri-
butions
($26.37 per
limited
partnership
interest) . -- -- (112,047) (112,047) -- -- (11,698,396) (11,698,396)
------- ----------- --------- ----------- ----------- ------------ ------------ -----------
Balance
(deficit)
Decem-
ber 31,
1996. . . . 20,000 (20,028,625) (1,020,769) (21,029,394) 384,978,681 (402,819,621) (41,705,004) (59,545,944)

Net earnings
(loss). . . -- 39,069 -- 39,069 -- 12,534,277 -- 12,534,277
Cash distri-
butions
($.83 per
limited
partnership
interest) . -- -- -- -- -- -- (370,023) (370,023)
------- ----------- --------- ----------- ----------- ------------ ------------ -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED

GENERAL PARTNERS LIMITED PARTNERS
----------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ----------- ------------- -----------
Balance
(deficit)
Decem-
ber 31,
1997. . . . 20,000 (19,989,556) (1,020,769) (20,990,325) 384,978,681 (390,285,344) (42,075,027) (47,381,690)

Net earnings
(loss). . . -- 351,653 -- 351,653 -- 46,996,159 -- 46,996,159
Cash distri-
butions
($40.33 per
limited
partnership
interest) . -- -- (425,098) (425,098) -- -- (17,890,328) (17,890,328)
------- ----------- --------- ----------- ----------- ------------ ------------ -----------
Balance
(deficit)
Decem-
ber 31,
1998. . . .$20,000 (19,637,903) (1,445,867) (21,063,770) 384,978,681 (343,289,185) (59,965,355) (18,275,859)
======= =========== ========== =========== =========== ============ ============ ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . $47,347,812 12,573,346 (31,403,748)
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . -- 1,187,772 5,413,953
Amortization of deferred expenses. . . . . . . . . 502,570 673,032 877,359
Restructuring fee. . . . . . . . . . . . . . . . . -- -- 11,589,974
Long-term debt - deferred accrued interest . . . . 8,217,491 10,129,734 3,138,667
Partnership's share of (income) loss from
operations of unconsolidated ventures. . . . . . (2,976,512) (9,992,145) (5,056,608)
Venture partners' share of ventures'
operations, gain on sale or
disposition of investment properties and
extraordinary items. . . . . . . . . . . . . . . (414,242) -- 114,226
Provisions for value impairment. . . . . . . . . . -- -- 26,000,000
Gain on liquidation of investment in venture . . . -- (269,147) --
Total gain on sale or disposition of
investment properties. . . . . . . . . . . . . . (23,212,184) (8,631,561) (12,434,265)
Total gain on sale of interests in uncon-
solidated ventures . . . . . . . . . . . . . . . (10,744,678) (568,625) (435,060)
Extraordinary items including venture
partner's share. . . . . . . . . . . . . . . . . (17,451,802) (5,992,828) (35,047,843)
Cumulative effect of an accounting change. . . . . -- -- 30,000,000
Changes in:
Interest, rents and other receivables. . . . . . . (320,709) 43,928 326,701
Current portion of note receivable . . . . . . . . (63,741) -- --
Escrow deposits and restricted securities. . . . . (499,772) 744,237 5,881,168
Other restricted securities. . . . . . . . . . . . 131,318 5,154,489 (1,520,685)
Accrued rents receivable, net. . . . . . . . . . . 798,484 526,261 146,353
Long-term portion of note receivable . . . . . . . (181,628) -- --
Accounts payable . . . . . . . . . . . . . . . . . (846,730) (1,092,706) (238,943)
Accrued interest payable . . . . . . . . . . . . . (413,804) (3,173,281) 6,901,461
Accrued real estate taxes. . . . . . . . . . . . . -- -- 312,963
Other current liabilities. . . . . . . . . . . . . -- 47,201 --
Deferred income. . . . . . . . . . . . . . . . . . (491,653) (491,651) (491,653)
Tenant security deposits . . . . . . . . . . . . . (82,601) (76,059) (54,507)
Other liabilities. . . . . . . . . . . . . . . . . 140,001 (47,202) --
------------ ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . (562,380) 744,795 4,019,513
------------ ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
----------- ----------- -----------
Cash flows from investing activities:
Additions to investment properties,
excluding amounts from escrow deposits
and restricted securities. . . . . . . . . . . . . (558,194) (1,062,024) (2,011,678)
Partnership's distributions from
unconsolidated ventures. . . . . . . . . . . . . . 21,500,873 2,700,000 3,349,635
Partnership's contributions to
unconsolidated ventures. . . . . . . . . . . . . . (296,983) -- (753,560)
Cash proceeds from sale or disposition of
investment properties. . . . . . . . . . . . . . . 200 3,120,382 17,695,317
Payment of deferred expenses . . . . . . . . . . . . (106,167) (395,000) (331,019)
------------ ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . 20,539,729 4,363,358 17,948,695
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from restructuring and refinancing of
long-term debt . . . . . . . . . . . . . . . . . . -- -- 650,000
Principal payments on long-term debt . . . . . . . . -- -- (172,147)
Principal payments on notes payable. . . . . . . . . (70,701) (70,701) (70,701)
Venture partners' contributions to venture . . . . . 453,039 -- --
Distributions to venture partners. . . . . . . . . . (38,797) (338,967) (4,946,038)
Distributions to general partners. . . . . . . . . . (425,098) -- (112,047)
Distributions to limited partners. . . . . . . . . . (17,890,328) (370,023) (11,698,396)
------------ ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . (17,971,885) (779,691) (16,349,329)
------------ ----------- -----------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . . 2,005,464 4,328,462 5,618,879
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . 24,992,726 20,664,264 15,045,385
------------ ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . . $ 26,998,190 24,992,726 20,664,264
============ =========== ===========

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
----------- ----------- -----------
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other interest. . . . . . $ 4,869,649 21,188,582 13,756,680
=========== =========== ===========
Non-cash investing and financing activities:
Non-cash gain recognized on sale of
interests in ventures. . . . . . . . . . . . . . $10,744,678 568,625 435,060
=========== =========== ===========
Gross proceeds from restructuring and
refinancing of long-term debt. . . . . . . . . . $ -- -- 18,084,557
Accrued interest . . . . . . . . . . . . . . . . . -- -- (5,844,583)
Restructuring fee. . . . . . . . . . . . . . . . . -- -- (11,589,974)
----------- ----------- -----------
Proceeds received on restructuring and
refinancing of long-term debt. . . . . . . $ -- -- 650,000
=========== =========== ===========
Sale or disposition of investment properties:
Total sale proceeds, net of selling
expenses . . . . . . . . . . . . . . . . . . . $ -- 26,146,900 58,491,798
Purchase price of mortgage loan. . . . . . . . . 74,891,213 -- --
Prepayment penalties . . . . . . . . . . . . . . -- -- (516,683)
Payment of mortgages payable and
accrued interest . . . . . . . . . . . . . . . -- (23,026,518) (38,549,782)
Discharge of mortgage loan . . . . . . . . . . . (74,891,013) -- --
Incentive fee to manager of
investment property. . . . . . . . . . . . . . -- -- (1,730,016)
----------- ----------- -----------
Cash proceeds from sale or disposition
of investment properties, net of
selling expenses . . . . . . . . . . . . . $ 200 3,120,382 17,695,317
=========== =========== ===========

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
----------- ----------- -----------

Disposition of investment properties:
Balance due on long-term debt cancelled. . . . . $ -- 10,932,588 50,853,648
Accrued interest expense on accelerated
long-term debt . . . . . . . . . . . . . . . . -- 397,729 1,853,284
Reduction of investment property, net. . . . . . -- (8,448,879) (16,419,175)
Reduction of other assets and liabilities. . . . -- 551,930 (507,101)
----------- ----------- -----------
Non-cash gain recognized due to lenders
realizing upon security . . . . . . . . . . $ -- 3,433,368 35,780,656
=========== =========== ===========
Accrued interest forgiven by lender
on sale of property. . . . . . . . . . . . . . . $17,451,802 2,559,460 --
=========== =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998, 1997 AND 1996

OPERATIONS AND BASIS OF ACCOUNTING

GENERAL

The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a wide variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate.

The accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned ventures, JMB/160 Spear
Street Associates ("160 Spear") (prior to the transfer of title in January
1996); 260 Franklin Street Associates ("260 Franklin") (prior to the sale
in January 1998); C-C California Plaza Partnership ("Cal Plaza"); Villages
Northeast Associates ("Villages Northeast") and VNE Partners, Ltd. ("VNE
Partners") (sold May 7, 1996). The effect of all transactions between the
Partnership and the consolidated ventures has been eliminated.

The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interests in JMB/Piper Jaffray Tower Associates ("JMB/Piper") and JMB/Piper
Jaffray Tower Associates II ("JMB/Piper II"); 900 Third Avenue Associates
("JMB/900"); Maguire/Thomas Partners - South Tower LLC (formerly
Maguire/Thomas Partners-South Tower) ("South Tower"); JMB/Owings Mills
Associates ("JMB/Owings") (sold June 30, 1993); JMB/NewPark Associates,
("JMB/NewPark") (sold November 18, 1998); Carlyle-XV Associates, L.P.,
which owned an interest in JMB/125 Broad Building Associates, L.P.
("JMB/125"). In November 1994, the Partnership through its indirect
ownership of JMB/125 assigned its interest in the 125 Broad Street
Building. In December 1998, JMB/125 was terminated.

Due to the restructuring of the Partnership's interest in Wells Fargo
Center - South Tower as discussed below, the Partnership has ceased loss
recognition relative to its real estate investment and has reversed those
previously recognized losses that the Partnership is no longer obligated to
fund, which is reflected as income from restructuring in 1996 in the
Partnership's share of income from operations of unconsolidated ventures.
The Partnership has no future funding obligation for its investment in
Wells Fargo Center - South Tower. Accordingly, the Partnership has
discontinued the application of the equity method of accounting and
additional losses from the investment in Wells Fargo Center - South Tower
will not be recognized.

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of certain ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items is summarized as
follows for the years ended December 31, 1998 and 1997:

<PAGE>

1998 1997
---------------------------- ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . $89,187,533 88,019,339 145,738,009 87,293,395

Partners' capital accounts
(deficit):
General partners . . . . . . . . (21,063,770) (10,421,992) (20,990,325) (14,622,150)
Limited partners . . . . . . . . (18,275,859) 9,021,905 (47,381,690) 10,213,185

Net earnings (loss):
General partners . . . . . . . . 351,653 9,625,257 39,069 3,294,084
Limited partners . . . . . . . . 46,996,159 16,552,176 12,534,277 (12,797,173)

Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . 105.95 37.31 28.25 (28.85)
============ ============ =========== ===========
</TABLE>

<PAGE>

The net earnings (loss) per limited partnership interest ("Interest")
is based upon the limited partnership interests outstanding at the end of
each period. Deficit capital accounts will result, through the duration of
the Partnership, in the recognition of net gain for financial reporting and
Federal income tax purposes.

The preparation of financial statements in accordance with GAAP
requires the General Partners to make estimates and assumptions that affect
the reported or disclosed amount of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.

Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from unconsolidated ventures are considered cash
flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership records
amounts held in U.S. Government obligations and other securities at cost
which approximates market. For the purposes of these statements, the
Partnership's policy is to consider all such amounts held with original
maturities of three months or less (approximately $27,000,000 and
$25,000,000 at December 31, 1998, 1997, respectively) as cash equivalents,
which includes investments in an institutional mutual fund which holds U.S.
Government obligations, with any remaining amounts (generally with
maturities of one year or less) reflected as short-term investments being
held to maturity.

Escrow deposits and restricted securities primarily represent cash and
investments restricted as to their use by the Partnership.

Deferred expenses are comprised principally of deferred financing fees
which are amortized over the related debt term and deferred leasing fees
which are amortized over the related lease term.

Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrues
prorated rental income for the full period of occupancy on a straight-line
basis.

No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners. Due
to this, approximately $16,000 representing such withholding was remitted
to the state of Maryland on behalf of the Holders of Interest in 1998.

The Partnership acquired, either directly or through joint ventures,
interests in four apartment complexes, twelve office buildings, four
shopping centers and one parking facility. The Partnership's aggregate
cash investment, excluding certain related acquisition costs, was
$299,637,926. During 1989, the Partnership disposed of its interest in the
investment property owned by CBC Investment Company ("Boatmen's"). During
1991, the Partnership sold 62% of its interest in Harbor and in 1993 sold
its remaining 38% interest in Harbor. In September 1992, the Partnership
sold the Erie-McClurg Parking Facility. In June 1993, the Partnership sold
(through JMB/Owings) its interest in Owings Mills Shopping Center. In
March 1994, the Partnership, through Villa Solana Associates, sold the
Villa Solana Apartments. In May 1994, the lender realized upon its
security interest in the Park at Countryside Apartments. In October 1994,
the Partnership sold the 9701 Wilshire Office Building. In November 1994,

<PAGE>

the Partnership assigned its interest in the JMB/125 venture to an
affiliate of its unaffiliated venture partner. In June 1995, the
Partnership sold its interest in Eastridge Mall. In January 1996, the
lender realized upon its security interest in the 160 Spear Street
Building. In March 1996, the lender realized upon its security interest in
the 21900 Burbank Boulevard Building. In May 1996, the Partnership sold
the Woodland Hills apartment complex. Also, in May 1996, the Partnership,
through Villages Northeast and VNE Partners, Ltd., sold the Dunwoody
Crossing Phases I, II and III apartment complex. In January 1997, the
lender realized upon its security interest in the Springbrook Shopping
Center. In December 1997, the Partnership sold the RiverEdge Place office
building. In January 1998, the Partnership, through 260 Franklin Street
Associates, disposed of the 260 Franklin Street Building. In November
1998, the Partnership, through the NewPark Associates venture, sold the
NewPark Mall. All of the remaining properties owned at December 31, 1998
were completed and operating.

