SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K - X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Certain pages of the prospectus of the registrant dated August 27, 1986 as
supplemented September 29, 1986, December 29, 1986, April 28, 1987, August 10,
1987 and December 22, 1987, and filed with the Commission pursuant to Rules
424(b) and 424(c) under the Securities Act of 1933 are incorporated by
reference in Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
-----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters . 7
Item 6. Selected Financial Data . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 14
Item 8. Financial Statements and Supplementary Data . . 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . 71
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . 71
Item 11. Executive Compensation. . . . . . . . . . . . . 73
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . 75
Item 13. Certain Relationships and Related Transactions. 76
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . 76
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 79
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, Carlyle Real Estate Limited Partnership-XVI (the
"Partnership"), is a limited partnership formed in December of 1985 and
currently governed by the Revised Uniform Limited Partnership Act of the State
of Illinois to invest in income-producing commercial and residential real
property. On August 27, 1986, the Partnership commenced an offering to the
public of $250,000,000 (subject to increase by up to $250,000,000) of Limited
Partnership Interests (and assignee interests therein) ("Interests") pursuant
to a Registration Statement on Form S-11 under the Securities Act of 1933 (No.
33-3567). A total of 140,342.82534 Interests were sold to the public at
$1,000 per Interest. The holders of 76,819.23 Interests were admitted to the
Partnership in 1986 and the holders of 63,523.59534 Interests were admitted to
the Partnership in 1987. The offering closed on December 31, 1987.
Subsequent to admittance to the Partnership, no Holder of Interests
(hereinafter, a "Holder" or "Holder of Interests") has made any additional
capital contribution. The Holders of Interests of the Partnership share in
their portion of the benefits of ownership of the Partnership's real property
investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title, leasehold estates and/or joint
venture partnership interests. The Partnership's real property investments
are located throughout the nation and it has no real estate investments
located outside of the United States. A presentation of information about
industry segments, geographic regions, raw materials or seasonality is not
applicable and would not be material to an understanding of the Partnership's
business taken as a whole. Pursuant to the Partnership Agreement, the
Partnership is required to terminate on or before December 31, 2036.
Accordingly, the Partnership intends to hold the real properties it acquires
for investment purposes until such time as sale or other disposition appears
to be advantageous. Unless otherwise described, the Partnership expects to
hold its properties for long-term investment. Due to current market
conditions, the Partnership is able to determine the holding period for such
properties. At sale of a particular property, the net proceeds, if any, are
generally distributed or reinvested in existing properties rather than
invested in acquiring additional properties.
The Partnership has made the real property investments set forth in the
following table:
<TABLE>
<CAPTION>
SALE DATE OR IF OWNED
AT DECEMBER 31, 1993,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (e) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Owings Mills Shopping
Center
Owings Mills (Baltimore
County), Maryland. . . . 325,000 sq.ft. 12/31/85 6/30/93 fee ownership of land
g.l.a. and improvements
(through joint venture
partnerships) (c)(g)
2. 125 Broad Street Building
New York, New York . . . 1,336,000 sq.ft.12/31/85 26% fee ownership of
n.r.a. improvements and
ground leasehold
interest in land
(through joint venture
partnerships) (b)(c)(d)(f)
3. 260 Franklin Street Building
Boston, Massachusetts. . 348,901 sq.ft. 5/21/86 12% fee ownership of land
n.r.a. and improvements
(through joint venture
partnership) (b)(c)
4. Dunwoody Crossing
Apartments
(Phase I, II and III)(h)
DeKalb County (Atlanta),
Georgia. . . . . . . . . 810 units 9/18/86 5% fee ownership of land
and improvements
(through joint venture
partnerships) (c)
5. NewPark Mall
Newark (Alameda County),
California . . . . . . . 423,748 sq.ft. 12/2/86 2% fee ownership of land
g.l.a. and improvements
(through joint venture
partnerships) (c)
6. Blue Cross Building
Woodland Hills (Los
Angeles), California . . 421,716 sq.ft. 12/18/87 11/2/93 fee ownership of land
n.r.a. and improvements
(through a joint
venture partnership)
(b)(c)(g)
SALE DATE OR IF OWNED
AT DECEMBER 31, 1993,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (e) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
7. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . 373,000 sq.ft. 12/23/88 20% fee ownership of
n.r.a. improvements and
ground leasehold
interest in land
(through joint venture
partnership) (b)(c)(d)(f)
<FN>
- -----------------------
(a) The computation of this percentage for properties held at December 31,
1993 does not include amounts invested from sources other than the original
net proceeds of the public offering as described above and in Item 7.
(b) Reference is made to Note 3 of Notes to Combined Statements, Note 4 and
the Schedule XI's to the Combined and Consolidated Financial Statements filed
with this annual report for the current outstanding principal balances and a
description of the long-term mortgage indebtedness secured by certain of the
Partnership's real property investments.
(c) Reference is made to Note 3 for a description of the joint venture
partnership or partnerships through which the Partnership has made this real
property investment.
(d) Reference is made to Notes 3(b) and 3(h) for a description of the
leasehold interests, under ground leases, in the land on which these real
property investments are situated.
(e) Reference is made to Item 8 - Schedules X and XI to the Consolidated and
Combined Financial Statements filed with this annual report for further
information concerning real estate taxes and depreciation.
(f) Reference is made to Item 6 - Selected Financial Data for additional
operating and lease expiration data concerning this investment property.
(g) This property has been sold. Reference is made to Note 6 for further
discussion of such sale.
(h) Formerly known as Post Crest, Post Terrace and Post Crossing Apartments,
respectively.
</TABLE>
Reference is made to Note 7 and to Note 4 of Notes to Combined Statements
for a schedule of minimum lease payments to be received in each of the next
five years, and in the aggregate thereafter, under leases in effect at certain
of the Partnership's properties as of December 31, 1993.
The Partnership's real property investments are subject to competition
from similar types of properties (including, in certain areas, properties
owned or advised by affiliates of the General Partners) in the respective
vicinities in which they are located. Such competition is generally for the
retention of existing tenants. Additionally, the Partnership is in
competition for new tenants in markets where significant vacancies are
present. Reference is made to Item 7 below for a discussion of competitive
conditions of the Partnership and certain of its significant investment
properties. Approximate occupancy levels for the properties are set forth in
the table in Item 2 below to which reference is hereby made. The Partnership
maintains the suitability and competitiveness of its properties in its markets
primarily on the basis of effective rents, tenant allowances and service
provided to tenants. In the opinion of the Corporate General Partner of the
Partnership, all the investment properties held at December 31, 1993 are
adequately insured. Although there is earthquake insurance coverage for a
portion of the value of the Partnership's investment properties, the Corporate
General Partner does not believe that such coverage for the entire replacement
cost of the investment properties is available on economic terms.
In June 1993, the Partnership and its affiliated joint venture partner
through JMB/Owings, sold their interest in the Owings Mills Shopping Center to
the unaffiliated venture partner for $9,416,000 represented by a purchase
price note. Reference is made to the Partnership's Report on Form 8-K (File
No. 0-16516) dated June 30, 1993 which description of such sale is hereby
incorporated herein by reference and to Note 6(a).
During November 1993, the Partnership, through JMB/Warner (a joint
venture with a partnership sponsored by the Corporate General Partner of the
Partnership), sold the Blue Cross building for $76,909,292. The sale price
consisted of $23,300,000 paid in cash at closing with the balance represented
by the buyer's assumption of the existing mortgage note. Reference is made to
the Partnership's Report on Form 8-K (File No. 0-16516) dated November 2,
1993, which description of such sale is incorporated herein by reference, and
to Note 6(b).
During August 1993, an affiliate of the Corporate General Partner of the
Partnership assumed management of Dunwoody Crossing Apartments from an
affiliate of the joint venture partner. Reference is made to Note 3(e).
The Partnership has no employees.
The terms of transactions between the Partnership, the General Partners
and their affiliates are set forth in Item 11 below to which reference is
hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns through joint venture partnerships the interests in
the properties referred to under Item 1 above to which reference is hereby
made for a description of said properties.
The following is a listing of principal businesses or occupations carried
on in and approximate occupancy levels by quarter during fiscal years 1993 and
1992 for the Partnership's investment properties owned during 1993:<PAGE>
<TABLE>
<CAPTION>
1992 1993
------------------------------- ------------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Owings Mills Shopping Center
Owings Mills (Baltimore
County), Maryland. . . . . . . . . . . Retail 93% 92% 92% 93% 93% N/A N/A N/A
2. 125 Broad Street Building
New York, New York . . . . . . . . . . Financial 71% 71% 72% 72% 72% 72% 72% 54%
3. 260 Franklin Street Building
Boston, Massachusetts. . . . . . . . . Financial 88% 93% 93% 96% 97% 98% 97% 99%
4. Dunwoody Crossing
(Phase I, II and III)
Apartments (a)
DeKalb County
(Atlanta), Georgia . . . . . . . . . . Residential 96% 95% 96% 90% 94% 96% 93% 90%
5. NewPark Mall
Newark (Alameda County), California. . Retail 80% 77% 78% 75% 71% 73% 80% 81%
6. Blue Cross Office Building
Woodland Hills (Los Angeles),
California . . . . . . . . . . . . . . Insurance 100% 100% 100% 100% 100% 100% 100% N/A
7. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . . . . . . . . Retail 98% 95% 93% 92% 92% 94% 96% 97%
<FN>
- --------------------
Reference is made to Item 6, Item 7, Note 7 and Note 4 of Notes to Combined Statements for further information regarding
property occupancy, competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
(a) Formerly known as Post Crest, Post Terrace and Post Crossing Apartments, respectively.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1992 and 1993.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1993, there were 16,208 record Holders of Interests of
the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Corporate General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any other
economic aspects of the transaction, will be subject to negotiation by the
investor. Reference is made to Article XVI of the Partnership Agreement and
Sections 3 and 4 of the Assignment Agreement (included as Exhibits 3 and 4-A,
respectively, filed with the Partnership's Report on Form 10-K for December
31, 1992 (File No. 0-16516) dated March 19, 1993 for provisions governing the
transferability of Interests, which provisions are hereby incorporated by
reference.
Reference is made to Item 6 below for a discussion of cash distributions
made to the Holders of Interests.
Reference is made to Note 5 for a discussion of the provisions of the
Partnership Agreement relating to cash distributions.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1993, 1992, 1991, 1990 AND 1989
(not covered by Independent Auditors' Report)
<CAPTION>
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . . . . . . . . $18,822,328 20,753,488 20,600,655 20,315,714 18,954,739
=========== ============ =========== =========== ===========
Operating loss . . . . . . . . . . . . . . $ 547,401 1,207,558 1,909,707 1,785,254 1,604,341
Partnership's share of loss from
operations of unconsolidated
ventures . . . . . . . . . . . . . . . . 4,852,148 14,384,114 8,086,449 8,903,059 3,543,187
Venture partners' share of venture's
operations . . . . . . . . . . . . . . . (1,228,201) (37,306) (306,058) (322,763) 454,178
----------- ------------ ----------- ----------- -----------
Net operating loss . . . . . . . . . . . . 4,171,348 15,554,366 9,690,098 10,365,550 5,601,706
Gain on sale of Partnership's investment
in unconsolidated venture. . . . . . . . (2,627,427) -- -- -- --
Loss on sale of investment property, net
of venture partner's share . . . . . . . 299,039 -- -- -- --
----------- ------------ ----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . . . $ 1,842,960 15,554,366 9,690,098 10,365,550 5,601,706
=========== ============ =========== =========== ===========
Net loss
Net operating loss . . . . . . . . . . . $ 28.53 106.39 66.28 70.90 38.32
Gain on sale of Partnership's investment
in unconsolidated venture . . . . . . . (18.53) -- -- -- --
Loss on sale of investment property, net
of venture partner's share. . . . . . . 2.10 -- -- -- --
----------- ------------ ----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . . . $ 12.10 106.39 66.28 70.90 38.32
=========== ============ =========== =========== ===========
Total assets . . . . . . . . . . . . . . . $89,771,714 154,176,204 166,584,090 183,056,188 202,201,358
Long-term debt . . . . . . . . . . . . . . $42,164,903 96,057,742 101,538,250 105,214,526 109,298,388
Cash distributions per Interest (d). . . . $ 34.00 34.00 32.54(c) 13.72(c) 13.72(c)
=========== ============ =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with
the consolidated financial statements and the related notes appearing
elsewhere in this annual report.
(b) The net loss per Interest is based on the number of Interests
outstanding at the end of each period (140,347.82534).
(c) Pursuant to the Partnership Agreement, certain Holders of Interests
received preferred distributions in an aggregate amount per Limited
Partnership Interest equal to 25% of the Excess Suspended Loss (as defined),
for such Holder's Interests. In 1990 and 1989, preferred distributions of
either $26.28, $7.56, $1.04 or $0 per Interest were paid to Holders of
Interests. In February 1991, the remaining preferred distributions were made
on such Interests of either $2.96, $.82, $.07, or $0 per Interest to Holders
of Interests. Such preferred distributions are not included in cash
distributions per Interest for the years ended December 31, 1991, 1990 and
1989.
(d) Cash distributions to the Limited Partners since the inception of the
Partnership have not resulted in taxable income to such Limited Partners and
have therefore represented a return of capital. Each Partner's taxable income
(loss) from the Partnership in each year is equal to his allocable share of
the taxable income (loss) of the Partnership, without regard to the cash
generated or distributed by the Partnership.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1993
<CAPTION>
Property
- --------
125 Broad
Street a) The GLA historical occupancy rate
and average base rent per square foot
for the last five years were as follows:
Year Ending GLA Avg. Base Rent Per
December 31, Occupancy Rate (1) Square Foot (2)
------------ ----------------- ------------------
<S> <C> <C> <C> <C>
1989 . . . . . 99% $34.54
1990 . . . . . 99% 34.83
1991 . . . . . 71% 42.99
1992 . . . . . 72% 36.64
1993 . . . . . 54% 49.52
<FN>
(1) As of December 31 of each year.
