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
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ________________
Commission file number 0-14986
AETNA REAL ESTATE ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
Delaware 11-2827907
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
242 Trumbull Street, Hartford, Connecticut 06103
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (203) 275-2178
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Depositary Units
(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: $198,409,829 (1)
________________
(1) This statement relates to Units which represent limited partnership
interests in the Registrant. The amount above is
calculated based on the Net Asset Value of Units of $15.59 at
December 31, 1996.
PART 1
Item 1. Business.
Aetna Real Estate Associates, L.P. (the "Registrant") is a limited
partnership organized under the laws of the State of Delaware
on September 11, 1986. The general partners of the Registrant
(the "General Partners") are Aetna/AREA Corporation
("Aetna/AREA"), a Connecticut corporation that is an affiliate
of Aetna Life Insurance Company ("Aetna"), and AREA GP
Corporation ("AREA GP"), a Delaware corporation that is an
affiliate of Lehman Brothers Inc. ("Lehman").
From March 1986 through December 31, 1990, the Registrant offered up
to $300,000,000 of units which represent the economic rights
attributable to limited partnership interests in the
Registrant ("Units") through an ongoing public offering (the
"Primary Offering") and an additional $30,000,000 of Units
pursuant to the Registrant's Distribution Reinvestment Plan
(the "DRIP"). In addition, in conjunction with the Primary
Offering, certain holders of Units (the "Selling Unitholders")
offered up to $30,000,000 of Units (the "Remarketing
Opportunity"). Since January 1, 1991, the Registrant has not
offered Units for sale in the Primary Offering, the
Remarketing Opportunity, or the DRIP. The Registrant received
an aggregate of $265,521,423 of capital contributions from the
sale of 12,724,547 Units. The Registrant does not anticipate
raising additional capital through the sale of Units.
The Registrant is engaged in the business of investing in
income-producing apartment complexes, office buildings,
shopping centers and other commercial real estate offered by
non-affiliated sellers ("Properties"). All investments in
Properties that the Registrant has made are referred to herein
collectively as "Investments in Properties". The Registrant
acquired its interests in Investments in Properties either
directly or through joint ventures or other partnerships that
own Properties. The Registrant has acquired all of its
interests in Properties entirely with cash.
As of December 31, 1996, the Registrant held 13 Investments in
Properties at a total cost of approximately $239.9 million.
(See Item 2 in this report for a further description of the
Investments in Properties.) Such Investments in Properties
have been funded from the proceeds of the sale of Units and
from cash retained by the Registrant from operations and from
sales of Investments in Properties.
The Registrant's principal objectives are to invest in Properties with
the goals of obtaining:
(1) cash distributions from rental and interest income;
(2) capital appreciation; and
(3) preservation and protection of capital.
In 1996, the Registrant made distributions of cash generated from
operations of $.18 per Unit per quarter. (See Item 5 below for
additional information regarding recent quarterly
distributions.) The General Partners anticipate that
quarterly cash distributions will continue throughout 1997.
The level and timing of future distributions will be reviewed
on a quarterly basis by the General Partners.
Net Asset Value per Unit increased to $15.59 at December 31, 1996 from
$15.24 at December 31, 1995. The increase in Net Asset Value
per Unit is attributable to the increases in the appraised
values of certain of the Registrant's properties, primarily
Summit Village, Town Center Business Park and Three Riverside
Drive. The increase in appraised value of Summit Village is a
result of an increase in projected market rents. The increase
in appraised value of Town Center Business Park and Three
Riverside Drive is primarily due to improved occupancy, from
72% to 83% and from 79% to 92%, respectively. These value
increases were partially offset by decreases in the appraised
value of certain of the Registrant's properties, primarily
Oakland Pointe Shopping Center due to the expected departure
of certain major tenants and the resulting changes in the
discount and exit capitalization rates to reflect the
increased risk associated with this property.
Competition
The Registrant competes with other real estate owners and developers
for tenants and potential buyers in the rental and sale of its
Investments in Properties. Each of the Investments in
Properties faces competition from similar properties within
the same vicinity. Increases in the availability of
properties competitive with the Registrant's Investments in
Properties may have an adverse effect on the occupancy levels,
revenues and marketability of the Registrant's Investments in
Properties. Should the Registrant be in the market to acquire
new or sell existing Investments in Properties, it would face
competition in connection with such acquisitions or sales from
businesses, individuals, fiduciary accounts and plans and
other entities engaged in real estate investment, which may
include certain affiliates of the General Partners. The
number of entities interested and the amount of funds
available for investment in properties of a type suitable for
investment by the Registrant may change.
Employees
The Registrant has no employees. The officers, directors and
employees of the General Partners and their affiliates and
agents perform services for the benefit of the Registrant.
These services are provided in consideration of the fees paid
to the General Partners as described under Item 13 below and
the expense of providing these services is not separately
charged to the Registrant. Aetna/AREA has retained Allegis
Realty Investors LLC to provide investment management services
to the Registrant. First Data Investor Services Group, Inc.,
formerly The Shareholder Services Group, has been retained by
AREA GP to provide accounting and investor communication
services to the Registrant.
Item 2. Properties.
As of December 31, 1996, the Registrant held 13 Investments in
Properties.
(in thousands)
Historical
Property Cost(1)
Cross Pointe Centre $ 22,521
Lincoln Square Apartments 13,551
Gateway Square 7,543
Summit Village 37,308
Village Square 5,527
Marina Bay Industrial Park 10,895
Town Center Business Park 43,091
Oakland Pointe Shopping Center 22,696
115 & 117 Flanders Road 12,573
Three Riverside Drive 10,566
Windmont Apartments 7,973
Powell Street Plaza 31,517
Westgate Distribution Center 14,128
Total $239,889
(1) Historical cost is before accumulated depreciation and may not
equal cash invested because of certain adjustments based on
the application of generally accepted accounting principles.
For historical cost purposes, properties are recorded at the
lower of cost, net of impairment write-downs, or estimated
fair value. (See Footnote 3 to the consolidated financial
statements.)
The Registrant determines the current value of each of its Investments
in Properties quarterly based on independent appraisals of the
underlying real estate using generally accepted valuation
techniques. These appraisals are used to determine Net Asset
Value per Unit on a quarterly basis and to prepare the
Registrant's current value financial statements.
Each appraisal is based on numerous assumptions, limiting conditions
and valuation techniques utilized by the independent
appraisers retained by the Registrant. Two of the many
assumptions utilized by the appraisers are the terminal
capitalization rate and the discount rate. The terminal
capitalization rate is used to estimate the reversionary
proceeds to be received from the assumed sale of an investment
at the end of a typical holding period. The discount rate is
used to determine the net present value of the estimated
annual cash flows of an investment, including the residual
proceeds, over the holding period. Terminal capitalization
rates utilized in the appraisals of the Investments in
Properties at December 31, 1996 ranged from 9.00% to 12.00%.
Discount rates utilized in the appraisals of the Investments
in Properties at December 31, 1996 ranged from 11.00% to
15.00%.
Current Properties
A brief description of all Investments in Properties is set forth
below. Neither the Registrant, if it owns a Property
directly, nor any joint venture or partnership in which the
Registrant has invested, have incurred any debt to acquire or
maintain any of the Properties.
Cross Pointe Centre
The Registrant owns Cross Pointe Centre, a community shopping center
with approximately 211,345 square feet of net rentable space,
located on a 25.8-acre site in Centerville, Ohio. As of
December 31, 1996, the shopping center was 77% leased and 75%
occupied.
Lincoln Square Apartments
The Registrant owns Lincoln Square Apartments, a 240-unit apartment
project on a 12.7-acre site located in Arlington Heights,
Illinois. As of December 31, 1996, the project was 99% leased
and 98% occupied.
Gateway Square
The Registrant owns Gateway Square, a specialty retail center located
in Hinsdale, Illinois. The center contains approximately
40,366 square feet of rentable space on a 3.7-acre site. As
of December 31, 1996, the retail center was 86% leased and
occupied.
Summit Village
The Registrant owns Summit Village, a 366-unit apartment complex built
in two phases on a 6.2-acre site in the Rosslyn area of
Arlington County, Virginia. Historical leasing and occupancy
information with respect to Summit Village for the five most
recent years is as follows:
Leased Occupied
12/31/92 99% 96%
12/31/93 96% 94%
12/31/94 99% 98%
12/31/95 99% 99%
12/31/96 98% 98%
The current leases generally have terms of seven or twelve months at
monthly rental rates ranging from $995 to $1,410 per unit.
Meridian Courthouse, an indirect competitor which is located less than
one mile from Summit Village, has completed leasing its second
phase. The second phase contains 316 additional units with
rents that are significantly higher than Summit Village. The
pace of absorption of the available units has been strong,
with minimal impact on Summit Village.
Marina Bay Industrial Park
The Registrant owns a controlling general partnership interest in a
limited partnership that owns the Marina Bay Industrial Park,
a 165,780 square foot industrial park located in Richmond,
California on an 8.6-acre site. The Marina Bay Industrial
Park is a four-building complex that includes a rehabilitated
industrial distribution building (approximately 103,680 square
feet) and three newer research/development/light industrial
buildings (approximately 62,100 square feet). As of December
31, 1996, the complex was 100% leased and 99% occupied.
Village Square
The Registrant owns Village Square, a community shopping center in
Hazelwood, Missouri containing approximately 207,304 square
feet of net rentable area on approximately 20 acres of land.
