SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q/A
AMENDMENT NO. 1
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
IRS Employer Identification
Commission File No. 0-16516 No. 36-3437938
The undersigned registrant hereby amends the following sections of its
Report for the quarter ended September 30, 1996 on Form 10-Q as set forth
in the pages attached hereto:
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. Pages 3 through 11
Item 2. Management's Discussion and Analysis of Financial
Condition and results of Operations. Pages 12 through 14
PART II OTHER INFORMATION
Item 3. Defaults Upon Senior Securities. Page 14
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
By: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
and Principal Accounting Officer
Dated: November 25, 1996
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 14,437,330 13,734,366
Interest, rents and other receivables, net of allowances for
doubtful accounts of approximately $890,000 and $619,000 at
September 30, 1996 and December 31, 1995, respectively . . . . . . . 468,866 629,945
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 205,772 178,944
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 15,111,968 14,543,255
------------ ------------
Investment properties, at cost:
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . 60,103,528 60,100,323
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . (15,529,491) 14,023,956
------------ ------------
Total investment properties, net of accumulated depreciation. . 44,574,037 46,076,367
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 2,316,370 2,723,887
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 597,443 559,909
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,636 205,418
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 2,464,150 2,117,997
------------ ------------
$ 65,230,604 66,226,833
============ ============
3
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 393,760 360,031
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 801,474 526,743
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,796 --
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 529,771 511,832
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . 1,878,801 1,398,606
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 60,451 47,950
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,232,076 1,059,000
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . 10,927,511 6,274,627
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . 41,185,681 41,485,363
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 55,284,520 50,265,546
Venture partners' subordinated equity in ventures . . . . . . . . . . . 3,822,584 4,190,839
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (3,359,270) (3,191,849)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (1,413,174) (1,394,169)
------------ ------------
(4,752,444) (4,566,018)
------------ ------------
Limited partners:
Capital contributions, net of offering
costs and purchase discounts. . . . . . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (59,651,719) (59,093,511)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (50,013,690) (45,111,376)
------------ ------------
10,875,944 16,336,466
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . . . 6,123,500 11,770,448
------------ ------------
$ 65,230,604 66,226,833
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
4
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 2,755,051 2,748,263 8,012,324 8,028,165
Interest income . . . . . . . . . . . . . . . . 199,215 213,834 604,458 676,686
----------- ---------- ----------- ----------
2,954,266 2,962,097 8,616,782 8,704,851
----------- ---------- ----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 1,248,303 1,277,041 3,774,214 3,821,247
Depreciation. . . . . . . . . . . . . . . . . . 501,882 501,217 1,505,535 1,503,650
Property operating expenses . . . . . . . . . . 1,167,897 1,430,999 3,726,411 3,891,455
Professional services . . . . . . . . . . . . . 8,652 1,019 141,289 184,637
Amortization of deferred expenses . . . . . . . 34,216 25,492 90,988 76,479
Management fees to corporate general
partner . . . . . . . . . . . . . . . . . . . -- 38,986 31,675 119,738
General and administrative. . . . . . . . . . . 100,104 92,676 319,667 277,619
----------- ---------- ----------- ----------
3,061,054 3,367,430 9,589,779 9,874,825
----------- ---------- ----------- ----------
Operating earnings (loss) . . . . . . . . (106,788) (405,333) (972,997) (1,169,974)
Partnership's share of earnings (loss)
from operations of unconsolidated
ventures. . . . . . . . . . . . . . . . . . . . (412,554) (367,337) (4,734,081) (548,896)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . 66,517 162,382 368,255 586,554
----------- ---------- ----------- ----------
Net operating earnings (loss) . . . . . . (452,825) (610,288) (5,338,823) (1,132,316)
Gain on sale of Partnership's investments
in unconsolidated ventures. . . . . . . . . . . 100,609 93,828 4,743,673 761,271
----------- ---------- ----------- ----------
5
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
Net operating earnings (loss)
before extraordinary item . . . . . . . (352,216) (516,460) (595,150) (371,045)
Extraordinary item:
Partnership's share of unconsolidated
venture debt prepayment penalty . . . . . . -- -- (130,479) --
----------- ---------- ----------- ----------