(2) Average base rent per square foot is based on GLA occupied as of December 31 of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Johnson & Higgins 424,482 $16,637,142 January, 2011 N/A
(Insurance Broker)
Sullivan & Cromwell 300,912 7,946,888 35,041 sq. ft.
(Law Firm) September, 1996
265,871 sq. ft.
September, 1997
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain
information with respect to the expiration
of leases for the next ten years at the
125 Broad Street:
Annualized Percent of
Number of Approx. Total Base Rent Total 1993
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994 1 1,359 $ 40,000 .11%
1995 - -- -- --
1996 2 35,541 1,511,329 4.23%
1997 9 267,059 6,654,563 18.63%
1998 - -- -- --
1999 - -- -- --
2000 - -- -- --
2001 - -- -- --
2002 - -- -- --
2003 - -- -- --
<FN>
(1) Excludes leases that expire in 1994 for which
renewal leases or leases with replacement tenants
have been executed as of March 25, 1994.
</TABLE>
<TABLE>
<CAPTION>
Property
- --------
Palm Desert
Town Center a) The GLA historical occupancy rate
and average base rent per square foot
for the last five years were as follows:
Year Ending GLA Avg. Base Rent Per
December 31, Occupancy Rate (1) Square Foot (2)
------------ ----------------- ------------------
<S> <C> <C> <C> <C>
1989 . . . . . 98% $18.63
1990 . . . . . 97% 18.40
1991 . . . . . 97% 19.21
1992 . . . . . 92% 19.51
1993 . . . . . 97% 18.90
<FN>
(1) As of December 31 of each year.
(2) Average base rent per square foot is based on GLA occupied as of December 31 of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
None - No single tenant
occupies more than 10% of
the total gross leasable
area of the building.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of leases
for the next ten years at the Palm Desert Town Center:
Annualized Percent of
Number of Approx. Total Base Rent Total 1993
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994 9 22,910 285,221 4.35%
1995 24 54,345 1,052,178 16.06%
1996 10 17,825 369,035 5.63%
1997 15 29,996 753,606 11.51%
1998 20 41,689 1,049,693 16.02%
1999 10 29,123 600,872 9.17%
2000 6 15,298 419,560 6.41%
2001 7 22,246 637,703 9.74%
2002 2 2,928 105,949 1.62%
2003 3 4,050 185,409 2.83%
<FN>
(1) Excludes leases that expire in 1994 for which renewal leases or leases with replacement tenants have
been executed as of March 25, 1994.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On August 27, 1986, the Partnership commenced an offering of $250,000,000
(subject to increase by up to $250,000,000) of limited partnership interests
(and assignee interests therein) pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933. The offering terminated on December
31, 1987. A total of 140,342.82534 Interests were issued by the Partnership
and assigned to the public at $1,000 per Interest (fractional interests are
due to a Distribution Reinvestment Program).
After deducting selling expenses and other offering costs, the Partner-
ship had approximately $120,541,000 with which to make investments in
income-producing commercial and residential real property, to pay legal fees
and other costs (including acquisition fees) related to such investments and
for working capital reserves. A portion of the proceeds was utilized to
acquire the properties described in Item 1 above.
At December 31, 1993, the Partnership and its consolidated ventures had
cash and cash equivalents of approximately $286,000. Such funds and short-
term investments of approximately $32,618,000 were available for distributions
to partners or from escrowed reserves for 260 Franklin Street as discussed
below, capital improvements and funding of anticipated operating deficits at
260 Franklin Street, to the extent not funded by joint venture partners, and
working capital requirements. In February 1994, the Partnership paid
aggregate distributions of approximately $14,800,000 to its Partners.
Reference is made to Note 10. 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 cash generated by the investment properties, through an obligation of
a venture partner to provide preferred returns of annual cash flow with
respect to the Palm Desert investment property through December 1994 and from
the sale and refinancing of such properties.
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 taxable income 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 secured by the Dunwoody Crossing Phase I and III
Apartment is scheduled to mature in October 1994. The Partnership plans to
refinance this note when it matures, although there can be no assurance the
Partnership will be able to obtain such financing.
In December 1992, NewPark Associates refinanced the existing indebtedness
related to its shopping center with a new mortgage loan as described in Note
3(f). In addition to retiring the prior mortgage loan and the notes payable
to the unaffiliated joint venture partner, the new mortgage loan, which is in
the principal amount of approximately $51,000,000 and bears interest at 8.75%
per annum, has provided approximately $14,000,000 of additional proceeds, a
major portion of which were used to pay the costs of the renovation work
described below and to provide a reserve for future tenant improvement costs
at the property. The new mortgage loan matures in November 1995, subject to
the right of the joint venture to extend the maturity date to November 2000
upon payment of a $250,000 fee and satisfaction of certain conditions.
New Park 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
expected 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 will continue over the next few years. The depressed market in downtown
Manhattan has significantly affected the 125 Broad Street Building as the
occupancy has decreased to 54% at December 31, 1993 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, the joint
venture owning the building, 125 Broad Street Company ("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 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 lower than
originally expected 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 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 the joint venture to pay such costs. The O&Y partners have made
outstanding loans to the joint venture of approximately $14,650,000 as of
December 31, 1993. 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 3(b),
the joint venture 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 the joint venture'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, 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 joint venture agreement, and as a result, the joint venture
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 $28,600,000 through December 31, 1993,
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. As a result of 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 the end
of 1993, the arrearage under the mortgage loan had increased to approximately
$48,180,000. However, 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, the joint venture has reserved the entire rent offset by J&H,
$19,300,000 and $9,300,000 in 1993 and 1992, respectively, 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 $3,725,000 and
$8,106,000 for 1993 and 1992, 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
joint venture agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. Therefore, it appears unlikely that 125
Broad will be able to restructure the mortgage loan, and 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. Reference is made to Note 3(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, 260
Franklin, the affiliated joint venture, reached an agreement with the lender
to modify the long-term mortgage note secured by the 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 leasing commissions to an affiliate) to be used to cover
the cost of capital and tenant improvements and lease inducements which are
the primarily components of the anticipated operating deficits noted above, 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. 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, which is more fully described in Note 3(d), and
accordingly, such fees and commissions remained unpaid. The Partnership's
share of such fees and lease commissions is approximately $102,000 at December
31, 1993. 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 will be significant cost
related to releasing this space. In addition, the long-term mortgage loan
matures January 1, 1996. If the Partnership 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.
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 6(a).
The Partnership received (through joint ventures with affiliates) its
specified cash returns relating to the Owings Mills Shopping Center (through
the date of sale) and the Palm Desert Town Center, which were funded by
unaffiliated venture partners pursuant to the terms of the joint venture
agreements. In addition, the Partnership is receiving cash distributions from
operations of the Dunwoody Crossing Apartments and NewPark Mall.
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 store at Newpark
Mall 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.
On November 2, 1993, the Partnership through JMB/Warner Center Associates
("JMB/Warner") 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 6(b). In
February 1994, the Partnership made cash distributions to the Limited Partners
that included $100 per Interest from proceeds received in connection with the
sale of the Blue Cross Building. Because the cash flow from the Blue Cross
Building was a significant portion of the Partnership's total operating cash
flow, distributions from operations subsequent to the sale will be
substantially reduced.
In response to the weakness of the economy and the limited amount of
available real estate financing in particular, the Partnership is taking steps
to preserve its working capital. Therefore, the Partnership is carefully
scrutinizing the appropriateness of any discretionary expenditures, parti-
cularly in relation to the amount of working capital 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 December 31, 1993 was
$2,372,056. Such amount does not bear interest and is payable from net cash
generated from future operations and sales at such time as the General
Partners determine. Reference is made to Note 8.
Due to the factors discussed above and the general lack of buyers of real
estate today, it is likely that the Partnership may hold some of its
investment properties longer than originally anticipated in order to maximize
the recovery of its investments and any potential for returns thereon. Also,
in light of the current severely depressed real estate markets, it currently
appears that the Partnership's goal of capital appreciation will not be
achieved. Although the Partnership expects to distribute from sale proceeds
some portion of the Limited Partners' original capital, without a dramatic
improvement in market conditions, the Limited Partners will not receive a full
return of their original investment.
RESULTS OF OPERATIONS
At December 31, 1992 and 1991, the Partnership owned an interest in seven
operating investment properties. During 1993, the Partnership sold its
interests in the Blue Cross Building and the Owings Mills Shopping Center
(reference is made to Note 6). Reference is made to Notes 2 and 3 for a
description of agreements which the Partnership, either directly or through
joint venture partnerships, has entered into with sellers or affiliates of
sellers of the Partnership's properties for the operation and management of
such properties.
The increase in short-term investments at December 31, 1993 as compared
to December 31, 1992 primarily is due to the temporary investment of the net
sales proceeds from the sale of the Blue Cross Office Building which were
partially distributed in February 1994. Reference is made to Notes 6(b) and
10.
The decrease in investment property, net of accumulated depreciation,
deferred expenses and long-term debt less current portion at December 31, 1993
as compared to December 31, 1992 and increase in loss on sale of investment
property for the year ended December 31, 1993 are primarily due to the sale of
the Blue Cross Building in November 1993. Reference is made to Note 6(b).
The decrease in venture partner's deficit in venture, current portion of
long-term debt, accrued interest at December 31, 1993 as compared to December
31, 1992 and the decrease in mortgage and other interest for the year ended
December 31, 1993 as compared to December 31, 1992 and for December 31, 1992
as compared to December 31, 1991 are primarily due to the unaffiliated venture
partners' required capital contribution made in January 1993 to fund the
annual debt service installment on the purchase price note secured by the Palm
Desert Town Center. The purchase price note was paid in full with the January
1993 installment payment. Reference is made to Note 3(h).
The changes in the Partnership's investments in unconsolidated ventures
at December 31, 1993 as compared to December 31, 1992 and the decrease in the
Partnership's share of loss from operations of unconsolidated ventures and
gain on sale of Partnership's investment in unconsolidated venture for the
year ended December 31, 1993 as compared to the year ended December 31, 1992
is primarily due to the sale of the Partnership's interest in Owings Mills and
a decrease in the share of loss attributable to 125 Broad as a result of the
Salomon Brothers lease termination payment in 1993 as discussed in the
Liquidity and Capital Resources section above. The increase in Partnership's
share of loss from unconsolidated ventures for the year ended December 31,
1992 as compared to the year ended December 31, 1991 is primarily due to
activity at the 125 Broad Street office building including recognition of
losses relating to J&H receivables in 1992 and a decrease in rental income as
a result of a major tenant vacating a large portion of its space in 1991.
Reference is also made to Notes 3(b) and 6(a).
The decrease in rental income for the year ended December 31, 1993 as
compared to December 31, 1992 is primarily due to the sale of the Blue Cross
Building in November 1993. Reference is made to Note 6(b). The increase in
rental income and venture partners share of ventures' operations for the year
ended December 31, 1992 as compared to the year ended December 31, 1991 is
primarily due to an increase in rental income recognized pursuant to the terms
of the triple net lease at the Blue Cross Office Building. Reference is made
to Note 3(g).
The decreases in interest income for the year ended December 31, 1993 as
compared to the year ended December 31, 1992 and for December 31, 1992 as
compared to December 31, 1991 are primarily due to the Partnership earning
lower interest rates on its interest bearing U.S. Government obligations.
The decrease in mortgage and other interest for the year ended December
31, 1993 as compared to December 31, 1992 and for December 31, 1992 as
compared to December 31, 1991 are primarily due to lower outstanding principal
balances as a result of the annual debt service payments paid in January on
the purchase price note secured by the Palm Desert Town Center described above
and partial year interest expense relating to the Blue Cross Building.
The decrease in depreciation for the year ended December 31, 1993 as
compared to the years ended December 31, 1992 and 1991 is primarily due to
certain operating equipment being fully depreciated as of December 1992 at the
Blue Cross Building and the sale of the Blue Cross Building in November 1993.
The decrease in property operating expenses for the years ended December
31, 1993 and 1992 as compared to the year ended December 31, 1991 is primarily
due to (i) the write-off of certain tenant accounts receivables at the Palm
Desert Town Center in 1991 and (ii) an increase in ground lease payments
during 1991 resulting from increased revenues at the Palm Desert Town Center.
The increase in venture partner's share of ventures' operations for the
year ended December 31, 1993 a compared to the year ended December 31, 1992 is
primarily due to the allocation in 1993 of operating losses to the venture
partner to JMB/PDTC Associates in 1993 in accordance with the venture
agreement. The increase in venture partners' share of venturers' operations
for the year ended December 31, 1992 as compared to the year ended December
31, 1991 is primarily due to an increase in rental income recognized pursuant
to the terms of the triple net lease at the Blue Cross Building in 1992.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation
generally has not had a material effect on rental income or property operating
expenses.
To the extent that inflation in future periods does have an adverse
impact on property operating expenses, the effect will generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering increases
in the cost of operating and maintaining the properties as well as real estate
taxes. Therefore, the effect on operating earnings generally will depend upon
whether the properties are substantially occupied. In addition, substantially
all of the leases at the Partnership's shopping center investments contain
provisions which entitle the property owner to participate in gross receipts
of tenants above fixed minimum amounts.
