SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1994 Commission file number 0-16516
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(Exact Name of registrant as specified in its charter)
Illinois 36-3437938
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
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
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . .
PART II OTHER INFORMATION
Item 3. Defaults on Senior Securities . . . . . . . . . . . . . .
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . .
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 209,694 286,137
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,686,996 32,618,483
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738,653 1,010,293
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,653 202,526
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,783,996 34,117,439
------------ ------------
Investment properties, at cost (note 2):
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,002,520 60,002,520
------------ ------------
60,002,520 60,002,520
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,513,549) (10,011,970)
------------ ------------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . . . . . 49,488,971 49,990,550
Investment in unconsolidated ventures, at equity (notes 1, 2 and 6). . . . . . . . . . . . . . . . . . 3,754,197 3,850,428
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,991 335,676
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267,859 292,124
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,237,718 1,185,497
------------ ------------
$ 74,910,732 89,771,714
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1994 1993
------------ ------------
Current liabilities:
Current portion of long-term debt (notes 2(e) and 2(f)). . . . . . . . . . . . . . . . . . . . . . .$ 292,140 283,548
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552,571 901,810
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453,061 444,215
Amounts due to affiliates (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,565,981 1,565,981
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,993 200,757
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,999,746 3,396,311
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,946 79,176
Investment in unconsolidated ventures, at equity (notes 1, 2 and 6). . . . . . . . . . . . . . . . . . 19,850,608 17,120,620
Long-term debt, less current portion (notes 2(e) and 2(f)) . . . . . . . . . . . . . . . . . . . . . . 42,088,566 42,164,903
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,010,866 62,761,010
Venture partners' subordinated equity in ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,459,646 5,766,754
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,100,814) (2,979,118)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (340,793) (175,636)
------------ ------------
(3,421,607) (3,134,754)
------------ ------------
Limited partners:
Capital contributions, net of offering costs and purchase discounts. . . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,673,249) (69,752,546)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,006,277) (26,410,103)
----------- ------------
6,861,827 24,378,704
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . . . . . . . . . . 3,440,220 21,243,950
------------ ------------
Commitments and contingencies (notes 2 and 5)
$ 74,910,732 89,771,714
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION> 1994 1993
------------ ----------
<S> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,424,632 4,718,090
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,629 130,997
------------ ----------
2,665,261 4,849,087
------------ ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,284,882 2,592,913
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,579 1,106,306
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,291,974 1,007,888
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,089 176,365
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,154 30,453
Management fees to corporate general partner (note 5). . . . . . . . . . . . . . . . . . . . . . . . 38,986 82,844
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,044 84,136
------------ ----------
3,353,708 5,080,905
------------ ----------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,447 231,818
Partnership's share of loss from operations of unconsolidated ventures (notes 1, 2 and 5). . . . . . . 2,636,565 2,800,147
Venture partners' share of ventures' operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . (282,613) 61,544
------------ ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,042,399 3,093,509
============ ==========
Net loss per limited partnership interest (note 1):
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 20.81 21.16
============ ==========
Cash distributions per limited partnership interest (note 1) . . . . . . . . . . . . . . . .$ 104.00 8.50
============ ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$(3,042,399) (3,093,509)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,579 1,106,306
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,154 30,453
Partnership's share of loss from operations of unconsolidated ventures . . . . . . . . . . . . . . 2,636,565 2,800,147
Venture partners' share of ventures' operations. . . . . . . . . . . . . . . . . . . . . . . . . . (282,613) 61,544
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,640 206,727
Prepaid interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3,893,702)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,873 77,618
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,265 26,382
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,221) (13,285)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650,761 75,505
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,846 (540,488)
Amounts due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 106,281
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,764) 7,008,375
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,230) 2,680
----------- ----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . 712,456 3,962,034
----------- ----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments . . . . . . . . . . . . . . . . . . . 13,931,487 (2,915,214)
Additions to investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (65,358)
Partnership's distributions from unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . 189,654 116,553
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,469) (34,753)
----------- ----------
Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . . . . 14,064,672 (2,898,772)
----------- ----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1994 1993
----------- ----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,745) (5,288,993)
Venture partners' distributions from venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,495) (23,932)
Venture partners' contributions to venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 5,382,000
Distributions to limited partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(14,596,174) (1,192,957)
Distributions to general partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165,157) --
----------- ----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . .(14,853,571) (1,123,882)
----------- ----------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . .$ (76,443) (60,620)
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 1,276,036 6,486,615
=========== ==========
Non-cash investing and financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ -- --
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1993, which are
included in the Partnership's 1993 Annual Report on Form 10-K (File No. 0-
16516) filed on March 25, 1994 (the "Annual Report"), as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts
of the Partnership and its consolidated ventures, JMB/Warner Center Associates
("JMB/Warner") (note 2(e)), JMB/Hahn PDTC Associates, L.P. ("Palm Desert")
(note 2(f)) and Carlyle-XVI Associates, L.P. (note 2(b)). The effect of all
transactions between the Partnership and its consolidated ventures has been
eliminated. The Partnership, through JMB/Warner, sold the Blue Cross Building
in November 1993.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's interests
in JMB/Owings Mills Associates ("JMB/Owings"); 260 Franklin Street Associates
("260 Franklin"); Villages Northeast Associates ("Villages Northeast");
JMB/NewPark Associates ("JMB/NewPark"); and its indirect ownership of JMB/125
Broad Building Associates, L.P. ("JMB/125"). The Partnership, through
JMB/Owings, sold its interest in Owings Mills Mall in June 1993.
The Partnership 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 reflect the Partnership's accounts in
accordance with generally accepted accounting principles ("GAAP") and to
consolidate the accounts of the ventures as described above. Such adjustments
are not recorded on the records of the Partnership. The effect of these items
is summarized as follows for the three months ended March 31:
<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net loss . . . . . . . . . $3,042,399 1,735,149 3,093,509 1,481,780
Net earnings (loss) per
limited partnership
interest. . . . . . . . . $ 20.81 11.82 21.16 10.14
========== ========= ========== ==========
</TABLE>
The net loss per limited partnership interest is based upon the 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 income tax purposes.
Certain amounts in the 1993 consolidated financial statements have been
reclassified to conform to the 1994 presentation.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 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 as cash equivalents with
any remaining (generally with original maturities of one year or less) amounts
reflected as short-term investments being held to maturity. None of the
Partnership's investments in U.S. Government obligations were classified as
cash equivalents at March 31, 1994 and December 31, 1993.
(2) VENTURE AGREEMENTS
(a) General
The Partnership at March 31, 1994 is party to five joint venture
agreements (JMB/Owings, JMB/125, 260 Franklin, Villages Northeast and
JMB/NewPark) directly or indirectly with Carlyle Real Estate Limited
Partnership - XV ("Carlyle-XV") (and for JMB/125, Carlyle Advisors, Inc.) and
two joint venture agreements (JMB/Warner and Palm Desert) with Carlyle Real
Estate Limited Partnership-XVII ("Carlyle-XVII"). Carlyle-XV and Carlyle-XVII
are all sponsored by the Corporate General Partner. The terms of the
affiliated joint venture agreements provide, in general, that the benefits and
obligations of ownership, including tax effects, net cash receipts and net
sale and refinancing proceeds and capital contribution obligations are
allocated or distributed, as the case may be, between the Partnership and the
affiliated partner in proportion to their respective capital contributions to
the affiliated venture. Pursuant to such agreements, the Partnership made
capital contributions aggregating $137,554,968 through March 31, 1994. Under
certain circumstances, either pursuant to the venture agreements or due to the
Partnership's obligations as general partner, the Partnership may be required
to make additional cash contributions to the ventures.
The Partnership at March 31, 1994 owns interests through the above
ventures in three apartment complexes, three office buildings and two shopping
centers. In 1993, the Partnership through JMB/Owings sold its interest in
Owings Mills Shopping Center and through JMB/Warner sold the Blue Cross
Building.
There are certain risks associated with Partnership's investments made
through joint ventures, including the possibility that 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.
(b) 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 owns 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 include O&Y 25 Realty Company L.P., Olympia & York Broad Street Holding
Company L.P. (USA) and certain other affiliates of Olympia & York
Developments, Ltd. ("O&Y").
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
JMB/125 is a joint venture between Carlyle-XVI Associates, L.P. (in which
the Partnership holds a 99% limited partnership interest), Carlyle-XV
Associates, L.P. and Carlyle Advisors, Inc. The terms of the JMB/125 venture
agreement generally provide that JMB/125's share of 125 Broad's annual cash
flow and sale or refinancing proceeds will be distributed or allocated to the
Partnership in proportion to its (indirect) approximate 40% share of capital
contributions to JMB/125. In April 1993 JMB/125, originally a general
partnership, was converted to a limited partnership, and the Partnership's
interest in JMB/125, which previously has been held directly, was converted to
a limited partnership interest and was contributed to Carlyle-XVI Associates,
L.P. in exchange for a limited partnership interest in Carlyle-XVI Associates,
L.P. As a result of these transactions, the Partnership currently holds,
indirectly through Carlyle-XVI Associates, L.P., an approximate 40% limited
partnership interest in JMB/125. The general partner in each of JMB/125 and
Carlyle-XVI Associates, L.P. is an affiliate of the Partnership. For
financial reporting purposes, profits and losses of JMB/125 are generally
allocated 40% to the Partnership.
JMB/125 acquired an approximately 48.25% interest in 125 Broad for a
purchase price of $16,000,000, subject to a first mortgage loan of
$260,000,000 and a note payable to an affiliate of the joint venture partners
in the amount of $17,410,516 originally due September 30, 1989. In June 1987,
the note payable was consolidated with the first mortgage loan forming a
single consolidated note in the principal amount of $277,410,516. The
consolidated note bears interest at a rate of 10-1/8% per annum payable in
semi-annual interest only payments and matures on December 27, 1995. JMB/125
has also contributed $14,055,500 to 125 Broad to be used for working capital
purposes and to pay an affiliate of O&Y for its assumption of JMB/125's share
of the obligations incurred by 125 Broad under the "takeover space" agreement
described below. In addition, JMB/125 contributed $24,222,042, plus interest
thereon of approximately $1,089,992, on June 30, 1986 for working capital
purposes. Thus, JMB/125's original cash investment (exclusive of acquisition
costs) was $55,367,534, of which the Partnership's share was approximately
$22,147,000.
The land underlying the office building is subject to a ground lease
which has a term through June 2067 and provides for annual rental payments of
$1,075,000. The terms of the ground lease grant 125 Broad a right of first
refusal to acquire the fee interest in the land in the event of any proposed
sale of the land during the term of the lease and an option to purchase the
fee interest in the land for $15,000,000 at 10-year intervals (the next option
date occurring in 1994).
The partnership agreement of 125 Broad, as amended, provides that the O&Y
partners are obligated to make advances to pay operating deficits incurred by
125 Broad from the earlier of 1991 or the achievement of a 95% occupancy rate
of the office building through 1995. In addition, from closing through 1995,
the O&Y partners are required to make capital contributions to 125 Broad for
the cost of tenant improvements and leasing expenses up to certain specified
amounts and to make advances to 125 Broad to the extent such costs exceed such
specified amounts and such costs are not paid for by the working capital
provided by JMB/125 or the cash flow of 125 Broad. The amount of all costs
for such tenant improvements and leasing expenses over the specified amounts
and the advances for operating deficits from the earlier of the achievement of
a 95% occupancy rate of the office building or 1991 will be treated by 125
Broad as non-recourse loans bearing interest, payable monthly, at the floating
prime rate of an institutional lender. The interest rate in effect at March
31, 1994 was 6.25% per annum. The amount of such outstanding O&Y partner non-
recourse loans was approximately $16,234,000 at March 31, 1994. Due to a
major tenant vacating in 1991, the property operated at a deficit in 1993 and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
is expected to operate at a deficit in 1994 and for the next several years.
Such deficits through 1995 are required to be funded by additional loans from
the O&Y partners, although as discussed below the O&Y partners have been in
default of such funding obligation since June 1992. The outstanding principal
balance and any accrued and unpaid interest on such loans will be payable from
125 Broad's annual cash flow or net sale or refinancing proceeds, as described
below. Any unpaid principal of such loans and any accrued and unpaid interest
thereon will be due and payable on December 31, 2000. JMB/125 and the O&Y
partners are obligated to make capital contributions, in proportion to their
respective interests in 125 Broad, in amounts sufficient to enable 125 Broad
to pay any excess expenditures not required to be covered by the capital
contributions or advances of the O&Y partners described above.