As of December 31, 1996, the shopping center was 46% leased
and 35% occupied.
A tenant with a lease totaling 22,282 square feet, included in the
leased percentage above, vacated the property during 1992 but
continues to pay rent until 1997 when the lease expires. At
this time, the General Partners are considering options for
the future strategy of this property.
Town Center Business Park
The Registrant owns a controlling interest in a general partnership
which owns and operates the Town Center Business Park,
totaling approximately 456,700 square feet of net rentable
area on approximately 28 acres in Santa Fe Springs,
California. Town Center Business Park was developed in two
phases. Phase I consists of a three-story office building and
six industrial buildings totaling approximately 322,700
rentable square feet. Phase II consists of a two-story
office/service building and two industrial buildings
containing approximately 134,000 square feet.
During 1997, ten leases covering 7% of the space in Town Center
Business Park are scheduled to expire. Two tenants totaling
3,472 square feet are expected to vacate. Two tenants
totaling 6,254 square feet are interested in staying in
downsized space. Terms have been agreed upon for the renewal
of a 4,753 square foot lease with one tenant, and another for
913 square feet on an ongoing month to month lease. The
remaining four tenants, occupying 4% of the space, expire in
the fourth quarter and will be contacted in the first quarter
to commence renewal discussions. Also, the Registrant
completed an office lease for a new tenant in early 1997 for
4% of space in Town Center Business Park.
Town Center Business Park has no single tenant which occupies 10% or
more of the rentable square footage. During 1998 and 1999,
nine and fifteen leases, respectively, are scheduled to expire
covering 7% and 29%, respectively, of the space in Town Center
Business Park.
Historical leasing and occupancy information with respect to Town
Center Business Park for the five most recent years is as
follows:
Leased Occupied
12/31/92 87% 66%
12/31/93 67% 62%
12/31/94 76% 74%
12/31/95 84% 72%
12/31/96 85% 83%
Average annualized rental rates for December 1996 were $10.49 per
square foot as compared to $10.87 per square foot in December
1995 and $10.75 per square foot for December 1994.
Oakland Pointe Shopping Center
The Registrant owns a portion of the Oakland Pointe Shopping Center, a
shopping center containing approximately 434,150 square feet
located on 49.8 acres in Pontiac, Michigan. The portion owned
by the Registrant (the "Oakland Project") contains
approximately 213,350 square feet of rentable area on
approximately 32.1 acres. As of December 31, 1996, the
Oakland Project was approximately 87% leased and 86% occupied.
Oakland Pointe Shopping Center (continued)
During 1997, three leases covering 9% of the space in Oakland Pointe
Shopping Center are scheduled to expire. One tenant,
occupying 13,629 square feet, is expected to terminate its
lease due to poor sales of its sporting goods as the result of
heavy competition from national sporting goods chains.
Another tenant occupying 3,500 square feet had its lease
terminated in January 1997 by a bankruptcy court. A tenant
occupying 2,010 square feet will be contacted to begin renewal
discussions on its lease expiring in August 1997. A final
lease document is currently being negotiated with a new tenant
to occupy 16,193 square feet.
During 1998 and 1999 nine and seven leases, respectively, are
scheduled to expire covering 30% and 9% of the space,
respectively.
Oakland Pointe Shopping Center has two tenants which occupy 10% or
more of the rentable square footage. A lease for 27,001
square feet expires in 1998 and provided annual base rent of
$189,007 (10% of total base rent) in 1996. Another lease for
27,060 square feet expires in 2004 and provided annual base
rent of $216,480 (11% of total base rent) in 1996.
Historical leasing and occupancy information with respect to Oakland
Pointe Shopping Center for the five most recent years is as
follows:
Leased Occupied
12/31/92 84% 84%
12/31/93 74% 74%
12/31/94 90% 90%
12/31/95 89% 88%
12/31/96 87% 86%
Average annualized rental rates for December 1996 were $14.92 per
square foot compared with $13.45 per square foot for December
1995.
115 and 117 Flanders Road
The Registrant owns 115 and 117 Flanders Road, two buildings
containing approximately 115,175 square feet of net rentable
area and located on approximately 26.6 acres in Westborough,
Massachusetts. Each building has a two-story office/research
and development section and a one-story office/warehouse
section. As of December 31, 1996, 115 Flanders was 100%
leased and occupied, while 117 Flanders was 100% leased and
48% occupied.
Three Riverside Drive
The Registrant owns Three Riverside Drive, an office/research and
development building containing approximately 91,350 square
feet of rentable area located on approximately 8.8 acres in
Andover, Massachusetts. As of December 31, 1996, the building
was 92% leased and occupied.
Windmont Apartments
The Registrant owns Windmont Apartments, a 178-unit apartment complex
which is located on 6.8 acres in DeKalb County, Georgia. As
of December 31, 1996, the complex was approximately 88% leased
and 86% occupied.
Powell Street Plaza
The Registrant owns Powell Street Plaza, a shopping center with
approximately 169,551 square feet of rentable space, located
on approximately 12.9 acres in Emeryville, California.
Certain governmental agencies in California, led by the Alameda County
Healthcare Services Agency, delivered a letter (the "Request
Letter") to the Registrant on June 4, 1993 requiring that it
remediate certain soil and ground water contamination by
petroleum hydrocarbons existing on the Powell Street property.
The contamination is the result of a use of the property prior
to its acquisition by the Registrant in 1990. Pursuant to the
agreement under which the Registrant acquired Powell Street
Plaza, the Registrant has made a demand on the former owner
from which it acquired the property (the "Former Owner") to
remediate the contamination. The Former Owner has agreed to
respond to the governmental agencies. The Former Owner
prepared a site characterization and submitted a remediation
plan to the Alameda County Healthcare Services Agency, which
have been approved. The Registrant is monitoring the process
and anticipates that all costs of complying with the Request
Letter will be borne by the Former Owner. The Registrant has
hired its own consultant to analyze the extent of the
pollution. Recent legislation has been adopted that may ease
the remediation requirements, but could restrict the use of
the land to certain non-residential use.
During 1997 and 1998 there are one and six leases, respectively, that
are scheduled to expire covering 1% and 13%, respectively, of
the space. Three leases expire in 1999 covering 9% of the
space in Powell Street Plaza. In 1995 a tenant occupying
13,576 square feet declared bankruptcy and had its lease
terminated by the bankruptcy court. Final lease comments are
in progress with a potential tenant to occupy 14,845 square
feet.
Powell Street Plaza has two tenants with leases covering 10% or more
of the rentable square footage of the property. The first
lease, for 27,275 square feet, expires in 2009 and provided
annual base rent of $358,666 (14% of total rent) in 1996. The
lease contains two consecutive five-year options to renew.
The second lease, for 25,025 square feet, expires in 2003 and
provided annual base rent of $287,788 (12% of total rent) in
1996, with an increase to $299,800 per year beginning in
October 1997. The lease contains four consecutive five-year
options to renew.
Powell Street Plaza-(continued)
Historical leasing and occupancy information with respect to Powell
Street Plaza for the five most recent years is as follows:
Leased Occupied
12/31/92 100% 100%
12/31/93 100% 86%
12/31/94 100% 100%
12/31/95 100% 100%
12/31/96 91% 91%
Average annualized rental rates for December 1996 were $16.54 per
square foot as compared to $15.67 per square foot for December
1995 and $15.28 per square foot for December 1994.
The trade area gained a major new development at the East Bay Bridge
site, a 450,000 square foot power center about one mile from
Powell Street. The property opened with a Home Depot,
Sportmart and Toys R Us. The only direct competition is
with Powell Street Plaza's Copeland Sports.
On December 21, 1995 approximately 12,100 square feet of land at
Powell Street Plaza was condemned, for purposes of road
construction, by the State of California Department of
Transportation. Net proceeds to the Registrant were
approximately $271,000, after paydown of a portion of the
City's special assessment. Loss on the sale included in the
consolidated financial statements was approximately $23,000
for the year ended December 31, 1995.
Westgate Distribution Center
The Registrant owns Westgate Distribution Center, which consists of
three warehouse/distribution buildings totaling approximately
430,300 rentable square feet on 20.6 acres in Corona,
California. Westgate Distribution Center was developed in two
phases. Phase One consists of two buildings containing
approximately 226,200 rentable square feet. Phase Two
consisted of two parcels, one containing a 98,000 square foot
building constructed during 1994 and the other containing a
96,400 square foot building constructed in December 1992, and
sold to its tenant in October 1994. The three remaining
buildings were 98% leased and occupied as of December 31,
1996.
Item 3. Legal Proceedings.
Neither the Registrant nor any of the Registrant's Investments in
Properties are subject to any material pending legal
proceedings, except for the following lawsuits.
In November 1996, the Registrant and the General Partners were named
as defendants in two purported class action lawsuits filed in
the Chancery Court of Delaware in New Castle County, entitled
Bobbitt v. Aetna Real Estate Associates, L.P., et al. and
Estes v. Aetna Real Estate Associates, L.P., et al. The
complaints in those actions claim, among other things, that
management fees that have been and are paid to the General
Partners are excessive and that a standstill agreement with a
tender offeror which has had the effect of limiting the number
of units that would be the subject of any tender offer is
unlawful. The defendants have moved to dismiss one of the
complaints and have not yet been served with the other. The
General Partners believe that the allegations in these
complaints are without merit and intend to defend the lawsuits
vigorously.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the fiscal year ended December 31, 1996,
no matter was submitted to a vote of security holders, through
the solicitation of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Units represent the economic rights attributable to limited
partnership interests in the Registrant. There is no
established public trading market for the Units. The
Registrant's Units are listed on certain matching services
(the "Matching Programs") currently maintained by various
broker-dealers. These Matching Programs are computerized
listing systems that put individuals who wish to sell listed
securities in contact with persons who wish to buy such
securities. Neither the broker-dealers nor the General
Partners are required to list the Registrant's Units on the
Matching Program. There can be no assurance that any Units
listed on the Matching Program will be sold.