Future inflation may also cause capital appreciation of the Partnership's
investment properties over a period of time to the extent that rental rates
and replacement costs of properties increase.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Operations, Years ended December 31, 1993, 1992
and 1991
Consolidated Statements of Partners' Capital Accounts (Deficits),
Years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows, Years ended December 31, 1993, 1992
and 1991
Notes to Consolidated Financial Statements
Schedule
--------
Supplementary Income Statement Information . X
Consolidated Real Estate and Accumulated
Depreciation . . . . . . . . . . . . . . . XI
Schedules not filed:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or the information is presented in
the consolidated financial statements or related notes.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Combined Balance Sheets, December 31, 1993 and 1992
Combined Statements of Operations, Years ended December 31, 1993, 1992
and 1991
Combined Statements of Partners' Capital Accounts (Deficits),
Years ended December 31, 1993, 1992 and 1991
Combined Statements of Cash Flows, Years ended December 31, 1993, 1992
and 1991
Notes to Combined Financial Statements
SCHEDULE
--------
Supplementary Income Statement Information . X
Combined Real Estate and
Accumulated Depreciation . . . . . . . . . XI
Schedules not filed:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or the information is presented in
the combined financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI:
We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XVI (a limited partnership) and Consolidated
Ventures as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the General Partners of the Partnership. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the General Partners of the Partnership, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Carlyle
Real Estate Limited Partnership - XVI and Consolidated Ventures at December
31, 1993 and 1992, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1993, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As described in Note 3(b), the property owned by 125 Broad Street Company
(125 Broad), in which the Partnership has an interest through 125 Broad
Building Associates (JMB/125), has suffered losses and cash flow deficits from
operations and expects to incur significant cash flow deficits in the future
that are required to be funded by the unaffiliated venture partners through
1995 pursuant to the 125 Broad joint venture agreement. In 1992, the
unaffiliated joint venture partner failed to advance necessary funds to 125
Broad and, as a result, 125 Broad defaulted on its mortgage loan. JMB/125 has
notified the unaffiliated joint venture partner that their failure to advance
funds to cover operating deficits constitutes a default under the 125 Broad
joint venture agreement. The 125 Broad joint venture partners have been
negotiating with the property's lender to restructure the mortgage loan;
however, there can be no assurances that negotiations to restructure the loan
will be successful. The Partnership believes it is unlikely that the
unaffiliated joint venture partners will fulfill their funding obligations to
125 Broad and JMB/125. As a result, it appears unlikely that 125 Broad will be
able to restructure the mortgage loan. In the event that 125 Broad is unable
to restructure the mortgage loan, JMB/125 would likely decide not to commit
additional funds to 125 Broad. These circumstances could result in the
Partnership no longer having an ownership interest in the investment property.
The ultimate outcome of these circumstances cannot presently be determined.
The consolidated financial statements do not contain any adjustments that
might result from the outcome of these uncertainties.
KPMG PEAT MARWICK
Chicago, Illinois
March 25, 1994
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
------
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 286,137 586,175
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,618,483 16,301,231
Interest, rents and other receivables, net of allowances for doubtful accounts of approximately
$880,000 and $650,000 at December 31, 1993 and 1992, respectively . . . . . . . . . . . . . . . . . 1,010,293 950,105
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,526 176,517
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,117,439 18,014,028
------------ ------------
Investment properties, at cost (notes 2, 3 and 6(b)) - Schedule XI:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 16,935,910
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,002,520 136,048,167
------------ ------------
60,002,520 152,984,077
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,011,970) (23,729,463)
------------ ------------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . . . . . 49,990,550 129,254,614
Investment in unconsolidated ventures, at equity (notes 1, 3 and 9). . . . . . . . . . . . . . . . . . 3,850,428 4,261,511
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,676 847,905
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,124 413,021
Accrued rents receivable (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,185,497 953,560
Venture partners' deficit in venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 431,565
------------ ------------
$ 89,771,714 154,176,204
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
DECEMBER 31, 1993 AND 1992
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1993 1992
------------ ------------
Current liabilities:
Current portion of long-term debt (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 283,548 5,480,508
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901,810 884,888
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,215 966,887
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,757 194,587
Amounts due to affiliates (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,565,981 1,493,803
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,396,311 9,020,673
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,176 88,820
Investment in unconsolidated ventures, at equity (notes 1, 3 and 9). . . . . . . . . . . . . . . . . . 17,120,620 14,240,407
Long-term debt, less current portion (note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,164,903 96,057,742
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,761,010 119,407,642
Venture partners' subordinated equity in ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,766,754 6,760,703
Partners' capital accounts (deficits) (note 5):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,979,118) (2,835,548)
Cash distributions (note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175,636) (26,517)
------------ ------------
(3,134,754) (2,842,065)
------------ ------------
Limited partners (140,347.82534 Interests):
Capital contributions, net of offering costs and purchase discounts. . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69,752,546) (68,053,156)
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,410,103) (21,638,273)
------------ ------------
24,378,704 30,849,924
------------ ------------
Total partners' capital accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,243,950 28,007,859
------------ ------------
Commitments and contingencies (notes 3, 4, 7 and 8)
$ 89,771,714 154,176,204
============ ============
<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
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,045,896 19,745,429 19,227,608
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776,432 1,008,059 1,373,047
----------- ----------- -----------
18,822,328 20,753,488 20,600,655
----------- ----------- -----------
Expenses (Schedule X):
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . 9,469,227 10,931,595 11,349,005
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021,646 5,080,004 5,090,639
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 4,873,173 4,819,900 5,048,541
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,195 314,656 298,877
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . 105,969 121,810 120,639
Management fees to corporate general partner (note 8). . . . . . . . . . . . . 331,376 331,376 332,132
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 277,143 361,705 270,529
----------- ----------- -----------
19,369,729 21,961,046 22,510,362
----------- ----------- -----------
Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (547,401) (1,207,558) (1,909,707)
Partnership's share of loss from operations of unconsolidated ventures (notes 3 and 9)(4,852,148) (14,384,114) (8,086,449)
Venture partners' share of ventures' operations (note 3) . . . . . . . . . . . . 1,228,201 37,306 306,058
----------- ----------- -----------
Net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,171,348) (15,554,366) (9,690,098)
Gain on sale of Partnership's investment in unconsolidated venture (note 6(a)) . 2,627,427 -- --
Loss on sale of investment property, net of venture partner's share of gain
of $261,656 (note 6(b)). . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,039) -- --
----------- ----------- -----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,842,960) (15,554,366) (9,690,098)
=========== =========== ===========
Net loss per limited partnership interest (note 1):
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (28.53) (106.39) (66.28)
Gain on sale of Partnership's investment in unconsolidated venture. . . 18.53 -- --
Loss on sale of investment property . . . . . . . . . . . . . . . . . . (2.10) -- --
----------- ----------- -----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12.10) (106.39) (66.28)
=========== =========== ===========
<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 PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (140,347.82534 INTERESTS)
------------------------------------------------------- -------------------------------------------------
CONTRIBU-
TIONS, NET
OF OFFERING
COSTS AND
CONTRI- CASH PURCHASE CASH
BUTIONS NET LOSS DISTRIBUTIONS TOTAL DISCOUNTS NET LOSS DISTRIBUTIONS TOTAL
-------- ---------- ------------- -------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit)
December 31, 1990 .$20,000 (1,825,770) (26,517) (1,832,287) 120,541,353 (43,818,470) (12,083,729) 64,639,154
Net loss . . . . . . -- (387,603) -- (387,603) -- (9,302,495) -- (9,302,495)
Cash distributions
($32.54 per limited
partnership interest
(note 1)) . . . . . -- -- -- -- -- -- (4,782,715) (4,782,715)
------- ---------- ------- ---------- ------------ ----------- ----------- ----------
Balance (deficit)
December 31, 1991 .20,000 (2,213,373) (26,517) (2,219,890) 120,541,353 (53,120,965) (16,866,444) 50,553,944
Net loss . . . . . . -- (622,175) -- (622,175) -- (14,932,191) -- (14,932,191)
Cash distributions
($34.00 per limited
partnership interest
(note 1)) . . . . . -- -- -- -- -- -- (4,771,829) (4,771,829)
------- ---------- ------- ---------- ----------- ----------- ----------- ----------
Balance (deficit)
December 31, 1992 . 20,000 (2,835,548) (26,517) (2,842,065) 120,541,353 (68,053,156) (21,638,273) 30,849,924
Net loss . . . . . . -- (143,570) -- (143,570) -- (1,699,390) -- (1,699,390)
Cash distributions
($34.00 per limited
partnership interest
(note 1)) . . . . . -- -- (149,119) (149,119) -- -- (4,771,830) (4,771,830)
------- ---------- ------- ---------- ----------- ----------- ----------- ----------
Balance (deficit)
December 31, 1993 .$20,000 (2,979,118) (175,636) (3,134,754) 120,541,353 (69,752,546) (26,410,103) 24,378,704
======= ========== ======== ========== =========== =========== =========== ==========
<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
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,842,960) (15,554,366) (9,690,098)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021,646 5,080,004 5,090,639
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . 105,969 121,810 120,639
Partnership's share of loss from operations of unconsolidated ventures . . . 4,852,148 14,384,114 8,086,449
Venture partners' share of ventures' operations and gain on sale . . . . . . (966,545) (37,306) (306,058)
Loss on sale of investment property. . . . . . . . . . . . . . . . . . . . . 37,383 -- --
Gain on sale of Partnership's investment in unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,627,427) -- --
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . (60,188) (637,366) 286,726
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,009) 36,101 40,588
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,897 98,066 (103,008)
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (231,937) (121,768) (226,696)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,922 154,843 512
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (522,672) (347,802) (412,224)
Amounts due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 72,178 335,101 306,872
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,170 (121,534) 316,121
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,644) (29,457) (17,374)
----------- ----------- ----------
Net cash provided by operating activities. . . . . . . . . . . . . . . 2,945,931 3,360,440 3,493,088
----------- ----------- ----------
Cash flows from investing activities:
Cash proceeds from sale of investment property,
net of selling expenses (note 6(b)). . . . . . . . . . . . . . . . . . . . . 22,424,531 -- --
Net sale (purchase) of short-term investments. . . . . . . . . . . . . . . . . (16,317,252) 1,066,913 958,516
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . (263,742) (499,896) (31,331)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . (158,786) (57,679) (20,616)
Partnership's distributions from unconsolidated ventures . . . . . . . . . . . 1,097,566 835,644 1,525,494
Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . (30,990) (110,515) (1,317,235)
----------- ----------- ----------
Net cash provided by investing activities. . . . . . . . . . . . . . . 6,751,327 1,234,467 1,114,828
----------- ----------- ----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . (5,480,508) (3,676,276) (4,194,446)
Venture partners' distributions from venture . . . . . . . . . . . . . . . . . (5,652,116) (1,097,019) (845,069)
Venture partners' contributions to venture . . . . . . . . . . . . . . . . . . 6,056,277 4,744,958 5,072,204
Distributions to limited partners. . . . . . . . . . . . . . . . . . . . . . . (4,771,830) (4,771,829) (4,782,715)
Distributions to general partners. . . . . . . . . . . . . . . . . . . . . . . (149,119) -- --
----------- ----------- ----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . (9,997,296) (4,800,166) (4,750,026)
----------- ----------- ----------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . $ (300,038) (205,259) (142,110)
=========== =========== ==========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . $ 9,991,899 11,279,397 11,761,229
=========== =========== ==========
Non-cash investing and financing activities:
Total sales price of investment property, net of selling expenses. . . . . . $76,033,823 -- --
Mortgage loan payable assumed by buyer . . . . . . . . . . . . . . . . . . . (53,609,292) -- --
----------- ----------- ----------
Cash proceeds from sale of investment property,
net of selling expenses. . . . . . . . . . . . . . . . . . . . . . . $22,424,531 -- --
=========== =========== ==========
<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
DECEMBER 31, 1993, 1992 AND 1991
(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 3(g)) and JMB/Hahn PDTC Associates, L.P. ("Palm Desert")
(note 3(h)). The effect of all transactions between the Partnership and its
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
(notes 3 and 9) 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 ("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
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 for the
years ended December 31, 1993 and 1992 is summarized as follows:
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
<CAPTION>
1993 1992
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 89,771,714 89,977,915 154,176,204 144,295,847
Partners' capital accounts (deficits):
General partners . . . . . . . . . . . . . . . . . . . . (3,134,754) (4,260,046) (2,842,065) (4,294,401)
Limited partners . . . . . . . . . . . . . . . . . . . . 24,378,704 44,254,461 30,849,924 39,324,155
Net earnings (loss):
General partners . . . . . . . . . . . . . . . . . . . . (143,570) 183,474 (622,175) (297,075)
Limited partners . . . . . . . . . . . . . . . . . . . . (1,699,390) 9,702,136 (14,932,191) (7,129,801)
Net earnings (loss) per limited partnership interest . . . (12.10) 69.13 (106.39) (50.80)
=========== ========== =========== ===========
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
The net loss per limited Partnership interest is based upon the number of
limited partnership interests outstanding at the end of the period
(140,347.82534). Deficit capital accounts will result, through the duration
of the Partnership, in net gain for financial reporting and income tax
purposes.
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 (none at December 31,
1993 and 1992) as cash equivalents with any remaining amounts reflected as
short-term investments.
Deferred expenses are comprised of organization costs which were
amortized over a five-year period on a straight-line basis, loan fees which
are amortized over the term of the related loan and lease commissions which
are amortized over the terms of the related leases using the straight-line
method.
Although certain leases of the Partnership provide for tenant occupancy
during periods for which no rent is due and/or increases in minimum lease
payments over the term of the lease, the Partnership accrues prorated rental
income for the full period of occupancy on a straight-line basis.