The 125 Broad partnership agreement also provides that beginning in 1991,
annual cash flow, if any, is distributable first to JMB/125 and to the O&Y
partners in certain proportions up to certain specified amounts. Next, the
O&Y partners are entitled to repayment of principal and any accrued but unpaid
interest on the loans for certain tenant improvements, leasing expenses and
operating deficits described above, and remaining annual cash flow, if any, is
distributable approximately 48.25% to JMB/125 and approximately 51.75% to the
O&Y partners. In general, operating profits or losses are allocable
approximately 48.25% to JMB/125 and approximately 51.75% to the O&Y partners,
except for certain specified items of profits or losses which are allocable to
JMB/125 or the O&Y partners.
The 125 Broad partnership agreement further provides that, in general,
upon sale or refinancing of the property, net sale or refinancing proceeds
(after repayment of the outstanding principal balance and any accrued and
unpaid interest on any loans from the O&Y partners described above) are
distributable approximately 48.25% to JMB/125 and approximately 51.75% to the
O&Y partners.
In the event of a dissolution and liquidation of 125 Broad, the terms of
the 125 Broad joint venture agreement provide that if there is a deficit
balance in the tax basis capital account of JMB/125, after the allocation of
profits or losses and the distribution of all liquidation proceeds, then
JMB/125 generally would be required to contribute cash to 125 Broad in the
amount of its deficit capital account balance. Taxable gain arising from the
sale or other disposition of 125 Broad's property would be allocated to the
joint venture partner or partners then having a deficit balance in its or
their respective capital accounts in accordance with the terms of the 125
Broad joint venture agreement. However, if such taxable gain is insufficient
to eliminate the deficit balance in its account in connection with a
liquidation of 125 Broad, JMB/125 would be required to contribute funds to 125
Broad (regardless of whether any proceeds were received by JMB/125 from the
disposition of 125 Broad's property) to eliminate any remaining deficit
capital account balance.
The Partnership's liability for such contribution, if any, would be its
share, if any, of the liability of JMB/125 and would depend upon, among other
things, the amounts of JMB/125's and the O&Y partners' respective capital
accounts at the time of a sale or other disposition of 125 Broad's property,
the amount of JMB/125's share of the taxable gain attributable to such sale or
other disposition of 125 Broad's property and the timing of the dissolution
and liquidation of 125 Broad. In such event, the Partnership could be
required to sell or dispose of other assets in order to satisfy an obligation
to make such contribution. Although the amount of such liability could be
material, the Limited Partners of the Partnership would not be required to
make additional contributions of capital to satisfy such obligation, if any,
of the Partnership.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As described above, the terms of the 125 Broad joint venture agreement
provide that the O&Y partners are obligated to advance to 125 Broad, in the
form of interest-bearing loans, amounts required to pay operating deficits and
capital improvement costs incurred during 1991 through 1995. O&Y and certain
of its affiliates have been involved in bankruptcy proceedings in the United
States and Canada and similar proceedings in England. During 1993, O & Y
emerged from bankruptcy protection in Canada. In addition, a reorganization
of the management of the company's United States operations has been
completed, and certain O&Y affiliates are in the process of renegotiating or
restructuring various loans affecting properties in the United States in which
they have an interest. In view of the present financial conditions of O&Y and
its affiliates and the anticipated deficits for the property, as well as the
existing defaults of the O&Y partners, it appears unlikely that the O&Y
partners will meet their financial and other obligations to JMB/125 and 125
Broad.
In October 1993, 125 Broad entered into an agreement with Salomon
Brothers, Inc. to terminate its lease covering approximately 231,000 square
feet (17% of the building) at the property on December 31, 1993 rather than
its scheduled termination in January 1997. In consideration for the early
termination of the lease, Salomon Brothers, Inc. paid 125 Broad approximately
$26,500,000, plus interest thereon of approximately $200,000, which 125 Broad
in turn paid to its lender to reduce amounts outstanding under the mortgage
loan. In addition, Salomon Brothers, Inc. paid JMB/125 $1,000,000 in
consideration of JMB/125's consent to the lease termination.
Due to the O&Y partners' failure to advance necessary funds to 125 Broad
as required under the 125 Broad joint venture agreement, 125 Broad defaulted
on its mortgage loan in June 1992 by failing to pay approximately $4,722,000
of the semi-annual interest payment due on the loan. As a result of this
default, the loan agreement provides for a default interest rate of 13-1/8%
per annum on the unpaid principal amount. In addition, during 1992 affiliates
of O&Y defaulted on a "takeover space" agreement with Johnson & Higgins, Inc.
("J&H"), one of the major tenants at the 125 Broad Street Building, whereby
such affiliates of O&Y agreed to assume certain lease obligations of J&H at
another office building in consideration of J&H's leasing space in the 125
Broad Street Building. As a result of this default, J&H has offset rent
payable to 125 Broad for its lease at the 125 Broad Street Building in the
amount of approximately $33,200,000 through March 31, 1994, and it is expected
that J&H will continue to offset amounts due under its lease corresponding to
amounts by which the affiliates of O&Y are in default under the "takeover
space" agreement. Due to the O&Y affiliates' default under the "takeover
space" agreement and the continuing defaults of the O&Y partners to advance
funds to cover operating deficits, as of March 31, 1994, the arrearage under
the mortgage loan had increased to approximately $48,180,00. As discussed
above, approximately $26,700,000 was remitted to the lender in October 1993 in
connection with the early termination of the Salomon Brothers lease, and was
applied towards mortgage principal for financial reporting purposes. Due to
their obligations relating to the "takeover space" agreement, the affiliates
of O&Y are obligated for the payment of the rent receivable associated with
the J&H lease at the 125 Broad Street Building. Based on the continuing
defaults of the O&Y partners, 125 Broad has reserved the entire $33,200,000 of
rent offset by J&H and has also reserved approximately $32,600,000 of accrued
rents receivable relating to such J&H lease, since the ultimate collectability
of such amounts depends upon the O&Y partners' and the O&Y affiliates'
performance of their obligations. The Partnership's share of such losses,
approximately $888,000 and $1,158,000 for the three months ended March 31,
1994 and 1993, respectively, is included in the Partnership's share of loss
from operations of unconsolidated ventures.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
negotiate a restructuring of the mortgage loan with the lender in order to
reduce operating deficits of the property. In view of, among other things,
the significant operating deficits which the property is expected to incur
during 1994 and for the next several years, it is unlikely that a
restructuring of the mortgage will be obtained. The loan restructuring is
part of a larger restructuring with the lender involving a number of loans
secured by various properties in which O&Y affiliates have an interest.
JMB/125 has notified the O&Y partners that their failure to advance funds to
cover the operating deficits constitutes a default under 125 Broad the joint
venture agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. As discussed above, it appears unlikely
that 125 Broad will be able to restructure the mortgage loan. Also, JMB/125
is not likely to commit any significant additional amounts to the property.
This is expected to result in the Partnership no longer having an ownership
interest in the property. If this event were to occur, the Partnership would
recognize a net gain for financial reporting and Federal income tax purposes
without any corresponding distributable proceeds. In addition, under certain
circumstances as discussed above, JMB/125 may be required to make an
additional capital contribution to 125 Broad in order to make up a deficit
balance in its capital account, and the Partnership may, under certain
circumstances, be required to bear a share of such additional capital
contribution obligation.
Vacancy rates in the downtown Manhattan office market have increased over
the last few years. As a result, competition for tenants has increased, which
has resulted in lower effective rents. The increased vacancy in the downtown
Manhattan office market has resulted primarily from layoffs, cutbacks and
consolidations by many financial service companies which, along with related
businesses, dominate the submarket. This resulted in uncertainty as to 125
Broad's ability to recover the net carrying value of the investment property
through future operations and sale. As a matter of prudent accounting
practice, a provision for value impairment of such investment property of
$14,844,420 was recorded as of December 31, 1991. The Partnership's share of
such provision was $3,227,867 and was included in the Partnership's share of
loss from operations of unconsolidated ventures. Such provision was recorded
to reduce the net book value of the investment property to the then
outstanding balance of the related non-recourse financing and O&Y partner
loans.
The office building is being managed pursuant to a long-term agreement
with an affiliate of the O&Y partners. Under the terms of the management
agreement, the manager is obligated to manage the office building, collect all
receipts from operations and to the extent available from such receipts pay
all expenses of the office building. The manager is entitled to receive a
management fee equal to 1% of gross receipts of the property.
(c) 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 is currently subject to a first mortgage loan in the
original principal amount of $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 $10,500,000.
The affiliated joint venture reached an agreement with the lender to
modify the terms of the long-term mortgage note secured by the 260 Franklin
Street Building in December 1991. Beginning May 1991, the modified mortgage
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
note provides for monthly payments of interest only based upon the then
outstanding balance at a rate of 6% per annum through January 1992 and 8% per
annum thereafter. Upon the scheduled or accelerated maturity, or prepayment
of the mortgage loan, the affiliated joint venture shall be obligated to pay
an amount sufficient to provide the lender with an 11% per annum yield on the
mortgage note from January 1, 1991 through the date of maturity or prepayment.
In addition, upon maturity or prepayment, the affiliated joint venture is
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. The affiliated joint
venture is required to (i) escrow excess cash flow from operations (computed
without a deduction for property management fees and leasing commissions to an
affiliate), 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 $75,000, and (iii) make annual escrow contributions,
through January 1995, of $150,000, of which the Partnership's share is
$45,000. The escrow account is to be used to cover the cost of capital and
tenant improvements and lease inducements ($726,983 used as of March 31, 1994)
as defined, with the balance, if any, of such escrowed funds available at the
scheduled or accelerated maturity to be used for the payment of principal and
interest due to the lender as described above.
(d) 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 acquired its 50% interest in NewPark Associates for a
purchase price of $32,500,000 paid in cash at closing, subject to an existing
first mortgage loan of approximately $23,556,000, and certain loans from the
joint venture partner of approximately $6,300,000.
On December 31, 1992, NewPark Associates refinanced the shopping center
with an institutional lender. The new mortgage note payable in the principal
amount of $50,620,219 is due on November 1, 1995. Monthly payments of
interest only of $369,106 were due through November 30, 1993. Commencing on
December 1, 1993 through October 30, 1995, principal and interest are due in
monthly payments of $416,351 with a final balloon payment due November 1,
1995. Interest on the note payable accrues at 8.75% per annum. The joint
venture has an option to extend the term of the mortgage note payable to
November 1, 2000 upon payment of a $250,000 option fee and satisfaction of
certain conditions as specified in the mortgage note. A portion of the
proceeds from the note payable were used to pay the outstanding balance,
including accrued interest, under the previous mortgage note payable and the
notes payable to the unaffiliated joint venture partner. NewPark Associates
commenced a renovation of NewPark Mall in early 1993 and such renovation was
substantially completed as of September 30, 1993.
(e) JMB/Warner
On November 2, 1993, the Partnership through JMB/Warner sold its interest
in the Blue Cross Building (see note 3(b)).
In December 1987, the Partnership acquired through JMB/Warner an interest
in an existing five-structure office complex in Woodland Hills (Los Angeles),
California known as the Blue Cross Building. The $90,000,000 purchase price
of the property was paid in cash at closing. During 1989, JMB/Warner obtained
a permanent mortgage loan in the principal amount of $55,000,000 secured by
the Blue Cross Office Building.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In connection with the sale of the property to JMB/Warner, the seller had
entered into a triple net lease of the entire office complex, which the seller
has occupied since its construction. The obligations under such lease were
secured by certain collateral pledged by the seller/tenant which was
subsequently released, as described below. The lease had an initial term of
13-1/2 years for certain space and 15-3/4 years for the remainder of the
property with three five-year renewal options. The lease provided for an
initial annual base rent of $7,947,000 with periodic increases in the annual
base rent equal to the lesser of (i) the periodic increase in a consumer price
index, or (ii) 5% per annum compounded over the period. In general, the
tenant was also obligated to pay the cost of property taxes and operating and
maintenance expenses (other than the cost of flood or earthquake insurance)
during the initial lease term and any renewal period. Commencing in 1993,
JMB/Warner was obligated to pay the cost of any structural maintenance and
repairs and any expenses for changes in the office complex attributable to
governmental compliance. As a result of the sale of its interest, JMB/Warner
was relieved of such obligations.