As of March 1, 1997, the number of Unitholders was approximately
18,400.
The Revised Limited Partnership Agreement dated December 1, 1988 by
and among Aetna/AREA Corporation, AREA GP Corporation and AREA
Depositary Corporation (the "Partnership Agreement") provides
for distributions of net cash from operations, if any, to be
paid quarterly to Unitholders. Net cash from operations,
according to the Partnership Agreement, is equal to net
income, before depreciation, less any amounts set aside to
increase or create reserves. In the last two years, quarterly
cash distributions of $.18 per Unit have been paid to
Unitholders.
Item 6. Selected Financial Data.
The following selected financial data of the Registrant have been
selected by the General Partners and derived from the
consolidated financial statements for the indicated periods,
which have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, whose report thereon
is included elsewhere herein. The information set forth below
should be read in conjunction with the Registrant's
consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" also included elsewhere herein.
(Dollars in thousands, except per Unit data)
Years Ended December 31,
1996 1995 1994 1993 1992
Revenue . . . . . . . . . . $ 29,030 $ 28,438 $ 26,454 $ 26,389 $ 29,507
Operating Income before
Impairment of Investment
in Real Estate . . . . . . . .5,711 5,002 4,144 4,492 4,457
Impairment of Investment
in Real Estate . . . . . . . . - 4,408 - - -
Operating Income . . . . . . .5,711 594 4,144 4,492 4,457
Gain (Loss) on Sale of
Property . . . . . . . . . . . .- (23) 355 2,358 4,111
Cash and Cash
Equivalents . . . . . . . . .9,133 8,971 9,373 13,234 13,299
Total Assets (Historical
Cost Basis) . . . . . . . .205,750 209,334 217,854 225,248 244,264
Total Assets (Current
Value Basis) . . . . . . . 204,222 199,709 195,916 190,237 214,807
Rental Income . . . . . . . .28,242 27,455 25,831 25,782 28,681
Interest Income . . . . . . . . 336 367 301 339 372
Earnings per Weighted
Average Unit . . . . . . . . .44 .04 .35 .54 .67
Cash Distributions per
Unit . . . . . . . . . . . . . .72 .72 .91 1.92 1.31
Net Asset Value per
Unit . . . . . . . . . . . . 15.59 15.24 14.96 14.50 16.32
Item 7.Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Registrant has current Reserves of $4.8 million, including
approximately $3.6 million retained from cash generated
from operations in 1996. During the year ended December
31, 1996, the Partnership expended approximately $3.3
million for capital improvements. At December 31, 1996,
the Registrant had approximately $.8 million of
outstanding commitments for capital improvements and
approximately $4.5 million of projected capital
improvements (collectively "Capital Costs") related to
existing Investments in Properties. The projected capital
improvements consist primarily of estimated tenant
improvements and leasing commissions for speculative
leasing activity at certain properties, which, based on
activity in the marketplace, may or may not materialize.
The Registrant expects to fund Capital Costs throughout
1997 from existing Reserves and the retention of a portion
of cash generated from operations. The General Partners
will continue to review the Reserves quarterly to
determine whether cash distributions should be adjusted.
If sufficient capital is not available at the time of a funding of
Capital Costs, the General Partners will review such
Capital Costs and take such steps as they consider
appropriate, including decreasing future cash
distributions from operations, negotiating a delay or
other restructuring of the capital funding requirements
related to an Investment in Properties or borrowing money,
as provided in the Partnership Agreement, on a short-term
basis to pay Capital Costs.
Results of Operations
1996 versus 1995
Operating income for the year ended December 31, 1996 increased
approximately $5,117,000 from 1995 resulting primarily
from an impairment loss of approximately $4,408,000
reflected in the 1995 Statement of Income. Revenue
increased approximately $592,000 from 1995, resulting from
an increase in rental revenue at the majority of the
residential and office/industrial properties. The most
significant increases in rental revenue occurred at Town
Center Business Park, as a result of increased occupancy,
and at Summit Village, as a result of an increase in
rental rates. These increases were partially offset by
certain decreases in rental revenue, as a result of
decreases in occupancy, at 117 Flanders Road, Village
Square Shopping Center and Oakland Pointe Shopping Center.
The decrease in other income of approximately $164,000 for
the year ended December 1996 is attributable to the
receipt of lease termination fees at Three Riverside Drive
and 117 Flanders Road during the year ended December 31,
1995.
Property operating expenses for the year ended December 31, 1996
increased approximately $502,000 in comparison to 1995,
primarily as a result of increases in operating expenses
at certain retail and office and industrial properties.
The majority of the increase is related to snow removal
expenses due to harsh winter conditions and increased
electricity expenses, as a result of vacated tenants who
were paying 100% of their electricity expenses at certain
office/industrial properties, and higher operating
expenses at Oakland Pointe Shopping Center and Powell
Street Plaza. The decrease in depreciation and
amortization expense is primarily a result of the write-
off of the unamortized cost of the tenant improvements and
leasing commissions associated with a tenant that vacated
Village Square Shopping Center during the year ended
December 31, 1995. The investment portfolio fee increased
slightly due to an increase in the current value of net
assets as discussed below, offset by a decrease in the fee
percentage for properties held more than ten years. Bad
debt expenses for the year ended December 31, 1996 were
approximately $615,000 due primarily to the write-off of
certain tenant receivables and an increase in the
allowance for doubtful accounts at the retail properties.
The Registrant made cash distributions, which were entirely from
cash generated from operations, of $.72 per Unit to
Unitholders for each of the years ended December 31, 1996
and 1995.
Net Asset Value per Unit increased to $15.59 at December 31, 1996
from $15.24 at December 31, 1995. The increase in Net
Asset Value per Unit is attributable to the increases in
the appraised values of certain of the Registrant's
properties, primarily Summit Village, Town Center Business
Park and Three Riverside Drive. The increase in appraised
value of Summit Village is a result of an increase in
projected market rents. The increase in appraised value
of Town Center Business Park and Three Riverside Drive is
primarily due to improved occupancy, from 72% to 83% and
from 79% to 92%, respectively. These value increases were
partially offset by decreases in the appraised value of
certain of the Registrant's properties, primarily Oakland
Pointe Shopping Center due to the expected departure of
three major tenants and the resulting changes in the
discount and exit capitalization rates to reflect the
increased risk associated with this property.
1995 versus 1994
Operating income for the year ended December 31, 1995 decreased
approximately $3,550,000 from 1994 resulting primarily
from an impairment loss of approximately $4,408,000
reflected in the 1995 Statement of Income. Revenue
increased approximately $1,984,000 from 1994, resulting
primarily from an increase in rental revenue at the
majority of the properties. The most significant
increases in rental revenue occurred at Oakland Pointe and
Marina Bay Industrial Park, as a result of increased
occupancy, and at Summit Village, as a result of an
increase in rental rates. The increase in other income of
approximately $294,000 for the year ended December 1995 is
attributable to receipt of lease termination fees at Three
Riverside Drive and 117 Flanders Road.
Property operating expenses for the year ended December 31, 1995
decreased approximately $200,000 in comparison to 1994,
primarily as a result of decreases in operating expenses
at certain retail and office and industrial properties.
The majority of the decrease is due to decreased operating
expenses at Town Center Business Park and Oakland Pointe.
The increase in depreciation and amortization expense is
primarily a result of the write-off of the unamortized
cost of the tenant improvements and leasing commissions
associated with a tenant that vacated Village Square
Shopping Center. The investment portfolio fee increased
slightly due to an increase in net assets at current value
as discussed below. Based on an analysis performed on
each property, it was necessary to increase the allowance
for doubtful accounts at certain properties, including
approximately $319,000 related to the tenant that vacated
Village Square and approximately $140,000 related to Town
Center Business Park.
Cash generated from operations per Unit, excluding the proceeds
from the sale of the building at Westgate Distribution
Center, for 1995 and 1994 was $1.02 and $.90,
respectively. The Registrant made cash distributions of
$.72 and $.91 per Unit to Unitholders for the years ended
December 31, 1995 and 1994, respectively, including the
$.19 per Unit special distribution made in December 1994
from the proceeds from the sale of the building at
Westgate Distribution Center.
Net Asset Value per Unit increased to $15.24 at December 31, 1995
from $14.96 at December 31, 1994. The increase in Net
Asset Value per Unit is attributable to the increases in
the appraised values of certain of the Registrant's
properties, primarily Cross Pointe Centre and Powell
Street Plaza. The increase in value in Cross Pointe
Centre is a result of an increase in leased percentage,
from 82% to approximately 90%, in conjunction with a
stronger tenant mix, including an expansion of a proven
anchor tenant and a reduced vacancy allowance. Powell
Street Plaza's increase in value is primarily due to an
increase in percentage rent with stable cash flow and
modest lease expirations projected over the next few
years. These value increases were partially offset by
decreases in the appraised value of Village Square
Shopping Center and Oakland Pointe Shopping Center. The
decrease in appraised value of Village Square Shopping
Center is a result of a significant decrease in its
occupancy rate. The General Partners are considering
options for the future strategy of this property. Part of
this strategy includes a change in the property management
firm, effective in April 1996. The majority of the
decrease in appraised value of Oakland Pointe Shopping
Center is a result of a change in renewal assumptions
associated with a major tenant and an increase in the
vacancy assumptions.