The cost of the investment properties represents the total cost to the
Partnership or its ventures plus miscellaneous acquisition costs reduced
for provisions for value impairment where applicable. Depreciation on the
operating properties has been provided over the estimated useful lives of
5-30 years using the straight-line method.

Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" was issued in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
to be held for investment whenever their carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the property's carrying value and the
property's estimated fair value. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term or the Partnership has concluded that it may dispose of the property
by no longer funding operating deficits or debt service requirements of the
property thus allowing the lender to realize upon its security. In
addition, the $30,000,000 impairment loss on the 21900 Burbank and 160
Spear Street investment properties, which were categorized as held for sale
or disposition at January 1, 1996 upon adoption of SFAS 121, has been
reflected in the accompanying consolidated financial statements as the
cumulative effect of an accounting change as provided by SFAS 121. In
accordance with SFAS 121, any properties identified as "held for sale or
disposition" are no longer depreciated. Adjustments for impairment loss
for such properties (subsequent to the date of adoption of SFAS 121) are
made in each period as necessary to report these properties at the lower of
carrying value or estimated fair value less costs to sell. In certain
situations, such estimated fair value could be less than the existing non-
recourse debt which is secured by the property. There can be no assurance
that any estimated fair value of these properties would ultimately be
obtained by the Partnership in any future sale or disposition transaction.

Under the prior accounting policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's carrying value. The amount of any such impairment loss
recognized by the Partnership was limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 is determined
without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a

<PAGE>

net gain for financial reporting purposes (comprised of gain on
extinguishment of debt and gain or loss on the sale or disposition of
property) for financial reporting purposes to the extent of any excess of
the then outstanding balance of the property's non-recourse indebtedness
over the then carrying value of the property, including the effect of any
reduction for impairment loss under SFAS 121.

In addition, upon the disposition of any impaired property, the
Partnership will generally recognize more net gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's prior
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
implementation of this accounting statement could significantly impact the
Partnership's reported earnings, there would be no impact on cash flows.
Further, any such impairment loss is not recognized for Federal income tax
purposes.

The results of operations for consolidated properties classified as
held for sale or disposition as of December 31, 1998 or sold or disposed of
during the past three years were $75,736, ($5,805,022) and ($38,038,482),
respectively, for the years ended December 31, 1998, 1997 and 1996. In
addition, the accompanying consolidated financial statements include for
the years ended December 31, 1998, 1997 and 1996 $2,864,907, $9,745,021 and
($4,933,242), respectively, as the Partnership's share of property
operations of $3,579,605, $18,479,631 and ($6,622,805) of unconsolidated
properties held for sale or disposition as of December 31, 1998, or sold or
disposed of in the past three years.

The Partnership has adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Partnership defines each of
its property investments as an individual operating segment and has
determined such property investments exhibit substantially identical
economic characteristics and meet the other criteria specified by SFAS No.
131 which permits the property investments to be aggregated into one
reportable segment. The Partnership assesses and measures operating
results based on net operating income (rental income less property
operating expenses). With the exception of interest income, professional
services and general and administrative expenses, substantially all other
components of net earnings (loss) of the Partnership relate to property
investments. With the exception of cash and cash equivalents,
substantially all other assets of the Partnership relate to property
investments.

Maintenance and repair expenses are charged to operations as incurred.

Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.

<PAGE>

VENTURE AGREEMENTS - GENERAL

The Partnership (or Carlyle-XV Associates, L.P., in which the
Partnership holds a limited partnership interest) had entered into eight
joint venture agreements (JMB/Piper, JMB/Piper II, JMB/900, JMB/Owings,
JMB/125, 260 Franklin, Villages Northeast and JMB/NewPark) with Carlyle
Real Estate Limited Partnership-XIV ("Carlyle-XIV") or Carlyle Real Estate
Limited Partnership-XVI (or Carlyle-XVI Associates, L.P., in which Carlyle
Real Estate Limited Partnership-XVI holds a limited partnership interest)
("Carlyle-XVI")), which are partnerships sponsored by the Corporate General
Partner, and eight joint venture agreements with unaffiliated venture
partners. Pursuant to such agreements, the Partnership made initial
capital contributions of approximately $247,300,000 (before legal and other
acquisition costs and its share of operating deficits as discussed below).
The terms of these affiliated partnerships provide, in general, that the
benefits of ownership, including tax effects, net cash receipts and sale
and refinancing proceeds, are allocated between or distributed to, as the
case may be, the Partnership and the affiliated partner in proportion to
their respective capital contributions to the affiliated venture.

There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership. Under certain
circumstances, either pursuant to the venture agreements or due to the
Partnership's obligations as a general partner, the Partnership may be
required to contribute additional amounts to the venture.

The terms of the 260 Franklin, Eastridge, 160 Spear, Cal Plaza and VNE
Partners ventures can be described in general, as follows:

In general, operating profits and losses are shared in the same ratio
as net cash receipts; however, if there are no net cash receipts, sub-
stantially all profits or losses are allocated to the Partnership. In
addition, generally amounts equal to certain expenses paid from capital
contributions by the Partnership or venture partners are allocated to the
contributing partner or partners.

INVESTMENT PROPERTIES

RIVEREDGE PLACE BUILDING

On December 23, 1997, the Partnership sold the RiverEdge Place Office
Building for $26,600,000 less selling costs of approximately $428,000.
Approximately $3,200,000 (which includes the $500,000 discussed below) of
cash proceeds was received by the Partnership from the sale, net of closing
costs and the payment of $23,026,518 of the outstanding mortgage principal
and accrued interest on the loan secured by the property pursuant to a
previously agreed upon term sheet described below. The remaining
approximately $2,600,000 of accrued interest was forgiven by the lender in
conjunction with the sale. The accompanying financial statements for 1997
include $8,631,561 of gain on disposition of investment property and
$2,559,460 of extraordinary gain of extinguishment of debt. The
Partnership also had a gain of approximately $11,750,000 for Federal income
tax purposes in 1997. In February 1998, the Partnership made a sales
distribution totalling $4,436,037 (approximately $10 per Interest) related
to the sale of the RiverEdge Place Building and prior undistributed sales
proceeds.

In 1992, the property was 100% leased to an affiliate of the major
tenant, First American Bank (the "Bank"), under a long-term over-lease
executed in connection with the purchase of the property. The Bank and its
affiliate approached the Partnership and indicated that they were
experiencing financial difficulties as a result of their substantial
percentage of problem loans and the adverse impact of their much publicized

<PAGE>

affiliation with the Bank of Credit and Commerce International (BCCI). On
June 23, 1992, the Partnership reached an agreement with the Bank and
received $9,325,000 for the buy-out of the Bank's over-lease obligations.
The $9,325,000 was concurrently remitted to the lender to reduce the
mortgage note secured by the property. The Partnership ceased making
monthly debt service payments effective July 1, 1992 and continued to seek
to restructure the mortgage note. Prior to the sale, the lender and the
Partnership agreed to a non-binding term sheet which allowed the
Partnership to participate in proceeds from a sale of the property. The
term sheet stipulated that after payment of the remaining outstanding
principal balance of approximately $18,166,000, the Partnership would
receive $500,000 with any remaining sale proceeds allocated 60% to the
lender (as a payment of previously accrued interest) and 40% to the
Partnership. Additionally, pursuant to the term sheet, the Partnership
agreed to remit to the lender all cash flow from operations of the property
commencing July 1, 1992 through the date of sale (approximately $6,350,000)
as an additional payment of previously accrued interest.

21900 BURBANK BOULEVARD BUILDING

In March 1996, the lender realized upon its security and took title to
the property in full satisfaction of the loan secured by the property.

The Partnership approached the lender during 1995 regarding a
modification of the loan (scheduled to mature December 1, 1996) due to the
anticipated repair and re-leasing costs expected to be incurred at the
property. The lender was not willing to provide such a modification and
notified the Partnership of its default under certain provisions of the
loan agreement. The Partnership decided not to commit additional amounts
to the property and ceased making debt service payments commencing with the
November 1995 payment. As a result, the lender realized upon its security
interest in the property in 1996. This resulted in the Partnership no
longer having an ownership interest in the property.

The property was classified as held for sale or disposition as of
January 1, 1996, and therefore, was not subject to continued depreciation.
The accompanying consolidated financial statements for 1996 include
$4,000,000 as a cumulative effect of an accounting change to record value
impairment to reflect the then estimated fair value of the property, less
costs to sell and $4,622,203 of extraordinary gain on extinguishment of
debt upon the lender taking title to the property in March 1996. The
Partnership also had a gain for Federal income tax purposes of
approximately $1,324,000 in 1996.

SPRINGBROOK SHOPPING CENTER

The Springbrook Shopping Center was approximately 53% occupied at the
end of 1996 and operated at a deficit in 1996. The Partnership decided not
to commit significant additional amounts to the property and ceased making
monthly debt service payments in June 1996. Accordingly, the mortgage loan
with a scheduled maturity of April 1997 and a principal balance of
$10,932,588 had been classified as a current liability at December 31,
1996. The property was classified as held for sale or disposition as of
April 1, 1996, and therefore, the property was no longer subject to
depreciation after such date. Also, commencing in June 1996, all net cash
flow from the property was being escrowed with the lender. Principal and
interest payments in arrears as of December 31, 1996 were approximately
$323,000. As a result of the non-payment of debt service, the lender
realized upon its security and in January 1997 took title to the property
in full satisfaction of the loan secured by the property. The Partnership
recognized a gain for financial reporting purposes of $3,433,368 and a loss
for Federal income tax purposes of $4,923,280 in 1997.

<PAGE>

WOODLAND HILLS APARTMENTS

On May 22, 1996, the Partnership sold the Woodland Hills apartment
complex to an unaffiliated third party for $12,225,000 less selling costs
of approximately $282,000. A portion of the sales proceeds was utilized to
retire the mortgage debt with an outstanding balance of approximately
$8,175,000. As a result of the sale, the Partnership recognized a gain of
$1,749,814 for financial reporting purposes and a gain of approximately
$7,300,000 for Federal income tax purposes in 1996.

As a result of the sale of the property in May 1996, the Partnership
was obligated to pay an incentive management fee of approximately
$1,730,000, all of which was paid at December 31, 1997. The Partnership
has reduced its recognized gain by the incentive fee.

As the Partnership had committed to a plan to sell the property, the
property was classified as held for sale or disposition as of January 1,
1996, and therefore, was not subject to continued depreciation.

BOATMEN'S

During 1989 the joint venture defaulted on the mortgage loan secured
by the property, and the lender obtained title to the property. As a
result, the Partnership has no further ownership interest in the property.

During 1990, the Partnership accepted non-interest bearing promissory
notes totalling $2,325,000 as settlement for certain claims against the
joint venture partner. As of December 31, 1997, the Partnership had
received cash payments totalling $1,910,937 and scheduled payments were
delinquent in the amount of $414,063. During 1998, $23,748 was received as
final settlement for one of the promissory notes and the remaining amount
of $224,690 was written off. The Partnership has recognized revenue on the
settlement to the extent of the cash collected. There is no assurance that
the remaining delinquent amounts of $165,625 will be collected.

CALIFORNIA PLAZA

Effective March 1, 1993, the joint venture ceased making the scheduled
debt service payments on the mortgage loan secured by the property which
was scheduled to mature on January 1, 1997. Subsequently, the Partnership
made partial debt service payments based on net cash flow of the property
through December 1993 when an agreement was reached with the lender to
modify the loan by reducing the pay rate. The loan modification reduced
the monthly payments to $384,505, effective with the March 1, 1993 payment.

The maturity date was extended, as a result of this modification, to
January 1, 2000 when the unpaid balance of principal and interest is due
(including the difference between the accrual rate of 10.375% and pay rate
of 8% per annum). Additionally, the joint venture entered into a cash
management agreement which requires monthly net cash flow to be escrowed
(as defined). The excess (of approximately $10,123,000) of the monthly
cash flow paid from March 1993 to December 1998 above the 8% interest pay
rate has been put into escrow for the payment of insurance premiums, real
estate taxes, and to fund a reserve account to be used to cover future
costs, including tenant improvements, lease commissions, and capital
improvements, approved by the lender. A portion of such funds are reserved
for the payment of deferred interest and principal on the mortgage loan.
Approximately $7,772,000 of the escrowed funds have been used to cover such
costs. The remaining escrow balance of approximately $2,351,000 at
December 31, 1998 is reflected in escrow deposits and restricted securities
in the accompanying consolidated financial statements. Payments are made
from the reserve amounts (none paid at December 31, 1998) if the reserve
balance exceeds $2,120,000 at any time. The joint venture also was
required to fund $500,000 into the reserve account in connection with the
loan modification.

<PAGE>

The property was classified as held for sale or disposition as of
December 31, 1996, and therefore, has not been subject to continued
depreciation. The Partnership recorded a provision for value impairment of
$7,200,000 as of January 1, 1996 to reflect the then estimated fair value
of the property based upon an analysis of discounted cash flows of the
property over the expected holding period.