(f) Palm Desert
In December 1988, the Partnership, Carlyle-XVII and an affiliate of the
seller acquired through Palm Desert an interest in an existing, enclosed
regional shopping center known as Palm Desert Town Center in Palm Desert,
California and a leasehold interest in the underlying land.
The Partnership and Carlyle-XVII acquired their interests in Palm Desert,
subject to a first mortgage loan with an outstanding principal balance of
approximately $43,500,000, for an initial aggregate contribution of
approximately $17,400,000, all of which was paid in cash at closing, of which
the Partnership's share was approximately $14,925,000. The Partnership's and
Carlyle-XVII's initial aggregate contributions were used to make the
distribution to the joint venture partner as described below and to pay a
portion of the closing costs. Except for amounts to be contributed to Palm
Desert to pay certain closing costs, the joint venture partner was not
required to make any capital contributions to Palm Desert at closing.
However, in consideration of a distribution from Palm Desert at closing, the
joint venture partner was obligated to make periodic contributions to Palm
Desert to retire the $13,752,746 purchase price obligation of Palm Desert to
the seller of the shopping center, of which $4,826,906 was paid in January
1993. As of January 1993, the purchase price obligation was paid in full. In
addition, the joint venture partner has made and is obligated to make
contributions to Palm Desert through December 1994 to pay any operating
deficits and to pay a portion of the returns to the Partnership and Carlyle-
XVII. Amounts required to pay the cost of tenant improvements and allowances
and other capital expenditures, as well as any operating deficits of Palm
Desert after December 1994, are expected to be contributed to Palm Desert 25%
by the joint venture partner and 75% by the Partnership and Carlyle-XVII in
the aggregate. Reference is made to Note 3(h) of Notes to Consolidated
Financial Statements contained in the Partnership's 1993 Report on Form 10-K
for further information concerning the joint venture agreement.
The shopping center is being managed pursuant to a long-term agreement
with an affiliate of the joint venture partner. The manager is paid a fee
equal to 3% of the base and percentage rents collected under tenant leases,
increasing to 4% of the base and percentage rents for those years that the
Partnership and Carlyle-XVII have received their current cash return and all
of their cumulative preferred return for current and previous periods. In
addition, under the terms of the management agreement, the manager or an
affiliate will be entitled to receive compensation for leasing services.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(g) Villages Northeast
The Villages Northeast joint venture, through a joint venture with an
affiliate of the developer, refinanced the first mortgage loan secured by the
Dunwoody Crossing (Phase II) Apartments (formerly known as Post Crest) located
in Atlanta, Georgia. Effective October 6, 1992, the joint venture obtained a
$9,800,000 replacement loan from an institutional lender to retire in full
satisfaction the original first mortgage loan.
The new first mortgage loan, which is also collateralized by the
property, requires monthly payments of principal and interest (7.64% per
annum) of $73,316 beginning November 1, 1992 and continuing through November
1, 1997, when the remaining balance is payable. The new lender required the
establishment of an escrow account for real estate taxes to be deposited on a
monthly basis.
An affiliate of the joint venture partner entered into an agreement to
manage the complexes through December 31, 2002 (subject to earlier termination
by either party upon 60 days' prior written notice) for a fee equal to 5% of
the gross revenues of the complexes. In August 1993, an affiliate of the
General Partners assumed management of the property for a fee equal to 5% of
the gross revenues of the complexes.
(3) SALE OF INVESTMENT PROPERTIES
(a) JMB/Owings
On June 30, 1993, JMB/Owings sold its partnership interest in Owings
Mills Limited Partnership ("OMLP"), which owns an allocated portion of the
land, building and related improvements of the Owings Mills Mall located in
Owings Mills, Maryland. The purchaser, O.M. Investment II Limited
Partnership, is an affiliate of the JMB/Owing's joint venture partner in OMLP.
The sale price of the interest in OMLP was $9,416,000, all of which was
received in the form of a promissory note. In addition, the Partnership and
Carlyle-XV were relieved of their allocated portion of the debt secured by the
property. The promissory note (which is secured by a guaranty from an
affiliate of the purchaser and of the JMB/Owing's joint venture partner in
OMLP) bears interest at a rate of 7% per annum unless a certain specified
event occurs, in which event the rate would increase to 8% per annum for the
remainder of the term of the note. The promissory note requires 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 be required under certain circumstances (as defined),
including the sale or further encumbrance of Owings Mills Mall.
The net cash proceeds and gain from sale of the interest in OMLP will be
allocated 50% to the Partnership and 50% to Carlyle-XV in accordance to 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 is $2,627,427,
attributable to JMB/Owings being relieved of its obligations under the OMLP's
partnership agreement pursuant to the terms of the sale agreement. The
Partnership has adopted the cost recovery method until such time as the
purchaser's initial investment is sufficient in order to recognize gain under
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Statement of Financial Accounting Standards No. 66. At March 31, 1994, the
total deferred gain of JMB/Owings, including principal and interest payments
of $757,956 received through March 31, 1994, is $9,898,759, of which the
Partnership's share is $4,949,380.
(b) JMB/Warner
On November 2, 1993, JMB/Warner sold the Blue Cross Building to an
unaffiliated purchaser for a sales price of $76,909,292, of which the
Partnership's share was $57,061,733. The sales price consisted of $23,300,000
(before costs of sale) paid in cash at closing and the assumption by the
purchaser of the existing mortgage note having an unpaid amount of
$53,609,292. For financial reporting purposes, the Partnership allocated
approximately $735,000 of prorations to the purchase price. The Partnership's
share of net cash proceeds (before costs of sale and after consideration of
the prorations) was approximately $17,833,000. As a result of the sale, the
Partnership recognized in 1993 a loss of $299,039 and a gain of $1,837,983 for
financial reporting and Federal income tax purposes, respectively.
Included in the consolidated cash balances is approximately $1,055,000 of
sales proceeds that has not been distributed as of March 31, 1994 to the
affiliated venture partner, Carlyle-XVII. These funds are expected to be
distributed in the second quarter of 1994.
(4) 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
disposition of investment properties generally 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
disposition (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 generally
will be allocated 4% 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 or the General Partners' interests in 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). However, for the five year period
through the end of 1992, the General Partners deferred their allocation of
"net cash receipts" to a stipulated return on capital for the Holders of
Interests. The deferred amounts are payable out of any "net cash receipts"
and "sales or refinancing proceeds" of the Partnership, without interest at
such times as the General Partners may determine.
The Partnership Agreement provides that, subject to certain conditions,
the General Partners shall receive as a distribution from the sale of a real
property by the Partnership up to 3% of the selling price, and that the
remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Holders of Interest and 15% to the General Partners.
However, prior to such distributions the Holders of Interest are entitled to
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
receive 99% and the General Partners 1% of net sale or refinancing proceeds
until the Holders of Interest (i) have received cash distributions of "sale
proceeds" or "refinancing proceeds" in an amount equal to the Holders' of
Interest 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 the Holders' of Interest 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 1987. The General Partners have
elected to waive their right to receive their distributive share of up to 3%
of the sale price of the Blue Cross Building.
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partner-
ship (or its consolidated ventures) to the General Partners and their
affiliates as of March 31, 1994 and for the three months ended March 31, 1994
and 1993 are as follows:
Unpaid at
1994 1993 March 31, 1994
------- -------- ---------------
Management fees to Corporate
General Partner . . . . . . . . . $38,986 82,844 1,482,537
Reimbursement (at cost) for
out-of-pocket expenses and
salaries and salary related
expenses. . . . . . . . . . . . . 18,510 28,129 83,444
------- ------- ---------
$57,496 110,973 1,565,981
======= ======= =========
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries (and salary related expenses) and direct expenses
of their officers and employees and direct expenses of the Corporate General
Partner and its affiliates while directly engaged in the administration of the
Partnership and operation of its properties. Such costs relating to the
administration of the Partnership were $18,257 and $83,444 for the three
months ended March 31, 1994 and for the twelve months ended December 31, 1993
of which $83,444 is unpaid as of March 31, 1994.
The General Partners deferred their share of net cash flow of the
Partnership due to them over a five-year period ending December 1992, to the
receipt by the Holders of Interests of a 5% per annum cumulative non-
compounded return on their Current Capital Accounts (as defined) for such
five-year period. These deferred amounts consist of the Corporate General
Partner's management fees (which are reflected in the above table) and the
General Partners' distributive share of net cash flow. The cumulative
combined amount of such deferred distributions and management fees aggregated
$889,619 and $1,482,537, respectively, at March 31, 1994. All amounts
deferred or currently payable do not bear interest and are payable from any
net cash flow or net sale or refinancing proceeds of the Partnership, at such
times as the General Partners determine.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(6) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/125, JMB/Owings (through the
date of sale - June 30, 1993) and 260 Franklin for the three months ended
March 31, 1994 and 1993 is as follows:
1994 1993
----------- ----------
Total income. . . . . . . . . . . . . . . . . . $11,472,085 15,785,384
Expenses applicable to operating loss . . . . . 24,295,630 26,982,252
----------- ----------
Operating loss. . . . . . . . . . . . . . . . . $12,823,545 11,196,868
=========== ==========
Partnership's share of loss . . . . . . . . . . $ 2,565,996 2,757,918
=========== ==========
(7) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of March 31, 1994
and for the three months ended March 31, 1994 and 1993.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
At March 31, 1994, the Partnership and its consolidated ventures had cash
and cash equivalents of approximately $200,000. Such funds and short-term
investments of approximately $18,700,000 are available for distributions to
partners, working capital requirements, and to fund anticipated operating
deficits at 260 Franklin to the extent not funded from escrowed reserves.
Such amounts include approximately $1,055,000 invested in short-term
securities by JMB/Warner that represents the affiliated partner's share of
undistributed net cash proceeds from the sale of the Blue Cross Building. The
Partnership and its consolidated ventures have currently budgeted in 1994
approximately $574,000 for tenant improvements and other capital expenditures.
The Partnership's share of such items, including its share of such items for
its unconsolidated ventures, is currently budgeted to be approximately
$778,500. Actual amounts expended may vary depending on a number of factors
including actual leasing activity, results of operations, liquidity
considerations and other market conditions over the course of the year. The
source of capital for such items and for both short-term and long-term future
liquidity and distributions is expected to be through working capital, cash
generated by the investment properties, through an obligation of a venture
partner to provide a preferred return of annual cash flow with respect to the
Palm Desert Town Center investment property through December 1994 and from the
sale and refinancing of such properties, including NewPark Mall. Because the
cash flow from the Blue Cross Building was a significant portion of the
Partnership's total operating cash flow, beginning in 1994, distributions from
operations will be reduced.
The Partnership's and its ventures' mortgage obligations are non-
recourse. Therefore, the Partnership and its ventures are not obligated to
pay mortgage indebtedness unless the related property produces sufficient net
cash flow from operations or sale. However, for any particular investment
property that is incurring deficits, the Partnership or its ventures may seek
a modification of existing indebtedness and, in the absence of a satisfactory
debt modification, 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 result in the
Partnership no longer having an ownership interest in such property and
generally would result in gain for financial reporting and Federal income tax
purposes to the Partnership with no corresponding distributable proceeds.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the Partnership's
joint venture partner(s) in an investment might become unable or unwilling to
fulfill its (their) financial or other obligations, or that such joint venture
partner(s) may have economic or business interests or goals that are
inconsistent with those of the Partnership.
The first mortgage loan in the principal amount of approximately
$20,579,000 at March 31, 1994, secured by the Dunwoody Crossing Phase I and
III Apartments is scheduled to mature in October 1994. The joint venture
owning the property plans to refinance this note when it matures, although
there can be no assurance the joint venture will be able to obtain such
financing.
NewPark Associates commenced a renovation of NewPark Mall in early 1993
and such renovation was substantially complete as of September 30, 1993.
NewPark Mall may be subject to increased competition from a new mall that is
scheduled to open in the vicinity in late 1994.
Concerning the 125 Broad Street Building, vacancy rates in the downtown
Manhattan office market have increased significantly over the last few years.