Item 8. Financial Statements and Supplementary Data.
See List of Financial Statements and Financial Statement Schedule on
page F-1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no officers or directors. Aetna/AREA and AREA GP,
the General Partners of the Registrant, jointly manage and
control the affairs of the Registrant and have general
responsibility and authority in all matters affecting its
business.
Certain officers and directors of AREA GP are now serving (or in the
past have served) as officers or directors of entities which
act as general partners of a number of real estate limited
partnerships, unrelated to the Registrant, which have sought
protection under the provisions of the Federal Bankruptcy
Code. The partnerships which have filed bankruptcy petitions
own real estate which has been adversely affected by the
economic conditions in the markets in which the real estate is
located and, consequently, the partnerships sought protection
of the bankruptcy laws to protect the partnerships' assets
from loss through foreclosure. As compared to the Registrant,
many of these partnerships had different investment
objectives, including the use of leverage.
Item 11. Executive Compensation.
No compensation was paid by the Registrant to the officers or
directors of either of the General Partners. See Item 13
below for a description of the compensation and fees paid to
the General Partners and their Affiliates by the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
As of March 15, 1997, no person was known by the Registrant to be the
beneficial owner of more than five percent of the Units of the
Registrant. The Registrant has no directors or officers, and
as of March 15, 1997, neither of the General Partners of the
Registrant owns any Units, though together they own a 1%
general partnership interest in the Registrant. As of March
15, 1997, no directors or officers of AREA GP beneficially
owned any Units. As of March 15, 1997, no directors of
Aetna/AREA owned any Units, and as of such date, officers of
Aetna/AREA as a group beneficially owned approximately 232
Units, which constituted less than 1% of the outstanding
Units.
Aetna Life Insurance Company entered into an Option Purchase Agreement
dated June 7, 1996, with the managing member of Allegis Realty
Investors LLC by which such managing member is granted the
right to purchase the stock of Aetna/AREA for nominal
consideration during the twelve-year period following the date
of the option. During the period of the option, such managing
member is also granted the right to designate the directors of
Aetna/AREA regardless of whether the option is exercised.
Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates have received or will
receive certain types of compensation, fees, or other
distributions in connection with the operations of the
Registrant. The arrangements for payment of compensation and
fees were not determined in arms-length negotiations with the
Registrant. The General Partners are entitled to receive an
investment portfolio fee based on the net asset value of the
Registrant's investments. The fee is payable quarterly from
available cash flow and may not exceed 2.5% per annum of net
asset value. For the year ended December 31, 1996, Aetna/AREA
and AREA GP were entitled to fees of $1,972,562 and
$2,914,167, respectively, totaling $4,886,729.
During the year ended December 31, 1996, $411,675 was paid to Aetna
Life Insurance Company, an affiliate of Aetna/AREA, primarily
as reimbursement for insurance expense previously paid on
behalf of the Registrant by Aetna Life Insurance Company to
persons not affiliated with the Registrant.
Cash distributions paid to the General Partners during the year ended
December 31, 1996 aggregated $185,084 of which $92,542 related
to operations for the quarters ended December 31, 1995, March
31, 1996, June 30, 1996 and September 30, 1996 and $92,542 was
for distributions that were withheld by the Partnership during
1995 and became distributable within the provisions of the
Partnership's Revised Limited Partnership Agreement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following documents are filed as part of this report:
(a) 1. Financial Statements:
See List of Financial Statements and Financial
Statement Schedule on page F-1.
2. Financial Statement Schedules:
See List of Financial Statements and Financial
Statement Schedule on page F-1.
3. Exhibits:
3.1 Form of Subscription Agreement
(incorporated by reference to Post-Effective Amendment
No. 15 to the Registrant's Registration Statement on
Form S-11, File No. 33-2264).
3.2 Revised Limited Partnership Agreement of
the Registrant (incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
3.3 Form of Certificate of Limited Partnership
Interest (incorporated by reference to Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form S-11, File No. 33-2264).
3.4 Form of Distribution Reinvestment Plan
Election Card (incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
4.1 Revised Depositary Agreement of the
Registrant (incorporated by reference to
Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
4.2 See Exhibits 3.1, 3.2, 3.3, and 3.4.
4.3 Distribution Reinvestment Plan of the
Registrant (incorporated by reference to
Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
4.4 Revised Form of Depositary Receipt of the
Registrant (incorporated by reference to
Post-Effective Amendment No. 17 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
4.5 Form of Distribution Reinvestment Plan
Administration Agreement (incorporated by reference to
Post-Effective Amendment No. 8 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264).
10.1 Revised Escrow Agreement
(incorporated by reference to Post-Effective Amendment
No. 15 to the Registrant's Registration Statement on
Form S-11, File No. 33-2264).
10.2 See Exhibits 4.1 and 4.5.
10.3 Custody Agreement (incorporated by
reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form S-11, File
No. 33-2264).
10.4 Processing Agreement (incorporated by
reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form S-11, File
No. 33-2264).
10.5 Amendment to Revised Escrow Agreement, dated March
4, 1991 (incorporated by reference to Form 10-K for the
year ended December 31,1990).
10.6 Amendment to Custody Agreement, dated March 4,
1991 (incorporated by reference to Form 10-K for the year
ended December 31, 1990).
10.7 Amendment to Processing Agreement, dated March 4, 1991
(incorporated by reference to Form 10-K for the year
ended December 31, 1990).
22 Subsidiaries of the Registrant
(incorporated by reference to Post-Effective Amendment
No. 11 to the Registrant's Registration Statement on
Form S-11, File No. 33-2264).
(b) There were no reports on Form 8-K filed in the fourth
quarter of fiscal year 1996.
(c) See Exhibit Index contained herein.
(d) See List of Financial Statements and Financial Statement
Schedule included on page F-1.
INDEX TO EXHIBITS
Exhibit Page
3.1 Form of Subscription Agreement (incorporated by
reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form S-11,
File No. 33-2264). . . . . . . . . . . . . . . . *
3.2 Revised Limited Partnership Agreement of the
Registrant (incorporated by reference to Post-
Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11, File No.
33-2264). . . . . . . . . . . . . . . . . . . *
3.3 Form of Certificate of Limited Partnership Interest
(incorporated by reference to Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form S-11, File No.33-2264). . . . *
3.4 Form of Distribution Reinvestment Plan Election Card
(incorporated by reference to Post-Effective Amendment
No. 15 to the Registrant's Registration Statement on
Form S-11, File No.33-2264). . . . . . . . . . . *
4.1 Revised Depositary Agreement of the Registrant
(incorporated by reference to Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form S-11, File No.33-2264). . . . . *
4.2 See Exhibits 3.1, 3.2, 3.3, and 3.4. . . . . . . *
4.3 Distribution Reinvestment Plan of the Registrant
(incorporated by reference to Post-Effective
Amendment No. 2 to the Registrant's Registration
Statement on Form S-11, File No. 33-2264). . . *
4.4 Revised Form of Depositary Receipt of the Registrant
(incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's Registration
Statement on Form S-11, File No. 33-2264). . . . *
4.5 Form of Distribution Reinvestment Plan Administration
Agreement (incorporated by reference to Post-
Effective Amendment No. 8 to the Registrant's
Registration Statement on Form S-11, File No. 33-2264) *
10.1 Revised Escrow Agreement (incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11,File No. 33-2264) *
10.2 See Exhibits 4.1 and 4.5. . . . . . . . . . . . . . *
10.3 Custody Agreement (incorporated by reference to Post-
Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11,File No. 33-2264) *
10.4 Processing Agreement (incorporated by reference to
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form S-11, File No. 33-2264) *
10.5 Amendment to Revised Escrow Agreement, dated March 4,
1991 (incorporated by reference to Form 10-K for the
year ended December 31, 1990). . . . . . . . . . . . *
10.6 Amendment to Custody Agreement, dated March 4, 1991
(incorporated by reference to Form 10-K for the year
ended December 31, 1990). . . . . . . . . . . . . . *
10.7 Amendment to Processing Agreement, dated March 4, 1991
(incorporated by reference to Form 10-K for the year
ended December 31, 1990). . . . . . . . . . . . . . *
22 Subsidiaries of the Registrant (incorporated by
reference to Post-Effective Amendment No. 11 to
the Registrant's Registration Statement on Form S-11,
File No. 33-2264). . . . . . . . . . . . . . . . . . . *
* Incorporated by reference
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized this 26th day of March
1997.
Aetna Real Estate Associates, L.P.
By: Aetna/AREA Corporation,
General Partner
By:/s/ Daniel R. Leary
Daniel R. Leary
President
By: AREA GP Corporation,
General Partner
By:/s/ Paul L. Abbott
Paul L. Abbott
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on March 26th, 1997,
by the following persons on behalf of the Registrant and in
the capacities indicated.