In June 1995, the venture entered into a seven year direct lease with
Maxis Inc. for approximately 38,500 square feet of space on the sixth floor
of the building previously occupied by a major tenant (Liquid Air). Liquid
Air paid the venture $3,740,000 (of which $2,745,058 relates to future lost
rents and of which the unamortized amount of $1,024,275 is included in
deferred income and other current liabilities in the accompanying
consolidated financial statements as of December 31, 1998) as a lease
amendment fee in June 1995 and guaranteed the obligations under the Maxis
lease up to $1,500,000 through its original expiration date of January
2001. Liquid Air remains obligated for lease payments on approximately
55,000 square feet on the third and seventh floors under its original lease
terms. It is currently attempting to sub-lease a portion of this space.
The $3,740,000 amendment fee was applied as follows (i) $2,112,200 was
remitted to the lender to reduce the principal balance on the mortgage
loan, (ii) $999,100 used to pay for leasing costs associated with the Maxis
lease, and (iii) $628,700 was placed into the reserve account.

In 1995, the venture received approximately $1,410,000 in full
settlement proceeds from a lawsuit filed against Dillingham, the general
contractor of the property, and several of the subcontractors ($150,000 was
received in 1994). As of December 31, 1998, approximately $1,313,000 of
the proceeds have been spent on necessary repairs with the remaining
balance of approximately $210,000 included in accounts payable at December
31, 1998.

Pursuant to the terms of a tenant lease at Cal Plaza, promissory notes
(for certain sub-leasing costs) aggregating $707,009 were issued by the Cal
Plaza joint venture to a tenant of the investment property. Commencing on
July 1, 1990 and on each July 1st thereafter until the notes are paid in
full, one tenth of the original principal balance together with 12% annual
interest on the outstanding balance of the notes shall be payable. The
joint venture partner is obligated to pay 40% of the amounts owed under the
promissory notes and the Partnership is obligated to pay 60% of such
amounts. During June 1996, June 1997, and July 1998, $70,701 of principal
was paid and $34,948, $26,368 and $17,884 of interest, respectively, was
paid to the tenant from cash flow generated from operations of the
property. As of December 31, 1998, the outstanding balance of the notes
was $78,331, which is included in other current liabilities and other
liabilities.

In 1998, the venture reached a settlement agreement with a former
tenant and accepted a promissory note in the principal amount of $275,000
with payments of principal and interest amortized over five years. As of
December 31, 1998, the outstanding balance of the note receivable was
$245,367 which is included in current portion of note receivable and long-
term portion of note receivable.

160 SPEAR STREET BUILDING

Tenant leases comprising approximately 69% of the building expired in
1995. Lease renewals and new leases were likely to be at rental rates less
than the rates on existing leases due to rental concessions and other
factors. In addition, new leases were expected to require expenditures for
lease commissions and tenant improvements prior to occupancy. As a result,
the Partnership decided not to commit any additional funds for anticipated
re-leasing costs since the recovery of such amounts would be remote.

<PAGE>

During 1992, the venture reached an agreement with the mortgage lender
to modify and extend the mortgage notes secured by the 160 Spear Street
investment property, which was scheduled to mature on December 10, 1992.
The maturity of the notes were extended to February 10, 1999.
Additionally, the venture was required to escrow net cash flow (as defined)
thirty days following each quarter end which could have been withdrawn for
expenditures approved by the lender, by the lender upon default of the
notes or by the venture on February 10, 1997 when the escrow agreement was
scheduled to terminate. At December 31, 1995, $210,136 had been placed in
the escrow account, and $170,985 had been withdrawn for expenditures
approved by the lender.

The venture approached the lender for an additional loan modification
due to anticipated re-leasing costs which were expected to be incurred at
the property. However, the lender indicated that it was not willing to
provide an additional modification. The venture ceased making its monthly
debt service payments effective June 1, 1995 and in July 1995, reached an
agreement whereby all cash flow from the property was deposited in a
lockbox controlled by the lender until title was transferred. On
January 25, 1996, the lender concluded proceedings to realize upon its
security and took title to the property.

The property was classified as held for sale or disposition as of
January 1, 1996, and therefore, was not subject to continued depreciation.
The accompanying consolidated financial statements include $26,000,000 as
the cumulative effect of an accounting change to record value impairment as
the carrying value of the property was reduced to its estimated fair value
based upon the application of an appropriate capitalization rate to the net
operating income of the property. In addition, the Partnership recognized
$31,158,453 of extraordinary gain on extinguishment of debt for financial
reporting purposes and a gain of approximately $9,450,000 for Federal
income tax purposes with no corresponding distributable proceeds in 1996.

PIPER JAFFRAY TOWER

In 1984, the Partnership with C-XIV acquired, through JMB/Piper, an
interest in a 42-story office building known as the Piper Jaffray Tower in
Minneapolis, Minnesota with the developer and certain limited partners. In
April 1986, JMB/Piper II, a joint venture partnership between the
Partnership and C-XIV, acquired the developer's interest in the OB Joint
Venture. JMB/Piper holds its interest in the property through three
existing joint ventures (OB Joint Venture, OB Joint Venture II and 222
South Ninth Street Limited Partnership, together "Piper"). The terms of
the JMB/Piper and JMB/Piper II venture agreements generally provide that
JMB/Piper's and JMB Piper II's respective shares of Piper's annual cash
flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership in proportion to its 50% share
of capital contributions.

JMB/Piper invested approximately $19,915,000 for its 71% interest in
Piper. JMB/Piper is obligated to loan amounts to Piper to fund operating
deficits (as defined). The loans bear interest at a rate of not more than
14.36% per annum, provide for payments of interest only from net cash flow,
if any, and are repayable from net sale or refinancing proceeds. Such
loans and accrued interest were approximately $127,406,000 and $110,458,000
at December 31, 1998 and 1997, respectively.

The property is subject to a mortgage loan in the principal amount of
$100,000,000 of which approximately $95,741,000 is outstanding as of
December 31, 1998. Under the terms of a modification agreement with the
lender, in addition to fixed interest on the mortgage notes secured by the
Piper Jaffray Tower, contingent interest is payable in annual installments
on April 1 computed at 50% of gross receipts, as defined, for each fiscal
year in excess of $15,200,000. No such contingent interest was due for the

<PAGE>

years ended December 31, 1996, 1997 or 1998. In addition, to the extent
the investment property generates cash flow after payment of the fixed
interest on the mortgage, contingent interest, if any, leasing and capital
costs, and 25% of the ground rent, such amount will be paid to the lender
as a reduction of the principal balance of the mortgage loan. The excess
cash flow payments remitted to the lender for 1996 and 1997 totalled
$741,627 and $385,523, respectively. During 1998, no such excess cash flow
was generated. On a monthly basis, Piper deposits the property management
fee into an escrow account to be used (including interest earned thereon)
for future leasing costs to the extent cash flow is not sufficient to cover
such items. To date, no escrow funds have been required to be used for
leasing costs. The escrow balance as of December 31, 1998 is approximately
$5,441,000. The manager of the property (which was an affiliate of the
Corporate General Partner through November 1994) has agreed to defer
receipt of its management fee until a later date. As of December 31, 1998,
the manager has deferred approximately $4,445,000 ($1,839,000 of which
represents deferred fees due to affiliates through November 1994) of
management fees. If upon sale or refinancing as discussed below, there are
funds remaining in this escrow after payment of amounts owed to the lender,
such funds will be paid to the manager to the extent of its deferred and
unpaid management fees. Any remaining unpaid management fees would be
payable out of Piper's share of sale or refinancing proceeds, if any.
Additionally, pursuant to the terms of the loan modification, effective
January 1992, OB Joint Venture, as majority owner of the underlying land,
began deferring receipt of its share of land rent. These deferrals, which
totaled $7,100,000 as of December 31, 1998, will be payable from net sale
or refinancing proceeds, if any.

Furthermore, repayment of the mortgage loan is subject to a prepayment
fee ranging from 6% to 1% through the maturity date as well as an amount
that will provide the lender with an internal rate of return from 12.75% to
13.59% out of proceeds from the sale or refinancing of the property. After
the prepayment fees, the lender participates in any remaining sale or
refinancing proceeds. For financial reporting purposes, through
December 31, 1995, additional interest expense had been accrued at a rate
of 13.59% per annum. During 1997 and 1998, interest expense of $10,250,000
was recognized at the loan's stated payment rate. Additionally, based on
the Partnership's estimate of the value of the building at December 31,
1997, it was determined that the lender is not expected to receive the
entire balance of the loan and interest that Piper had accrued based on the
above mentioned internal rate of return, contingent upon the sale or
refinancing of the property. Therefore, in 1997, $18,600,000 of such
interest was reversed and charged to operations. Total indebtedness,
including such interest under the mortgage loan, is approximately
$99,384,000 and $99,769,000 at December 31, 1998 and 1997, respectively.
Under the current terms of the modified debt, there must be a significant
improvement in the current market and property operating conditions
resulting in a significant increase in value of the property in order for
JMB/Piper to share in any future net sale or refinancing proceeds. During
1997, JMB/Piper, on behalf of Piper, explored refinancing alternatives with
the lender. Although JMB/Piper had intended to pursue further discussions
with the lender concerning possible refinancing and/or loan modification
alternatives, it currently appears unlikely that an agreement with respect
to such a transaction will be made.

The Piper venture agreements provide that any net cash flow, as
defined, will be used to pay principal and interest on the operating
deficit loans (as described above) with any excess generally distributable
71% to JMB/Piper and 29% to the venture partners, subject to certain
adjustments (as defined). In general, operating profits or losses are
allocated in relation to the economic interests of the joint venture
partners. Accordingly, operating profits (excluding depreciation and
amortization) were generally allocated 71% to the JMB/Piper and 29% to the
venture partners during 1998, 1997 and 1996.

<PAGE>

The Piper venture agreements further provide that, in general, upon
any sale or refinancing of the property, the principal and any accrued
interest outstanding on any operating deficit loans are to be repaid out of
net proceeds. Any remaining proceeds will be distributable 71% to
JMB/Piper and 29% to the joint venture partners, subject to certain
adjustments, as defined.

During the fourth quarter 1991, Larkin, Hoffman, Daly & Lindgren, Ltd.
(23,344 square feet) approached Piper indicating it was experiencing
financial difficulties and desired to give back a portion or all of its
leased space. Larkin's lease was scheduled to expire in January 2005 and
provided for annual rental payments which were significantly higher than
current market rental rates. Larkin was also a limited partner with
partial interests in the building and the land under the building. On
January 15, 1992, Piper agreed to terminate Larkin's lease in return for
its partial interest in the land under the building and a $1,011,798 note
receivable. The note receivable provides for monthly payments of principal
and interest at 8% per annum with full repayment over ten years. Larkin
may prepay all or a portion of the note at any time. As of the date of
this report, all amounts due under the note have been received. The
balance of the note receivable as of December 31, 1998 is $410,883.

The property was classified as held for sale or disposition as of
September 30, 1997 in the accompanying financial statements and, therefore,
was not subject to continuing depreciation.

JMB/900

In 1984, the Partnership with C-XIV acquired, through JMB/900, an
interest in an existing joint venture ("Progress Partners") which owns a
36-story office building known as the 900 Third Avenue Building in New
York, New York. The partners of Progress Partners were the developer of
the property ("PPI") and an original affiliate of PPI ("JRA") and JMB/900.
In 1986, PPI transferred a portion of its interest to another partnership
("PC-900") in which it and a major tenant of the building (Central National
Bank) were partners. In 1987 the bank failed and the Federal Deposit
Insurance Corporation ("FDIC") assumed its position as a limited partner in
PC-900. The current partners of Progress Partners are PPI, JRA and PC-900
(together "Venture Partners") and JMB/900.

The terms of the JMB/900 venture agreement generally provide that
JMB/900's share of Progress Partners' cash flow, sale or refinancing
proceeds and profits and losses will be distributed or allocated to the
Partnership in proportion to its 33-1/3% share of capital contributions.

JMB/900 has made capital contributions to Progress Partners and
certain payments to an affiliate of the developer, in the aggregate amount
of $18,270,000, subject to the obligation to make additional capital
contributions as described below.

JMB/900 has also made a loan to PPI in the amount of $20,000,000 which
is secured by the Venture Partners' interest in Progress Partners. The
loan bears interest at the rate of 16.4% per annum and is payable in
monthly installments of interest only until maturity on the earlier of the
sale or refinancing of the property or August 2004. For financial
reporting purposes, the loan is classified as an additional investment in
Progress Partners and any related interest received would be accounted for
as distributions (none in 1996, 1997 and 1998). The source of funds from
which PPI was expected to pay interest were the Guaranteed Payments,
discussed below.

<PAGE>

The Progress Partners venture agreement provides that the venture is
required to pay the Venture Partners a stated return of $3,285,000 per
annum payable quarterly (the "Guaranteed Payments"). Generally, JMB/900 is
required to contribute funds to the venture, to the extent net cash flow is
not sufficient, to enable the venture to make the Guaranteed Payments. As
a result of the lawsuit discussed below, such amounts have not been
contributed by JMB/900 to pay the Venture Partners and interest has not
been received by JMB/900 on the $20,000,000 loan discussed above.

Under the terms of the Progress Partners' venture agreement, the
Venture Partners are generally entitled to receive a non-cumulative
preferred return of net cash flow (net after the $3,285,000 per annum
Guaranteed Payments to the Venture Partners discussed above) of
approximately $3,414,000 per annum, with any remaining net cash flow
distributable 49% to JMB/900 and 51% to the Venture Partners.