As vacancy rates rise, competition for tenants increases, which results in
lower effective rental rates. The increased vacancy rate in the downtown
Manhattan office market has resulted primarily from layoffs, cutbacks and
consolidations by many of the financial service companies which, along with
related businesses, dominate this submarket. The Partnership believes that
these adverse market conditions and the negative impact on effective rental
rates may continue over the next few years. The current competitive market in
downtown Manhattan has significantly affected the 125 Broad Street Building,
as the occupancy has decreased to 54% at March 31, 1994 partially as a result
of a major tenant vacating 395,000 square feet (30% of the building) at the
expiration of its lease during 1991. Additionally, in October 1993, 125 Broad
entered into an agreement with Salomon Brothers, Inc. to terminate its lease
covering approximately 231,000 square feet (17% of the building) at the
property on December 31, 1993 rather than its scheduled termination in January
1997. In consideration for the early termination of the lease, Salomon
Brothers, Inc. paid 125 Broad approximately $26,500,000, plus interest thereon
of approximately $200,000, which 125 Broad in turn paid to its lender to
reduce amounts outstanding under the mortgage loan. In addition, Salomon
Brothers, Inc. paid JMB/125 $1,000,000 in consideration of JMB/125's consent
to the lease termination. The property will be adversely affected by low
effective rental rates to be achieved upon releasing of the space. The low
effective rental rates coupled with the lower occupancy during the releasing
period are expected to result in the property operating at a significant
deficit in 1994 and for the next several years. The unaffiliated venture
partners (the "O&Y partners"), who are affiliates of Olympia & York
Developments, Ltd. ("O&Y"), are obligated to fund (in the form of interest-
bearing loans) operating deficits and costs of lease-up and capital
improvements through the end of 1995. However, as discussed below, the O&Y
partners are in default in respect to certain of their funding obligations,
and it appears unlikely that the O&Y partners will fulfill their obligations
to 125 Broad and JMB/125. Releasing of the building's vacant space will
depend upon, among other things, the O&Y partners advancing the costs
associated with such releasing since JMB/125 does not intend to contribute
funds to 125 Broad to pay such costs. The O&Y partners have made outstanding
loans to 125 Broad of approximately $16,234,000 as of March 31, 1994. Such
loans, which are non-recourse to JMB/125, are payable out of cash flow from
property operations or sale or refinancing proceeds. Based on the facts
discussed above and as described more fully in Note 2(b), 125 Broad recorded a
provision for value impairment as of December 31, 1991 to reduce the net book
value of the 125 Broad Street Building to the then outstanding balance of the
related non-recourse financing and O&Y partner loans due to the uncertainty of
125 Broad's ability to recover the net carrying value of the investment
property through future operations or sale.
O & Y and certain of its affiliates have been involved in bankruptcy
proceedings in the United States and Canada and similar proceedings in
England. Subsequent to December 31, 1992, O & Y emerged from bankruptcy
protection in Canada. In addition, a reorganization of the management of the
company's United States operations has been completed, and certain O&Y
affiliates are in the process of renegotiating or restructuring various loans
affecting properties in the United States in which they have an interest. In
view of the present financial condition of O&Y and its affiliates and the
anticipated deficits for the property as well as the existing defaults of the
O&Y partners discussed below, it appears unlikely that the O&Y partners will
meet their financial and other obligations to JMB/125 and 125 Broad.
The O&Y partners have failed to advance necessary funds to 125 Broad as
required under the 125 Broad joint venture agreement, and as a result, 125
Broad defaulted on its mortgage loan, which has an outstanding principal
balance of approximately $277,000,000, in June 1992 by failing to pay
approximately $4,722,000 of the semi-annual interest payment due on the loan.
In addition, during 1992 affiliates of O&Y defaulted on a "takeover space"
agreement with Johnson & Higgins, Inc. ("J&H"), one of the major tenants at
the 125 Broad Street Building, whereby such affiliates of O&Y agreed to assume
certain lease obligations of J&H at another office building in consideration
of J&H's leasing space in the 125 Broad Street Building. As a result of this
default, J&H has offset rent payable to 125 Broad for its lease at the 125
Broad Street Building in the amount of approximately $33,200,000 through March
31, 1994, and it is expected that J&H will continue to offset amounts due
under its lease corresponding to amounts by which the affiliates of O&Y are in
default under the "takeover space" agreement. Due to the O&Y affiliates'
default under the "takeover space" agreement and the continuing defaults of
the O&Y partners to advance funds to cover operating deficits, as of March 31,
1994, the arrearage under the mortgage loan had increased to approximately
$48,180,000. As discussed above, approximately $26,700,000 was remitted to
the lender in October 1993 in connection with the early termination of the
Salomon Brothers lease, and was applied towards the mortgage principal for
financial reporting purposes. Due to their obligations relating to the
"takeover space" agreement, the affiliates of O&Y are obligated for the
payment of the rent receivable associated with the J&H lease at the 125 Broad
Street Building. Based on the continuing defaults of the O&Y partners, 125
Broad has reserved the entire $33,200,000 of rent offset by J&H and has also
reserved approximately $32,600,000 of accrued rents receivable relating to
such J&H lease, since the ultimate collectability of such amounts depends upon
the O&Y partners' and the O&Y affiliates' performance of their obligations.
The Partnership's share of such losses was approximately $888,000 and
$1,158,000 for the three months ended March 31, 1994 and 1993, respectively,
and is included in the Partnership's share of loss from operations of
unconsolidated ventures. The O&Y partners have attempted to negotiate a
restructuring of the mortgage loan with the lender in order to reduce
operating deficits of the property. In view of, among other things, the
significant operating deficits which the property is expected to incur during
1994 and for the next several years, it is unlikely that a restructuring of
the mortgage loan will be obtained. The loan restructuring is part of a
larger restructuring with the lender involving a number of loans secured by
various properties in which O&Y affiliates have an interest. JMB/125 has
notified the O&Y partners that their failure to advance funds to cover the
operating deficits constitutes a default under the 125 Broad joint venture
agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. As discussed above, it also appears
unlikely that 125 Broad will be able to restructure the mortgage loan. As a
result, JMB/125 is not likely to commit any significant additional amounts to
the property. This would result in the Partnership no longer having an
ownership interest in the property. If this event were to occur, the
Partnership would recognize a net gain for financial reporting and Federal
income tax purposes without any corresponding distributable proceeds. In
addition, under certain circumstances, JMB/125 may be required to make an
additional capital contribution to 125 Broad in order to make up a deficit
balance in its capital account, and the Partnership may, under certain
circumstances, be required to bear a share of such additional capital
contribution obligation. Reference is made to Note 2(b).
The office market in the Financial District of Boston remains competitive
due to new office building developments and layoffs, cutbacks and
consolidations by financial service companies. The effective rental rates
achieved upon releasing have been substantially below the rates which were
received under the previous leases for the same space. In December 1991, the
affiliated joint venture reached an agreement with the lender to modify the
long-term mortgage note secured by 260 Franklin Street Building. The property
is currently expected to operate at a deficit for 1994 and for several years
thereafter. The loan modification required that the affiliated joint venture
establish an escrow account for excess cash flow from the property's
operations (computed without a deduction for property management fees and
lease commissions to an affiliate) to be used to cover the cost of capital and
tenant improvements and lease inducements (as defined), which are the primary
components of the anticipated operating deficits noted above, with the
balance, if any, of such escrowed funds available at the scheduled or
accelerated maturity to be used for the payment of principal and interest due
to the lender. Beginning January 1, 1992, 260 Franklin began escrowing the
payment of property management fees and lease commissions owed to an affiliate
of the Corporate General Partner pursuant to the terms of the debt
modification. The Partnership's share of such fees and lease commissions is
approximately $212,000 at March 31, 1994. In 1995, the leases of tenants
occupying approximately 107,000 square feet (approximately 31% of the
property) at the 260 Franklin Street Building expire. It is anticipated that
there would be significant cost related to releasing this space. In addition,
the long-term mortgage loan matures January 1, 1996. If the affiliated joint
venture is unable to refinance or extend the mortgage loan, the Partnership
may decide not to commit any significant additional funds. This may result in
the Partnership no longer having an ownership interest in the property. This
would result in the Partnership recognizing a gain for financial reporting
purposes.
On November 2, 1993, the Partnership through JMB/Warner Center Associates
sold the Blue Cross Building to an unaffiliated buyer for a sale price of
$76,909,292, of which the Partnership's share was $57,061,733. The sales
price consisted of $23,300,000 (before costs of sale) paid in cash at closing
and the assumption by the purchaser of the existing mortgage note having an
unpaid amount of $53,609,292. Reference is made to Note 3(b). In February
1994, the Partnership made cash distributions to its Limited Partners that
included $100 per Interest from proceeds received in connection with the sale
of the Blue Cross Building.
The Partnership received (through a joint venture with an affiliate) its
specified cash return relating to Palm Desert Town Center, which is being
funded by an unaffiliated venture partner through December 31, 1994 pursuant
to the terms of the applicable joint venture agreement. In addition, the
Partnership is receiving cash distributions from operations of the Dunwoody
Crossings Apartments and NewPark Mall.
In June 1993, JMB/Owings sold its interest in the Owings Mills Shopping
Center for $9,416,000 represented by a purchase price note. Reference is made
to Note 3(a).
R.H. Macy's & Co., Inc. and affiliated entities, which are the owners of
Macy's, Bullock's and Bullock's Wilshire stores, filed for protection under
Chapter XI of the Bankruptcy Act in January 1992. The Macy's stores at
Newpark Mall and Owings Mills Shopping Center and the Bullock's and Bullock's
Wilshire stores at Palm Desert Town Center have continued to operate since the
bankruptcy filing. The stores have continued to pay their required
contributions towards common area expenses since the filing. It is not
currently expected that the bankruptcy proceedings will have a significant
adverse impact on the Partnership. Palm Desert Town Center did not incur any
significant damage as a result of the January 1994 earthquake in Southern
California.
Though the economy has recently shown signs of improvement and financing
is generally becoming more available for certain types of higher-quality
properties in healthy markets, real estate lenders are typically requiring a
lower loan-to-value ratio for mortgage financing than in the past. This has
made it difficult for owners to refinance real estate assets at their current
debt levels unless the value of the underlying property has appreciated
significantly. As a consequence, and due to the weakness of some of the local
real estate markets in which the Partnership's properties operate, the
Partnership is taking steps to preserve its working capital. Therefore, the
Partnership is carefully scrutinizing the appropriateness of any discretionary
expenditures, particularly in relation to the amount of working capital
reserves it has available. By conserving working capital, the Partnership
will be in a better position to meet future needs of its properties without
having to rely on external financing sources.
The General Partners had deferred through December 31, 1992, their
receipt of partnership management fees and distributions of net cash generated
from operations. Beginning in 1993, the General Partners are receiving
partnership management fees and distributions of net cash generated from
operations. The cumulative amount of such deferrals at March 31, 1994 was
$2,372,056. Such amount does not bear interest and is payable from net cash
generated from future net cash flow and net sale or refinancing proceeds at
such time as the General Partners determine. Reference is made to Note 5.
Due to the factors discussed above, it is likely that the Partnership
will hold certain of its investment properties longer than originally
anticipated in order to maximize the return to the Limited Partners. Although
the Partnership expects to distribute sale proceeds from the disposition of
the Partnership's remaining assets, without a dramatic improvement in market
conditions, Limited Partners will receive significantly less than their
original investment.
RESULTS OF OPERATIONS
The decrease in short-term investments at March 31, 1994 as compared to
December 31, 1993 is primarily due to the distribution to the Limited Partners
in February 1994 of $14,034,783 of sales proceeds from the Blue Cross Building
sale.
The decrease in interest rents and other receivables at March 31, 1994 as
compared to December 31, 1993 is primarily due to the collection in 1994 of
tenant expense reimbursements related to 1993 at Palm Desert Town Center.
The increase in accounts payable at March 31, 1994 as compared to
December 31, 1993 is primarily due to an increase in state withholding taxes
payable of approximately $340,000 for distributions made to the Limited
Partners relating to the sale of the Blue Cross Building.
The decrease in rental income, mortgage and other interest, depreciation,
amortization of deferred expenses and venture partners' share of ventures'
operations for the three months ended March 31, 1994 as compared to the three
months ended March 31, 1993 is primarily due to the sale of the Blue Cross
Building in November 1993. Reference is made to Note 3(b).
The increase in interest income for the three months ended March 31, 1994
as compared to the three months March 31, 1993 is primarily due to interest
earned on the temporary investment of the sales proceeds of the Blue Cross
Building prior to their distribution in February 1994.
The increase in property operating expenses for the three months ended
March 31, 1994 as compared to the three months ended March 31, 1993 is
primarily due to increased ground rental payments and an increase in provision
for doubtful accounts at Palm Desert Town Center.