Signature Title
_/s/ Daniel R. Leary__ President (Principal Executive
Daniel R. Leary Officer) and Director of Aetna/AREA
Corporation
_/s/ Carol M. Kuta ___ Treasurer (Principal Financial Officer
Carol M. Kuta and Comptroller of Aetna/AREA
Corporation
_/s/ James W. O'Keefe Chairman and Vice President of
James W. O'Keefe Aetna/AREA Corporation
_/s/ Dean A. Lindquist Assistant Treasurer and Assistant
Dean A. Lindquist Comptroller of Aetna/AREA Corporation
_/s/ Paul L. Abbott __ Director, Chief Executive
Paul L. Abbott Officer, President and Chief
Financial Officer of AREA GP
Corporation
AETNA REAL ESTATE ASSOCIATES, L.P.
(a Delaware limited partnership)
List of Financial Statements and Financial Statement Schedule
Page
Report of Independent Accountants F-2
Report of Hanford /Healy Appraisal Company F-3 - F-4
Consolidated Balance Sheets (Historical Cost and
Current Value) December 31, 1996 and 1995 F-5
Consolidated Statements of Income (Historical
Cost) for the years ended December 31, 1996, 1995
and 1994 F-6
Consolidated Statements of Partners' Capital
(Deficiency) (Historical Cost) for the years
ended December 31, 1996, 1995 and 1994 F-7
Consolidated Statements of Partners' Capital
(Deficiency) (Current Value) for the years ended
December 31, 1996, 1995 and 1994 F-8
Consolidated Statements of Cash Flows (Historical
Cost) for the years ended December 31, 1996, 1995
and 1994 F-9
Consolidated Current Value Basis Statements of
Changes in Deficiency of Current Value over
Historical Cost for the years ended December 31,
1996, 1995 and 1994 F-10
Notes to Consolidated Financial Statements F-11 - F-19
Report of Independent Accountants-
Supplementary Information F-20
The following financial statement schedule of
Aetna Real Estate Associates, L.P. required by Item
14 (d) is included in this Item 8:
Schedule III -- Real Estate and Accumulated
Depreciation F-21 - F-27
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission have been
omitted since: (1) the information required is disclosed in the financial
statements and notes thereto; (2) the schedules are not required under the
related instructions; or (3) the schedules are inapplicable.
Report of Independent Accountants
To the Partners of
Aetna Real Estate Associates, L.P.:
We have audited the consolidated historical cost balance sheets
of Aetna Real Estate Associates, L.P. ("the Partnership") as of
December 31, 1996 and 1995, and the related consolidated
historical cost statements of income, partners' capital (deficit)
and cash flows for each of the three years in the period ended
December 31, 1996. We have also audited the supplemental
consolidated current value basis balance sheets of Aetna Real
Estate Associates, L.P. as of December 31, 1996 and 1995, and the
supplemental consolidated current value basis statements of
partners' capital and changes in the excess of current value over
historical cost for each of the three years in the period ended
December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the historical cost financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Aetna Real Estate Associates,
L.P. at December 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
As described in Note 3, during 1995, the Partnership adopted
Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assest to Be Disposed Of."
As described in Note 2, the supplemental consolidated current
value financial statements have been prepared by management to
present relevant financial information that is not provided by
the consolidated historical cost financial statements and are not
intended to be a presentation in conformity with generally
accepted accounting principals. In addition, the supplemental
consolidated current value financial statements do not purport to
present the net realizable, liquidation, or market value of the
Partnership as a whole. Furthermore, amounts ultimately realized
by the Partnership from the disposal of properties may vary
significantly from the current values presented.
In our opinion, the supplemental consolidated current value
financial statements referred to above present fairly, in all
material respects, the information set forth in them on the basis
of accounting described in Note 2.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 11, 1997
Hanford/Healy Appraisal Company
March 3, 1997
Coopers & Lybrand
and The Unitholders of Aetna
Real Estate Associates, L.P.:
Re: Cross Pointe Center, Centerville, OH
Windmont Apartments, DeKalb Co., GA
Powell Street Plaza, Emeryville, CA
Lincoln Marina Bay, Richmond, CA
Village Square Shopping Center, Hazelwood, MO
Andover Research Park, Andover, MA
Metrowest Business Park I, Westborough, MA
Metrowest Business Park II, Westborough, MA
Gateway Square, Hinsdale, IL
Oakland Pointe Shopping Center, Pontiac, MI
Smmit Village, Rosslyn, VA
Westgate Distribution Center, Corona, CA
Town Center Business Park, Santa Fee Springs, CA
Lincoln Square, Arlington Heights, IL
We have estimated the market value of certain real property (the
"Properties") owned by Aetna Real Estate Associates, L.P. (the
"Partnership") as of December 31, 1996. The properties consist
of the 14 Properties identified above.
Full annual valuation reports and three quarterly update reports
were performed for each of the properties during 1996. In
accordance with an on-going schedule, the dates of the full
annual valuation varied from property to property during the
course of the year. The quarterly valuations, which were more
limited in scope, were based on and subject to the most recent
full valuation. Each property was inspected at least once during
the course of the assignment. The reports were prepared in
accordance with the Code of Professional Ethics and Standards of
Professional Practice of the Appraisal Institute.
The aggregate market value estimate reported below is subject to
the detailed assumptions and limiting conditions with respect to
each property considered, or incorporated by reference, in the
Appraisal with respect to such Property. The aggregate market
value estimate is the sum of the individual property market
values and does not reflect any premium or discount for the
properties as a whole.
In our opinion, the aggregate market value of the Properties, as
of December 31, 1996 was:
ONE HUNDRED NINETY-THREE MILLION NINE HUNDRED THOUSAND DOLLARS
$193,900,000
Hanford/Healy Appraisal Company was not employed to provide legal
analysis and assumes no responsibility for any matters of a legal
nature. Hanford/Healy Appraisal Company was also not employed to
perform engineering inspections and assumes no responsibility for
structural and mechanical, electrical or any other construction
matters, or the ability of the underlying properties to withstand
climatic or seismic disruptions.
Neither Hanford/Healy Appraisal Company, its officers, or any
staff employed on the valuations have any known present or
contemplated future interest in the Properties. We have no
personal interest or bias with respect to the subject matter or
the parties involved. To the best of our knowledge and belief,
the facts upon which the analyses and conclusions are based are
true and correct. Hanford/Healy Appraisal Company's fee for the
assignment was in no way contingent upon the values reported.
HANFORD/HEALY APPRAISAL COMPANY
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Balance Sheets
(Historical Cost and Current Value)
As of December 31, 1996 and 1995
(in thousands)
1996 1995
Current Current
Value Historical Value Historical
(Note 2) Cost (Note 2) Cost
Assets
Investments in real estate:
Properties $193,565 $239,889 $189,415 $237,334
Less accumulated depreciation
and amortization - (47,772) - (41,152)
Total investments in real
estate 193,565 192,117 189,415 196,182
Cash and cash equivalents 9,133 9,133 8,971 8,971
Rent and other receivables 1,511 4,487 1,310 4,168
Other 13 13 13 13
Total assets $204,222 $205,750 $199,709 $209,334
Liabilities and Partners' Capital
Liabilities:
Investment portfolio fee payable
to related parties $ 1,195 $ 1,195 $ 1,212 $ 1,212
Accounts payable and accrued
expenses 496 496 452 452
Accrued property taxes 766 766 815 815
Security deposits 934 934 824 824
Unearned income 189 189 225 225
Total liabilities 3,580 3,580 3,528 3,528
Commitments (Note 14)
Partners' capital (deficiency):
General Partners (58) (43) (11) 85
Limited Partners 200,700 202,213 196,192 205,721
Total partners' capital 200,642 202,170 196,181 205,806
Total liabilities and
partners' capital $204,222 $205,750 $199,709 $209,334
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income (Historical Cost)
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands, except units and per unit amounts)
1996 1995 1994
Revenue:
Rental $ 28,242 $ 27,455 $ 25,831
Interest 336 367 301
Other income 452 616 322
29,030 28,438 26,454
Expenses:
Property operating 9,681 9,179 9,379
Depreciation and amortization 7,369 8,004 7,237
Investment portfolio
fee - related parties 4,887 4,814 4,712
General and administrative 767 725 749
Bad debt 615 714 233
23,319 23,436 22,310
Impairment of investment in
real estate - (4,408) -
Operating income 5,711 594 4,144
(Loss) gain on sale of property - (23) 355
Net income $ 5,711 $ 571 $ 4,499
Net income allocated:
To the General Partners $ 57 $ 6 $ 45
To the Limited Partners 5,654 565 4,454
$ 5,711 $ 571 $ 4,499
Weighted average number of
limited partnership units
outstanding 12,724,547 12,724,547 12,724,547
Earnings per limited
partnership unit $ .44 $ .04 $ .35
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency) (Historical Cost)
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
General Limited
Partners Partners Total
Balance at January 1, 1994 $ 34 $ 221,426 $ 221,460
Capital contributions 117 - 117
Net income 45 4,454 4,499
Cash distributions (117) (11,562) (11,679)
Balance at December 31, 1994 79 214,318 214,397
Capital contributions 92 - 92
Net income 6 565 571
Cash distributions (92) (9,162) (9,254)
Balance at December 31, 1995 85 205,721 205,806
Net income 57 5,654 5,711
Cash distributions (185) (9,162) (9,347)
Balance at December 31, 1996 $ (43) $ 202,213 $ 202,170
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency) (Current Value)
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
General Limited
Partners Partners Total
Balance at January 1, 1994 $ (316) $ 186,765 $ 186,449
Capital contributions 117 - 117
Net income 45 4,454 4,499
Decrease in deficiency of
current value over historical
cost 131 12,942 13,073
Cash distributions (117) (11,562) (11,679)
Balance at December 31, 1994 (140) 192,599 192,459
Capital contributions 92 - 92
Net income 6 565 571
Decrease in deficiency of
current value over historical
cost 123 12,190 12,313
Cash distributions (92) (9,162) (9,254)