Certain amounts in the 1992 and 1991 consolidated financial statements
have been reclassified to conform to the 1993 presentation.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the Partnership.
However, in certain instances, the Partnership has been required under
applicable law to remit directly to the tax authorities amounts representing
withholding from distributions paid to partners.
(2) INVESTMENT PROPERTIES
The Partnership has acquired, through joint ventures, interests in three
contiguous apartment complexes, three office buildings and three shopping
centers. During 1993, the Partnership, through JMB /Warner, sold its interest
in the Blue Cross Building and its interest in Owings Mills Mall (note 6).
All of the properties owned at December 31, 1993 were in operation. The cost
of the investment properties represents the total cost to the Partnership or
its ventures plus miscellaneous acquisition costs.
Depreciation on the consolidated investment properties has been provided
over the estimated useful lives of 5 to 30 years using the straight-line
method.
The investment properties are pledged as security for the long-term debt,
for which generally there is no recourse to the Partnership.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over
their estimated useful lives.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1993 is party to five joint venture
agreements (JMB/Owings, JMB/125, 260 Franklin, Villages Northeast and
JMB/NewPark) with Carlyle Real Estate Limited Partnership - XV ("Carlyle-XV")
(and for JMB/125, Carlyle Advisors, Inc.), and two (JMB/Warner and Palm
Desert) with Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"),
all sponsored by the General Partners or their affiliates. The terms of these
affiliated partnerships 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 December 31, 1993.
Certain of these affiliated partnerships have entered into joint venture
agreements with unaffiliated joint venture partners. In general, the
unaffiliated joint venture partners, who are either the sellers (or their
affiliates) of the property investments being acquired or parties which have
contributed an interest in the property being developed, or were subsequently
admitted to the ventures, make no cash contributions to the ventures, but
their retention of an interest in the property, through the joint venture, is
taken into account in determining the purchase price of the Partnership's
interest, which is determined by arm's-length negotiations. 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 has acquired, through the above ventures, three apartment
complexes, three office buildings and three shopping centers. In 1993, the
Partnership through JMB/Owings sold its interest in Owings Mills Mall and
through JMB/Warner sold the Blue Cross Building (note 6). Certain of the
ventures' properties have been financed under various long-term debt
arrangements as described in note 4 and in note 3 of Notes to Combined
Financial Statements filed with this report.
There are certain risks associated with Partnership's investments made
through joint ventures, including the possibility that the Partnership's joint
venture partners in an investment might become unable or unwilling to fulfill
their financial or other obligations, or that such joint venture partners may
have economic or business interests or goals that are inconsistent with those
of the Partnership.
(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
December 31, 1993 was 6%. The amount of such outstanding O&Y partner non-
recourse loans was approximately $14,650,000 at December 31, 1993. Due to a
major tenant vacating in 1991 and the O&Y affiliates' default under the
"takeover space" agreement, the property operated at a deficit in 1993 and is
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
expected to operate at a deficit for the next several years. Such deficits
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 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 the joint venture, the
terms of the joint venture agreement between the O&Y partners and JMB/125
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 the joint venture in the amount of its deficit capital account
balance. Taxable gain arising from the sale or other disposition of the joint
venture'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 joint venture agreement. However, if such
taxable gain is insufficient to eliminate the deficit balance in its account
in connection with a liquidation of the joint venture, JMB/125 would be
required to contribute funds to the joint venture (regardless of whether any
proceeds were received by JMB/125 from the disposition of the joint venture's
property) to eliminate any remaining deficit 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 any obligation
attributable to it as a partner of JMB/125 to make such contribution.
Although the amount of such liability may be material, the Limited Partners of
the Partnership would not be required to make additional contributions of
capital to satisfy the 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 joint venture agreement provide that
the O&Y partners are obligated to advance to the joint venture, 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 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 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 $28,600,000 through December 31, 1993, 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. As a result of 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 the end of 1993,
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 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 provided loss reserves for the entire rent offset by J&H,
$19,300,000 and $9,300,000 in 1993 and 1992, respectively, 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
the O&Y partners' and the O&Y affiliates' performance of their obligations.
The Partnership's share of such losses was approximately $3,725,000 and
$8,106,000 for the years ended December 31, 1993 and 1992, respectively, and
is included in the Partnership's share of loss from operations of
unconsolidated venture. 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 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 joint venture agreement.
Accordingly, it appears unlikely the O&Y partners will fulfill their
obligations to 125 Broad and JMB/125. As a result, as discussed above, it
appears unlikely that 125 Broad will be able to restructure the mortgage loan
and 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, 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.
The O&Y partners and certain other O&Y affiliates reached an agreement
with the City of New York to defer the payment of real estate taxes owed in
July 1992 on properties in which O&Y affiliates have an ownership interest,
including the 125 Broad Street Building. Payment of the real estate taxes was
made in six equal monthly installments from July through December 1992.
Interest on the deferred amounts was paid in July 1992. A similar agreement
to defer payment of real estate taxes owed in January 1993 was entered into
for the first six months of 1993. Interest on the deferred amounts was paid
in January 1993.
Vacancy rates in the downtown Manhattan office market have increased
substantially over the last several 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
has 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.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(c) JMB/Owings
On June 30, 1993, JMB/Owings sold its interest in Owings Mills Shopping
Center (note 6(a)).
In December 1985, the Partnership, through the JMB/Owings joint venture
partnership, acquired an interest in an existing joint venture partnership
("Owings Mills") which owns an interest in an enclosed regional shopping
center which was completed in July 1986.
JMB/Owings acquired its interest in Owings Mills for an initial capital
contribution of $500,000, subject to the interim mortgage loan of
approximately $60,000,000 (maximum commitment $99,000,000). In July 1987, the
permanent mortgage loan funded in the amount of $99,000,000, of which
$90,000,000 represents financing of the venture and $9,000,000 represents
financing of an affiliate of the joint venture partners with respect to its
leasehold interest in the ground lease described below. JMB/Owings made
additional capital contributions of $1,300,000 and $3,000,000 in December 1986
and July 1987, respectively. JMB/Owings was obligated to pay operating
deficits of the shopping center incurred for the period from commencement of
the shopping center operations (July 1986) through March 31, 1987, and
JMB/Owings paid an affiliate of the developer a fee of $2,200,000 in December
1986 in consideration of its assumption of JMB/Owings's obligation to fund
such operating deficits. Thus, JMB/Owings's original cash investment was
$7,000,000, of which the Partnership's share was $3,500,000.
Operating profits and losses of Owings Mills, in general, were allocable
40% to JMB/Owings and 60% to the joint venture partners.
JMB/Owings had a cumulative preferred interest in net cash receipts (as
defined) from the property. Such preferential interest related to a
negotiated rate of return on contributions made by JMB/Owings. Such
preferential interest was received through June 1993. After JMB/Owings
received its preferential return, the joint venture partners were entitled to
a non-cumulative return on their interest in Owings Mills; additional net cash
receipts were to be shared in a ratio relating to the various ownership
interests of JMB/Owings and its joint venture partners. JMB/Owings also had
preferred positions (related to JMB/Owings's cash investment in Owings Mills)
with respect to distribution of net sale or refinancing proceeds from Owings
Mills.
Owings Mills had entered into a long-term ground lease under which it has
leased approximately 79 acres of the land owned by Owings Mills to an
affiliate of the joint venture partners. In general, all rent and proceeds of
the sale of sub-parcels received by Owings Mills pursuant to the ground lease
would have been distributable to the joint venture partners.
The shopping center was managed by an affiliate of the developer under a
long-term agreement for a fee equal to 3-1/2% of the gross receipts of the
property.
(d) 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.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
An affiliate of the General Partner manages the property for a fee
computed at 3% of the property's gross receipts. Beginning January 1, 1992,
260 Franklin Street is escrowing the payment of property management fees and
leasing commissions to the affiliate pursuant to the terms of the debt
modification described below.
The office market in the Financial District of downtown Boston remains
competitive due to new office building developments and layoffs, cutbacks and
consolidations by many of the financial service companies which, along with
related businesses, dominate this sub-market. Due to the competitive nature
of the Boston office market, various rental concessions and lower effective
rates have been required to facilitate leasing at the property. The property
is currently expected to operate at a deficit for 1994 and for several years
thereafter. This has resulted in uncertainty as to 260 Franklin's ability to
recover the net carrying value of the investment property through future
operations and sales. As a matter of prudent accounting practice, a provision
for value impairment of such investment property of $17,120,734 was recorded
as of December 31, 1990. The Partnership's share of such provision was
$5,136,220. 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.
260 Franklin 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. During 1991, 260 Franklin made monthly payments of principal
and interest, in the amount of $714,375, which reduced the outstanding balance
to $74,891,013 as of April 30, 1991. The modified terms of the mortgage note
provide for payments made relating to 1991, which were paid through April
1991, to be amortized based upon an accrued interest rate of 6%. Beginning
May 1991, the modified mortgage 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, 260 Franklin 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, 260 Franklin 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. 260 Franklin is required
to (i) escrow excess cash flow from operations, 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 which are
the primary components of the anticipated operating deficits noted above
($726,983 used as of December 31, 1993) 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.
(e) Villages Northeast
In September 1986, the Partnership, through the Villages Northeast joint
venture partnership, acquired through a joint venture ("Post Associates") with
an affiliate of the developer, an interest in three apartment complexes known
as the Dunwoody Crossing (Phase I, II and III) Apartments, formerly known as
Post Crest Apartments, Post Terrace Apartments and Post Crossing Apartments,
respectively, located near Atlanta, Georgia.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Villages Northeast acquired its interest in the apartment complexes from
an affiliate of the developer for a purchase price of $35,027,117 paid at
closing, subject to an existing first mortgage loan of $9,557,600 secured by
the Dunwoody Crossing (Phase II). Villages Northeast and the seller formed
Post Associates with each contributing its interest in the complexes to Post
Associates. In addition, Villages Northeast contributed $1,371,043 to Post
Associates to pay certain expenses in connection with the retirement of
indebtedness related to the complexes.
As contemplated at the time of acquisition, in September 1987 an
additional mortgage loan funded in the amount of $21,000,000, of which the
Partnership's share was $6,300,000. The note was secured by the Dunwoody
(Phase I and III) Apartments, bore interest at a rate of 9.75% and required
monthly debt service payments consisting of interest only through April 1991
and monthly payments of $180,425 thereafter representing principal and
interest until October 1, 1994, when the entire outstanding balance of
principal of $20,692,324 and any unpaid interest is due. Thus, Villages
Northeast's cash investment was approximately $15,398,000, of which the
Partnership's share was approximately $4,619,000.
Post Associates refinanced the first mortgage loan of approximately
$9,467,000 secured by the Dunwoody (Phase II) Apartments effective October 6,
1992, with a $9,800,000 replacement loan from an institutional lender. The
new first mortgage loan, bearing interest of 7.64% per annum, is
collateralized by the property and requires monthly payments of principal and
interest of $73,316 beginning November 1, 1992 and continuing through November
1, 1997, when the remaining balance is payable.
Villages Northeast is entitled to a cumulative preferred return of annual
net cash receipts (as defined) from the properties. Such preferential return
relates to a negotiated rate of return on contributions made by Villages
Northeast. Villages Northeast has received cash distributions from property
operations through December 31, 1993. In addition, pursuant to the terms of
the venture agreement, the unaffiliated venture partner was obligated to fund
the shortfall in the Villages Northeast's cumulative preferred cash return
through September 30, 1990, all of which was received. After Villages
Northeast receives its preferential return, the unaffiliated venture partner
is entitled to a non-cumulative return on its interest in the venture;
additional net cash receipts are shared in a ratio relating to the various
ownership interests of Villages Northeast (90%) and its unaffiliated venture
partner (10%). Villages Northeast also has preferred positions (related to
Villages Northeast's investment in Post Associates) with respect to
distribution of net sale or refinancing proceeds from Post Associates.
Operating profits and losses, in general, are allocable 90% to Villages
Northeast and 10% to the unaffiliated venture partner, except that certain
expenses paid for out of Villages Northeast's cash payments are to be
allocated solely to Villages Northeast and certain costs of operations paid
for out of capital contributions, if any, of the unaffiliated venture partner
are allocable solely to it.
An affiliate of the unaffiliated 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.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(f) 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.
In 1990, NewPark Associates reached an agreement with J.C. Penney to open
an anchor store at NewPark Mall, which opened in November 1991. Under the
terms of the agreement, J.C. Penney built its own store and NewPark Associates
constructed a parking deck to accommodate the addition of J.C. Penney to the
center. NewPark Associates incurred costs of approximately $10,400,000
related to this addition, of which $2,000,000 was reimbursed by J.C. Penney.
The unaffiliated joint venture partner loaned NewPark Associates all of the
funds to cover the costs incurred related to the addition. In December 1992,
proceeds from the refinancing described below were used to repay all amounts
due to the unaffiliated joint venture partner.
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 are 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 was 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 that was substantially complete as of September 30,
1993.
The NewPark Associates partnership agreement provides that JMB/NewPark
and the joint venture partner are each entitled to receive 50% of profits and
losses, net cash flow and net sale or refinancing proceeds of NewPark
Associates and are each obligated to advance 50% of any additional funds
required under the terms of the NewPark Associates partnership agreement.
The portion of the shopping center owned by NewPark Associates is managed
by the unaffiliated joint venture partner under a long-term agreement pursuant
to which it is obligated to manage the property and collect all receipts from
operations of the property. The joint venture partner is paid a management
fee equal to 4% of the fixed and percentage rent.