The decrease in management fees to the Corporate General Partner for the
three months ended March 31, 1994 as compared to the three months ended March
31, 1993 is due to a decrease in the distribution paid to the partners a
portion of which is in the form of a management fee.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES
The mortgage loan secured by the 125 Broad Street property is in default
at March 31, 1994 due to the partial payment of scheduled debt service since
June 1992. Reference is made to Note 2(b) of Notes to Consolidated Financial
Statements filed with this quarterly report and the discussion of Liquidity
and Capital Resources contained in the Management's Discussions and Analysis
of Financial Condition section of this quarterly report for further
information regarding the loan default, which discussions are herein
incorporated by reference.<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment properties:
<CAPTION>
1993 1994
------------------------------- ------------------------------
At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30
---- ---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1. Owings Mills Shopping Center
Owings Mills (Baltimore County), Maryland . . . . . . . 93% N/A N/A N/A N/A
2. 125 Broad Street Building
New York, New York. . . . . . . . . . . . . . . . . . . 72% 72% 72% 54% 54%
3. 260 Franklin Street Building
Boston, Massachusetts . . . . . . . . . . . . . . . . . 97% 98% 97% 99% 99%
4. Dunwoody Crossing (Phase I, II, and III)
Apartments
DeKalb County (Atlanta), Georgia (a). . . . . . . . . . 94% 96% 93% 90% 91%
5. NewPark Mall
Newark (Alameda County), California . . . . . . . . . . 71% 73% 80% 81% 80%
6. Blue Cross Office Building
Woodland Hills (Los Angeles), California . . . . . . . 100% 100% 100% N/A N/A
7. Palm Desert Town Center
Palm Desert (Palm Springs), California. . . . . . . . . 92% 94% 96% 97% 97%
<FN>
- - ------------------
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
(a) Formerly known as Post Crossing, Post Crest and Post Terrace Apartments, respectively.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4-A. Assignment Agreement set forth as Exhibit B to the Prospectus, a
copy of which is hereby incorporated by reference to Exhibit 4-A to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-16516)
dated March 19, 1993.
4-B. Documents relating to the loan modification of the mortgage loan
secured by the 260 Franklin Street Building is hereby incorporated by
reference to Exhibit 4-B to the Partnership's report for December 31, 1991 on
Form 10-K (File No. 0-16516) dated March 27, 1992.
10-A. Escrow Deposit Agreement is hereby incorporated by reference to
Exhibit 10.1 to the Partnership's Amendment No. 1 to Form S-11 (File No. 33-
3567) Registration Statement dated May 14, 1986.
10-B. 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 Exhibit 10.13 to Post-Effective
Amendment No. 3 to the Form S-11 (File No. 33-3567) Registration Statement of
Carlyle Real Estate Limited Partnership-XV (File No. 2-95382) dated March 13,
1986.
10-C. Additional 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 Exhibit 10.2.1
to the Partnership's Post-Effective Amendment No. 2 on Form S-11 (File No. 33-
3567) dated December 30, 1986.
10-D. Acquisition documents relating to the purchase by the Partnership
of an interest in the 125 Broad Street Building, New York, New York, are
hereby incorporated herein by reference to Exhibit 10.14 to Post-Effective
Amendment No. 3 to the Form S-11 Registration Statement of Carlyle Real Estate
Limited Partnership-XV (File No. 2-95382) dated March 13, 1986.
10-E. Acquisition documents relating to the purchase of an interest in
the 260 Franklin Street Building, Boston, Massachusetts, are hereby
incorporated herein by reference to Exhibit 10.4 to the Partnership's
Amendment No. 2 to Form S-11 (File No. 33-3567) dated July 25, 1986.
10-F. Additional acquisition documents relating to the purchase of an
interest in the 260 Franklin Street Building, Boston, Massachusetts, are
hereby incorporated herein by reference to Exhibit 10.4.1 to the Partnership's
Post-Effective Amendment No. 1 to Form S-11 (File No. 33-3567) dated September
30, 1986.
10-G. Acquisition documents relating to the purchase by the Partnership
of an interest in the Post Crest Apartments, Post Terrace Apartments, and Post
Crossing Apartments in DeKalb County (Atlanta), Georgia, are hereby
incorporated herein by reference to Exhibit 10.5 to the Partnership's Post-
Effective Amendment No. 2 to Form S-11 (File No. 33-3567) dated September 30,
1986.
10-H. Acquisition documents relating to the purchase by the Partnership
of an interest in NewPark Mall in Newark (Alameda County), California, are
hereby incorporated herein by reference to Exhibit 10.6 to the Partnership's
Post-Effective Amendment No. 2 to Form S-11 (File No. 33-3567) dated December
30, 1986.
10-I. Acquisition documents (as amended) relating to the purchase by the
Partnership of an interest in the Blue Cross Office Building in Woodland Hills
(Los Angeles), California, dated December 8, 1987 are hereby incorporated by
reference to Exhibit 10-I to the Partnership's report for December 31, 1987 on
Form 10-K (File No. 0-16516) dated March 28, 1988.
10-J. Acquisition documents relating to the acquisition by the
Partnership of an interest in the Palm Desert Town Center in Palm Desert,
California, dated December 23, 1988 are hereby incorporated by reference to
Exhibit 1 to the Partnership's Form 8-K (File No. 0-16516) dated January 6,
1989.
10-K. First Amendment to Lease between JMB/Warner Center Associates and
Blue Cross of California dated February 7, 1989, is hereby incorporated by
reference to Exhibit 10-K to the Partnership's report for December 31, 1988 on
Form 10-K (File No. 0-16516) dated March 24, 1989.
10-L. Copy of documents relating to the mortgage loan secured by the Blue
Cross Building, Woodland Hills (Los Angeles), California, dated September 14,
1989 is hereby incorporated by reference to Exhibit 10-L to the Partnership's
report for December 31, 1989 on Form 10-K (File No. 0-16516) dated March 28,
1990.
10-M. Copies of documents relating to JMB/125 Broad Building Associates
ownership interest in 125 Broad Street Building are hereby incorporated by
reference to the Partnership's Form 10-Q for September 30, 1993 (File No. 0-
16516) dated November 11, 1993.
10-N. Sale document and exhibits thereto relating to the Partnership's
contract of sale of the Blue Cross Building in Woodland Hills, California is
hereby incorporated by reference to Exhibit 10-N to the Partnership's Form 10-
Q for September 30, 1993 (File No. 0-16516) dated November 11, 1993.
10-O. Takeover Agreement relating to the Johnson & Higgins space at the
125 Broad Building is filed herewith.
(b) The following reports on Form 8-K were filed since the beginning of
the last quarter of the period covered by this report.
(i) The Partnership's report on Form 8-K/A dated April 11, 1994
amending the Partnership's report on Form 8-K dated November 16, 1993
regarding the sale of the Blue Crossing Building on November 2, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 11, 1994
TAKEOVER AGREEMENT
------------------
AGREEMENT, dated this 11th day of August 1983, between 0LYMPIA & YORK 125
BROAD STREET COMPANY, a New York partnership with its office at 245 Park Avenue,
New York, New York 10017 (hereinafter called "Owner") and JOHNSON & HIGGINS, a
New Jersey corporation with its office at 95 Wall Street, New York, New York
10005 (hereinafter called "J&H").
WITNESSETH
----------
WHEREAS:
A. Owner is the landlord of the building known as 125 Broad Street, New
York, New York (hereinafter called the "Building");
B. J&H is leasing from Owner a portion of the Building on terms and
conditions set forth in a lease (hereinafter called the "Broad Street Lease")
between Owner and J&H being executed simultaneously herewith;
C. J&H has heretofore executed a lease for office space comprising the
second through twelfth floors (hereinafter called the "Hanover Space") within
the building known as 7 Hanover Square, New York, New York, pursuant to a
certain lease dated September 28th, 1981 between Seven Hanover Associates as
landlord and J&H as tenant as amended by Agreement dated August 5, 1983
(hereinafter called the "Hanover Lease");
D. J&H has executed a lease for the entire building (excluding certain
ground floor space) known as 46-48 Water Street (hereinafter called the "Water
Street Space") pursuant to a certain lease dated March 7, 1983 between 46 Water
Associates, as landlord and J&H as tenant (hereinafter called the "Water Street
Lease");
E. J&H and the Landlords (as hereinafter defined) have executed an
agreement dated March 7, 1983 with respect to the creation of openings between
the Water Street Space and the Hanover Space (hereinafter called the "Joinder of
Space Agreement"); and
F. Owner has agreed to become responsible to J&H for its obligations as
tenant under the Hanover Lease and the Water Street Lease and the Joinder of
Space Agreement (such two leases and such agreement being hereinafter
collectively called the "Takeover Leases") pursuant to the terms and provisions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein the parties hereto covenant and agree as follows:
1. J&H represents and warrants to Owner that: (i) true and complete
copies of the Takeover Leases are annexed hereto as Exhibit A and that the same,
together with certain other documents annexed hereto as Exhibit A, in the
aggregate constitute the entire agreements binding and affecting J&H in
connection with the space demised thereunder (hereinafter in the aggregate
called the "Takeover Space"); (ii) as of the date hereof the Takeover Space
is free of all subtenancies and/or other claims of possession (except for the
existing tenants of the Water Street Space) created by or known to J&H; (iii)
J&H has to date received no bills or statements from the respective landlords
under the Takeover Leases (hereinafter sometimes collectively called "Landlords"
or referred to individually as "Landlord") for rent or additional rent or for
tenant improvements or any other charges other than as are annexed hereto as
Exhibit B;(iv) J&H has delivered to Owner true and correct copies of all plans
which J&H has delivered to the Landlord under the Hanover Lease, a list of
which is annexed hereto as Exhibit F (hereinafter called "Tenant's Plans");
(v) annexed hereto as Exhibit C is a schedule setting forth the dates on
which Tenant's Plans were to be delivered in accordance with the terms of the
Hanover Lease and the dates on which plans complying therewith were delivered;
(vi) annexed hereto as Exhibit D are true and correct copies of all agreements,
orders, estimates and other pertinent data in the possession of J&H relating
to the costs of improvements, work, services and materials being assumed by
Owner (hereinafter called "Leasehold Improvements") which costs in no event
exceed in the aggregate $8,000,000; and (vii) J&H has received no notices of
default from the Landlords under the Takeover Leases and has no knowledge of
any defaults thereunder which would, after notice or with the passage of time
or otherwise, entitle either Landlord to terminate either of the Takeover
Leases.
2. Owner shall have the right (in the name of J&H or otherwise, as Owner
shall determine) to direct or cause J&H to exercise its rights under the
Takeover Leases with respect to assignments thereof and subletting of all or
portions of the Takeover Space or any other disposition of the Takeover Space
or any part thereof before and during the respective terms of the Takeover
Leases. J&H covenants and agrees that it will fully cooperate with Owner in
the assignment of the Takeover Leases and the subletting or other disposition
of the Takeover Space or any part thereof and shall use its best efforts in
obtaining the consent, if and when needed, of the Landlords to any such
disposition of and in all matters pertaining to the Takeover Leases and/or
the Takeover Space.
3. J&H covenants and agrees (wherever a party is said herein to
"covenant" as to any matter, it shall be deemed to have "covenanted and agreed")
that it shall at all times hereafter promptly deliver to Owner all bills,
notices, invoices, statements and other communications which J&H receives from
the Landlords. J&H covenants that it will, upon request of Owner, from time to
time, promptly execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, to Owner or to anyone Owner shall designate, such
papers and instruments (including, but not limited to, any assignment, sublease
or other similar or dissimilar instrument) pertaining, directly or indirectly,
to the Takeover Leases or any interest therein and/or the Takeover Space or any
part thereof as Owner shall deem necessary or desirable. J&H covenants that it
will, when requested by Owner, give or cause to be given, to the Landlords such
notice or notices or other communications as Owner shall specify including any
notices required for the valid exercise of any options contained in the Takeover
Leases and J&H shall in no event transmit any such notice or any other notice
whatsoever except upon the prior written request of Owner. Notwithstanding the
foregoing, in no event shall any option to extend the term of any Takeover Lease
be exercised unless J&H is protected against any resulting liability in a manner
fully satisfactory to J&H in its absolute discretion. Any notice or other
communication shall be transmitted by J&H to the Landlords promptly (and in any
event no later than as required by the circumstances dictating the giving of
such notice) after any such written request by Owner, and J&H hereby
constitutes and appoints Owner its attorney-in-fact to execute and deliver
such instruments for and on behalf of J&H. Such appointment and any similar
appointment in this Agreement, or wherever in or pursuant to this Agreement
Owner is authorized to act for or on behalf of J&H, the same shall be deemed
a power coupled with an interest and irrevocable by J&H. Owner shall be
entitled to make any agreement and/or arrangement with the Landlords which
would result in a reduction or discharge of J&H's obligations under the
Takeover Leases or with respect to the Takeover Space, on such terms as
Owner, in its reasonable discretion, may decide (but shall not make any
agreement with the Landlords which would increase the obligations of J&H
under the Takeover Leases without the consent of J&H, which shall not be
unreasonably withheld). All rents, charges and any other sums, however
designated, that are derived from any assignment of the Takeover Leases
or subletting or other disposition of the Takeover Space or any part thereof
including any sums payable by the Landlords in the event that they exercise any
right or option to recapture contained in the Takeover Leases shall belong to
and be the property of Owner and shall be collected by Owner, unless Owner
advises J&H that Owner elects not to collect such moneys or any part of such
moneys in which event J&H shall at Owner's request make such collections on
behalf of Owner and remit the same promptly to Owner. At Owner's request,
J&H shall immediately confirm in writing to any subtenant of the Takeover
Space that Owner is authorized by J&H to collect rentals, charges or any other
monies as set forth in this Paragraph 3.