Balance at December 31, 1995 (11) 196,192 196,181
Net income 57 5,654 5,711
Decrease in deficiency of
current value over historical
cost 81 8,016 8,097
Cash distributions (185) (9,162) (9,347)
Balance at December 31, 1996 $ (58) $ 200,700 $ 200,642
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows (Historical Cost)
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
Cash flows from operating activities:
Net income $ 5,711 $ 571 $ 4,499
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,369 8,004 7,237
Impairment of investment in real estate - 4,408 -
Loss (gain) on sale of property - 23 (355)
Bad debt expense 615 714 233
Deferred (accrued) rental income (118) (5) 52
Increase (decrease) in cash arising
from changes in operating assets and
liabilities:
Rent and other receivables (816) (763) (678)
Investment portfolio fee payable to
related parties (17) 24 37
Accounts payable and accrued expenses 10 (115) (49)
Accrued property taxes (49) 60 18
Security deposits 110 10 (152)
Unearned income (36) 92 (37)
Other liabilities - - (4)
Net cash provided by operating
activities 12,779 13,023 10,801
Cash flows from investing activities:
Investments in real estate (3,270) (4,534) (7,967)
Proceeds from sale of property - 271 4,867
Net cash used in investing
activities (3,270) (4,263) (3,100)
Cash flows from financing activities:
Cash distributions (9,347) (9,254) (11,679)
Partners' capital contributions - 92 117
Net cash used in financing
activities (9,347) (9,162) (11,562)
Net increase (decrease) in cash and
cash equivalents 162 (402) (3,861)
Cash and cash equivalents at
beginning of year 8,971 9,373 13,234
Cash and cash equivalents at
end of year $ 9,133 $ 8,971 $ 9,373
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Current Value Basis Statements of Changes in
Deficiency of Current Value Over Historical Cost
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
Deficiency of current value over historical
cost at January 1, 1994 $ (35,011)
Current value increase in properties 11,913
Decrease in deficiency of current value
over historical cost resulting from sale
of property 1,108
Decrease in accrued rent 52
13,073
Deficiency of current value over historical
cost at December 31, 1994 (21,938)
Current value increase in properties 7,910
Write-down of property for permanent impairment 4,408
Increase in accrued rent (5)
12,313
Deficiency of current value over historical
cost at December 31, 1995 (9,625)
Current value increase in properties 8,215
Increase in accrued rent (118)
8,097
Deficiency of current value over historical
cost at December 31, 1996 $ (1,528)
The accompanying notes are an integral part of
these consolidated financial statements.
AETNA REAL ESTATE ASSOCIATES, L.P.
(a Delaware limited partnership)
Notes to Consolidated Financial Statements
1. ORGANIZATION
Aetna Real Estate Associates, L.P. ("the Partnership") was
organized on September 11, 1986 as a limited partnership
under the laws of the State of Delaware pursuant to a
Certificate and Agreement of Limited Partnership (the
"Partnership Agreement"), as amended and restated. The
Partnership was formed for the purpose of making acquisitions
in and operating certain types of residential and commercial
real estate, either directly or through joint venture
arrangements and, subject to certain limitations, making
participating investments, construction loans and
conventional mortgage loans. The General Partners of the
Partnership are Aetna/AREA Corporation ("Aetna/AREA"), an
affiliate of Aetna Life Insurance Company, and AREA GP
Corporation ("AREA GP"), an affiliate of Lehman Brothers Inc.
The Partnership will continue until December 31, 2015 unless
sooner terminated by law or in accordance with the terms of
the Partnership Agreement.
2. CURRENT VALUE BASIS FINANCIAL STATEMENTS
Current Value Reporting
The consolidated current value basis financial statements are
presented to provide supplementary information about the
Partnership's financial position and changes in partners'
capital which is not provided by the historical cost basis
financial statements. The Partnership's investments in real
estate are subject to changes in value and, therefore, their
current values differ from their historical cost basis net
book values determined in conformity with generally accepted
accounting principles. Management believes that reporting
the financial position on a current value basis is a more
realistic basis for reporting the Partnership's activities
because of the changing economic conditions affecting the
real estate market.
As more fully explained below, estimates of the current
values of the Partnership's assets and liabilities are
determined by management. The estimates of current values of
the Partnership's investments in real estate are based upon
independent appraisals of the underlying real estate using
generally accepted valuation techniques. Such estimates of
current value represent the value of real estate assets held
as investments for purposes of obtaining the benefit of
appreciation and operating cash flows.
The estimates do not necessarily represent the realizable
sales values of these assets at the date of valuation.
Additionally, partners' capital on a current value basis is
not intended to represent the liquidation value of the
Partnership or the market value of its net assets taken as a
whole.
Bases of Valuation
The following describes the bases of management's estimates
of current values:
- The current values of the Partnership's operating
properties are determined by independent appraisers.
Independent appraisals of each property are performed at
the date of purchase and on a quarterly basis
thereafter. The value of future cash payments from
joint venture partners and additional capital costs, if
any, are determined by management to the extent they
have not been considered in the independent appraisals.
- All other assets and liabilities are carried in the
current value basis balance sheets at the lower of cost
or net realizable value. Accrued rent related to
scheduled rent increases and tenant concessions,
included in rent and other receivables on the historical
cost basis balance sheets, is deemed to have a net
realizable value of zero on a current value basis.
- The aggregate difference between the current value basis
and historical cost basis of the Partnership's assets and
liabilities is reflected in the partners' capital accounts
in the current value basis balance sheets. The components
of this difference at December 31, 1996 and 1995 are as
follows:
1996 1995
(in thousands)
Properties $ 1,448 $(6,767)
Accrued rent (2,976) (2,858)
Deficiency of current value
over historical cost $(1,528) $(9,625)
3. SIGNIFICANT ACCOUNTING POLICIES
Financial Statements
The Partnership has a controlling interest in each of its
joint venture investments and, therefore, has consolidated
the accounts of such joint ventures in the financial
statements. The consolidated financial statements for 1996,
1995 and 1994 include the accounts of the Partnership and
its joint ventures Lincoln Marina Bay and Town Center
Associates. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Properties
The Partnership regularly evaluates the carrying value of its
properties. In 1995 the Partnership adopted Financial Accounting
Standards No. 121 (FAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the
accounting for long- lived assets that are expected to be disposed of.
During the fourth quarter of 1995, a permanent impairment write-down of
one investment property to bring the property's carrying value to its
estimated fair value resulted in a reduction of operating income of
approximately $4,408,000, and is reflected in the 1995 Statement of
Income. At December 31, 1995 the property had a high vacancy rate with
no new tenant prospects in the near future thus causing the estimated
undiscounted cash flows to be less than the asset's carrying value. The
estimated fair value represents the property's current value, as
discussed in Note 2. There were no such write-downs required in 1996.
Investments in properties, which the Partnership has the intent
to hold for the production of income, are carried at depreciated
cost, which includes the initial purchase price of the property,
plus closing costs, legal fees, and other miscellaneous
acquisition costs, net of impairment write-downs. Properties to
be disposed of are carried at the lower of depreciated cost or
fair value less estimated selling costs. Leases are accounted
for under the operating method where rental income is recognized
on a straight-line basis. Expenses including advertising,
maintenance and repairs are charged to operations as incurred.
Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives. Depreciation is
computed using the straight-line method based upon the estimated
useful lives, ranging from 5 to 50 years, of the respective
depreciable properties and improvements. Leasing commissions
and tenant improvements are amortized over the life of the
respective leases or the lives of the improvements, whichever is
shorter. Properties to be disposed of are not depreciated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expense during the reporting period. Actual results could
differ from those estimates.
Cash Equivalents
For purposes of the consolidated statements of cash flows,
the Partnership considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. Included in cash and cash equivalents are
restricted security deposits of $85,844 and $90,140 at
December 31, 1996 and 1995, respectively. Also, included in
cash and cash equivalents at December 31, 1996 and 1995 was
$6,080,343 and $6,152,203, respectively, held in a mutual
fund utilizing investments such as commercial paper,
certificates of deposit and government obligations, which are
carried at market value. The cost of cash equivalents
approximates fair value at December 31, 1996 and 1995.
At December 31, 1996 and 1995, approximately $885,000 and $927,000,
respectively, of the bank balances of the Partnership's checking and
money market accounts were insured by the Federal Deposit Insurance
Corporation ("FDIC") while approximately $2,087,000 and $2,760,000,
respectively, were uninsured. Included in the uninsured bank balances
was approximately $1,522,000 and $1,738,000 held at one major financial
institution at December 31, 1996 and December 31, 1995, respectively.
The remainder of the uninsured balances were held in multiple banks,
minimizing the risk of an isolated bank failure.
Income Taxes
No provision for federal or state income taxes has been made
in the financial statements since income, losses and tax
credits are generally passed through to the individual
partners.