(g) JMB/Warner
On November 2, 1993, the Partnership through JMB/Warner sold its interest
in the Blue Cross Building (note 6(b)).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
In December 1987, the Partnership, through a joint venture partnership
(JMB/Warner), (with Carlyle-XVII) acquired an interest in an existing five-
structure office complex in Woodland Hills (Los Angeles), California known as
the Blue Cross Building. The purchase price of the property of $90,000,000
was paid in cash at closing. During 1989, JMB/Warner obtained a permanent
mortgage loan (see note 4) in the principal amount of $55,000,000 secured by
the Blue Cross Office Building. Thus, JMB/Warner's initial cash investment in
the property, excluding certain acquisition costs, was approximately
$35,000,000, of which the Partnership's share was $25,967,742 (or approxi-
mately 74%). The JMB/Warner venture agreement generally provided that any
allocation of profits or losses and distributions of cash flow, net sale
proceeds or net financing proceeds were to be distributed or allocated, as the
case may be, to the Partnership in proportion to its capital contributions.
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, the
Partnership was relieved of such obligations.
As contemplated at the time of acquisition, the seller/tenant of the Blue
Cross Building sold to an affiliate of the General Partners of the Partnership
an 85% interest in approximately 24 acres of land adjacent to the property
owned in fee simple by the seller/tenant, and a joint venture was formed
between such affiliate and the seller/tenant to develop a major commercial
center on such property. As of the date of sale, there had not been any
significant development activity relating to such property. In connection
with this transaction, the collateral securing the seller/tenant obligations
under the lease was terminated and such affiliate issued a guaranty to
JMB/Warner to secure the obligations of the seller/tenant up to $35,000,000,
subject to certain conditions. In connection with JMB/Warner's sale of the
Blue Cross Building, this guarantee was terminated.
(h) 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 (note 4), 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 and
Carlyle-XVII's initial aggregate contribution was 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
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
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 contributions to Palm Desert to
pay the $13,752,746 purchase price obligation (note 4) of Palm Desert to the
seller of the shopping center, which $4,836,906, $3,089,602, $3,667,804 and
$2,168,434 were paid in January 1993, 1992, 1991 and 1990, respectively. As
of January 1993, the purchase price obligation was paid in full. The joint
venture partner is also 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 as described below. Amounts
required to pay the cost of tenant improvements and allowances (the "Tenant
Improvement Costs") 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.
The terms of the Palm Desert agreement provide that the Partnership and
Carlyle-XVII are entitled to receive out of net cash flow a current preferred
return and a cumulative preferred return, each based on a negotiated rate of
return on their respective initial capital contributions (other than those
used to pay closing costs). Such current preferred return was received
through December 31, 1993. The Partnership, Carlyle-XVII and the joint
venture partner are entitled to a cumulative preferred return, based on a
negotiated rate of return on their respective contributions to pay the Tenant
Improvement Costs through December 1994 (the "Tenant Improvement Cost
Contributions"). All cumulative preferred returns are distributable on an
equal priority level; however, they are subordinate to the receipt by the
Partnership and Carlyle-XVII of their respective current year preferred
return. Any remaining annual cash flow will be distributable 75% to the
Partnership and Carlyle-XVII and 25% to the joint venture partner until the
Partnership and Carlyle-XVII have received an amount equal to their initial
capital contributions (other than those used to pay closing costs) plus a
negotiated annual internal rate of return thereon and an amount equal to
their Tenant Improvement Cost Contributions and thereafter, any remaining
annual cash flow shall be distributable 50% to the Partnership and Carlyle-
XVII and 50% to the joint venture partner.
The Palm Desert agreement also provides that upon sale or refinancing of
the property, net sale or refinancing proceeds will be distributable first to
the Partnership, Carlyle-XVII and the joint venture partner to the extent of
any deficiencies in the receipt of their respective cumulative preferred
returns; second, to the Partnership and Carlyle-XVII in an amount equal to
their initial capital contributions (other than those used to pay closing
costs) and their Tenant Improvement Cost Contributions and, as an equal
priority, to the joint venture partner in an amount equal to its Tenant
Improvement Cost Contributions; third, to the joint venture partner in an
amount equal to the amount contributed by it to pay operating deficits through
December 1994 and to provide a portion of the Partnership's and Carlyle-XVII's
current and cumulative preferred return described above (not to exceed
$1,700,000); fourth, 75% to the Partnership and Carlyle-XVII and 25% to the
joint venture partner until the Partnership and Carlyle-XVII have received a
negotiated annual internal rate of return on their respective initial capital
contributions (other than those used to pay closing costs), and any remaining
proceeds will be distributable 50% to the Partnership and Carlyle-XVII and 50%
to the joint venture partner.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
The land underlying the shopping center is owned by the lender under the
first mortgage loan. Palm Desert leases the land by assignment of an existing
ground lease which has a term through December 2038 and provides for minimum
annual rental payments of $900,000, as well as for additional rental payments
for each calendar year equal to 50% of the amount by which certain of the
ground lessee's gross receipts from the shopping center exceed $6,738,256.
Total ground lease payments for the years ended December 31, 1993, 1992 and
1991 were $1,015,968, $1,021,382, and $1,314,828, respectively. The ground
lease provides for two 10-year extensions at the option of the lessee. The
ground lease does not provide for any option on the part of Palm Desert to
purchase the land.
Operating profits and losses, in general, are allocable in proportion to
the amount of net cash flow distributed to the partners of Palm Desert, or, if
there are no distributions of net cash flow, generally 75% to the Partnership
and Carlyle-XVII and 25% to the joint venture partner, except that the
deductions allocable with respect to certain expenses are allocable to the
partner whose contributions are used to pay such expenses. For 1993, in
accordance with the Palm Desert partnership agreement, losses were allocated
to the joint venture partner to the extent that it had cumulatively
contributed capital to fund the Partnership's and Carlyle-XVII's preferred
return as discussed above. The remainder of the loss was allocated 75% to the
Partnership and Carlyle-XVII and 25% to the joint venture partner. For 1992
and 1991, profits and losses were allocated in accordance with the cash flow
distributed.
The Palm Desert agreement also provides that the annual cash flow, net
sale or refinancing proceeds and tax items distributed or allocated
collectively to the Partnership and Carlyle-XVII generally are distributable
or allocable between them based upon their respective capital contributions.
Such capital contributions are generally in the percentages of approximately
85.8% for the Partnership and approximately 14.2% for Carlyle-XVII.
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.
(4) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1993 and 1992:
1993 1992
------------ ------------
12% per annum mortgage note; secured by
the Palm Desert Town Center; payable
in monthly installments of principal
and interest of $446,842 until paid
in full in January 2019. . . . . . . . $42,448,451 42,700,084
11.5% per annum purchase price obligation
on the Palm Desert Town Center; payable
in annual installments of principal
and interest commencing January 10,
1990 through January 10, 1993
(see note 3(h)). . . . . . . . . . . . -- 4,826,906
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
1993 1992
------------ ------------
10.14% per annum mortgage note secured
by the Blue Cross Office Building,
assumed by buyer at sale (note 6(b));
annual installments of principal and
interest of $5,593,600 were due until
October 1, 1999 when the outstanding
principal balance of approximately
$50,803,000 was due and payable. . . . -- 54,011,260
----------- -----------
Total debt . . . . . . . . . . . 42,448,451 101,538,250
Less current portion of
long-term debt . . . . . . . . 283,548 5,480,508
----------- -----------
Total long-term debt . . . . . . $42,164,903 96,057,742
=========== ===========
Five year maturities of long-term debt are summarized as follows:
1994. . . . . . . . $283,548
1995. . . . . . . . 319,509
1996. . . . . . . . 360,031
1997. . . . . . . . 405,692
1998. . . . . . . . 457,143
========
(5) 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 (note 8). 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.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
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
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.
(6) 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 Partnership'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 Partnership'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 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 Mills Associates 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
Statement of Financial Accounting Standards No. #66. At December 31, 1993,
the total deferred gain of JMB/Owings including principal and interest
payments of $546,639 received through December 31, 1993 is $9,687,441 of which
the Partnership's share is $4,843,721.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(b) JMB/Warner
On November 2, 1993, JMB/Warner sold the Blue Cross Building to an
unaffiliated buyer 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 of which approximately $1,040,000 has not been
distributed as of December 31, 1993 to the affiliated venture partner,
Carlyle-XVII. 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.
(7) LEASES
(a) As Property Lessor
At December 31, 1993, the Partnership and its consolidated ventures'
principal asset is a shopping center. The Partnership has determined that all
leases are properly classified as operating leases; therefore rental income is
reported when earned and the cost of the properties, excluding the cost of
land, is depreciated over the estimated useful lives. Leases with tenants at
Palm Desert Town Center range in term from one to twenty-five years and
provide for fixed minimum rent and partial reimbursement of operating costs.
In addition, leases with shopping center tenants generally provide for
additional rent based upon percentages of tenants' sales volumes. A
substantial portion of the ability of the retail tenants at Palm Desert Town
Center to honor their leases is dependent upon the retail economic sector.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements are as follows:
1994 . . . . . . . . . . . . . . . . $ 6,788,757
1995 . . . . . . . . . . . . . . . . 6,731,221
1996 . . . . . . . . . . . . . . . . 5,778,505
1997 . . . . . . . . . . . . . . . . 5,290,805
1998 . . . . . . . . . . . . . . . . 4,640,254
Thereafter . . . . . . . . . . . . . 18,915,436
-----------
$48,144,978
===========
(b) As Property Lessee
The following lease agreement has been determined to be an operating
lease:
The Partnership owns, through Palm Desert, a leasehold interest which
expires in December 2038 in the land underlying the Palm Desert Town Center.
The ground lease provides for annual rental payments of $900,000 plus 50% of
certain gross receipts of the shopping center above $6,738,256. Total
payments for the years ended December 31, 1993, 1992 and 1991 were $1,015,968,
$1,021,382 and $1,314,828, respectively.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Future minimum rental commitments under the lease are as follows:
1994. . . . . . . . . . . $ 900,000
1995. . . . . . . . . . . 900,000
1996. . . . . . . . . . . 900,000
1997. . . . . . . . . . . 900,000
1998. . . . . . . . . . . 900,000
Thereafter. . . . . . . . 36,000,000
-----------
$40,500,000
===========
(8) TRANSACTIONS WITH AFFILIATES
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 and the General Partners' distributive share of net
cash flow (see note 5). The cumulative combined amount of such deferred
distributions and management fees aggregated $2,372,056 and $2,239,506 at
December 31, 1993 and 1992, respectively. All amounts deferred do not bear
interest and are payable from any net cash flow or net sale or refinancing
proceeds of the Partnership, at such times as the General Partners determine.
Fees, commissions and other expenses required to be paid by the Partner-
ship (or its consolidated ventures) to the General Partners and their
affiliates as of December 31, 1993 and for the years ended December 31, 1993,
1992 and 1991 are as follows:
UNPAID AT
DECEMBER 31,
1993 1992 1991 1993
-------- -------- -------- ------------
Insurance commissions. . . .$ 28,810 17,634 49,934 --
Reimbursement (at cost) for
accounting services . . . . 76,669 90,567 86,291 76,669
Reimbursement (at cost) for
data processing . . . . . . -- 434 2,536 --
Reimbursement (at cost) for
legal services. . . . . . . 6,775 5,106 4,095 6,775
Management fees to Corporate
General Partner . . . . . .331,376 331,376 332,132 1,482,537
Disbursement agent fees. . . -- -- 10,142 --
Reimbursement (at cost) for
out-of-pocket expenses. . . 29,407 14,421 17,518 --
-------- -------- -------- ---------
$473,037 459,538 502,648 1,565,981
======== ======== ======== =========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries (and salary related expenses) and direct expenses
of officers and employees of the Corporate General Partner and its affiliates
while directly engaged in the administration of the Partnership.
(9) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary combined financial information for JMB/125, JMB/Owings (through
the date of sale - June 30, 1993), 260 Franklin, Villages Northeast and
JMB/NewPark are as follows:
1993 1992
------------ -----------
Current assets . . . . . . . . . . . . . . . . .$ 21,169,710 22,731,010
Current liabilities, including $296,919,801
in default in 1993 (note 3(b)) . . . . . . . . (325,829,424) (307,308,392)
------------ -----------
Working capital (deficit). . . . . . . . . . (304,659,714) (284,577,382)
------------ -----------
Deferred expenses and accrued rents receivable . 35,176,540 44,881,845
Ventures partners' equity. . . . . . . . . . . . (13,051,155) (30,395,000)
Investment properties, net . . . . . . . . . . . 437,509,566 524,354,457
Other liabilities. . . . . . . . . . . . . . . . (9,887,673) (197,167)
Long-term debt . . . . . . . . . . . . . . . . . (158,357,756) (264,045,649)
----------- ------------
Partnership's capital (deficit). . . . . . .$ (13,270,192) (9,978,896)
============== ============
Represented by:
Invested capital . . . . . . . . . . . . . . .$ 57,623,233 57,592,243
Cumulative cash distributions. . . . . . . . . (19,275,162) (18,177,596)
Cumulative losses. . . . . . . . . . . . . . . (51,618,263) (49,393,543)
----------- -------------
$(13,270,192) (9,978,896)
============= =============
Total income . . . . . . . . . . . . . . . . . .$104,538,897 88,026,766
Expenses applicable to operating loss. . . . . . 134,358,616 160,292,419
------------ ------------
Net operating loss . . . . . . . . . . . . . . . (29,819,719) (72,265,653)
Gain on sale of investment in unconsolidated
venture (note 6(a)). . . . . . . . . . . . . . 5,254,855 --
Loss on sale of investment property (note 6(b)). (37,383) --
------------- -----------
Net loss (see note 3(b)) . . . . . . . . . .$(24,602,247) (72,265,653)
============ ============
Partnership's share of loss. . . . . . . . . . .$ (2,224,720) (14,384,114)
============= ==========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
Additionally, for the year ended December 31, 1991, total income was
$95,441,955, expenses applicable to operating loss were $132,990,700 and the
net loss was $37,548,745 for the unconsolidated ventures listed above.