4. Owner shall indemnify and hold harmless J&H with respect to J&H's
obligations as sublessor under any sublease or as assignor of any assignment or
with respect to any other disposition of the Takeover Leases and/or the Takeover
Space which Owner requests J&H to execute and any claims arising thereunder, and
Owner is authorized, at Owner's expense, to perform on behalf of J&H, J&H's
obligations as sublessor of the Takeover Space.
5. Owner shall indemnify and hold J&H harmless for all of its
obligations as the tenant under the Takeover Leases from and after the date
hereof and all costs, expenses, claims and liability incurred in connection with
or arising under the Takeover Leases, including without limitation occupancy
taxes and any and all rent, additional rent, utility charges or other expenses.
Owner shall perform, or cause to be performed on behalf of J&H, any and all
obligations of J&H as tenant, of whatever kind or nature arising hereafter under
or in connection with the Takeover Leases. Owner is authorized by J&H to pay
any of J&H's bills relating to the Takeover Space directly to the entity
issuing such bill. J&H shall cooperate with Owner to minimize and mitigate
Owner's obligation hereunder. If Owner shall fail to perform or cause to be
performed on behalf of J&H any of the obligations of J&H under the Takeover
Leases which it has agreed to perform hereunder, then whether or not the
Landlord(s) thereunder shall give notice of default to J&H, J&H shall not
without the consent of Owner take any action to perform such obligation or to
cure such default or take any other action with respect thereto unless (i) the
Landlord(s) under such Takeover Lease(s) give notice of default thereunder,
and (ii) Owner shall fail within two days prior to the expiration of any grace
period afforded by such Takeover Lease(s) after such notice either (y) to cure
the same or (z) to obtain and maintain in effect a restraining order or
injunction or other equitable relief to stay the running of such grace period.
Notwithstanding any other provision of this Agreement, Owner shall not indemnify
J&H with respect to any obligation to make any payment which shall be allocable
under or with respect to the Takeover Leases to a date prior to July 15, 1983
(including without limitation on account of liability for any defaults of J&H)
except that Owner shall promptly pay on behalf of J&H in accordance with the
terms of the Hanover Lease or reimburse J&H for the payment of all costs
incurred by J&H thereunder with respect to Leasehold Improvements (including
but not limited to flooring, wall covering and vertical conveyor) in the
Hanover Space in excess of the allowances granted J&H therefor under the
Hanover Lease in aggregate amount up to but not in excess of $8,000,000.
6. J&H will not, after the date hereof, make any modifications of or
amendments to the Takeover Leases, assign the Takeover Leases (except as
permitted under Paragraph 20 hereof) or sublease all or any part of the
Takeover Space or enter into any agreement with respect to the surrender or
discharge of or take any other action with respect to the Takeover Leases or
the Takeover Space without the prior written consent or except pursuant to
the written instructions of Owner. In addition, after the date hereof J&H
will not make any modifications of Tenant's Plans without first obtaining the
written consent of Owner, and at Owner's discretion, will submit to Landlords
modifications of Tenant's Plans or issue instructions to the Landlords not to
complete all or portions of work shown on Tenant's Plans. J&H shall with
respect to any and all contracts or commitments for Leasehold Improvements or
other work, materials or installation at or in the Takeover Space, act in
accordance with Owner's written instructions, whether the same shall involve
termination or modification of planned or ongoing work or otherwise. Unless
the Broad Street Lease and this Agreement have been terminated J&H will not
at any time occupy the Takeover Space or any part thereof.
7. (a) J&H covenants and agrees to indemnify and hold Owner harmless
against any loss, liability, claims, damages, or expenses (including attorney's
fees) arising out of or resulting from any of the representations and warranties
contained herein being false or misleading and from any breach or default by J&H
of its obligations pursuant to this Agreement.
(b) If (i) J&H is adjucated a bankrupt or (ii) as a consequence of
the failure of J&H to pay Fixed Minimum Rent (which for the purposes of this
Agreement shall not be deemed to include any portion thereof attributable to
electric service) under the Broad Street Lease, the same shall have been duly
and validly terminated and J&H shall not have contested such termination by
judicial proceedings or (iii) such a termination of the Broad Street Lease is
contested, and there shall have occurred a final determination not subject to
appeal by a court of competent jurisdiction that the Broad Street Lease has
been duly and properly terminated, then this Agreement shall at the option of
the Owner (to be exercised by written notice from Owner to J&H) terminate
effective as of the date of such notice, and Owner shall have no further
liability hereunder.
(c) If (i) a default notice for non-payment of all or a portion of
the Fixed Minimum Rent (exclusive of any charge for electric service, as
aforesaid) is given by Owner to J&H pursuant to the provisions of the Broad
Street Lease, and J&H obtains an injunction staying the running of the default
period commenced by the giving of such notice or (ii) the termination of the
Broad Street Lease is being contested before a court of competent jurisdiction,
then during the period such injunction is in effect or pendency of such contest
including any appeal therefrom (as the case may be) J&H shall not have recourse
to nor draw upon any insurance or trust fund obtained or created pursuant to the
provisions of this Agreement.
8. J&H agrees that it will promptly notify Owner of any action or
proceeding which may be brought or asserted against J&H and of any notice which
may be given to J&H arising out or by reason of and/or involving the Takeover
Leases and/or the Takeover Space and/or any part thereof, and J&H will cooperate
fully with Owner with respect to any such action, proceeding or notice and will
execute, or cause to be executed, such instrument(s) and/or document(s) and/or
take such action, or cause such action to be taken, as Owner may reasonably
request in the situation. Owner may, at its option and expense and utilizing
counsel of Owner's choice (who shall be reasonably acceptable to J&H provided
that insurance company counsel shall be deemed to be satisfactory), cause to be
resisted or defended in the name of J&H, any claim or liability under the
Takeover Leases asserted by the Landlords, or if Owner shall so elect, J&H shall
in accordance with Owner's instructions and at Owner's expense resist or defend
such claim or liability. J&H shall not settle or compromise any such claim
without Owner's consent and shall immediately notify Owner of any communication
it may have with the claimant with respect to such claim. If all or any portion
of the Takeover Space is sublet or if either of the Takeover Leases is assigned
and the sublessee or assignee with respect thereto shall commit a default with
respect to any of its obligations under its sublease or assignment, as the case
may be, Owner may in name of and on behalf of J&H (including without limitation
asserting any rights of J&H under the appropriate documents), commence and
prosecute any and all actions or proceedings against such subtenant or assignee,
and J&H shall cooperate with Owner in the prosecution of such action or
proceeding (including without limitation the execution of any and all documents
required in connection therewith).
9. Owner, O&Y Equity Corp. (hereinafter called "O&Y") and J&H agree that
it would be difficult at any time to determine the value of a contingent claim
against Owner or O&Y or both based upon its obligations with respect to the
Hanover Lease pursuant to this Agreement. This valuation is particularly
difficult if there are persons in occupancy of the Hanover Space as assignees of
the Hanover Lease or as subtenants of the Hanover Space and there is no default
under the Hanover Lease, but is also difficult if the Hanover Space is vacant
and a default under the Hanover has occurred or would have occurred but for
action on the part of J&H. Therefore, Owner and O&Y and J&H agree that if at
any time the last sentence of Paragraph 10 of this Agreement or the law shall
require the valuation or estimation of a contingent claim against Owner or O&Y
or both based upon their obligations with respect to the Hanover Lease under
this Agreement, whether or not there is then due and unpaid any amount under
this Agreement or under the Hanover Lease, then such contingent claim shall
be valued or estimated as follows (provided however that prior to proceeding
to value or estimate such contingent claim the party initiating such valuation
or estimation shall insure that the other has notice that such valuation or
estimation has been initiated):
(a) at an amount equal to the amount which the Landlord under the
Hanover Lease is then willing to accept in order to grant a release satisfying
the requirements of Paragraph 12 hereof and to obtain the same from any other
party required pursuant to Paragraph 12 hereof in each case within 60 days after
it is determined that valuation or estimation of a contingent claim is
necessary; or
(b) if the release referred to in subparagraph 9(a) above cannot
be obtained, then at an amount equal to the amount for which the insurance
referred to in Paragraph 11 (but with coverage of $131,400,000 declining after
the year 1999 in accordance with Exhibit E hereof) is then offered to J&H by an
insurance company satisfying the requirements of Paragraph 11 within 90 days
after it is determined that valuation or estimation of a contingent claim is
necessary; or
(c) if the release referred to subparagraph 9(a) above or the
insurance referred to in subparagraph 9(b) above cannot be obtained before the
expiration of 90 days after it is determined that valuation or estimation of a
contingent claim is necessary, then at an amount equal to the amount set forth
in Exhibit E annexed hereto for the date set forth in Exhibit E next preceding
the date as of which it is determined that a valuation or estimation of
contingent claim is necessary.
If at the time of any determination or estimate of the value of a
contingent claim there is any amount then already due and unpaid with respect to
the Hanover Lease under this Agreement or under the Hanover Lease, then such
amount plus the amount determined pursuant to subparagraphs (a), (b), or (c)
above, as the case may be, shall be the value of the contingent claim.
10. (a) J&H agrees to deliver to Owner an amendment to the Broad Street
Lease in the form annexed hereto as Exhibit G deleting the provisions of the
First Supplemental Agreement to the Broad Street Lease and terminating the right
of offset thereunder promptly after Owner delivers Acceptable Securities (as
such term is hereinafter defined) having a Value (as such therm is hereinafter
defined) having a Value (as such term is hereinafter defined) of not less than
$100,000,000 (subject to reduction pursuant to Paragraph 14 hereof) to a trustee
reasonably acceptable to J&H acting under a trust agreement (hereinafter called
"Trust Agreement") reasonably acceptable to J&H, provided that all amounts then
due to J&H with respect to the Hanover Lease and arising under this Agreement
have been paid. Owner covenants that so long as J&H does not have the right of
setoff provided in the First Supplemental Agreement to the Broad Street Lease by
reason on this Paragraph 10, it will at all times maintain with the trustee
Acceptable Securities having a Value of not less than $100,000,000 (except as
provided in Paragraphs 11 and 14 hereof or unless the obligations and
liabilities of J&H under the Hanover Lease have been terminated).