The Progress Partners venture agreement further provides that net sale
or refinancing proceeds are distributable to JMB/900 and the Venture
Partners, on a pro rata basis, in an amount equal to the sum of any
deficiencies in the receipt of their respective cumulative preferred
returns of net cash flow plus certain contributions to the venture made by
JMB/900 to pay for the Venture Partners' Guaranteed Payments. Next,
proceeds will be distributable to the Venture Partners in an amount equal
to $20,000,000. JMB/900 is entitled to receive the next $21,000,000 and
the Venture Partners will receive the next $42,700,000. Any remaining net
proceeds are to be distributed 49% to JMB/900 and 51% to the Venture
Partners. As discussed above, the $20,000,000 loan to the Venture Partners
matures upon sale or refinancing (under certain conditions) of the
property. The $20,000,000 distribution level to the Venture Partners would
be used to pay off the $20,000,000 loan from JMB/900. Furthermore, to the
extent that JMB/900 has not received annual distributions equal to the
interest payable on the $20,000,000 loan discussed above, JMB/900's
preferred return deficiency is increased by the amounts not received.

Operating profits, in general, are allocated 49% to JMB/900 and 51% to
the Venture Partners. Operating losses, in general, are allocated 90% to
JMB/900 and 10% to the Venture Partners. As a result of the settlement
agreement discussed below, effective January 1, 1998 Operating Profits are
allocated 70% to JMB/900 and 30% to the Venture Partners.

As a result of certain defaults by PPI, an affiliate of the General
Partners assumed management responsibility for the 900 Third Avenue
building as of August 1987 for a fee computed as a percentage of certain
revenues. In December 1994, the affiliated property manager entered into a
sub-management contract with an unaffiliated third party. Pursuant to the
sub-management agreement, the unaffiliated property manager is managing the
property.

Through December 31, 1991, it was necessary for JMB/900 to contribute
approximately $4,364,000 ($2,909,000 of which was contributed by the
Partnership) to pay past due property real estate taxes and to pay certain
costs, including litigation settlement costs, which were the responsibility
of one of the Venture Partners under the terms of the joint venture
agreement to the extent such funds were not available from the investment
property. In July 1989, JMB/900 filed a lawsuit in Federal court against
the former manager and the Venture Partners to recover the amounts
contributed and to recover for certain other joint venture obligations on
which the Venture Partners had defaulted. This lawsuit was dismissed on
jurisdictional grounds. Subsequently, however, the FDIC filed a complaint,
since amended, in a lawsuit against PPI, JRA, JMB/900, and other
unaffiliated defendants, which has enabled JMB/900 to refile its previously
asserted claims against the Venture Partners as part of that lawsuit in
Federal court. There is no assurance that JMB/900 will recover the amounts
of its claims as a result of the litigation. Due to the uncertainty, no
amounts in addition to the amounts advanced to date, noted above, have been
recorded in the financial statements.

<PAGE>

During the fourth quarter of 1996, The State of Maryland Deposit
Insurance Fund Corporation (the "MDIFC") commenced an action against PPI
and JRA to collect on a certain note receivable by foreclosing its security
interest in PPI and JRA's interest in Progress Partners. The trial court
in that action had entered summary judgment in favor of MDIFC for in excess
of $6 million and authorized MDIFC to conduct a sale of PPI's and JRA's
interest in Progress Partners. MDIFC then entered into an agreement with
JMB/900 which provided that if MDIFC acquired those interests at the sale,
MDIFC would convey those interests to JMB/900. MDIFC's scheduled sale was
cancelled as a result of the bankruptcy filing of JRA and PPI discussed
below. After the scheduled sale was cancelled, an affiliate of PPI
purchased MDIFC's claims. As a result, there are no assurances that the
agreement with MDIFC or its successor will be consummated.

Concurrent with the lawsuit filed by the MDIFC, FDIC has filed two
additional lawsuits against JMB/900, PPI, JRA, and other non-affiliated
defendants, in an attempt, among other things, to obtain a legal resolution
of competing claims made as to the interests in PC-900 and to challenge the
consent given by JMB/900 in 1990 to allow MDIFC, in the event it acquired
PPI and JRA's interest through foreclosure, to become a partner of Progress
Partners. JMB/900 has been discussing a settlement with the FDIC in which
JMB/900 would purchase the interest of the FDIC and/or PC-900 in Progress
Partners. If a settlement is not achieved and the FDIC pursues these
actions, JMB/900 intends to vigorously defend itself.

In December, 1997, two of the Venture Partners, JRA and PPI, filed for
bankruptcy in order to prevent the foreclosure of their interests by MDIFC.
Since the bankruptcy filing, an affiliate of PPI effected a settlement with
MDIFC by purchasing its claims. JMB/900 pursued its claims against the
Venture Partners in the bankruptcy forum and sought to either foreclose on
or buyout the interests of the Venture Partners in the venture, or to
otherwise dispose of those interests pursuant to a bankruptcy plan. The
Venture Partners asserted claims against the venture and JMB/900 including
claims for unpaid Guaranteed Payments in the purported amount of $36
million. JMB/900 denied that such claims were due and owing and contended
that, in any event, such claims were offset by PPI's failure to pay
interest in the aggregate amount of approximately $36 million on a $20
million loan to PPI. To the extent that JMB/900 would have been required
to make contributions to pay for any part of the purported claim for
Guaranteed Payments, a portion of the Guaranteed Payments actually paid may
have been allocated to other unsecured creditors of PPI and JRA and,
therefore, JMB/900 might not have received the full amount of the interest
due on the $20 million loan. However, JMB/900's contributions would have
created a preferred return level payable out of future net cash flow or net
sale or refinancing proceeds. Furthermore, JMB/900 took the position that
to the extent that it did not receive annual distributions equal to the
interest payable on the $20,000,000 loan, JMB/900's preferred return
deficiency would be increased by the amounts not received, but the Venture
Partners disputed this characterization.

In July 1998, JMB/900 entered into an agreement with the Venture
Partners and a judgment creditor of JRA and PPI (such judgment creditor,
JRA and PPI, are hereinafter collectively referred to as the "Progress
Parties") to resolve outstanding claims. The agreement was subject to
occurrence of various terms and conditions, which failed to occur. In a
further effort to resolve outstanding claims and to place JMB/900 in a
position to control and market the property, JMB/900 entered into a
settlement agreement with the Progress Parties effective as of March 17,
1999 ("Settlement Agreement"). The Settlement Agreement generally provides
for the settlement and release of all claims and causes of action by and
against JMB/900 and the Progress Parties related to or arising from the
joint venture relationship or the property including, without limitation,
any claims by the Venture Partners to Guaranteed Payments and any claims by

<PAGE>

Progress Partners for capital contributions from JMB/900. Under the
Settlement Agreement and related transactions, JMB/900 and an affiliate
acquired all of the right, title and interest of the Progress Parties in
the property, Progress Partners and PC-900 and resolved all outstanding
litigation in exchange for a total payment of $16.0 million, $13.5 million
of which was paid at closing of the Settlement Agreement with the remaining
$2.5 million to be paid upon the earlier of (i) closing of a sale of the
property by Progress Partners or (ii) January 3, 2000. In a related
agreement and for the payment of $300,000 and the release of various
claims, the litigation and claims by and between the FDIC and JMB/900 were
resolved and dismissed. As part of the settlement, the limited partnership
interests in PC-900 in Progress Partners were assigned to 14-15 Office
Associates, L.P. ("Office Associates"), in which JMB/900 owns a 99% limited
partnership interest. P-C 900's interest in Progress Partners was then
transferred to JMB/900 and Office Associates, which are now the sole
remaining partners in Progress Partners. Amendments to the joint venture
agreement of Progress Partners were made to effectuate the terms of the
settlement and the substitution of partners.

As the venture has committed to a plan to sell or dispose of the
property, 900 Third Avenue Building was classified as held for sale or
disposition as of July 1, 1998, and therefore, will not be subject to
continued depreciation beyond such date.

In 1994, JMB/900, on behalf of Progress Partners, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. Pursuant to the loan extension, net cash flow
(as defined) after debt service and capital expenditures and after
repayment of costs associated with and deposits made by Progress Partners
in connection with the loan extension (totaling approximately $3,229,000 of
which approximately $1,335,000 was advanced to Progress Partners by
JMB/900) was paid into an escrow account controlled by the lender. Such
escrow including interest earned thereon can be used by Progress Partners
for releasing costs associated with leases which expire in 1999 and 2000
(approximately 240,000 square feet of space). The remaining proceeds in
this escrow plus interest earned thereon, if any, will be released to the
Progress Partners once 90% of such leased space has been renewed or
released. As of July 1996, all of the amounts advanced by Progress
Partners have been repaid to Progress Partners and subsequently distributed
to JMB/900 (of which the Partnership's share was approximately $2,000,000).

The escrow balance at December 31, 1998 is approximately $10,172,000.

The Partnership will not commit additional capital to this property
unless, among other things, it believes that upon sale of the property, the
Partnership will receive a return of such funds and a reasonable rate of
return thereon.

WELLS FARGO CENTER - SOUTH TOWER

In June 1985, the Partnership acquired an interest in a joint venture
partnership ("South Tower") which owns a 44-story office building in Los
Angeles, California. The joint venture partners of the Partnership
included Carlyle-XIV ("Affiliated Partner"), one of the sellers of the
interests in South Tower, and another unaffiliated venture partner.

The Partnership and the Affiliated Partner purchased their interests
for $61,592,000. In addition, the Partnership and the Affiliated Partner
made capital contributions to South Tower totaling $48,400,000 for general
working capital requirements and certain other obligations of South Tower.
The Partnership's share of the purchase price, capital contributions (net
of additional financing) and interest thereon totaled $53,179,000.

The terms of the original South Tower agreement generally provided
that the Partnership and Affiliated Partner's aggregate share of the South
Tower's annual cash flow, net sale or refinancing proceeds, and profits and
losses be distributed or allocated to the Partnership and the Affiliated
Partner in proportion to their aggregate capital contributions.

<PAGE>

Annual cash flow was to be distributed 80% to the Partnership and
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner received, in the aggregate, a cumulative preferred
return of $8,050,000 per annum. The remaining cash flow was to be
distributable 49.99% to the Partnership and the Affiliated Partner, and the
balance to the other joint venture partners. Additional contributions to
South Tower were contributed 49.99% by the Partnership and the Affiliated
Partner until all partners had contributed $10,000,000 in aggregate.

Operating profits and losses, in general, were to be allocated 49.99%
to the Partnership and the Affiliated Partner and the balance to the other
joint venture partners. Substantially all depreciation and certain
expenses paid from the Partnership's and Affiliated Partner's capital
contributions were to be allocated to the Partnership and Affiliated
Partner. In addition, operating profits, up to the amount of any annual
cash flow distribution, were allocated to all partners in proportion to
such distributions of annual cash flow.

In general, upon sale or refinancing of the property, net sale or
refinancing proceeds were to be distributed 80% to the Partnership and the
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner received the amount of any deficiency in their preferred
return described above plus an amount equal to their "Disposition
Preference" (which, in general, begins at $120,000,000 and increases
annually by $8,000,000 to a maximum of $200,000,000). Any remaining net
sale or refinancing proceeds were to be distributed 49.99% to the
Partnership and the Affiliated Partner and the remainder to the other
partners.

The office building is being managed by an affiliate of one of the
venture partners under a long-term agreement pursuant to which the
affiliate is entitled to receive a monthly management fee of 2-1/2% of
gross project income, a tenant improvement fee of 10% of the cost of tenant
improvements, and commissions on new leases.

The mortgage note secured by the property (with a balance of
approximately $167,593,000 and accrued interest of approximately $1,445,000
as of December 31, 1998), matured December 1, 1994. The Partnership and
the joint venture had been in discussions with the lender regarding an
extension of the mortgage note. The venture continued to make interest
payments to the lender under the original terms of the mortgage note and
was required to escrow all available cash flow. In the fourth quarter of
1996, the joint venture and the lender reached an agreement to modify the
mortgage note. The agreement provides that the mortgage note be extended
to September 2003 at an interest rate of 10% with all excess cash flow
being escrowed for future tenant improvements and principal payments. In
addition, upon sale or refinancing of the property subsequent to September
1, 1999, the mortgage loan requires payment of participation interest (as
defined) of any excess proceeds. The mortgage lender received a $2,000,000
extension fee paid by the venture partners in their ownership percentages
(of which the Partnership's share was $650,000).

The promissory note secured by the Partnership's interest in the joint
venture matured December 1, 1994. The Partnership had been in discussion
with the lender regarding an extension of the promissory note. The
Partnership had ceased making debt service payments on the promissory note.

In the fourth quarter of 1996, the Partnership reached an agreement with
the lender to modify the promissory note (with a principal balance of
$22,750,000 and accrued interest of approximately $5,800,000 prior to
modification). The Partnership's amended and restated promissory note has
an adjusted principal balance of approximately $40,830,000 consisting of
the original principal loan balance, unpaid accrued interest, the
Partnership's share of the mortgage loan extension fee and a restructuring
fee of approximately $11,600,000. The promissory note is due September
2003 and accrues interest at 17% per annum. The loan requires payments of
cash flow distributed by the venture from either property operations or
sales proceeds as well as a portion of the property management fee paid to
the venture partner. The loan is secured solely by the Partnership's
interest in the property.

<PAGE>

In conjunction with the note modifications, the South Tower was
converted to a limited liability company with members' interests in the
same ratio as the prior venture ownership interests. The conversion of the
Partnership's interest to a member's interest in a limited liability
company eliminates any potential additional obligation of the Partnership
in the future to provide additional funds under the previous joint venture
agreement. As a result, previously recognized losses of $10,620,944 have
been reversed and the Partnership's share of income for financial reporting
purposes (approximately $286,000 in 1997 and $464,000 in 1998) has not been
recognized as such amount is not considered realizable.