(10) SUBSEQUENT EVENT - DISTRIBUTIONS
In February 1994, the Partnership paid an operating distribution of
$561,391 ($4 per Interest) and a sales distribution of $14,034,783 ($100 per
Interest) to the Limited Partners and $204,142 to the General Partners (of
which $38,986 constituted a management fee).
SCHEDULE X
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
---------- ---------- ----------
Depreciation . . . . . . . . . . $4,021,646 5,080,004 5,090,639
Amortization of deferred expenses 105,969 121,810 120,639
Repair and maintenance . . . . . 2,273,058 2,338,602 2,272,338
Real estate taxes. . . . . . . . 758,595 694,813 700,859
========== ========== ==========
<TABLE>
SCHEDULE XI
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
<CAPTION>
COST
CAPITALIZED
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
----------------------------- -------------- --------------------------------------------
BUILDINGS LAND, BUILDINGS
AND BUILDINGS AND AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL (D)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Palm Desert Town Center
Palm Desert (Palm
Springs), California . .$42,448,451 -- (C) 59,126,292 876,228 -- 60,002,520 60,002,520
=========== ========== =========== ======= ========== =========== ==========
</TABLE>
<TABLE>
SCHEDULE XI - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
<CAPTION>
LIVES ON WHICH
DEPRECIATION
IN LATEST
INCOME 1993
ACCUMULATED DATE OF DATE STATEMENT IS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Palm Desert Town Center
Palm Desert (Palm
Springs), California . . . . . . . . . . . 10,011,970 1983 12/23/88 5-30 YEARS 758,595
========== =======
<FN>
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the property, including amounts
incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1993 for Federal income tax purposes was approximately
$59,881,585.
(C) Property operated under ground lease; see Note 7(b).
</TABLE>
<TABLE>
SCHEDULE XI - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(D) Reconciliation of real estate owned:
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . $152,984,077 152,484,181 152,452,850
Additions during period . . . . . . . . 263,742 499,896 31,331
Sale of investment property . . . . . . (93,245,299) -- --
------------ ----------- -----------
Balance at end of period. . . . . . . . $ 60,002,520 152,984,077 152,484,181
============ =========== ===========
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . $ 23,729,463 18,649,459 13,558,820
Depreciation expense. . . . . . . . . . 4,021,646 5,080,004 5,090,639
Sale of investment property . . . . . . (17,739,139) -- --
------------ ----------- -----------
Balance at end of period. . . . . . . . $ 10,011,970 23,729,463 18,649,459
============ =========== ===========
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI:
We have audited the combined financial statements of Certain Uncon-
solidated Joint Ventures of Carlyle Real Estate Limited Partnership-XVI (note
1) as listed in the accompanying index. In connection with our audits of the
combined financial statements, we also have audited the financial statement
schedules as listed in the accompanying index. These combined financial
statements and financial statement schedules are the responsibility of the
General Partners of the Partnership. Our responsibility is to express an
opinion on these combined financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the General Partners of the Partnership, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Certain
Unconsolidated Joint Ventures of Carlyle Real Estate Limited Partnership-XVI
at December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1993, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedules, when considered in
relation to the basic combined financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
The accompanying combined financial statements and financial statement
schedules have been prepared assuming that the ventures comprising Certain
Unconsolidated Joint Ventures of Carlyle Real Estate Limited Partnership-XVI
will continue as going concerns. 125 Broad Building Associates (JMB/125) and
its venture, 125 Broad Street Company (125 Broad) comprise approximately
78.8%, 86.1% and 76.9% of combined assets, revenues and net loss,
respectively, in the accompanying combined financial statements as of and for
the year ended December 31, 1993. As discussed in Note 3(b) of the
Partnership's Notes to Consolidated Financial Statements, incorporated by
reference in Note 2 of the Combined Financial Statements, the property owned
by 125 Broad has suffered losses and cash flow deficits from operations and
expects to incur significant cash flow deficits in the future that are
required to be funded by the unaffiliated venture partners through 1995
pursuant to the 125 Broad joint venture agreement. In 1992, the unaffiliated
joint venture partners failed to advance necessary funds to 125 Broad and, as
a result, 125 Broad defaulted on its mortgage loan. JMB/125 has notified the
unaffiliated joint venture partners that their failure to advance funds to
cover operating deficits constitutes a default under the 125 Broad joint
venture agreement. The 125 Broad joint venture partners have been negotiating
with the property's lender to restructure the mortgage loan; however, there
can be no assurances that negotiations to restructure the loan will be
successful. The Partnership believes it is unlikely that the unaffiliated
joint venture partners will fulfill their funding obligations to 125 Broad and
JMB/125. As a result, it appears unlikely that 125 Broad will be able to
restructure the mortgage loan. In the event that 125 Broad is unable to
restructure the loan, JMB/125 would likely decide not to commit additional
funds to 125 Broad. These circumstances raise substantial doubt about
JMB/125's and 125 Broad's ability to retain their ownership interests in the
investment property and continue as going concerns. The General Partners'
plans with regard to these matters are also described in Note 3(b) of the
Partnership's notes to consolidated financial statements. The accompanying
combined financial statements and financial statement schedules do not include
any adjustments that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK
Chicago, Illinois
March 25, 1994
<TABLE> CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
------
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,018,234 602,953
Rents and other receivables, net of allowances for doubtful accounts of approximately $28,600,000
and $9,300,000 for 1993 and 1992, respectively (note 1). . . . . . . . . . . . . . . . . . . . 1,183,725 2,201,877
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,219 31,596
Escrow deposits (note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,891,496 3,563,865
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,121,674 6,400,291
------------ ------------
Investment properties, at cost (notes 1 and 2) - Schedule XI:
Land and leasehold interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,662,200 6,662,200
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,822,638 430,155,221
------------ ------------
437,484,838 436,817,421
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,686,750) (116,396,199)
------------ ------------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . 306,798,088 320,421,222
------------ ------------
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,983,380 28,210,188
Accrued rents receivable, net of allowance of approximately $32,600,000 for 1992 and 1993 (note 1) 9,506,520 12,662,026
------------ ------------
$348,409,662 367,693,727
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED BALANCE SHEETS - CONTINUED
DECEMBER 31, 1993 AND 1992
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1993 1992
------------ ------------
Current liabilities:
Current portion of long-term debt (notes 2 and 3). . . . . . . . . . . . . . . . . . . . . . $248,739,738 277,410,516
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,171,912 3,462,459
Accrued interest payable (notes 2 and 3) . . . . . . . . . . . . . . . . . . . . . . . . . . 48,180,063 19,702,140
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,606,928 2,975,775
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,698,641 303,550,890
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,614 69,501
Long-term debt, less current portion (note 3). . . . . . . . . . . . . . . . . . . . . . . . . 83,629,438 80,883,435
Loans from venture partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,650,326 12,054,105
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,054,019 396,557,931
Partners' capital accounts (deficits) (note 2):
Carlyle-XVI:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,610,119 38,609,129
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,769,726) (43,330,191)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,678,607) (7,286,567)
------------ ------------
(16,838,214) (12,007,629)
------------ ------------
Venture Partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,257,333 192,257,223
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (172,264,917) (154,923,199)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,798,559) (54,190,599)
------------ ------------
(34,806,143) (16,856,575)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . . . . . . (51,644,357) (28,864,204)
------------ ------------
Commitments and contingencies (notes 1, 2, 3, 4 and 5)
$348,409,662 367,693,727
============ ============
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
------------ ----------- -----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,635,345 56,501,354 63,564,048
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,395 247,317 584,173
Other income (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,670,778 -- --
------------ ----------- -----------
79,530,518 56,748,671 64,148,221
------------ ----------- -----------
Expenses (Schedule X):
Mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . . . 38,243,949 37,718,309 37,487,838
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,290,551 14,282,738 14,770,247
Property operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 25,958,917 27,473,788 27,949,819
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,446 249,163 178,508
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . 3,277,449 2,439,871 2,463,791
Provision for value impairment (note 1). . . . . . . . . . . . . . . . . . . . -- -- 14,844,420
Provision for uncollectible rents and accrued rents receivable (note 1). . . . 19,289,459 41,945,558 --
------------ ----------- -----------
101,311,771 124,109,427 97,694,623
------------ ----------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,781,253 67,360,756 33,546,403
============ =========== ===========
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE> CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
VENTURE
CARLYLE-XVI PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,139,413 62,310,758 70,450,171
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,287,735 3,004,049 4,291,784
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (810,000) (1,890,000) (2,700,000)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,135,678) (26,410,725) (33,546,403)
------------ ----------- -----------
Balance at December 31, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,481,470 37,014,082 38,495,522
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 600 1,000
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,489,499) (53,871,257) (67,360,756)
------------ ----------- -----------
Balance (deficit) at December 31, 1992 . . . . . . . . . . . . . . . . . . . . . (12,007,629) (16,856,575) (28,864,204)
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990 110 1,100
Cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (392,040) (607,960) (1,000,000)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,439,535) (17,341,718) (21,781,253)
------------ ----------- -----------
Balance (deficit) at December 31, 1993 . . . . . . . . . . . . . . . . . . . . . $(16,838,214) (34,806,143) (51,644,357)
============ =========== ===========
<FN>
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(21,781,253) (67,360,756) (33,546,403)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,290,551 14,282,738 14,770,247
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . 3,277,449 2,439,871 2,463,791
Long-term debt-deferred accrued interest . . . . . . . . . . . . . . . . . . 2,746,003 2,246,731 3,745,691
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 3,155,506 (569,354) (2,762,073)
Provisions for value impairment. . . . . . . . . . . . . . . . . . . . . . . -- -- 14,844,420
Provision for uncollectible rents and accrued rents receivable . . . . . . . 19,289,459 41,945,558 --
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . (18,271,307) (9,743,609) (1,141,191)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,377 2,051 (4,114)
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,327,631) (703,081) (2,860,784)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (290,547) 382,966 192,389
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,477,923 18,625,490 (235,023)
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,368,847) 934,889 1,375,078
Amounts due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (186,951)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,113 (16,120) (31,634)
------------ ------------ ------------
Net cash provided by (used in) operating activities. . . . . . . . . . 28,206,796 2,467,374 (3,376,557)
------------ ------------ ------------
Cash flows from investing activities:
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . (667,417) (1,164,325) (2,201,123)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . (50,641) (274,276) (334,622)
------------ ------------ ------------
Net cash used in investing activities. . . . . . . . . . . . . . . . . (718,058) (1,438,601) (2,535,745)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . (28,670,778) -- (108,987)
Loans from (repayments to) venture partners. . . . . . . . . . . . . . . . . . 2,596,221 (539,702) 4,056,748
Cash contributions from Partnership. . . . . . . . . . . . . . . . . . . . . . 990 400 1,287,735
Cash distributions to Partnership. . . . . . . . . . . . . . . . . . . . . . . (392,040) -- (810,000)
Cash contributions from venture partners . . . . . . . . . . . . . . . . . . . 110 600 3,004,049
Cash distributions to venture partners . . . . . . . . . . . . . . . . . . . . (607,960) -- (1,890,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities. . . . . . . . . . (27,073,457) (538,702) 5,539,545
------------ ------------ ------------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . $ 415,281 490,071 (372,757)
============ ============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
------------ ------------ ------------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . $ 7,020,023 16,846,088 33,977,170
============ ============ ============
Non-cash investing and financing activities. . . . . . . . . . . . . . . . . .
Disposal of fully depreciated fixed assets . . . . . . . . . . . . . . . . . . $ -- -- 178,453
============ ============ ============
<FN>
See accompanying notes to combined financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) ORGANIZATION AND BASIS OF ACCOUNTING
The accompanying combined financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of certain of the
unconsolidated joint ventures in which Carlyle Real Estate Limited
Partnership-XVI ("Carlyle-XVI" or "Partnership") owns a direct interest. Also
included are the accounts of certain of those joint venture partnerships
(underlying ventures) in which Carlyle-XVI owns an indirect interest through
one of the unconsolidated joint ventures. Certain unconsolidated ventures
previously included in the combined financial statements have been excluded.
The entities included in the combined financial statements are as follows:
VENTURE DATE ACQUIRED
------- -------------
1. Carlyle-XVI Associates, L.P. (a)
- JMB/125 Broad Building Associates, L.P.
("JMB/125") (b) 12/31/85
- 125 Broad Street Company (b)
2. 260 Franklin Street Associates
("260 Franklin") (a) 5/21/86
(a) Represents an unconsolidated venture in which Carlyle-XVI owns a
direct ownership interest.
(b) Represents a joint venture in which Carlyle-XVI owns an indirect
ownership interest through an unconsolidated venture.
For purposes of preparing the combined financial statements, the effect
of all transactions between an unconsolidated joint venture and an underlying
venture has been eliminated.
The records of the ventures are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The accom-
panying combined financial statements have been prepared from such records
after making appropriate adjustments to reflect the ventures' accounts in
accordance with generally accepted accounting principles. Such adjustments
are not recorded on the records of the ventures.