(b) The term "Acceptable Securities" means:
(i) cash;
(ii) general obligations of the United States of America and
obligations the payment of which as to both principal and interest is guaranteed
by the United States of America;
(iii)certificates of deposit maturing in one year or less
issued by any bank organized under the laws of the United States or any state
thereof and a member of the Federal Reserve System having a capital and surplus,
as most recently reported to the Board of Governors of the Federal Reserve
System, in excess of $500,000,000, provided that not more than $10,000,000 shall
be from any one bank;
(iv) commercial paper maturing within 90 days which has been
rated by either Standard & Poors Corporation or Moody's Investors Service, Inc.
in the highest rating category for commercial paper (provided that if both such
services rate such paper, then both services shall rate such paper in such
category), provided that not more than $10,000,000 shall be from any one issuer
or group of affiliated issuers;
(v) irrevocable letters of credit naming the trustee as
beneficiary having an expiration date of not more than five years from the date
of issuance and conditioned only upon delivery of a sight draft by the trustee
and otherwise in form and substance reasonably satisfactory to J&H issued by
banks (i) which are members of the New York Clearing House Association, (ii)
having a capital and surplus as reported most recently to the Board of Governors
of the Federal Reserve System in excess of $500,000,000 and (iii) the long term
debt of which is rated by Moody's and Standard & Poors (or either one if not
rated by both) at least AA, provided no more than $50,000,000 shall be from any
one bank; and
(vi) any other items J&H shall approve in writing (such
approval not to be unreasonably withheld);
(c) the term "Value" means:
(i) as to Acceptable Securities listed in clause (b)(ii)
above having a maturity of less than 45 days or listed in clauses (b)(i) or
(b)(v), 100% of the face value thereof plus accrued interest at maturity, if
any;
(ii) as to Acceptable Securities listed in clause (b)(ii)
above having a maturity of 45 days or more but less than 6 months or in clauses
(b)(iii) or (b)(iv) above having a maturity of less than 45 days, 95% of the
face value thereof plus accrued interest at maturity, if any;
(iii)as to Acceptable Securities listed in clause (b)(ii)
having a maturity of 6 months or more in clauses (b)(iii) or (b)(iv) having a
maturity of 45 days or more, 95% of the fair market value, as determined by the
trustee, thereof at the time of valuation (but in no event greater than face
value at maturity); and
(iv) as to all other Acceptable Securities as specified in the
writing approving such, it being understood that liquid debt securities will
generally be discounted at least 15% from fair market value and that liquid
equity securities will generally be discounted at least 25% from fair market
value.
(d) The Trust Agreement shall provide, among other things, that the
trustee shall on submission of a written statement from an officer of J&H
certifying that Owner is in default of its obligations under this Agreement with
respect to the Hanover Lease in an amount in excess of $1,000,000 or that Owner
has failed to maintain the Value of Acceptable Securities under this Agreement,
and in either event that such default or failure has continued for 30 days after
notice (hereinafter called a "Trust Default Notice") to Owner and O&Y of such
failure, deliver to J&H the full corpus and income of the trust. The Trust
Default Notice shall specifically state that the failure to cure such default
shall result in all the Acceptable Securities being turned over to J&H.
Notwithstanding anything contained in this Paragraph 10 with respect to
the Trust Agreement and J&H's rights thereunder, in no event shall J&H exercise
its rights to obtain delivery of the corpus and income of the trust unless and
until Owner has defaulted in its obligations under this Agreement and such
default shall have continued for a period of 30 days after notice from J&H.
Furthermore, regardless of whether J&H obtains delivery of the corpus and income
of the trust, J&H shall not retain and shall promptly remit to Owner so much
thereof as exceeds the value (determined as provided in Paragraph 9 except that
the date that such corpus and income are delivered to J&H shall be deemed the
date that it is determined that the valuation of a contingent claim is
necessary) of J&H's contingent claim hereunder.
11. If (a) Owner provides J&H with either (i) an insurance
agreement reasonably acceptable to J&H providing that if J&H delivers to the
insurer a certificate stating that Fixed Minimum Rent (as defined in the Hanover
Lease) or additional rent payable pursuant to Articles 19 or 20 of the Hanover
Lease has not at any time during the term of the Hanover Lease been paid to J&H
when stated to be due in accordance with the terms of this Agreement and the
Hanover Lease and that such rent has not been paid to the Landlord under the
Hanover Lease, then the insurer shall have an unconditional obligation to pay to
J&H the amount claimed due up to a policy limit of $100,000,000 (subject to
reduction pursuant to Paragraph 14 hereof), provided that such amounts have not
been actually received in respect of such rent by J&H or by the Landlord under
the Hanover Lease, and provided further that the policy may contain such
covenants on the part of the insured as are normally contained in an insurance
policy of this nature or a policy analogous thereto, and provided further that
J&H has complied with such customary notice requirements as such insurer may
require or (ii) a surety bond reasonably acceptable to J&H which provides for a
bond penalty in the aggregate of not less than $100,000,000 (subject to
reduction pursuant to Paragraph 14 hereof) for all occurrences against any
liability for actual damage or loss (i.e., without coverage for the value of
any contingent claim of J&H) arising out of or related to the Hanover Lease,
and (b) no amounts are then due to J&H under this Agreement with respect to
the Hanover Space, then J&H shall promptly deliver to Owner an amendment to
the Broad Street Lease deleting the First Supplemental Agreement therefrom
and terminating the right of offset thereunder in the form annexed hereto as
Exhibit G, and upon such delivery the trust under Paragraph 10, if established,
shall terminate and the corpus and income of the trust shall be paid over to
Owner. Any such insurance agreement (whether or not in the form of a surety
bond) shall be issued by an insurance carrier rated by Bests in its highest
rating category as to size (or the rating category which is the substantive
equivalent to the current highest rating category) and in a rating category
not less than A (or its equivalent in any substitute system) as to quality
of credit.
12. If (a) Owner provides J&H with a release, reasonably
satisfactory to J&H, from liabilities under each of the Takeover Leases from the
Landlord thereunder and from (to the extent that J&H or Owner has received
notice thereof) all other entities, if any, (i) to which either Landlord's
interest thereunder has been pledged as security or collateral or otherwise
assigned or (ii) (if their consent is required for such release to be binding
upon it) which holds a mortgage on the building in which the Takeover Space
is located or (iii) which is the lessor under any lease by which the estate
of the Landlord in the Takeover Space derives, directly or indirectly, and
(b) no amounts are then due and unpaid to J&H under this Agreement, or if any
amount is owing but in dispute, security for such amount in dispute shall be
held by the trustee, then J&H shall, if requested to do so by
Owner, promptly deliver to Owner an agreement in form satisfactory
to Owner terminating all further rights of J&H and obligations of
Owner under this Agreement, and upon such delivery with respect to
the Hanover Lease (whether or not the same has been obtained with
respect to the Water Street Lease), the trust under Paragraph 10,
if established, shall terminate, and the corpus and income of the
trust shall be paid over to Owner, and the First Supplemental
Agreement to the Broad Street Lease and the right of offset
contained therein shall be deleted therefrom by execution of an
agreement in the form annexed hereto as Exhibit G.
13. If Owner shall establish a trust pursuant to Paragraph
10, then J&H agrees to reimburse Landlord its out-of-pocket costs
in connection with the trust within 15 days of receipt of paid
bills therefor, but not to exceed $250,000 for any 12 month period.
14. Prior to the Commencement Date (as defined in the Broad
Street Lease) and at all times thereafter during which J&H shall
have liability as tenant under the Hanover Lease, (i.e., until J&H
is released therefrom as provided in Paragraph 12 hereof, or until
the term of the Hanover Lease expires or such lease or J&H's
liability thereunder earlier terminates), Owner covenants and
agrees that either:
(i) J&H shall have the right of setoff provided in
the First Supplemental Agreement, which right shall be subordinate
to no mortgage of Owner's interest in the Building or if
subordinate, the mortgagee thereunder shall have offered to enter
into a non-disturbance agreement with J&H with respect to the Broad
Street Lease, including the right of setoff contained in the First
Supplemental Agreement thereof, or
(ii) Owner shall maintain the insurance contract(s)
referred to in Paragraph 11 hereof, or
(iii)Owner shall maintain the trust referred to in
Paragraph 10 hereof.
The foregoing obligation shall not be affected by the
existence of subtenants occupying the Hanover Space and paying rent
with respect thereto; however, in no event shall the trust or
surety contract be required to be maintained or funded in an amount
greater than the amount at the time in question for such date
pursuant to Exhibit E hereto (as the same may thereafter be reduced
pursuant to Exhibit E).
15. Except as hereinafter provided in this Paragraph 15, all
notices hereunder by either party to the other shall be sent by
registered or certified mail, return receipt requested, addressed
J&H as follows:
(a) Prior to Commencement Date under the Broad
Street Lease:
Johnson & Higgins
95 Wall Street
New York, New York 10005
Attention: James Delaney
(b) After the Commencement Date under the Broad
Street Lease:
Johnson & Higgins
125 Broad Street
New York, New York 10004
Attention: James Delaney
with a copy in each instance to J&H at such address;
Attention: Corporate Secretary
and to the Owner at:
Olympia & York 125 Broad Street Company
245 Park Avenue
New York, New York 10167
Attention: General Counsel
with a copy to:
O&Y Equity Corp
245 Park Avenue
New York, New York 10167
Attention: William Hay
Notices given in the foregoing manner shall be deemed served
on the date of registration with the postal authorities if sent by
registered mail, and on the date of mailing if set by certified
mail. Notices on behalf of the respective parties may be given by
their attorneys and such notices shall have the same effect as if
in fact subscribed by the party on whose behalf it is given.
Either party hereto may change the address to which notice may be
given or provide an additional address to which notice must be
given by notice to the other given in the manner provided herein.
In addition to the foregoing, Owner shall have the right to
designate from time to time individuals located in New York City
and to require J&H to Likewise designate individuals located in New
York City to whom written communications concerning this Agreement
and notices hereunder may be personally delivered. In any such
instance, without regard to the right of either party to give
notice by mail as hereinabove provided, notices shall also be
deemed delivered if delivered personally to any of such persons.
Owner and J&H shall each make a reasonable effort to comply with
any request from the other that specified notices and/or
communications be transmitted by personal delivery rather than by
registered or certified mail, as hereinabove provided, but delivery
by certified mail shall nevertheless constitute good and effective
notice whether or not there has been compliance with any such
request.
16. Wherever in this Agreement Owner is entitled to expect
the cooperation of J&H, Owner shall, to the extent that J&H incurs
any substantial out of pocket expenses (excluding attorney's fees
except as specifically provided in Paragraph 8) in connection
therewith, promptly after being furnished with a statement
therefor, reimburse J&H for any such expenses.
17. It is understood and agreed that all understandings and
agreements heretofore had between the parties hereto with respect
to the Takeover Space are hereby merged in this Agreement which
alone fully and completely expresses their agreement, and that the
same is entered into after full investigation, neither party
relying upon any statement or representation made by the other not
embodied in this Agreement.
18. This Agreement may not be changed or terminated orally.
The stipulations and agreements aforesaid are to apply to and bind
the heirs, executors, administrators, successors and assigns of the
respective parties hereto.
19. O&Y joins in the execution of this Agreement for the
purpose of guarantying the performance by Owner of its obligations
and responsibilities hereunder and agreeing to the provisions of
Paragraph 9 hereof. O&Y unconditionally guarantees, without offset
or deduction, (i) the prompt payment when due of all amounts
payable by Owner pursuant to this Agreement, the guaranty hereunder
constituting a guaranty of payment and not of collection, and (ii)
that Owner will perform punctually and faithfully all its
obligations under and in accordance with the terms of this
Agreement. O&Y agrees that in the event that Owner does not or is
unable to pay or perform in accordance with the terms of this
Agreement for any reason (including without limitations the
liquidation, dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other similar
proceeding affecting the status, existence, assets or obligations
of Owner, or the disaffirmance of this Agreement or any part
thereof in any such proceeding), O&Y will pay the amounts provided
for herein to be paid by Owner and otherwise perform or cause to be
performed the obligations of Owner under this Agreement. O&Y
agrees that it shall not be necessary or required that J&H file
suite or proceed to obtain or assert a claim for personal judgment
against Owner for the obligations of Owner hereunder or make any
effort at collection of such obligations from Owner or foreclose
against or seek to realize upon any security now or hereafter
existing for any such obligations or file suite or proceed to
obtain or assert a claim for personal judgment against any other
party liable for such obligations or make any effort at collection
of such obligation from such other party, before or as a condition
of enforcing the liability of O&Y under this guaranty or requiring
the payment of such obligations by O&Y hereunder. O&Y waives
notice of the acceptance of this guaranty and of the performance or
non-performance of any of the obligations of Owner hereunder;
demand of payment; and notice of non-payment or failure to perform
on the part of Owner. The obligations of O&Y shall not IPSO FACTO
be released or discharged (but shall be modified, decreased or
terminated to the same extent as the obligation of Owner) by the
happening from time to time of any of the following with respect to
this Agreement, although without notice to and further consent of
O&Y: (i) the waiver of J&H or its successors or assigns of the
performance by Owner of any obligation, term or condition contained
in this Agreement or any default thereunder, (ii) the extension of
the time or performance by Owner of such obligations, or (iii) any
failure, omission or delay of J&H in this Agreement or any
instrument contemplated herein or any action on the part of J&H to
enforce, assert or exercise any right, power or remedy conferred on
J&H in this Agreement or any instrument contemplated herein or any
action on the part of J&H granting extension or indulgence in any
form. O&Y will note consolidate with or merge into another
corporation, or sell or otherwise dispose of all or the major
portion of its properties and assets in a single transaction or
series of related transactions to any other single corporation or
entity or to other corporations or entities which are commonly
controlled by a single corporation or entity, unless such
corporation or entity will assume the observance and performance of
the covenants, agreements and conditions of this guaranty and
shall, unless the same are assumed by operation of law, execute and
deliver to J&H an agreement whereby such corporation or entity
expressly assumes the observances and performance of such
covenants, agreements and conditions. O&Y shall not exercise any
rights which it may have acquired by subrogation under this
guaranty, by any payment made hereunder or otherwise (except to the
extent required to preserve any rights it may have under any
applicable statute of limitations), unless and until all of the
obligations of Owner hereunder shall have been paid in full, and if
any such payment shall be made to O&Y on account of such
subrogation rights at any time when all of the obligations of Owner
hereunder shall not have been paid in full, each and every amount
so paid will forthwith be paid to J&H to be credited and applied
upon any of the obligations of Owner hereunder.