Earnings Per Limited Partnership Unit
Earnings per unit is based upon net income allocated to the
Limited Partners and their weighted average number of units
outstanding during the year.
Reclassifications
Certain 1995 and 1994 consolidated financial statement items
have been reclassified to conform to the 1996 presentation.
4. SALE OF INVESTMENT IN REAL ESTATE
On December 21, 1995 approximately 12,100 square feet of land
at Powell Street Plaza was condemned, for the purpose of road
construction, by the State of California Department of
Transportation. Net proceeds to the Partnership were
approximately $271,000. Loss on the sale included in these
consolidated financial statements was approximately $23,000
for the year ended December 31, 1995.
On October 18, 1994, one building at Westgate Distribution
Center was sold to its tenant at a gross sales price of
$5,000,000. The value of this building at December 31, 1993
was approximately $3,500,000. After closing costs and
adjustments aggregating $133,162 and $43,246 respectively,
net cash proceeds to the Partnership were approximately
$4,824,000. Gain on the sale included in these consolidated
financial statements was approximately $355,000 for the year
ended December 31, 1994.
5. RENT AND OTHER RECEIVABLES
Rent and other receivables at December 31, 1996 and 1995 are
summarized as follows:
1996 1995
Current Historical Current Historical
Value Cost Value Cost
Rent and reimbursements
receivable $1,739,095 $1,739,095 $2,033,809 $2,033,809
Prepaids and other
receivables 275,605 275,605 261,900 261,900
Accrued rent - 2,975,752 - 2,857,756
2,014,700 4,990,452 2,295,709 5,153,465
Less: allowance for
doubtful accounts (503,323) (503,323) (985,399) (985,399)
Total rent and other
receivables $1,511,377 $4,487,129 $1,310,310 $4,168,066
6. PARTNERSHIP ALLOCATIONS
Generally, net income and losses for any fiscal year and
gains and losses from sales are allocated 99% to the Limited
Partners and 1% to the General Partners.
The Partnership Agreement provides that net cash from
operations, as defined therein, and distributable proceeds
from sale of investments (other than from the sale of
investments pursuant to the liquidation of the Partnership)
generally will be distributed, on a quarterly basis, 99% to
the Limited Partners and 1% to the General Partners.
Distributable proceeds from the sale of investments in
liquidation of the Partnership will be distributed in
accordance with the partners' capital accounts after all
allocations of income and loss. The Partnership Agreement
also provides for potentially substantial compensation to be
paid to the General Partners in the event the Limited
Partners elect to remove the General Partners.
7. JOINT VENTURES
The Partnership was a general partner in two consolidated
joint ventures as of December 31, 1996, 1995 and 1994. The
joint venture agreements in existence as of December 31, 1996
provide the Partnership with priority cash payments from
operations of the joint ventures ranging from 9% to 13% per
annum on all funds contributed by the Partnership to the
extent sufficient cash flows are generated by the underlying
properties. Any cash flows in excess of these payments to the
Partnership will be distributed to the Partnership and its
joint venture partners in accordance with their joint venture
interests. The Partnership's interests in its joint ventures
range from 50% to 80%.
8. CAPITAL CONTRIBUTIONS/DISTRIBUTIONS
The Partnership initially offered up to $300,000,000 of
depositary partnership units representing units of limited
partnership interests and an additional $30,000,000 of units
pursuant to the Partnership's Distribution Reinvestment Plan
("DRIP"). Pursuant to such Plan, Unitholders were entitled to
elect to have their Partnership distributions reinvested in new
units.
Effective January 1, 1991, the Partnership suspended its initial
offering of $300,000,000 of units. In March 1992, the Partnership
terminated the offering and suspended sales of units pursuant to the
DRIP. During 1993, the Partnership received a favorable response to a
no-action request submitted to the Securities and Exchange Commission
regarding its ability to continue to sell units pursuant to the DRIP
without registration of such units under the Securities Act of 1933, as
amended. As of December 31, 1996, the Partnership had not reopened
sales of units pursuant to the DRIP. No additional units were issued
since 1991. Information related to Unitholders' distributions for the
years ended December 31, 1996, 1995 and 1994 is as follows:
Cash
Distributions
Paid Per Unit
1996 $ 9,161,674 $ .72
1995 9,161,674 .72
1994 11,561,674 .91
Cash distributions paid to the General Partners during the year
ended December 31, 1996 aggregated $185,084 of which $92,542
related to operations for the quarters ended December 31, 1995,
March 31, 1996, June 30, 1996 and September 30, 1996 and $92,542
was for distributions that were withheld by the Partnership
during 1995 and became distributable within the provisions of the
Partnership's Revised Limited Partnership Agreement.
The General Partners distributions aggregating $116,785 for the
year ended December 31, 1994 were withheld by the Partnership,
since funds of an equal amount would have been contributed to the
Partnership at the end of the year as required by the
Partnership's Revised Limited Partnership Agreement.
Cash distributions paid to Unitholders in 1994 included a
special distribution of $2,400,000 from the sale of one
building at Westgate Distribution Center, discussed in Note 4.
9. TRANSACTIONS WITH AFFILIATES
Investment Portfolio Fee
The General Partners are entitled to receive an investment
portfolio fee based on the net asset value of the
Partnership's investments. As specified in the Partnership
Agreement, the fee is determined by applying various
percentages to the portion of net asset value attributable to
committed and uncommitted funds available for investment.
The fee is payable quarterly from available cash flow and may
not exceed 2.5% per annum of net asset value. For the years
ended December 31, 1996, 1995 and 1994, Aetna/AREA and AREA
GP were entitled to fees as follows:
Aetna/AREA AREA GP
1996 $1,972,562 $2,914,167
1995 1,925,626 2,888,440
1994 1,884,718 2,827,077
Other
The General Partners are entitled to reimbursement of
expenses paid on behalf of the Partnership incurred in
connection with the investments and operation of the
Partnership. Reimbursable expenses of $411,675, $403,479 and
$319,687, which consist primarily of insurance expense paid
to a third party, were reimbursed during 1996, 1995 and 1994
respectively, to an affiliate of Aetna/AREA.
10. LEASE AGREEMENTS
At December 31, 1996, the Partnership's principal assets
subject to lease agreements consisted of shopping centers,
apartment complexes, business parks and industrial parks.
Apartment leases generally have terms of 6 to 12 months and
provide for a fixed minimum rent. Leases with shopping
center, industrial park and business park tenants generally
range in term from 1 to 10 years and provide for fixed
minimum rent and reimbursement of their proportionate share
of operating expenses. Included in rental revenue are
$3,956,228, $4,109,685 and $3,455,573 primarily consisting of
expense reimbursements for the years ended December 31, 1996,
1995 and 1994, respectively. In addition, various leases
with shopping center tenants provide for additional rent
based upon percentages of tenants' sales volume. Percentage
rent included in rental revenue is $458,715, $426,272 and
$270,561 for the years ended December 31, 1996, 1995 and
1994, respectively. The following table is a schedule of
minimum future rents to be received under noncancelable
operating leases:
Year ending December 31,
1997 $18,527,592
1998 12,090,877
1999 10,387,978
2000 8,408,435
2001 6,509,097
Thereafter 16,563,608
Total $72,487,587
11. NET ASSET VALUE PER UNIT
Prior to the termination of the Offering and the Remarketing
Opportunity and the suspension of the DRIP in 1992, units
offered to new Unitholders or issued pursuant to the DRIP
were purchased at net asset value per unit as defined in the
Partnership Agreement. As discussed in Note 8, the
Partnership had not reopened sales of units pursuant to the
DRIP as of December 31, 1996. The net asset value per unit
calculated in accordance with the Partnership Agreement, is
summarized as of December 31, 1996 and 1995 as follows:
1996 1995
Limited Partners' capital - current
value basis $ 200,700,247 $196,192,156
Cash to be distributed to Limited
Partners (2,290,418) (2,290,418)
$ 198,409,829 $193,901,738
Units outstanding 12,724,547 12,724,547
Net asset value per unit $ 15.59 $ 15.24
12. SUPPLEMENTARY INFORMATION
Maintenance and repairs, real estate taxes and advertising costs
included in property operating expenses for the years ended
December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
Maintenance and repairs $1,085,405 $ 983,635 $1,065,895
Real estate taxes 2,898,371 2,990,923 2,885,617
Advertising costs 296,932 255,119 349,185
13. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION
The following is a reconciliation of net income for financial
statement purposes to net income for federal income tax
purposes for the years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
Net income per financial statements $5,710,699 $ 570,340 $4,499,375
Gain on sale of property for tax purposes
less than gain on sale of property
per financial statements - - (1,445)
Joint venture net income for tax purposes
in excess of (less than) joint venture net
income per financial statements (38,240) 298,224 466,802
Depreciation deducted for tax purposes
less than depreciation expense per
financial statements 673,968 1,591,245 644,077
Permanent impairment not deductible
for tax purposes - 4,407,851 -
Rental income related to accrued rent
on wholly owned properties 130,895 109,766 (56,883)
Bad debt expense deducted per financial
statements in excess of (less than) bad
debt expense deducted for tax purposes (415,238) 431,230 203,361
Other (22,829) (58,719) (34,797)
Taxable net income $6,039,255 $7,349,937 $5,720,490
The following is a reconciliation of partners' capital (historical
cost) for financial statement purposes to partners' capital for federal
income tax purposes as of December 31, 1996, 1995 and 1994:
1996 1995 1994
Partners' capital per financial
statements $202,170,215 $205,806,275 $214,397,608
Adjustment for cumulative difference
between tax basis net income and net
income per financial statements 11,175,217 10,846,661 4,067,064
Partners' capital per tax return $213,345,432 $216,652,936 $218,464,672
14.COMMITMENTS
As of December 31, 1996, the Partnership had outstanding
commitments of approximately $.8 million relating to
previously acquired investments. Of this amount, $.5 million
relates to the Partnership's commitment to fund additional
tenant improvements, leasing commissions, and other capital
projects at certain retail properties, and $.2 million
relates to the Partnership's commitment to fund additional
tenant and building improvements at 115 and 117 Flanders
Road.