Statement of Financial Accounting Standards No. 95 requires the ventures
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. The ventures record amounts
held in U.S. government obligations at costs 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 amounts reflected as short-term investments.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires entities
with total assets exceeding $150 million at December 31, 1993 to disclose the
SFAS 107 value of all financial assets and liabilities for which it is
practicable to estimate. Value is defined in the Statement as the amount at
which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. The Partnership
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
believes the carrying amount of its financial instruments classified as
current assets and liabilities (excluding current portion of long-term debt)
approximates SFAS 107 value due to the relatively short maturity of these
instruments. There is no quoted market value available for any of the
Partnership's other instruments. As the debt secured by the 125 Broad Street
Building has been classified by the Partnership as a current liability at
December 31, 1993 as a result of defaults (see Note 3(b)of Notes to
Consolidated Financial Statements of Carlyle-XVI), and because the resolution
of such defaults is uncertain, the Partnership considers the disclosure of the
SFAS 107 value of such long-term debt to be impracticable. The remaining
debt, with a carrying balance of $83,629,438, has been calculated to have an
SFAS 107 value of $82,234,956 by discounting the scheduled loan payments to
maturity. Due to restrictions on transferability and prepayment, the general
illiquid nature of the current real estate financing market and the inability
to obtain comparable financing due to property specific competitive
conditions, the Partnership would be unable to refinance these properties to
obtain such calculated debt amounts reported. (See note 3.) The Partnership
has no other significant financial instruments.
Deferred expenses are comprised of deferred leasing and renting costs,
which are amortized using the straight-line method over the terms of the
related leases and financing costs which are amortized over the term of the
related debt.
Depreciation on the investment properties has been provided over the
estimated useful lives of 5 to 30 years using the straight-line method.
All investment properties are pledged as security for the long-term debt,
for which there is no recourse to the ventures.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over
their estimated useful lives.
Certain amounts in the 1991 and 1992 combined financial statements have
been reclassified to conform to the 1993 presentation.
Although certain leases provide for tenant occupancy during periods for
which no rent is due and/or increases in minimum lease payments over the term
of the lease, the ventures accrue prorated rental income for the full period
of occupancy on a straight-line basis.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the venture partners rather than the
ventures.
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 has resulted in uncertainty as to
the ability of the joint venture partnership that owns the 125 Broad Street
Building 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. 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 unaffiliated venture partner loans.
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
Additionally, as more fully described in Note 3(b) of Notes to the
Consolidated Financial Statements of Carlyle-XVI, JMB/125 has reserved for
certain receivables relating to one of the major tenants at 125 Broad Street.
In 1992, 125 Broad reserved for approximately $32,600,000 of accrued rents
receivable relating to such tenant's lease. Additionally, 125 Broad has
provided for additional losses of approximately $19,300,000 and $9,300,000 in
1993 and 1992, respectively, relating to amounts currently due from the O&Y
partners relating to such tenant's lease.
In October 1993, 125 Broad entered into an agreement with Salomon
Brothers, Inc. to terminate its lease covering approximately 236,000 square
feet 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 $26,700,000,
which 125 Broad in turn paid to its lender to reduce mortgage principal
outstanding under the mortgage loan. In addition, Salomon Brothers, Inc. paid
JMB/125 $1,000,000 in consideration of JMB/125's consent of the lease
termination.
(2) VENTURE AGREEMENTS
A description of the venture agreements is contained in Note 3 of Notes
to Consolidated Financial Statements of Carlyle-XVI. Such note is hereby
incorporated herein by reference.
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1993 and 1992:
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
11.0% per annum mortgage note; secured by the 260 Franklin Street Building; monthly
payments of interest only at 11% per annum were required through January 1,
1991; modified in 1991 to require monthly payments of principal and interest
of $714,375 through May 1, 1991, monthly payments of interest only (6% per
annum) of $374,455 from June 1, 1991 through January 1, 1992, monthly payments
of interest only (8% per annum) of $499,273 from February 1, 1992 through
December 1, 1995, with the unpaid balance of principal and interest of
approximately $74,891,013 due on January 1, 1996. Additional interest
payable upon maturity to provide an 11% per annum return to lender and
60% of the greater of net sales or refinancing proceeds or the net appraised
value, as defined. Reference is made to Note 3(d) of Notes to Consolidated
Financial Statements of Carlyle-XVI. . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 83,629,438 80,883,435
10.125% per annum consolidated mortgage notes; secured by the 125 Broad
Street Building; semi-annual payments of interest only are required
through December 23, 1995; any outstanding principal and unpaid interest
is due on December 27, 1995. In default as of June 1992. Reference is
made to Note 3(b) of Notes to Consolidated Financial Statements of
Carlyle-XVI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .248,739,738 277,410,516
------------ ------------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .332,369,176 358,293,951
Less current portion of long-term debt representing amounts in
default at December 31, 1992 and 1993. . . . . . . . . . . . . . . . . . . . . .248,739,738 277,410,516
------------ ------------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 83,629,438 80,883,435
============ ============
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
As of December 1993, accrued interest relating to the 125 Broad Street
mortgage note in default was $48,180,063.
Included in the above total long-term debt is $2,746,003 and $5,992,422
for 1993 and 1992, respectively, which represents mortgage interest accrued
but not currently payable pursuant to the terms of the 260 Franklin mortgage
note.
Five year maturities of long-term debt are as follows:
1994. . . . . . . . . $248,739,738
1995. . . . . . . . . --
1996. . . . . . . . . 83,629,438
1997. . . . . . . . . --
1998. . . . . . . . . --
============
(4) LEASES
(a) As Property Lessor
At December 31, 1993, the properties in the combined group consisted of
two office buildings. The ventures have determined that all leases relating
to the properties are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of each of the properties,
excluding cost of land, is depreciated over the estimated useful lives.
Leases range in term from one to 25 years and provide for fixed minimum rent
and partial to full reimbursement of operating costs.
Minimum lease payments including amounts representing executory costs
(e.g., taxes, maintenance, insurance), to be received in the future under the
above operating commercial lease agreements, are as follows:
1994. . . . . . . . . $ 33,971,048
1995. . . . . . . . . 32,109,659
1996. . . . . . . . . 31,392,418
1997. . . . . . . . . 28,012,975
1998. . . . . . . . . 21,503,945
Thereafter. . . . . . 285,974,806
------------
$432,964,851
============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
NOTES TO COMBINED FINANCIAL STATEMENTS - CONCLUDED
(b) As Property Lessee
The 125 Broad Street Building property is currently subject to a ground
lease as more fully described in Note 3(b) of Notes to Consolidated Financial
Statements of Carlyle-XVI.
Future minimum rental commitments under the lease are as follows:
1994. . . . . . . . . $ 1,075,000
1995. . . . . . . . . 1,075,000
1996. . . . . . . . . 1,075,000
1997. . . . . . . . . 1,075,000
1998. . . . . . . . . 1,075,000
Thereafter. . . . . . 74,175,000
-----------
$79,550,000
===========
(5) TRANSACTIONS WITH AFFILIATES
An affiliate of the Corporate General Partner has provided property
management services at 260 Franklin Street since June of 1988. Additionally,
during 1993, 1992 and 1991, an affiliate of the Corporate General Partner
provided leasing services. Such affiliates earned property management fees of
$340,753, $308,339 and $364,686 in 1993, 1992 and 1991, respectively, of which
the Partnership's share was $102,226, $92,502 and $109,406 for 1993, 1992 and
1991, respectively. Such affiliates also earned leasing fees of $6,789,
$65,157 and $129,304 for 1993, 1992 and 1991, respectively. As of December
31, 1993, $89,092 of these fees were unpaid, of which the Partnership's share
is $26,727. Pursuant to the terms of the loan modification for 260 Franklin,
cash flow from the property in an amount equal to all management fees and
leasing fees payable to affiliates of the Corporate General Partner are being
escrowed by 260 Franklin and are reported as escrow deposits in the
accompanying Combined Financial Statements.
<PAGE>
SCHEDULE X
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
CHARGED TO COSTS AND EXPENSES
---------------------------------------------
1993 1992 1991
---------- ---------- ----------
Depreciation . . . . . . $14,290,551 14,282,738 14,770,247
Amortization of
deferred expenses. . . 3,277,449 2,439,871 2,463,791
Repairs and maintenance. 2,838,276 3,008,899 2,986,565
Real estate taxes. . . . 13,632,935 14,896,356 14,348,573
=========== =========== ===========
<TABLE>
SCHEDULE XI
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
<CAPTION>
COST
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
UNCONSOLIDATED VENTURES(A)ACQUISITION AT CLOSE OF PERIOD (B)
--------------------------------------- --------------------------------------
BUILDINGS
LAND BUILDINGS AND PROVISION LAND AND BUILDINGS
LEASEHOLD AND ------------- FOR VALUE LEASEHOLD AND
ENCUMBRANCE INTERESTS IMPROVEMENTSIMPROVEMENTS IMPAIRMENT INTEREST IMPROVEMENTS TOTAL (F)
----------- ----------- ------------------------ ---------- ----------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
New York,
New York. . . . . . . . $248,739,738 -- (C) 347,338,617 13,215,086 14,844,420(D) -- 345,709,283 345,709,283
Boston,
Massachusetts . . . . . 83,629,438 8,169,209 97,607,593 3,119,487 17,120,734(E) 6,662,200 85,113,355 91,775,555
------------ ----------- ----------- ---------- ----------- ---------- ----------- -----------
Total. . . . . . . . $332,369,176 8,169,209 444,946,210 16,334,573 31,965,154 6,662,200 430,822,638 437,484,838
============ ========== =========== ========== =========== ========== =========== ===========
</TABLE>
<TABLE>
SCHEDULE XI - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1993
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(G) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
New York, New York . . . . . . . . . . . . . 107,147,398 1970 12/31/85 5-30 years $11,864,207
Boston, Massachusetts. . . . . . . . . . . . 23,539,352 1985 05/21/86 5-30 years 1,768,728
----------- -----------
Total. . . . . . . . . . . . . . . . . . 130,686,750 $13,632,935
=========== ===========
<FN>
- -----------------
Notes:
(A) The initial cost to the unconsolidated venture or underlying ventures represents the original purchase price of the
properties, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1993 for Federal income tax purposes was approximately
$457,355,761.
(C) Property operated under ground lease; see Note 4(b).
(D) In 1991, the affiliated joint venture recorded a provision for value impairment totalling $14,844,420; see Note 2.
(E) In 1990, the affiliated joint venture recorded a provision for value impairment totalling $17,120,734; see Note 2.
</TABLE>
<TABLE>
SCHEDULE XI - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
CERTAIN UNCONSOLIDATED VENTURES
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(F) Reconciliation of real estate owned as of December 31, 1993, 1992 and 1991:
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . $436,817,421 524,492,548 537,089,929
Additions during period. . . . . . . . . . . 667,417 1,538,843 2,470,494
Retirements during period. . . . . . . . . . -- -- (223,455)
Provision for value impairment . . . . . . . -- -- (14,844,420)
------------ ------------ ------------
Balance at end of period . . . . . . . . . . $437,484,838 436,817,421 524,492,548
============ ============ ============
(G) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . $116,396,199 108,843,465 93,023,616
Retirements during period. . . . . . . . . . -- -- (223,455)
Depreciation expense . . . . . . . . . . . . 14,290,551 15,557,970 16,043,304
------------ ------------ ------------
Balance at end of period . . . . . . . . . . $130,686,750 116,396,199 108,843,465
============ ============ ============
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with the accountants during
fiscal year 1992 and 1993.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. JMB has responsibility for all
aspects of the Partnership's operations, subject to the requirement that sales
of real property must be approved by the Associate General Partner of the
Partnership, Realty Associates-XVI, L.P., an Illinois limited partnership with
JMB as the sole general partner. The Associate General Partner shall be
directed by a majority in interest of its limited partners (who are generally
officers, directors and affiliates of JMB or its affiliates) as to whether to
provide its approval of any sale of real property (or any interest therein) of
the Partnership. Various relationships of the Partnership to the Corporate
General Partner and its affiliates are described under the caption "Conflicts
of Interest" at pages 9-14 of the Prospectus, a copy of which description is
filed herewith and is hereby incorporated herein by reference to Exhibit 28 to
the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16516)
dated March 19, 1993.
The names, positions held and length of service therein of each director
and executive officer and certain officers of the Corporate General Partner
are as follows:
Served in
Name Office Office Since
---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Neil G. Bluhm President 5/03/71
Director 5/03/71
Jerome J. Claeys III Director 5/09/88
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Chief Executive Officer 8/01/93
Jeffrey R. Rosenthal Chief Financial Officer 8/01/93
Ira J. Schulman Executive Vice President 6/01/88
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or
officers. The foregoing directors have been elected to serve one-year terms
until the annual meeting of the Corporate General Partner to be held on June
7, 1994. All of the foregoing officers have been elected to serve one-year
terms until the first meeting of the Board of Directors held after the annual
meeting of the Corporate General Partner to be held on June 7, 1994. There
are no arrangements or understandings between or among any of said directors
or officers and any other person pursuant to which any director or officer was
elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate
Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV
("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"),
Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage
Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners, Ltd.-II
("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III ("Mortgage
Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"),
Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus,
Ltd.-II ("Carlyle Income Plus-II") and the managing general partner of JMB
Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V
("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income
Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-VIII
("JMB Income-VIII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB
Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI
("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII"), and JMB
Income Properties, Ltd.-XIII ("JMB Income-XIII"). Most of the foregoing
directors and officers are also officers and/or directors of various
affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general
partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc.