At maturity of the loan, it is not anticipated that further
modifications or extensions can be obtained. This would likely result in
the Partnership no longer having an ownership interest in the property, and
in such event would result in a gain for Federal income tax purposes with
no corresponding distributable proceeds. Since the terms of the modified
mortgage note and the amended and restated promissory note make it unlikely
that the Partnership would recover any incremental investment, the
Partnership has decided not to commit any significant additional amounts to
the property.

JMB/125

In December 1985, the Partnership, through the JMB/125 joint venture
partnership, acquired an interest in an existing joint venture partnership
("125 Broad") which owned a 40-story office building, together with a
leasehold interest in the underlying land, located at 125 Broad Street in
New York, New York. In addition to JMB/125, the other partners (the "O&Y
partners") of 125 Broad included O&Y 25 Realty Company L.P., Olympia & York
Broad Street Holding Company L.P. (USA) and certain other affiliates of
Olympia & York Development, Ltd. ("O&Y").

In November 1994, the Partnership through its indirect ownership of
JMB/125 assigned its interest in the 125 Broad Street Building to the
venture partners.

Due to the O&Y partners' previous failure to advance necessary funds
to 125 Broad as required under the joint venture agreement, 125 Broad in
June 1992 defaulted on certain mortgage obligations. On November 15, 1994,
effective as of October 31, 1994, JMB/125 and certain affiliates of O&Y
reached an agreement to settle their disputes regarding 125 Broad and its
property. Under the terms of the agreement, JMB/125 assigned its interest
in 125 Broad to an affiliate of O&Y and released the O&Y partners from any
claims related to 125 Broad. In return, JMB/125 received an unsecured
promissory note in the principal amount of $5 million bearing simple
interest at 4.5% per annum with all principal and accrued interest due at
maturity in October 1999, subject to mandatory prepayments of principal and
interest or acceleration of the maturity date under certain circumstances.
As of December 31, 1994, the note had been fully reserved for by JMB/125.
In addition, JMB/125 received a release from any claims of certain O&Y
affiliates and generally was to be indemnified against any liability as a
general partner of 125 Broad. JMB/125 was also relieved of any obligation
to contribute cash to 125 Broad in the amount of its deficit capital
account balance. Affiliates of O&Y subsequently filed a prearranged
bankruptcy plan for reorganization of 125 Broad under Chapter 11 of the
Bankruptcy Code in order to facilitate 125 Broad's transfer of the office
building to the mortgage lender in satisfaction of the mortgage debt and
other claims. In January 1995, the plan for reorganization was approved by
the bankruptcy court, was consummated, and the bankruptcy case was
concluded. As a result of the assignment of its interest, JMB/125 no
longer has an ownership interest in the office building.

<PAGE>

In October 1995, the makers of the $5 million promissory note payable
to JMB/125 filed for protection from creditors under Chapter 11 of the
Bankruptcy Code. Pursuant to the bankruptcy reorganization of the makers
of the note, JMB/125, as an unsecured creditor, received limited
partnership interests and a convertible note receivable in a reorganized
entity that has majority or controlling interests in six office buildings
in New York, New York and Boston, Massachusetts. The assigned value, as of
the bankruptcy confirmation date, of the interests and note received by
JMB/125 was approximately $400,000. The convertible note was fully
reserved due to the uncertainty of the realizable value of the note. In
June 1997, the convertible note receivable for $297,000 was collected on by
JMB/125 resulting in the recognition of gain, of which the Partnership's
share was $174,654. In December 1998, the limited partnership interests
were sold back to the reorganized entity for $118,642 resulting in
recognition of gain, of which the Partnership's share was $81,612, and
JMB/125 was terminated.

JMB/NEWPARK

In December 1986, the Partnership, through the JMB/NewPark joint
venture partnership, acquired an interest in an existing joint venture
partnership ("NewPark Associates") with the developer which owns an
interest in an existing enclosed regional shopping center in Newark,
California known as NewPark Mall. JMB/NewPark invested $32,500,000 for its
50% interest in NewPark Associates. In December 1995, the developer
transferred its interest in NewPark Associates to a new venturer which is
affiliated with the developer.

The NewPark Mall secured a mortgage note payable in the principal
amount of $60,000,000, due on December 31, 2000. The loan provided for
monthly interest-only payments of $357,500. Interest on the non-recourse
loan accrued at 7.15% per annum.

A portion of the proceeds from the note payable was used to pay the
outstanding balance, including accrued interest, under the previous
mortgage note payable. The Partnership's share of net refinancing proceeds
(after payment of the previous mortgage note payable and costs and fees
relating to the refinancing) was $4,815,000.

The NewPark Associates partnership agreement provided that JMB/NewPark
and the joint venture partner were each entitled to receive 50% of profits
and losses, net cash flow and net sale or refinancing proceeds of NewPark
Associates and were each obligated to advance 50% of any additional funds
required under the terms of the NewPark Associates partnership agreement.

As a result of the acquisition by Federated Department Stores of the
company which owned the Emporium Capwell store at NewPark, Federated, which
also owns the Macy's store at NewPark, approached the NewPark joint venture
regarding a sale of the Emporium building. Simultaneously with its
negotiations to acquire the Emporium Capwell building, the NewPark joint
venture negotiated to sell the building to a national retail store owner.
The transactions closed on April 22, 1997 and the joint venture received a
lease termination fee of approximately $2,187,000, of which the
Partnership's share was approximately $984,000.

The portion of the shopping center owned by NewPark Associates was
managed by the former joint venture partner under a long-term agreement
pursuant to which it was obligated to manage the property and collect all
receipts from operations of the property. In December 1995, the former
joint venture partner assigned its interest in the management agreement to
the new venture partner. The manager was paid a management fee equal to 4%
of the fixed and percentage rent. An amendment to the management agreement
provided that the new manager would pay to an affiliate of the General
Partners of the Partnership an annual consulting fee in the amount of
$100,000 in consideration for assisting NewPark Associates and the new
venture partner in the evaluation of property budgets, and leasing and
long-term strategies for NewPark Mall. Such consulting fee was paid out of
the management fee noted above.

<PAGE>

Pursuant to a liquidation agreement dated November 13, 1998, the
Partnership, its affiliated venture partner and its unaffiliated venture
partner dissolved NewPark Associates and distributed all of its assets to
the joint venture partners. On November 18, 1998, the Partnership and its
affiliated venture partner sold their interest in the net assets of the
NewPark Mall to the unaffiliated joint venture partner for $16,000,000 less
brokerage commissions and closing costs of approximately $455,000. As a
result of the sale, the Partnership recognized a gain for financial
reporting purposes of approximately $7,656,000 in 1998, in part as a result
of a previous impairment loss recognized by the Partnership of $3,780,000.
The Partnership recognized a gain on sale of approximately $4,781,000 for
Federal income tax purposes in 1998.

260 FRANKLIN

In May 1986, the Partnership, through the 260 Franklin joint venture
partnership, acquired an interest in an office building in Boston,
Massachusetts known as the 260 Franklin Street Building.

The property was subject to a first mortgage loan in the original
principal amount of approximately $75,000,000. 260 Franklin's original
cash investment (exclusive of acquisition costs) was approximately
$35,000,000 of which the Partnership's share was approximately $24,500,000.

An affiliate of the General Partner managed the property until
December 1994 for a fee computed at 3% of the property's gross receipts.
Beginning January 1, 1992, 260 Franklin Street escrowed the payment of
property management fees and leasing commissions to the affiliate pursuant
to the terms of the debt modification described below. In December 1994,
the affiliated property manager sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. The property was then managed by the purchaser of the affiliate's
assets on the same terms provided in the property management agreement,
with the payment of the management fees guaranteed by JMB in 1995.
Beginning in January 1996, the unaffiliated property manager was paid
management fees by the property.

The mortgage note, as modified in December 1991, provided for monthly
payments of interest only based upon the then outstanding balance at a rate
of 8% per annum. Upon maturity, 260 Franklin was obligated to pay an
amount sufficient to provide the lender with an 11% per annum yield on the
mortgage note from January 1, 1991. In addition, upon maturity, 260
Franklin was obligated to pay to the lender a residual interest amount
equal to 60% of the highest amount, if any, of (i) net sales proceeds, (ii)
net refinancing proceeds, or (iii) net appraisal value, as defined. 260
Franklin was required to (i) escrow excess cash flow from operations
(computed without a deduction for property management fees and leasing
commissions), beginning in 1991, to cover future cash flow deficits, (ii)
make an initial contribution to the escrow account of $250,000, of which
the Partnership's share was $175,000, and (iii) make annual escrow
contributions, through January 1995, of $150,000, of which the
Partnership's share was $105,000. The escrow account ($202,378 at
December 31, 1997 including accrued interest) was to be used to cover the
cost of capital and tenant improvements and lease inducements
(approximately $5,045,000 used as of December 31, 1997) as defined. The
balance of the escrowed funds remaining at December 31, 1997 was used for
the payment of interest due to the lender as described above.

The mortgage loan matured January 1, 1996. 260 Franklin, as of such
date, began submitting the net operating cash flow of the property to the
lender while seeking an extension or refinancing of the loan. The joint
venture reached an agreement with the lender for an extension of the
mortgage loan through January 1, 1997 and again through January 1, 1998.
In addition to substantially the same terms as were in effect prior to such
extensions, the agreement required that 260 Franklin submit net operating
cash flow of the property to the lender. In addition, the lender had
indicated that it would not extend the loan beyond January 1, 1998. 260
Franklin and the Partnership believed that the value of the office building

<PAGE>

was less than the mortgage loan, and the Partnership did not intend to
expend any additional funds of its own on the property. Accordingly, 260
Franklin entered negotiations with the lender and an unaffiliated third
party regarding the disposition of the property to the unaffiliated third
party. Effective January 1, 1998, the joint venture entered into a loan
modification agreement with the lender in which the lender waived accrued
unpaid interest owed for the period prior to January 1, 1998, which was
approximately $17,200,000.

On January 2, 1998, 260 Franklin disposed of, through a trust, the
land, building and related improvements of the 260 Franklin Street
Building. 260 Franklin transferred title to the land, building and
improvements, and other assets and liabilities related to the property in
consideration of a discharge of the mortgage loan and receipt of $200 in
cash. 260 Franklin recognized in 1998 gains in the aggregate of
approximately $23,200,000 for financial reporting purposes, in part as a
result of previous impairment losses recognized by the joint venture in
1996 aggregating $17,400,000, and an extraordinary gain on forgiveness of
indebtedness of approximately $17,500,000 for financial reporting purposes,
all of which is included in the consolidated financial statements of the
Partnership. In addition, 260 Franklin recognized a gain of approximately
$24,400,000 for Federal income tax reporting purposes, of which the
Partnership's share was approximately $17,000,000, with no distributable
proceeds in 1998. 260 Franklin and the Partnership have no future
liability for any representations, warranties or covenants to the purchaser
as a result of the disposal of the property.

Due to the lender negotiations described above, the property had been
classified as held for sale or disposition as of July 1, 1997, and
therefore, was not subject to continued depreciation after such date.

VILLAGES NORTHEAST

The property was classified as held for sale or disposition as of
January 1, 1996, and therefore, had not been subject to continued
depreciation prior to its sale in May 1996.

In September 1986, the Partnership, through the Villages Northeast
joint venture partnership, acquired through a joint venture ("Post
Associates") with an affiliate of the developer, an interest in three
apartment complexes known as the Dunwoody Crossing (Phase I, II and III)
Apartments, respectively, located near Atlanta, Georgia.

Villages Northeast acquired its interest in the apartment complexes
from an affiliate of the developer subject to an existing first mortgage
loan secured by the Dunwoody Crossing (Phase II) Apartments.

Dunwoody (Phases I and III) Apartments secured an approximately
$21,000,000 first mortgage loan, which required monthly payments of
principal and interest (8.65% per annum) of $171,737 beginning February 15,
1995 and continuing through November 15, 1997, when the remaining principal
balance was payable. The Dunwoody (Phase II) Apartments secured a
$9,800,000 first mortgage loan, which bore interest of 7.64% per annum, and
required monthly payments of principal and interest of $73,316 through
November 1, 1997, when the remaining balance was payable.

Villages Northeast was entitled to a cumulative preferred return of
annual net cash receipts (as defined) from the properties. Villages
Northeast received cash distributions from property operations through
May 7, 1996. After Villages Northeast received its preferential return,
the unaffiliated venture partner was entitled to a non-cumulative return on

<PAGE>

its interest in the venture; additional net cash receipts were shared in a
ratio relating to the ownership interests of Villages Northeast (90%) and
its unaffiliated venture partner (10%). Villages Northeast also had
preferred positions (related to Villages Northeast's investment in Post
Associates) with respect to distribution of net sale or refinancing
proceeds from Post Associates. Operating profits and losses, in general,
were allocable 90% to Villages Northeast and 10% to the unaffiliated
venture partner, except that certain expenses paid for out of Villages
Northeast's cash payments were allocable solely to Villages Northeast and
certain costs of operations paid for out of capital contributions, if any,
of the unaffiliated venture partner were allocable solely to it.