15.SUBSEQUENT EVENTS
Capital Contributions/Distributions
In February 1997, the Partnership declared cash distributions
aggregating $2,313,554 ($.18 per Unit) pertaining to the
period from October 1, 1996 to December 31, 1996, which was
distributed on or about February 14, 1997.
16.LITIGATION
In November 1996, the Partnership and the General Partners
were named as defendants in two purported class action
lawsuits filed in the Chancery Court of Delaware in New
Castle County, entitled Bobbitt v. Aetna Real Estate
Associates, L.P., et al. and Estes v. Aetna Real Estate
Associates, L.P., et al. The complaints in those actions
claim, among other things, that management fees that have
been and are paid to the General Partners are excessive and
that a standstill agreement with a tender offeror which has
had the effect of limiting the number of units that would be
the subject of any tender offer is unlawful. The defendants
have moved to dismiss one of the complaints and have not yet
been served with the other. The General Partners believe
that the allegations in these complaints are without merit
and intend to defend the lawsuits vigorously.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Unitholders of
Aetna Real Estate Associates, L.P.
In connection with our audits of the consolidated financial
statements of Aetna Real Estate Associates, L.P. as of
December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996, which financial
statements are included herein, we have also audited the
related financial statement schedule listed in the index on
page F-1 herein.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P
Hartford, Connecticut
February 11, 1997
<TABLE>
<CAPTION>
AETNA REAL ESTATE ASSOCIATES L.P.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs Capitalized Sub- Gross Amount at which
Initial Cost sequent to Acquisition Carried at End ofYear
------------------- --------------------- ---------------------
Building Building Building
Encum- and and and
Description brances Land Improvements Land Improvements Land Improvements Total (a)
Partnership Owned:
Cross Pointe $ - $3,300,000 $12,200,000 $ 16,751 $7,004,484 $3,316,751 $19,204,484 $22,521,235
Shopping Center
Centerville, OH
Gateway Square - 1,516,679 5,377,320 799 648,555 1,517,478 6,025,875 7,543,353
Shopping Center
Hinsdale, IL
Lincoln Square - 1,859,283 11,102,944 1,660 586,836 1,860,943 11,689,780 13,550,723
Apartment Complex
Arlington Hts., IL
Oakland Pointe - 3,412,062 16,981,319 7,112 2,295,330 3,419,174 19,276,649 22,695,823
Shopping Center
Pontiac, MI
Summit Village - 5,395,408 30,154,302 116,350 1,642,229 5,511,758 31,796,531 37,308,289
Apartment Complex
Rosslyn, VA
Partnership Owned
(Cont'd):
Three Riverside - 1,722,156 7,389,779 (22,892) 1,476,870 1,699,264 8,866,649 10,565,913
Riverside Drive
Office/R&D Bldg.
Andover, MA
Village Square (b) - 2,710,355 4,103,802 285,346 (1,572,876) 2,995,701 2,530,926 5,526,627
Shopping Center
Hazelwood, MO
Windmont Apartments - 1,429,226 6,093,017 28,430 422,224 1,457,656 6,515,241 7,972,897
Apartment Complex
Atlanta, GA
115 & 117 - 2,369,342 8,947,868 7,016 1,248,635 2,376,358 10,196,503 12,572,861
Flanders Road
R&D Warehouse Bldgs.
Westborough, MA
Powell Street Plaza (c) - 9,196,813 20,167,160 (68,973) 2,221,785 9,127,840 22,388,945 31,516,785
Shopping Center
Emeryville, CA
Partnership Owned
(Cont'd):
Westgate - 3,916,801 6,047,987 18,474 4,144,796 3,935,275 10,192,783 14,128,058
Distribution Center (d)
Industrial Park
Corona, CA
Consolidated Ventures:
Marina Bay - 1,777,110 5,212,740 166,987 3,738,264 1,944,097 8,951,004 10,895,101
Industrial Park
Richmond, CA
Town Center - 10,880,641 19,198,867 94,939 12,916,680 10,975,580 32,115,547 43,091,127
Business Park
Santa Fe Springs, CA
$ - $49,485,876 $152,977,105 $651,999 $36,773,812 $50,137,875 $189,750,917 $239,888,792(e)
See notes to schedule III
</TABLE>
AETNA REAL ESTATE ASSOCIATES L.P.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1996
Life on
which
Depreciation
in Latest
Accumulated Date of Date Income Statement
Description Depreciation(a) Construction Acquired is Computed
Partnership
Owned:
Cross Pointe $ 3,056,775 1985 10/3/86 40 years
Shopping Center
Centerville, OH
Gateway Square 1,856,087 1986 11/21/86 33 years
Shopping Center
Hinsdale,IL
Lincoln Square 3,976,059 1986 11/14/86 33 years
Apartment Complex
Arlington Hts., IL
Oakland Pointe 6,664,990 1987 1/26/88 33 years
Shopping Center
Pontiac, MI
Summit Village 7,790,174 1987/1989 6/09/87 and 40 years
Apartment Complex 8/31/89
Rosslyn, VA
Partnership Owned
(Cont'd):
Three Riverside Drive 2,728,992 1986 2/8/88 33 years
Office/R&D Bldg.
Andover, MA
Village Square (b) 239,050 1961/1988 6/24/87 33 years
Shopping Center
Hazelwood, MO
Windmont Apartments 1,769,133 1989 7/18/89 33 years
Apartment Complex
Atlanta, GA
115 & 117 Flanders 2,852,675 1986/1988 2/8/88 33 years
Road and
R&D Warehouse Bldgs. 8/31/89
Westborough, MA
Powell Street Plaza 4,864,682 1988 2/16/90 33 years
Shopping Center
Emeryville, CA
Partnership Owned
(Cont'd):
Westgate Distribution 1,877,408 1989 2/22/90 50 years
Center
Industrial Park
Corona,CA
Consolidated
Ventures:
Marina Bay 2,523,533 1962/1987 6/30/87 50 years
Industrial Park
Richmond, CA
Town Center 7,572,439 1982 12/18/87 33 years
Business Park
Santa Fe Springs, CA
$47,771,997 (e)
AETNA REAL ESTATE ASSOCIATES, L.P.
(a) Reconciliation of the carrying amount of real estate investments and
accumulated depreciation for the years ended Decenber 31, 1996, 1995 and 1994
is as follows:
1996 1995 1994
Balance of real estate
investments at beginning
of year $237,333,658 $241,332,804 $239,880,898
Additions during year:
Improvements and additions 3,304,120 4,532,853 7,822,401
Deductions during year:
Cost of real estate sold (c)(d) - (293,615) (4,646,536)
Impairment (b) - (4,407,851) -
New basis adjustment (b) - (2,609,207) -
Other (1) (748,986) (1,221,326) (1,723,959)
Balance of real estate investments
at close of year $239,888,792 $237,333,658 $241,332,804
Balance of accumulated deprec-
iation at beginning of year $ 41,152,009 $ 36,978,911 $ 31,600,606
Depreciation expense 7,368,974 8,003,631 7,236,999
Accumulated depreciation of
real estate sold - - (134,735)
New basis adjustment (b) - (2,609,207) -
Other (1) (748,986) (1,221,326) (1,723,959)
Balance of accumulated
depreciation at close of year $ 47,771,997 $ 41,152,009 $ 36,978,911
(1) Write-off of tenant improvements and leasing commissions for vacated
tenants.
(b) In 1995, a property was written down by $4,407,851 for permanent
impairment. Accumulated depreciation and amortization of $2,609,207 at the
time of the permanent impairment has been adjusted against cost to conform to
the 1996 presentation.
(c) In 1995, approximately 12,100 square feet of land was condemned at Powell
Street Plaza for the purpose of road construction. The initial cost of land
was reduced by $293,615.
(d) One of four buildings at Westgate Distribution Center was sold on October
18, 1994. The building was constructed subsequent to the initial purchase of
land and two other buildings. As a result of removing the cost of real estate
sold, the initial purchase price of the land was reduced by $1,645,801 and the
subsequent cost of building and improvements was reduced by $3,000,735.
(e) For Federal income tax purposes, the aggregate cost of land, buildings and
improvements is $244,109,585. The amount of accumulated depreciation on real
property for Federal income tax purposes is $46,593,588.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,133,000
<SECURITIES> 000
<RECEIVABLES> 4,990,000
<ALLOWANCES> 503,000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 239,889,000
<DEPRECIATION> 47,772,000
<TOTAL-ASSETS> 205,750,000
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 202,170,000
<TOTAL-LIABILITY-AND-EQUITY> 205,750,000
<SALES> 28,242,000
<TOTAL-REVENUES> 29,030,000
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 23,319,000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 5,711,000
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 000
</TABLE>