(the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income
Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced
Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are
also partners of certain partnerships which are associate general partners in
the following real estate limited partnerships: the Partnership, Carlyle-VII,
Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV,
Carlyle-XV, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-VIII, JMB
Income-IX, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII,
Mortgage Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage
Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such director
and officer of the Corporate General Partner of the Partnership in addition to
that described above is as follows:
Judd D. Malkin (age 56) is an individual general partner of JMB Income-IV
and JMB Income-V. Mr. Malkin has been associated with JMB since October,
1969. He is a Certified Public Accountant.
Neil G. Bluhm (age 56) is an individual general partner of JMB Income-IV
and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Jerome J. Claeys III (age 51) (Chairman and Director of JMB Institutional
Realty Corporation) has been associated with JMB since September, 1977. He
holds a Masters degree in Business Administration from the University of Notre
Dame.
Burton E. Glazov (age 55) has been associated with JMB since June, 1971
and served as an Executive Vice President of JMB until December 1990. He is a
member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 52) has been associated with JMB since July, 1972.
He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 60) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 47) has been associated with JMB since December,
1970 and served as an Executive Vice President of JMB until December 1990. He
holds a Masters degree in Business Administration from Harvard University
Graduate School of Business.
H. Rigel Barber (age 44) has been associated with JMB since March, 1982.
He holds a J.D. degree from the Northwestern Law School and is a member of the
Bar of the State of Illinois.
Jeffrey R. Rosenthal (age 42) has been associated with JMB since
December, 1987. He is a Certified Public Accountant.
Gary Nickele (age 41) has been associated with JMB since February, 1984.
He holds a J.D. degree from the University of Michigan Law School and is a
member of the Bar of the State of Illinois.
Ira J. Schulman (age 42) has been associated with JMB since February,
1983. He holds a Masters degree in Business Administration from the
University of Pittsburgh.
Gailen J. Hull (age 45) has been associated with JMB since March, 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 58) has been associated with JMB since March, 1973. He
is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the Corporate General Partner receive no direct
remuneration in such capacities from the Partnership. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions, when
and as cash distributions are made to the Limited Partners, and a share of
profits or losses as described under the caption " Compensation and Fees" at
pages 9-13, "Cash Distributions" at pages 88-91, "Allocation of Profits or
Losses for Tax Purposes" at page 88 of the Prospectus and at pages A-12 to
A-25 of the Partnership Agreement, included as an exhibit to the Prospectus,
which descriptions are hereby incorporated herein by reference to Exhibit 28
to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-
16516) dated March 19, 1993. Reference is also made to Notes 5 and 8 for a
description of such distributions and allocations. In 1993, the General
Partners received $149,119 and deferred $49,706 of distributions and the
Corporate General Partner earned management fees of $331,376 of which $82,844
was deferred and unpaid as of December 31, 1993. See Note 8. The General
Partners received a share of Partnership income for tax purposes aggregating
$183,474 in 1993. Such losses may benefit the General Partners (or the
partners thereof) to the extent that such losses may be offset against taxable
income from the Partnership or other sources.
The Partnership is permitted to engage in various transactions involving
the General Partners and their affiliates, as described under the captions
"Compensation and Fees" at pages 9-13, "Conflicts of Interest" at pages 14-21
of the Prospectus and "Powers, Rights and Duties of the General Partners" at
pages A-27 to A-35 of the Partnership Agreement, which descriptions are hereby
incorporated herein by reference to Exhibit 28 to the Partnership's Report on
Form 10-K for December 31, 1992 (File No. 0-16516) dated March 19, 1993. The
relationship of the Corporate General Partner (and its director and officers)
to its affiliates is set forth above in Item 10.
An affiliate of the Corporate General Partner provided property
management services in 1993 for the 260 Franklin Street Building in Boston,
Massachusetts. In 1993, such affiliate earned property management fees of
$332,666 for such services. Additionally during 1993, an affiliate of the
Corporate General Partner provided leasing services for the 260 Franklin
Building amounting to $6,789, of which all were unpaid as of December 31,
1993. All property management and leasing fees earned in 1993 were escrowed
by 260 Franklin. See Note 3(d) for a description of the accounting for these
fees. Additionally, during 1993, an affiliate of the Corporate General
Partner provided property management services for the Dunwoody Crossing
(Phases I, II and III) Apartments and earned property management fees
amounting to $117,143, of which $6,580 was unpaid as of December 31, 1993. As
set forth in the Prospectus of the Partnership, the Corporate General Partner
must negotiate such agreements on terms no less favorable to the Partnership
than those customarily charged for similar services in the relevant
geographical area (but in no event at rates greater than 6% of the gross
income from the property), and such agreements must be terminable by either
party thereto, without penalty, upon 60 days notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1993
aggregating $28,810 in connection with the provision of insurance coverage for
certain of the real property investments of the Partnership. Such commissions
are at rates set by insurance companies for the classes of coverage provided.
The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses or out-of-pocket expenses relating to the
administration of the Partnership and the acquisition and operation of the
Partnership's real property investments. In 1993, the Corporate General
Partner of the Partnership was due reimbursement for such out-of-pocket
expenses in the amount of $29,407 all of which was paid as of December 31,
1993.
Additionally, the General Partners are also entitled to reimbursements
for legal, accounting and data processing services. Such costs for 1993 were
$83,444, all of which was unpaid as of December 31, 1993. Amounts of these
reimbursements may not exceed cost or 90% of what an independent party would
charge.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Interests of the
Partnership.
(b) The Corporate General Partner and its officers and directors own the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership JMB Realty Corporation 5 Interests (1) Less than 1%
Interests indirectly
Limited Partnership Corporate General Partner 5 Interests (1) Less than 1%
Interests and its officers and indirectly
director as a group
- -----------------
<FN>
(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership, for which JMB, as its indirect
majority shareholder, is deemed to have sole voting and investment power.
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire beneficial
ownership of Interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in
a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the
Corporate General Partner, affiliates or their management other than those
described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this annual report).
(2) Exhibits.
3. Amended and Restated Agreement of Limited
Partnership, which is incorporated by reference to Exhibit 3 to the
Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16516)
dated March 19, 1993.
4-A. Assignment Agreement set forth as Exhibit B to the
Prospectus, a copy of which is incorporated by reference to Exhibit 4-A to the
Partnership's Report on Form 10-K for December 31, 1992 (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 Form 10-K for
December 31, 1992 (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 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 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 Form 10-K (File No. 0-16516) dated March 28, 1990.
10-M Copies of documents relating to the Partnership's
ownership interest in 125 Broad Street Building are hereby incorporated by
reference to Exhibit 10-M to the Partnership's Report on Form 10-Q for
September 30, 1993 (File No. 0-16516) dated November 11, 1993.
10-N Sale documents and exhibits thereto relating to the
Partnership's contract of sale of the Blue Cross Building, Woodland Hills (Los
Angeles), California are hereby incorporated by reference to Exhibit 10-N to
the Partnership's Report on Form 10-Q for September 30, 1993 (File No. 0-
16516) dated November 11, 1993.
21. List of Subsidiaries.
24. Powers of Attorney
99. The Partnership's Report on Form 8-K for November
16, 1993 (describing the November 2, 1993 sale of the Partnership's interest
in the Blue Cross Building and exhibits thereto are hereby incorporated herein
by reference. A copy of such report is filed herewith.
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such to the
Securities and Exchange Commission upon request.
(b) The following report on Form 8-K was filed since the beginning
of the last quarter of the period covered by this report.
(i) The Partnership's report on Form 8-K describing the sale
of the Blue Cross Building. The Report was dated November 3, 1993. No
financial statements were filed herewith.
No annual report or proxy material for the fiscal year 1993 has been sent to
the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XIII
By: JMB Realty Corporation
Managing General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date:March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Managing General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and Director
Date:March 25, 1994
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date:March 25, 1994
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date:March 25, 1994
JEFFREY R. ROSENTHAL*
By: Jeffrey R. Rosenthal, Chief Financial Officer
Principal Financial Officer
Date:March 25, 1994
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date:March 25, 1994
A. LEE SACKS*
By: A. Lee Sacks, Director
Date:March 25, 1994
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date:March 25, 1994
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date:March 25, 1994
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
EXHIBIT INDEX
-------------
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
3. Amended and Restated Agree-
ment of Limited Partnership
of the Partnership Yes
4-A. Assignment Agreement Yes
4-B. Documents relating to the
loan modification of the
mortgage loan secured by the
260 Franklin Street Office
Building Yes
10-A. Escrow Deposit Agreement Yes
10-B Acquisition documents relating
to the purchase by the Partnership
of an interest in the Owings Mills
Shopping Center in Owings Mills,
Maryland Yes
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 Yes
10-D. Acquisition documents relating
to the purchase by the Partnership
of an interest in the 125 Broad
Street Building, New York, New York Yes
10-E. Acquisition documents relating
to the purchase of an interest
in the 260 Franklin Street
Building, Boston, Massachusetts Yes
10-F. Additional acquisition documents
relating to the purchase of an
interest in the 260 Franklin
Street Building, Boston,
Massachusetts Yes
10-G. Acquisition documents relating
to the purchase by the Part-
nership of an interest in the
Post Crest Apartments, Post
Terrace Apartments, and Post
Crossing Apartments in DeKalb
County (Atlanta), Georgia Yes
10-H. Acquisition documents relating
to the purchase by the Partnership
of an interest in NewPark Mall
in Newark (Alameda County),
California Yes
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
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 Decem-
ber 8, 1987 Yes
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 Decem-
ber 23, 1988 Yes
10-K. First Amendment to Lease
between JMB/Warner Center
Associates and Blue Cross of
California dated February 7,
1989 Yes
10-L. Copy of documents relating to
the mortgage loan secured by
the Blue Cross Building,
Woodland Hills (Los Angeles),
California, dated Septem-
ber 14, 1989 Yes
21. List of Subsidiaries No
24. Powers of Attorney No
99. Form 8-K for Blue Cross No
- -----------------
* Previously filed as exhibits to the Partnership's Registration
Statement (as amended) on Form S-11 (File No. 33-3567) to the Securities Act
of 1933 and to Carlyle Real Estate Limited Partnership - XVI's, Registration
Statement (as amended) on Form S-11 (File No. 2-95382) to the Securities Act
of 1933 and the Partnership's prior Reports on Form 8-K and Form 10-K of the
Securities Act of 1934.
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a partner of the following joint ventures: JMB/Owings
Mills Associates, an Illinois general partnership, which is a partner in
Owings Mills Limited Partnership, a limited partnership which holds title to
Owings Mills Shopping Center located in Owings Mills (Baltimore), Maryland;
Carlyle-XVI Associates, L.P., a Delaware limited partnership, which is a
partner in JMB/125 Broad Building Associates, an Illinois general partnership,
which is a partner in 125 Broad Street Company, a limited partnership, which
holds title to 125 Broad Street Building, located in New York, New York; 260
Franklin Street Associates, an Illinois general partnership which holds title
to the 260 Franklin Street office building, located in Boston Massachusetts;
Villages Northeast Associates, an Illinois general partnership, which is a
partner in the VNE Partners, Ltd., a limited partnership, which holds title to
the Post Crest, Post Terrace and Post Crossing Apartment complexes located in
DeKalb County (Atlanta), Georgia; JMB/NewPark Associates, an Illinois general
partnership, which is a partner in NewPark Associates, a general partnership
which holds title to the NewPark Mall in Newark, California; JMB/Warner Center
Associates, an Illinois general partnership JMB/Hahn PDTC Associates, L.P., a
California Limited Partnership, which holds title to Palm Desert Town Center
located in Palm Desert (Palm Springs), California. The Partnership also owns
a 50% interest in Carlyle/Palm Desert, Inc., a corporation which is a partner
in JMB/Hahn PDTC Associates, L.P. Reference is made to Note 3 for a
description of the terms of such venture partnerships.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and
directors of JMB Realty Corporation, the managing general partner of
Carlyle Real Estate Ltd. - XVI, do hereby nominate, constitute and appoint
GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys
and agents of the undersigned with full power of authority to sign in the
name and on behalf of the undersigned officer or directors a Report on Form
10-K of said partnership for the fiscal year ended December 31, 1993, and any
and all amendments thereto, hereby ratifying and confirming all that said
attorneys and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 23rd day of March, 1994.
JUDD D. MALKIN
- ------------------- Chairman and Director
Judd D. Malkin
NEIL G. BLUHM
- ------------------- President and Director
Neil G. Bluhm
H. RIGEL BARBER
- ------------------- Chief Executive Officer
H. Rigel Barber
JEFFREY R. ROSENTHAL
- ----------------------- Chief Financial Officer
Jeffrey R. Rosenthal
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officer and directors,
a Report on Form 10-K of said partnership for the fiscal year ended
December 31, 1993, and any and all amendments thereto, the 23rd day of
March, 1994.
GARY NICKELE
------------
Gary Nickele
GAILEN J. HULL
---------------
Gailen J. Hull
DENNIS M. QUINN
---------------
Dennis M. Quinn
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and
directors of JMB Realty Corporation, the managing general partner of
Carlyle Real Estate Ltd. - XVI, do hereby nominate, constitute and appoint
GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name and
on behalf of the undersigned officer or directors a Report on Form 10-K of
said partnership for the fiscal year ended December 31, 1993, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney
the 26th day of January, 1994.
STUART C. NATHAN
_________________________ Executive Vice President and Director of
Stuart C. Nathan General Partner
A. LEE SACKS
_________________________ Director of General Partner
A. Lee Sacks
The undersigned hereby acknowledge and accept such power of authority to
sign, in the name on behalf of the above named officer and directors, a Report
on Form 10-K of said partnership for the fiscal year ended December 31, 1993,
and any and all amendments thereto, the 26th day of January, 1994.
GARY NICKELE
______________________
Gary Nickele
GAILEN J. HULL
______________________
Gailen J. Hull
DENNIS M. QUINN
___________________________
Dennis M. Quinn