On May 7, 1996, the Partnership sold (through the Villages Northeast
venture) the Dunwoody apartment complex to the unaffiliated venture
partner, pursuant to such venture partner's right of first refusal, for
$47,000,000 less brokerage commissions, transfer taxes and legal fees of
approximately $470,000. Approximately $30,900,000 of the sales proceeds
was utilized to retire the mortgage debt including a prepayment penalty of
approximately $435,000 (of which the Partnership's share of approximately
$304,453 is reported as an extraordinary item in the 1996 Consolidated
Financial Statements). Additionally, approximately $787,000 (of which the
Partnership's share was approximately $551,000) was paid to the State of
Georgia on behalf of the Holders of Interests for withholding tax related
to the sale. As a result of the sale, the Partnership recognized a gain of
approximately $10,500,000 for financial reporting purposes for the year
ended December 31, 1996 and a gain of approximately $17,500,000 for Federal
income tax purposes in 1996. The Partnership made a distribution of $25
per Interest from its share of the net sales proceeds of this sale in May
1996. In 1997, the Partnership recognized a gain of approximately $269,000
for financial reporting purposes resulting from the liquidation of Villages
Northeast.

OWINGS MILLS

In December 1985, the Partnership, through the JMB/Owings joint
venture partnership, acquired an interest in an existing joint venture
partnership ("Owings Mills") which owned an interest in an enclosed
regional shopping center. JMB/Owings's original cash investment was
$7,000,000, of which the Partnership's share was $3,500,000. On June 30,
1993, JMB/Owings sold its interest in Owings Mills Shopping Center as
described below.

JMB/Owings sold its partnership interest in Owings Mills to an
affiliate of the Partnership's unaffiliated joint venture partners. The
sale price of the interest was $9,416,000, all of which was received in the
form of a promissory note. In addition, the Partnership and Carlyle-XVI
were relieved of their allocated portion of the debt secured by the
property. The promissory note (which was secured by a guaranty from an
affiliate of the purchaser and the unaffiliated joint venture partner) bore
interest at a rate of 7% per annum subject to increase to 8% per annum for
the remainder of the term of the note. The promissory note required
principal and interest payments of approximately $109,000 per month with
the remaining principal balance of approximately $5,500,000 due and payable
on June 30, 1998. The monthly installment of principal and interest would
be adjusted for the increase in the interest rate if applicable. Early
prepayment of the promissory note may have been required under certain
circumstances, including the sale or further encumbrance of Owings Mills
Mall. On June 30, 1998, JMB Ownings collected the remaining principal
balance of the purchase price note of approximately $5,598,000 of which the
Partnership's share was approximately of $2,800,000 and JMB/Ownings was
subsequently terminated.

<PAGE>

The net cash proceeds and gain from sale of the interest were
allocated 50% to the Partnership and 50% to Carlyle-XVI in accordance with
the JMB/Owings partnership agreement. For financial reporting purposes,
JMB/Owings recognized, on the date of sale, gain of $5,254,855, of which
the Partnership's share was $2,627,427, attributable to JMB/Owings being
relieved of its obligations under the Owings Mills partnership agreement
pursuant to the terms of the sale agreement. JMB/Owings had adopted the
cost recovery method until such time as the purchaser's initial investment
was sufficient in order to recognize additional gain under Statement of
Financial Accounting Standards No. 66 ("SFAS #66"). At December 31, 1994,
the total deferred gain of JMB/Owings including principal and interest
payments of $1,858,572 received through December 31, 1994 was $10,305,310
of which the Partnership's share was $5,152,655. As JMB/Owings had
collected a sufficient amount of the purchaser's initial investment, at
March 31, 1995, the joint venture adopted the installment method for
recognition of the remaining deferred gain. JMB/Owings recognized
$6,048,733, $787,942 and $870,121 of deferred gain and $202,547, $494,172
and $527,237 of interest income for the years ended December 31, 1998, 1997
and 1996, respectively, of which the Partnership's share of deferred gain
was $3,028,163, $393,971 and $435,060, and the Partnership's share of
interest income was $101,273, $247,086 and $263,619, respectively.

LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1998 and
1997:
1998 1997
------------ -----------
17.0% promissory note; secured by the
Partnership's interest in the Wells
Fargo Center South Tower office building
in Los Angeles, California; principal
and accrued interest due September 2003 . . $55,667,069 48,725,194

11.0% mortgage note; secured by the
260 Franklin Street Building; monthly
payments of interest only of $374,455
were due from June 1991 through January 1,
1992, monthly payments of interest
only of $499,273 were due from
February 1, 1992 through December 1,
1995, monthly payments of net cash flow
submitted thereafter until the unpaid
balance of approximately $74,891,013
plus unpaid accrued interest was due
on January 1, 1998. Additional interest
payable upon maturity to provide
an 11% return to lender and 60% of
the greater of net sales or refinancing
proceeds or appraised value, as
defined, discharged in 1998 in
conjunction with the assignment of
title to the property to an
affiliate of the lender . . . . . . . . . . -- 92,117,086

10.375% mortgage note; secured by the
California Plaza Building; principal
and interest payments of $525,136 were
due monthly from February 1, 1992
through December 1, 1996; the unpaid
balance of principal and interest of
approximately $56,673,315 was due on
January 1, 1997; modified in December 1993

<PAGE>

1998 1997
------------ -----------
to require interest only payments of
$384,505 (8.00%) due monthly effective
February 1993 through January 1, 2000;
interest accrues at 10.375% through
January 1, 2000 when the unpaid principal
and interest is due . . . . . . . . . . . . 62,523,394 61,247,778
------------ ------------
Total debt. . . . . . . . . . . . . . . 118,190,463 202,090,058
Less current portion
of long-term debt . . . . . . . . . . -- 92,117,086
------------ ------------
Total long-term debt. . . . . . . . . . $118,190,463 109,972,972
============ ============

Included in the above total long-term debt is $21,792,401 and
$30,800,983 for 1998 and 1997, respectively, which represents interest
accrued but not currently payable pursuant to the terms of the notes.

Five year maturities of long-term debt are as follows:

1999 . . . . . . . $ --
2000 . . . . . . . 62,523,394
2001 . . . . . . . --
2002 . . . . . . . --
2003 . . . . . . . 55,667,069

PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Holders
of Interests and 4% to the General Partners. Profits from the sale or
other dispositions of investment properties will be allocated first to the
General Partners in an amount equal to the greater of the General Partners'
share of cash distributions from the proceeds of any such sale or other
dispositions (as described below) or 1% of the total profits from any such
sales or other dispositions, plus an amount which will reduce deficits (if
any) in the General Partners' capital accounts to a level consistent with
the gain anticipated to be realized from the sale of investment properties.

Losses from the sale or other disposition of investment properties will be
allocated 1% to the General Partners. The remaining sale or other
disposition profits and losses will be allocated to the Holders of
Interests.

The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. "Net cash receipts" from operations of
the Partnership will be allocated 90% to the Holders of Interests and 10%
to the General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).

The Partnership Agreement provides that subject to certain conditions,
the General Partners shall receive as a distribution of the proceeds (net
after expenses and liabilities and retained working capital) from the sale
or refinancing of an investment property by the Partnership of up to 3% of
the selling price for any property sold, and that the remaining proceeds be
distributed 85% to the Holders of Interests and 15% to the General
Partners. However, prior to such distribution being made, the Holders of
Interests are entitled to receive 99% and the General Partners l% of net
sale or refinancing proceeds until the Holders of Interests (i) have
received cash distributions of "sale proceeds" or "refinancing proceeds" in
an amount equal to the Holders' aggregate initial capital investment in the
Partnership and (ii) have received cumulative cash distributions from the
Partnership's operations which, when combined with "sale proceeds" or
"refinancing proceeds" previously distributed, equal a 6% annual return on

<PAGE>

the Holders' average capital investment for each year (their initial
capital investment as reduced by "sale proceeds" or "refinancing proceeds"
previously distributed) commencing with the third fiscal quarter of 1986.
The Holders of Interests have not yet received and are not expected to
receive cash distributions of net sale or refinancing proceeds in an amount
equal to their initial capital investment in the Partnership. If upon the
completion of the liquidation of the Partnership and the distribution of
all Partnership funds, the Holders of Interests have not received the
amounts in (i) and (ii) above, the General Partners will be required to
return all or a portion of the 1% distribution of net sale or refinancing
proceeds described above up to an amount equal to such deficiency in
payments to the Holders of Interests pursuant to (i) and (ii) above. As of
the date of this report, the General Partners have received net sale or
refinancing proceeds aggregating $170,311.

MANAGEMENT AGREEMENTS

Certain of the Partnership's properties are managed by affiliates of
the General Partners or their assignees for fees computed as a percentage
of certain rents received by the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager has acted as property
manager of the 260 Franklin Street Building (through its sale in January
1998), the Dunwoody Crossing Apartments (through its sale in May 1996) and
the RiverEdge Place Building (through its sale in December 1997) on the
same terms that existed prior to the assignment of the management
contracts. In connection with such transaction, an affiliate of the
Corporate General Partner previously guaranteed the payments to the
successor manager of certain property management fees. As a result, such
affiliate paid property management fees for the 260 Franklin Street
Building for 1995 to the successor manager pursuant to the guarantee. In
addition, the affiliated property manager has entered into a sub-management
agreement with the successor for management of the 900 Third Avenue
Building.

NOTES RECEIVABLE

In 1987 and 1988, the Partnership advanced funds to pay for certain
deficits at the 21900 Burbank Boulevard Building which were the obligation
of an affiliate of the seller. Such advances, including unpaid interest,
were approximately $2,313,000. The Partnership received demand notes from
the seller which are personally guaranteed by certain of its principals.
The seller had been paying interest on the note at a rate equal to 3% over
the prime rate. In February 1991, the seller ceased paying monthly
interest required under terms of the note. The Partnership put the seller
in default and effective October 31, 1991, the notes began accruing
interest at the default rate. During 1994, two of the principals which
guaranteed the notes became subject to Chapter 7 bankruptcy proceedings.
Subsequently, these individual's obligations, including their obligations
under the notes, were discharged. Previously, it appeared that the
principals guaranteeing the notes had little or no assets which the
Partnership could pursue for collection and it appeared unlikely that any
further amounts would be collected. As a matter of prudent accounting
policy, a reserve for uncollectibility for the entire amount recorded for
financial reporting purposes ($1,466,051) had been reflected in the
accompanying consolidated financial statements at December 31, 1997. In
July 1998, the Partnership received final collection, from bankruptcy
proceeds, toward the notes in the amount of $785,998. Therefore, such
amount was recognized in income as of December 31, 1998.

<PAGE>

LEASES

At December 31, 1998, the Partnership and its consolidated venture's
principal asset is one office building. The Partnership has determined
that all leases relating to this property are properly classified as
operating leases; therefore, rental income is reported when earned and the
cost of the property, excluding cost of land, was depreciated over the
estimated useful lives until such time the property is considered held for
sale or dispositions at which time depreciation is no longer taken. Leases
with commercial tenants range in term from one to 30 years and provide for
fixed minimum rent and partial to full reimbursement of operating costs.

Cost or carrying value and accumulated depreciation of the leased
asset is summarized as follows at December 31, 1998:

Office building:
Cost or carrying value. . . . . . $69,515,748
Accumulated depreciation. . . . . (23,322,426)
-----------
Total . . . . . . . . . . $46,193,322
===========

Minimum lease payments, including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements, are as follows:

1999 . . . . . . . . . . $ 6,015,258
2000 . . . . . . . . . . 5,703,993
2001 . . . . . . . . . . 3,677,215
2002 . . . . . . . . . . 2,632,797
2003 . . . . . . . . . . 1,031,362
Thereafter . . . . . . . 1,486,538
-----------
Total. . . . . . . . $20,547,163
===========

TRANSACTIONS WITH AFFILIATES

The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1998, 1997 and 1996 are as follows:

UNPAID AT
DECEMBER 31,
1998 1997 1996 1998
-------- ------- -------- ------------
Property management
and leasing fees. . . . . $ -- 9,246 66,560 1,057,092
Management fees to
corporate general
partner . . . . . . . . . 708,497 -- -- --
Insurance commissions. . . 1,706 15,019 9,330 --
Reimbursement (at cost)
for accounting services . 15,520 18,963 11,760 2,085
Reimbursement (at cost)
for portfolio manage-
ment services . . . . . . 74,307 52,248 89,867 18,776
Reimbursement (at cost)
for legal services. . . . 15,368 15,008 17,775 4,965

<PAGE>

UNPAID AT
DECEMBER 31,
1998 1997 1996 1998
-------- ------- -------- ------------
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket expenses. . 17,153 77 -- --
-------- ------- --------- ---------
$832,551 110,561 195,292 1,082,918
======== ======= ========= =========

The Partnership is required to pay a management fee to the Corporate
General Partner and the General Partners are entitled to receive a share of
cash distributions, when and as cash distributions are made to the Holders
of Interests, and a share of profits or losses. During 1998, management
fees of $708,497 were paid to the Corporate General Partner (which is
reflected in the above table) and the General Partners received a
distribution from operational cash flow of $425,098.

Through November of 1994, certain of the properties owned by the
Partnership's consolidated and unconsolidated ventures were managed by an
affiliate of the Corporate General Partner. Included in accounts payable
are amounts due to affiliates of $1,732,968 at December 31, 1998 and
December 31, 1997, which consists of management fees and leasing
commissions of $1,057,092 (included in the table above) and advances of
$675,876 payable to the affiliated manager. The cumulative deferred
amounts do not bear interest and are expected to be paid in future periods.