20. J&H agrees to look solely to the assets and property of
Owner for the satisfaction of any right or remedy of J&H for the
collection of a judgment or other judicial process requiring the
payment of money by Owner in the event of any liability of Owner,
and the partners or members therein (by reason of their being
partners or members) shall have no personal liability in connection
therewith or be subject to levy, execution, attachment or other
enforcement procedure for the satisfaction of J&H's remedies under
or with respect to this Agreement, or the relationship of the
parties hereunder.
21. Notwithstanding any other provisions of this Agreement,
J&H shall not be obligated to execute, acknowledge or deliver any
papers or instruments, take any action or give any notice (except
that J&H shall if so requested exercise any option in the Takeover
Leases for additional space) nor will Owner on its behalf, if the
effect thereof shall be to increase substantially any obligation or
decrease any right of J&H or otherwise materially adversely affect
J&H without the consent of J&H (which shall not be unreasonably
withheld), provided, however, J&H agrees that the execution and
delivery by a wholly owned subsidiary of J&H of a sublease or
assignment or other instruments relating thereto or any other
papers or instruments or notices or the taking by such subsidiary
of any other action shall not be deemed to increase any obligation
or decrease any right of J&H or otherwise adversely affect J&H.
J&H shall have the right at any time to assign, and upon 15 days
prior written notice from Owner shall assign, the Takeover Leases
to a wholly owned subsidiary of J&H or waive any right it (as
distinguished from such subsidiary) would have to decline to
execute and deliver such sublease, assignment or other instrument.
No such assignment shall, however, be effected or be effective, and
if executed at the request of Owner such request shall not be
deemed to have been complied with, unless the assignee thereof
shall simultaneously with its acceptance of the assignment of the
Takeover Leases and the assumption of the obligations of the tenant
thereunder, also assume all of the obligations of J&H under this
Agreement. Nothing, however, contained herein, shall be deemed to
release J&H from any obligations that it may have under this
Agreement, notwithstanding such assignment and assumption by such
subsidiary. Any sale or transfer of the capital stock of any
subsidiary to which the Takeover Leases have been assigned shall be
deemed an assignment of the Takeover Leases for purposes of this
Agreement.
22. If one or more of the provisions of this Agreement shall
be invalid or illegal, the validity and legality of the remaining
provisions shall not be affected or impaired thereby.
23. This Agreement shall be governed by the laws of the State
of New York.
IN WITNESS WHEREOF, the parties hereto have executed these
presents as of the day and year first above written.
OLYMPIA & YORK 125 BROAD
STREET COMPANY
BY: S/TOM ARNOTT
WITNESS: Sr. Vice President
S/MARTIN R. LEVINE
WITNESS: JOHNSON & HIGGINS
By:
WITNESS: O&Y EQUITY CORP.
S/MARTIN R. LEVINE
By: S/TOM ARNOTT
Sr. Vice President
April 11, 1994
U.S. Securities and Exchange Commission
Operations Center, Stop 0-7
6432 General Green Way
Alexandria, Virginia 22312
Re: Carlyle Real Estate Limited Partnership - XVI
Commission File No. 0-16516
Form 8-K/A
Gentlemen:
Enclosed, for the above-captioned registrant is a copy of the electronically
transmitted current report of the registrant on Form 8-K/A.
Please acknowledge receipt of the Form 8-K/A filing by signing and returning
the enclosed self-addressed post card.
Thank you.
Very truly yours,
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
By: JMB Realty Corporation
Corporate General Partner
By: C. SCOTT NELSON
_____________________________________
C. Scott Nelson, Vice President
Accounting Officer
CSN:jo
Enclosures
April 11, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Carlyle Real Estate Limited Partnership - XVI
Commission File No. 0-16516
Form 8-K/A
Gentlemen:
Transmitted, for the above-captioned registrant, is the electronically filed
executed copy of the registrant on Form 8-K/A.
Thank you.
Very truly yours,
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
By: JMB Realty Corporation
Corporate General Partner
By: C. SCOTT NELSON
________________________________
C. Scott Nelson, Vice President
Accounting Officer
CSN:jo
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
Pursuant to Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(Exact name of registrant as specified in its charter)
0-16516 36-3437938
------------- ---------------------
(Commission (IRS Employer
File Number) Identification No.)
The undersigned registrant hereby amends the following section of its
Report for November 2, 1993 on Form 8-K as set forth in the pages attached
hereto:
Item 7. Financial Statements and Exhibits.
-------------------------------------------
Pages 3 through 8
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
By: JMB Realty Corporation
Corporate General Partner
By: C. SCOTT NELSON
-----------------------------------
C. Scott Nelson, Vice President
Accounting Officer
Dated: April 11, 1994
1
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements. Not applicable.
(b) Proforma financial information.
1. Unaudited proforma condensed financial information.
(c) Exhibits.
1. Purchase Agreement among JMB/Warner Associates and Trident
Group, Inc., dated July 23, 1993 and exhibits thereto.
2. Assignment, Assumption and Consent among Trident Group,
Inc., and TA/Warner Center Associates L.P., dated October 29, 1993.
3
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
Unaudited Pro Forma Condensed
Financial Information
As of September 30, 1993
<CAPTION>
HISTORICAL PRO FORMA
CARLYLE REAL ESTATE CARLYLE REAL ESTATE
LIMITED PARTNERSHIP-XVI ADJUSTMENTS NOTE (2) LIMITED PARTNERSHIP-XVI
----------------------- ----------- -------- -----------------------
<S> <C> <C> <C> <C>
Total cash . . . . . . . . . . . . . . . . . . . $ 17,795,733 11,930,909 (a) 29,726,642
============ =========== ===========
Total net investment property. . . . . . . . . . 126,004,340 (75,482,997) (a) 50,521,343
============ =========== ===========
Total assets . . . . . . . . . . . . . . . . . . 155,329,489 (65,500,195) (a) 89,829,294
============ =========== ===========
Total liabilities. . . . . . . . . . . . . . . . 120,132,678 (56,010,280) (a) 64,122,398
============ =========== ===========
Venture Partners' subordinated equity in ventures',
at equity. . . . . . . . . . . . . . . . . . . 12,463,433 (6,295,670) (a) 6,167,763
============ =========== ===========
Total partner's capital accounts . . . . . . . . 22,733,378 (3,194,245) (a) 19,539,133
============ =========== ===========
<FN>
See accompanying notes to unaudited pro forma condensed financial information
- 5 -
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
Unaudited Pro Forma Condensed
Financial Information
Nine Months Ended September 30, 1993
<CAPTION>
HISTORICAL PRO FORMA
CARLYLE REAL ESTATE CARLYLE REAL ESTATE
LIMITED PARTNERSHIP-XVI ADJUSTMENTS NOTE (2) LIMITED PARTNERSHIP-XVI
----------------------- ----------- -------- -----------------------
<S> <C> <C> <C> <C>
Total income . . . . . . . . . . . . . . . . . . $ 15,059,358 (7,302,683) (a)(b) 7,756,675
============ =========== ===========
Operating loss . . . . . . . . . . . . . . . . . $ (291,982) (1,471,233) (a)(b) (1,763,215)
Partnership's share of operations of unconsolidated
ventures . . . . . . . . . . . . . . . . . . . $ (6,956,106) -- (6,956,106)
Venture partners' share of ventures' operations. $ (167,131) 379,673 (a)(b) 212,542
Net operating loss . . . . . . . . . . . . . . . $ (7,415,219) (1,091,560) (b) (8,506,779)
============ =========== ===========
Gain on sale of Partnership's investment in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . $ 5,819,023 -- 5,819,023
Net loss . . . . . . . . . . . . . . . . . . . . $ (1,596,196) (1,091,560) (2,687,756)
============ =========== ===========
Taxable earnings (loss). . . . . . . . . . . . . $ 3,021,387 (618,103) (a)(b) 2,403,284
============ =========== ===========
Net loss per limited partnership interest:
Net operating loss . . . . . . . . . . . . . . $ (50.72) (7.47) (b) (58.19)
Gain on sale of Partnership's investment in
unconsolidated venture . . . . . . . . . . . 41.05 -- 41.05
------------ ----------- -----------
$ (9.67) (7.47) (b) (17.14)
============ =========== ===========
Taxable earnings (loss) per Interest . . . . . . $ 20.67 (4.40) (b) 16.27
============ =========== ===========
Cash distributions per Interest. . . . . . . . . $ 25.50 -- 25.50
============ =========== ===========
<FN>
See accompanying notes to unaudited pro forma condensed financial information.
- 6 -
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
Unaudited Pro Forma Condensed
Financial Information
Year Ended December 31, 1992
<CAPTION>
HISTORICAL PRO FORMA
CARLYLE REAL ESTATE CARLYLE REAL ESTATE
LIMITED PARTNERSHIP-XVI ADJUSTMENTS NOTE (2) LIMITED PARTNERSHIP-XVI
----------------------- ----------- -------- -----------------------
<S> <C> <C> <C> <C>
Total income . . . . . . . . . . . . . . . . . . $ 20,753,488 (9,611,578) (b) 11,141,910
============ =========== ===========
Operating loss . . . . . . . . . . . . . . . . . $ (1,207,558) (1,131,727) (b) (2,339,285)
Partnership's share of operations of unconsolidated
ventures . . . . . . . . . . . . . . . . . . . $(14,384,114) -- (14,384,114)
Venture Partners' share of Ventures' operations. $ 37,306 292,059 (b) 329,365
Net operating loss . . . . . . . . . . . . . . . $(15,554,366) (839,668) (b) (16,394,034)
============ =========== ===========
Taxable earnings (loss). . . . . . . . . . . . . $ 7,426,876 (804,831) (b) 6,622,045
============ =========== ===========
Net loss per Interest. . . . . . . . . . . . . . $ (106.39) (5.74) (b) (112.14)
============ =========== ===========
Taxable earnings (loss) per Interest . . . . . . $ 50.80 (5.73) (b) 45.07
============ =========== ===========
Cash distributions per Interest. . . . . . . . . $ 34.00 -- 34.00
============ =========== ===========
<FN>
See accompanying notes to unaudited pro forma condensed financial information.
- 7 -
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
Notes to Unaudited Pro Forma Condensed
Financial Information
(1) BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed financial information has
been prepared in accordance with Article 11 of Regulation S-X and is not
intended to be indicative of the actual or future results of operations or
financial position of the Partnership. The unaudited pro forma condensed
balance sheet information as of September 30, 1993 has been presented on the
assumption that the sale of the Blue Cross Building (the "Property") had
occurred on September 30, 1993. The unaudited pro forma condensed statements
of operations information for the nine months ended September 30, 1993 and the
year ended December 31, 1992 have been presented on the assumption that the
title transfer of the property had occurred and were completed on January 1,
1993 and January 1, 1992, respectively.
(2) PRO FORMA ADJUSTMENTS
(a) The pro forma adjustments to and assumptions for the condensed
balance sheet information reflect transactions involved in the transfer of the
Property. The pro forma adjustments are based on property operations as
recorded under generally accepted accounting principles for the nine months
ended September 30, 1993.
(b) The pro forma adjustments to the condensed statements of
operations are applicable to the operations of the assets of the Property
during the nine months ended September 30, 1993 and the year ended December
31, 1993. The adjustments are based upon the Property's actual operations
computed in accordance with generally accepted accounting principles for the
relevant periods.
- 8 -