An affiliate of the General Partners was entitled to payment of
property management and leasing fees relating to 260 Franklin through
November 1994 and subsequently JMB guaranteed payment to the unaffiliated
third party property manager for the property management and leasing fees.
Pursuant to a loan modification for the property, property management and
leasing fees were required to be escrowed through December 1995. Beginning
in January 1996, the unaffiliated property manager was paid management and
leasing fees by the property. During 1998, $1,510,132 of management and
leasing fees remained payable (as a result of the escrowing of certain 1995
and prior years' management and leasing fees payable to an affiliate of the
General Partners and JMB's payment pursuant to its guarantee of the fees to
the unaffiliated property manager) of which the Partnership's share is
$1,057,092 (included in the table above). In connection with the sale of
the 260 Franklin Street building, the Partnership assumed the liability for
its pro rata share of the unpaid fees, which amount was transferred to the
accounts of the Partnership upon the sale of 260 Franklin.

The affiliate also managed Piper Jaffray Tower prior to December 1994,
and pursuant to the terms of a loan modification, agreed to defer receipt
of its property management fees earned of approximately $1,839,000 as of
December 31, 1998 (of which the Partnership's share is approximately
$919,500). The unconsolidated venture's obligation to the affiliate is not
reflected in the Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997.

Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, had provided management services to Erie McClurg Park
Facility (sold in September 1992). In connection with the sale of Erie
McClurg, a management termination agreement was reached which requires the
Partnership to make monthly payments to such company through 2010. Such
acquisition had no effect on the fees payable by the Partnership under any
existing agreements with such company. The amount paid in 1998 was
$83,636.

<PAGE>

INVESTMENT IN UNCONSOLIDATED VENTURES

Summary financial information for Wells Fargo Center - South Tower,
JMB/Piper, JMB/Piper II and JMB/900, for the years ended 1998 and 1997
follows:
1998 1997
------------ ------------

Current assets . . . . . . . . . . . $ 30,057,665 23,287,185
Current liabilities. . . . . . . . . (18,191,860) (16,569,351)
------------ ------------
Working capital (deficit). . . . 11,865,805 6,717,834
------------ ------------
Other assets . . . . . . . . . . . . 43,398,071 47,147,715
Deferred expenses. . . . . . . . . . 7,053,036 5,533,720
Investment properties, net . . . . . 286,077,699 294,054,919
Other liabilities. . . . . . . . . . (1,011,524) (2,820,441)
Long-term debt . . . . . . . . . . . (354,324,874) (364,925,620)
Venture partners' equity . . . . . . 510,714 5,859,891
------------ ------------
Partnership's capital (deficit). $ (6,431,073) (8,431,982)
============ ============
Represented by:
Invested capital . . . . . . . . . $148,405,103 148,108,615
Cumulative distributions . . . . . (49,903,117) (49,903,117)
Cumulative losses. . . . . . . . . (104,933,059) (106,637,480)
------------ ------------
$ (6,431,073) (8,431,982)
============ ============
Total income . . . . . . . . . . . . $ 86,760,343 87,541,408
Expenses applicable to
operating earnings . . . . . . . . 79,960,482 66,800,486
------------ ------------
Operating earnings . . . . . . . . . 6,799,861 20,740,922
------------ ------------
Net earnings (loss). . . . . . . . . $ 6,799,861 20,740,922
============ ============

The total income, expenses applicable to operating loss and net income
(loss) for the above ventures for the year ended December 31, 1996 were
$88,175,915, $91,621,900 and $(3,445,985), respectively.

During 1996, as a result of the restructuring at Wells Fargo Center -
South Tower, the Partnership reversed previously recognized losses from the
unconsolidated venture. The Partnership's capital (deficit) in Wells Fargo
Center - South Tower differs from its investment in the unconsolidated
venture as reflected in the accompanying financial statements due to the
Partnership's 1996 reversal of previously recognized losses. The
Partnership's 1998 and 1997 share of income from Wells Fargo Center - South
Tower (approximately $464,000 and $286,000, respectively) has not been
recognized as such amount is not considered realizable.

<PAGE>

<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
-------------------------- --------------------------------------------------------
LAND AND BUILDINGS LAND AND LAND AND BUILDINGS
LEASEHOLD AND BUILDINGS AND LEASEHOLD AND
ENCUMBRANCE INTERESTS IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTS TOTAL
------------ ----------- ------------ ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BLDGS:
California Plaza
Walnut Creek, (E)
California (D). . $62,523,394 6,010,604 62,029,222 1,475,922 5,132,408 64,383,340 69,515,748
=========== ========== =========== =========== ========== =========== ===========
</TABLE>

<PAGE>

<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998

<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME 1998
ACCUMULATED DATE OF DATE STATEMENT REAL ESTATE
DEPRECIATION(H) CONSTRUCTION ACQUIRED IS COMPUTED (C) TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BLDGS:
California Plaza
Walnut Creek,
California (D). . . . . . . . 23,322,426 1985 06/30/86 5-30 years 609,204
=========== =========
<FN>

Notes:
(A) The initial cost to the Partnership represents the original purchase price of the properties,
including amounts incurred subsequent to acquisition which were contemplated at the time the property was
acquired.
(B) The aggregate cost of real estate owned at December 31, 1998 for Federal income tax purposes
was $66,757,471.
(C) The investment property has been classified as held for sale or disposition as of December 31, 1996 as
more fully described in the Notes.
(D) Property owned and operated by joint venture.
(E) In 1996, the Partnership recorded a provision for value impairment. The portion allocated to real
estate totalled $7,200,000.
</TABLE>

<PAGE>

<TABLE>
SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998

(G) Reconciliation of real estate owned as of December 31, 1998, 1997 and 1996:

<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . . . . . $151,882,698 187,262,501 334,836,768
Additions during period. . . . . . . . . . . . . . . . . . . 558,194 3,524,500 2,011,678
Provisions for value impairment. . . . . . . . . . . . . . . -- -- (49,528,382)
Sales and dispositions during period . . . . . . . . . . . . (82,925,144) (38,904,303) (100,057,563)
------------ ----------- -----------

Balance at end of period . . . . . . . . . . . . . . . . . . $ 69,515,748 151,882,698 187,262,501
============ =========== ===========

(H) Reconciliation of accumulated depreciation:

Balance at beginning of period . . . . . . . . . . . . . . . $ 56,276,386 68,586,254 104,766,634
Depreciation expense . . . . . . . . . . . . . . . . . . . . -- 1,187,772 5,413,953
Sales and dispositions during period . . . . . . . . . . . . (32,953,960) (13,497,640) (41,594,333)
------------ ----------- -----------

Balance at end of period . . . . . . . . . . . . . . . . . . $ 23,322,426 56,276,386 68,586,254
============ =========== ===========

</TABLE>

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

There were no changes of or disagreements with accountants during
fiscal years 1998 and 1997.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB, as the Corporate General Partner, has responsibility for all aspects
of the Partnership's operations, subject to the requirement that purchases
and sales of real property must be approved by the Associate General
Partner, ABPP Associates, L.P., an Illinois limited partnership with JMB as
its sole general partner. The limited partners of the Associate General
Partner are generally officers, directors and affiliates of JMB or its
affiliates.

The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves and the determination
of the sources (i.e., from offering proceeds, cash generated from
operations or sale proceeds) and uses of such reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.

The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:

<PAGE>

SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------

Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Chief Executive Officer 8/01/93
Executive Vice President 1/02/87
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91

There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 2, 1999. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 2,
1999. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.

JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV
("Carlyle-XIV"), and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-
II") and the managing general partner of JMB Income Properties, Ltd.-V
("JMB Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-X ("JMB Income-X"), and JMB Income Properties,
Ltd.-XI ("JMB Income-XI"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing officers and directors are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P.). Most of such directors
and officers are also partners, directly or indirectly, of certain
partnerships which are associate general partners in the following real
estate limited partnerships: the Partnership, Carlyle-XI, Carlyle-XIII,
Carlyle-XIV, JMB Income-VII, JMB Income-X, JMB Income-XI, and Carlyle
Income Plus - II. Certain of such officers were also officers and the sole
director of Carlyle Advisors, Inc., formerly the general partner of
JMB/125. Reference is made to the Notes.

The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:

Judd D. Malkin (age 61) is an individual general partner of JMB
Income-V. Mr. Malkin has been associated with JMB since October, 1969.
Mr. Malkin is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of Chisox
Corporation, which is the general partner of a limited partnership that
owns the Chicago White Sox Major League Baseball team, and CBLS, Inc.,
which is the general partner of the general partner of a limited
partnership that owns the Chicago Bulls National Basketball Association
team. He is a Certified Public Accountant.

<PAGE>

Neil G. Bluhm (age 61) is an individual general partner of JMB
Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr.
Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors
real estate investment funds, and a director of Urban Shopping Centers,
Inc. He is a member of the Bar of the State of Illinois and a Certified
Public Accountant.

Burton E. Glazov (age 60) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
Mr. Glazov is currently retired. He is a member of the Bar of the State of
Illinois.

Stuart C. Nathan (age 57) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.

A. Lee Sacks (age 65) has been associated with JMB since December,
1972. He is also President and a director of JMB Insurance Agency, Inc.

John G. Schreiber (age 52) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
which is engaged in the real estate investing business. He is also a
senior advisor and partner of Blackstone Real Estate Advisors L.P., an
affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a director
of Urban Shopping Centers, Inc., Host Marriott Corporation, The Brickman
Group, Ltd., which is engaged in the landscape maintenance business, and a
number of investment companies advised by T. Rowe Price Associates, Inc.
and its affiliates and a trustee of Amli Residential Property Trust. He
holds a Masters degree in Business Administration from Harvard University
Graduate School of Business.

H. Rigel Barber (age 50) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.

Glenn E. Emig (age 51) has been associated with JMB since December,
1979. It is expected that Mr. Emig will leave his positions with JMB on or
about May 31, 1999 and his responsibilities will be taken over by various
other officers of JMB. Prior to becoming Executive Vice President of JMB
in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB
Institutional Realty Corporation. He holds a Masters degree in Business
Administration from the Harvard University Graduate School of Business and
is a Certified Public Accountant.

Gary Nickele (age 46) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.

Gailen J. Hull (age 50) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.

Howard Kogen (age 63) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.

ITEM 11. EXECUTIVE COMPENSATION

The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Holders of Interests, and a
share of profits or losses. Reference is also made to the Notes for a
description of such transactions, distributions and allocations. During
1998, management fees of $708,497 were paid to the Corporate General
Partner and the General Partners received a distribution from operational
cash flow of $425,098. The General Partners received a share of
Partnership profits for tax purposes aggregating $9,625,257 in 1998.

<PAGE>

The Partnership is permitted to engage in various transactions
involving the General Partners and their affiliates, certain of which may
involve conflicts of interest, as discussed in Item 10 above. The
relationship of the Corporate General Partner (and its directors and
officers) to its affiliates is set forth above in Item 10.

Through November of 1994, certain of the properties owned by the
Partnership's consolidated and unconsolidated ventures were managed by an
affiliate of the Corporate General Partner. In December 1994, the
affiliated manager sold substantially all of its assets and assigned its
interest in its management contracts, including the one for 260 Franklin
Street, to an unaffiliated third party. In connection with such
assignment, JMB Realty Corporation ("JMB") guaranteed payment to the
unaffiliated third party of the property management fees for the 260
Franklin Street property in 1995. Beginning in January 1996, the
unaffiliated property manager was paid management fees by the property.
Included in accounts payable are amounts due to affiliates of $1,732,968 at
December 31, 1998 and December 31, 1997, which consists of management fees
and leasing commissions of $1,057,092 and advances of $675,876 payable to
the affiliated manager. Of the $1,057,092 of management and leasing fees
unpaid at December 31, 1998, $232,268 represents the amount JMB is entitled
to as a result of JMB paying the management fees to the unaffiliated third
party manager pursuant to the guarantee. The cumulative deferred amounts
do not bear interest and are expected to be paid in future periods. The
affiliate also managed Piper Jaffray Tower prior to December 1994, and
pursuant to the terms of a loan modification, agreed to defer receipt of
its property management fees earned of approximately $1,839,000 as of
December 31, 1998 (of which the Partnership's share is approximately
$919,500).

JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1998
aggregating $1,706 in connection with the provision of liability insurance
coverage for the Partnership. Such commissions are at rates set by
insurance companies for the classes of coverage provided.

The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses or out-of-pocket expenses relating to
the administration of the Partnership and the operation of the
Partnership's real property investments. In 1998, $17,153 of such
out-of-pocket expenses were incurred by the General Partner or its
affiliates, all of which were paid as of December 31, 1998.

Additionally, the General Partners are also entitled to reimbursements
of salaries for administrative, legal, accounting and portfolio management
services. Such costs for 1998 were $105,195, of which $25,826 was unpaid
as of December 31, 1998. Reference is made to the Notes.

Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, had provided management services to Erie McClurg Park
Facility (sold in September 1992). In connection with the sale of Erie
McClurg, a management termination agreement was reached which required the
Partnership to make monthly payments to such company through 2010. Such
acquisition had no effect on the fees payable by the Partnership under any
existing agreements with such company. The amount paid in 1998 was
$83,636.

<PAGE>

<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.

(b) The Corporate General Partner, its officers and directors and the Associate General Partner beneficially
own the following Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests and Assignee
Interests therein JMB Realty Corporation 25 Interests (1) Less than 1%

Limited Partnership Corporate General Partner, 31.43852 Interests Less than 1%
Interests and Assignee its officers and (1)(2)(3)
Interests therein directors and the
Associate General
Partner as a group

<FN>
- ----------

(1) Includes 20 Interests owned directly by JMB and 5 Interests owned by the Initial Limited Partner of the
Partnership for which JMB, as its indirect majority shareholder, is deemed to have shared voting and investment
power.

(2) Includes 4.7578 Interests owned by an officer for which such officer has sole investment and voting
power as to such Interests so owned.

(3) Includes 1.68072 Interests owned by an estate for which an officer acts as co-executor and is deemed to
have shared voting and investment power with respect to such Interests.

No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.

Reference is made to Item 10 for information concerning the ownership of the Corporate General Partner.

(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent
date result in a change in control of the Partnership.

</TABLE>

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements (See Index to Financial Statements
filed with this annual report).

(2) Exhibits.

3-A. Amended and Restated Agreement of Limited
Partnership, is hereby incorporated by reference to Exhibit 3 to the
Partnership's Form 10-K (File No. 0-16111) for December 31, 1992 dated
March 19, 1993.

3-B. Acknowledgement of rights and duties of the
General Partners of the Partnership between ABPP Associates, L.P. (a
Successor Associated General Partner of the Partnership), and JMB Realty
Corporation as of December 31, 1995 is incorporated herein by reference to
the Partnership's Report on Form 10-Q (File No. 0-1611) for September 30,
1996 dated November 8, 1996.

4-A. Assignment Agreement set forth as Exhibit B to the
Prospectus is hereby incorporated herein by reference to Exhibit 4-A to the
Partnership's Report on Form 10-K (File No. 0-16111) for December 31, 1992
dated March 19, 1993.

4-B. Documents relating to the modification of the
mortgage loan secured by 260 Franklin Street Building are hereby
incorporated herein by reference to the Partnership's Report on Form 10-K
(File No. 0-16111) for December 31, 1992 dated March 19, 1993.

4-C. Forbearance agreement relating to the modification
of the mortgage loan secured by NewPark Mall dated October 1995 is
incorporated herein by reference to the Partnership's Report for September
30, 1995 on Form 10-Q (File No. 0-16111) dated November 9, 1995.

4-D. Documents relating to the modification and
extension of the mortgage loan secured by Wells Fargo-South Tower are
hereby incorporated herein by reference to the Partnership's Report on Form
10-K (File No. 0-16111) dated March 21, 1997.

4-E. Amended and restated promissory note between Wells
Fargo Bank and the Partnership is hereby incorporated herein by reference
to the Partnership's Report on Form 10-K (File No. 0-16111) dated March 21,
1997.

<PAGE>

4-F. Loan modification agreement of Wells Fargo Bank is
hereby incorporated herein by reference to the Partnership's Report on Form
10-K (File No. 0-16111) dated March 21, 1997.

4-G. Documents relating to the third mortgage
modification and extension agreement secured by the 260 Franklin Street
Building dated December 4, 1996 are hereby incorporated herein by reference
to the Partnership's Report on Form 10-K (File No. 0-16111) dated March 21,
1997.

10-A. Acquisition documents relating to the purchase by
the Partnership of an interest in the 900 Third Avenue Building in New
York, New York, are hereby incorporated herein by reference to the Partner-
ship's Registration Statement on Form S-11 (File No. 2-95382) dated January
18, 1985.

10-B. Acquisition documents relating to the purchase by
the Partnership of an interest in the Piper Jaffray Tower in Minneapolis,
Minnesota, are hereby incorporated herein by reference to the Partnership's
Registration Statement on Form S-11 (File No. 2-95382) dated January 18,
1985.

10-C. Acquisition documents relating to the purchase by
the Partnership of an interest in the Crocker Center South Tower in Los
Angeles, California, are hereby incorporated herein by reference to the
Partnership's Registration Statement on Amendment No. 2 to Form S-11 (File
No. 2-95382) dated July 5, 1985.

10-D. Acquisition documents relating to the purchase by
the Partnership of an interest in the Owings Mills Shopping Center in
Owings Mills, Maryland, are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 3 to
Form S-11 (File No. 2-95382) dated March 13, 1986.

10-E. Acquisition documents relating to the purchase by
the Partnership of an interest in the 260 Franklin Street Building in
Boston, Massachusetts, are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 4 to
Form S-11 dated April 30, 1986.

10-F. Acquisition documents relating to the purchase by
the Partnership of an interest in the California Plaza office building in
Walnut Creek, California are hereby incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 5 to
Form S-11 dated July 31, 1986.

10-G.* Real Estate Purchase Agreement dated June 30,
1992, between Erie-McClurg Associates ("Beneficiary") and The Streeterville
Corporation ("Purchaser") for the sale of Erie-McClurg Parking Facility, is
hereby incorporated herein by reference.

<PAGE>

10-H.* First Amendment to Real Estate Purchase Agreement
dated August 26, 1992, between Erie-McClurg Associates ("Beneficiary") and
The Streeterville Corporation ("Purchaser") for the sale of Erie-McClurg
Parking Facility, is hereby incorporated herein by reference.

10-I.* Second Amendment to Real Estate Purchase Agreement
dated September 3, 1992, between Erie-McClurg Associates ("Beneficiary")
and The Streeterville Corporation ("Purchaser") for the sale of Erie-
McClurg Parking Facility, is hereby incorporated herein by reference.

10-J. Agreement of Limited Partnership of Carlyle-XV
Associates, L.P., dated April 19, 1993 between the Partnership and Carlyle
Partners, Inc. relating to the 125 Broad Street Building, is hereby
incorporated herein by reference to the Partnership's report for December
31, 1993 on Form 10-K (File No. 0-16111) dated March 28, 1994.

10-K. Documents relating to the modification of the
mortgage loan secured by California Plaza are hereby incorporated herein by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-16111) dated March 28, 1994.

10-L. Documents relating to the extension of the
mortgage loan secured by the 900 Third Building are incorporated herein by
reference to the Partnership's report for December 31, 1994 on Form 10-K
(File No. 0-16111) dated March 27, 1995.

10-M. Documents relating to the assignment of the
Partnership's interest in the 125 Broad Street Building to O&Y Plaza Corp.
("Assignee") are incorporated herein by reference to the Partnership's
report for October 15, 1994 on Form 8-K dated November 15, 1994.

10-N. Lockbox and forbearance agreements related to the
mortgage note secured by the Wells Fargo Building are incorporated herein
by reference to the Partnership's report for December 31, 1994 on Form 10-K
(File No. 0-16111) dated March 27, 1995.

10-O. Modification to Reserve Escrow Agreement relating
to the 260 Franklin Street Building is hereby incorporated by reference to
the Partnership's Report for June 30, 1995 on Form 10-Q (File No. 0-16111)
dated August 9, 1995.

10-P. Documents relating to the operating agreement of
Maguire Thomas Partners-South Tower, L.L.C. are hereby incorporated herein
by reference to the Partnership's Report on Form 10-K (File No. 0-16111)
dated March 21, 1997.

<PAGE>

10-Q.* Modification to Reserve Escrow Agreement dated
December 4, 1996 relating to the 260 Franklin Street Building dated
December 4, 1996 are hereby incorporated herein by reference to the
Partnership's Report on Form 10-K (File No. 0-16111) dated March 21, 1997.

10-R. Modification to Reserve Escrow Agreement relating
to the 260 Franklin Street building dated May 22, 1997 is hereby
incorporated herein by reference to the Partnership's Report for June 30,
1997 on Form 10-Q (File No. 0-16111) dated August 8, 1997.

10-S. Purchase Agreement relating to the sale of the
RiverEdge Place office building dated December 18, 1997, is hereby
incorporated herein by reference to the Partnership's Report on Form 8-K
(File No. 0-16111) dated December 23, 1997.

10-T. Purchase Agreement relating to the disposition of
260 Franklin Street building dated December 30, 1997, is hereby
incorporated by reference to the Partnership's Report on Form 8-K (File No.
0-16111) dated January 2, 1998.

21. List of Subsidiaries.

24. Powers of Attorney.

27. Financial Data Schedule.

-----------------

* Previously filed as Exhibits 10-G, 10-H and 10-I,
respectively, to the Partnership's Report for December 31, 1992 on Form 10-
K of the Securities Exchange Act of 1934 (File No. 0-16111) dated March 19,
1993 and hereby incorporated herein by reference.

(b) No reports on Form 8-K were filed since the beginning of the
last quarter of the period covered by this report.

No annual report for the fiscal year 1998 or proxy material has
been sent to the Partners of the Partnership. An annual report will be
sent to the Partners subsequent to this filing.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV

By: JMB Realty Corporation
Corporate General Partner

GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 22, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: JMB Realty Corporation
Corporate General Partner

JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 22, 1999

NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 22, 1999

H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 22, 1999

GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 22, 1999

GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 22, 1999

A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 22, 1999

STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 22, 1999

*By: GAILEN J. HULL, Pursuant to a Power of Attorney

GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 22, 1999

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XV
EXHIBIT INDEX

Document
Incorporated
By Reference Page
------------ ----

3-A. Amended and Restated Agreement Yes
of Limited Partnership of the
Partnership, included as Exhibit A
to the Partnership's Prospectus
dated July 5, 1985.

3-B. Acknowledgement of Rights and
Dates of General Partners Yes

4-A. Assignment Agreement, included as Yes
Exhibit B to the Partnership's
Prospectus dated July 5, 1985.

4-B. Documents relating to the modification
of the mortgage loan secured by
the 260 Franklin Street Building Yes

4-C. Documents relating to the modification
of the mortgage loan secured by
NewPark Mall Yes

4-D. Documents relating to the modifica-
tion and extension of the mortgage
loan secured by Wells Fargo-
South Tower Yes

4-E. Amended and restated promissory
note of Wells Fargo Bank Yes

4-F. Loan modification agreement of
Wells Fargo Bank Yes

4-G. Documents relating to the third
mortgage modification and extension
agreement secured by the 260 Franklin
Street Building Yes

10-A. through
10-F. * Exhibits 10.A through 10.F Yes
are hereby incorporated herein by
reference.

10-G. through
10-K. Exhibits 10-S. through 10-K.
are hereby incorporated herein by
reference. Yes

10-L. Documents relating to the extension of
the mortgage loan secured by the 900
Third Building are filed herewith Yes

10-M. Documents relating to the assignment
of the Partnership's interest in the
125 Broad Street Building are
incorporated by reference. Yes

10-N. Lockbox and forbearance agreements
related to the mortgage note secured
by the Wells Fargo Building are
hereby incorporated by reference. Yes

<PAGE>

10-O. Document relating to the
Modification to Reserve Escrow
Agreement relating to the
260 Franklin Street Building
is hereby incorporated by reference. Yes

10-P. Documents relating to the operating
agreement of Maguire Thomas Partners-
South Tower, L.L.C. Yes

10-Q. Modification to Reserve Escrow
Agreement dated December 4,
1996 relating to the 260 Franklin
Street Building Yes

10-R. Modification to Reserve Escrow
Agreement dated May 22, 1997 relating
to 260 Franklin Street Building Yes

10-S. Document relating to the sale
of RiverEdge Place office building Yes

10-T. Document relating to the disposition
of 260 Franklin Street Building Yes

21. List of Subsidiaries No

24. Powers of Attorney No

27. Financial Data Schedule No

EXHIBIT 21

LIST OF SUBSIDIARIES

The Partnership is a partner of the following joint ventures:
JMB/Piper Jaffray Tower Associates, a general partnership, which is a
partner in (i) OB Joint Venture II, a general partnership, which is a
partner of 222 South Ninth Street Limited Partnership, a limited partner-
ship, which holds title to the Piper Jaffray Tower office building in
Minneapolis, Minnesota, and (ii) OB Joint Venture, a general partnership,
which holds title to the land underlying the Piper Jaffray Tower office
building; JMB/Piper Jaffray Tower Associates II, a general partnership
which also is a partner in OB Joint Venture, a general partnership, which
holds title to the land underlying the Piper Jaffray Tower office building;
900 3rd Avenue Associates, a general partnership, which is a partner of
Progress Partners, a general partnership, which holds title to 900 Third
Avenue Building located in New York, New York; Maguire Thomas Partners -
South Tower, a limited liability company, which holds title to Wells Fargo
Center - IBM Tower located in Los Angeles, California; and C-C California
Plaza Partnership, a general partnership, which holds title to the
California Plaza office building in Walnut Creek, California. Reference is
made to the Notes for a description of the terms of such venture
partnerships.

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XV, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1998, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 29th day of January, 1999.

H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer

GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer

The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1998,
and any and all amendments thereto, the 29th day of January, 1999.

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 29th day of January, 1999.

NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm

JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin

A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks

STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998

<CASH> 26,998,190
<SECURITIES> 0
<RECEIVABLES> 3,234,944
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,233,134
<PP&E> 46,193,322
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,187,533
<CURRENT-LIABILITIES> 2,962,230
<BONDS> 118,190,463
<COMMON> 0
0
0
<OTHER-SE> (39,339,629)
<TOTAL-LIABILITY-AND-EQUITY> 89,187,533
<SALES> 9,443,662
<TOTAL-REVENUES> 11,459,393
<CGS> 0
<TOTAL-COSTS> 4,157,767
<OTHER-EXPENSES> 2,079,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,673,336
<INCOME-PRETAX> (7,451,606)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,060,852)
<DISCONTINUED> 33,956,862
<EXTRAORDINARY> 17,451,802
<CHANGES> 0
<NET-INCOME> 47,347,812
<EPS-PRIMARY> 105.95
<EPS-DILUTED> 105.95

</TABLE>