Net earnings (loss) . . . . . . . . . . . $ (352,216) (516,460) (725,629) (371,045)
=========== ========== =========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . . $ (3.09) (4.18) (36.52) (7.75)
Gain on sale of Partnership's
investments in unconsolidated
ventures. . . . . . . . . . . . . . . 10.12 .66 33.46 5.37
Extraordinary item . . . . . . . . . . -- -- (.92) --
----------- ---------- ----------- ----------
$ 7.03 (3.52) (3.98) (2.38)
=========== ========== =========== ==========
Cash distributions per
limited partnership
interest (including
Georgia State withholding
taxes). . . . . . . . . . . . . . . . . $ 29.93 4.00 34.93 12.00
=========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
6
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (725,629) (371,045)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505,535 1,503,650
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 90,988 76,479
Partnership's share of (earnings) loss from operations of
unconsolidated ventures, net of distributions . . . . . . . . . . . . 4,968,017 548,896
Venture partners' share of ventures' operations . . . . . . . . . . . . (368,255) (586,554)
Gain on sale of Partnership's investments in
unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (4,743,673) (761,271)
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . 130,479 --
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 161,079 438,380
Other prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . (26,828) (48,806)
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,782 27,706
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (346,153) (273,232)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,731 258,052
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,796 (21,119)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,939 35,690
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 12,501 (18,375)
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . 173,076 89,729
----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . . . . . . . . . . . 1,316,385 898,180
----------- -----------
Cash flows from investing activities:
Net sales and maturities of short-term investments. . . . . . . . . . . . -- 783,716
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (3,205) (39,186)
Partnership's distributions from unconsolidated ventures. . . . . . . . . 4,710,000 129,663
Partnership's contributions to unconsolidated ventures. . . . . . . . . . (4,422) (201,000)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (128,522) (146,483)
----------- -----------
Net cash provided by (used in) investing activities . . . . . . . . 4,573,851 526,710
----------- -----------
7
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (265,953) (236,020)
Venture partners' distributions from venture. . . . . . . . . . . . . . . -- (24,496)
Venture partners' contributions to venture. . . . . . . . . . . . . . . . -- 137,120
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (4,902,314) (1,684,141)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (19,005) (71,842)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . (5,187,272) (1,879,379)
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . 702,964 (454,489)
Cash and cash equivalents, beginning of the year. . . . . . . . . . 13,734,366 14,266,786
----------- -----------
Cash and cash equivalents, end of the period. . . . . . . . . . . . $14,437,330 13,812,297
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 3,756,275 3,785,557
=========== ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
8
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1995, which
are included in the Partnership's 1995 Annual Report on Form 10-K (File No.
0-16516) filed on March 25, 1996, as certain footnote disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report. Capitalized terms used but
not defined in this quarterly report have the same meaning as in the
Partnership's 1995 Annual Report on Form 10-K.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain amounts in the 1995 consolidated financial statements have
been reclassified to conform with the 1996 presentation.
Statement of Financial Accounting Standards No. 121 was adopted by the
Partnership on January 1, 1996.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership (or its consolidated
venture) to the General Partners and their affiliates as of September 30,
1996 and for the nine months ended September 30, 1996 and 1995 were as
follows:
Unpaid at
September 30,
1996 1995 1996
-------- ------- -------------
Management fees to
Corporate General
Partner. . . . . . . . . . . $ 31,675 119,737 --
Insurance commissions . . . . 28,153 28,811 --
Reimbursement (at cost)
for out-of-pocket
salary and salary-related
expenses related to the
on-site personnel and for
other costs for the
Partnership and its
investment properties. . . . 73,605 137,047 65,464
-------- ------- ------
$133,433 285,595 65,464
======== ======= ======
9
An affiliate of the General Partners guaranteed payment to the
unaffiliated third party property manager for the property management and
leasing fees relating to the 260 Franklin property. As of September 30,
1996, $521,757 and $988,375 of management and leasing fees payable to the
unaffiliated third party property manager and the affiliate of the General
Partners, respectively, were unpaid, of which the Partnership's share is
$156,527 and $296,513, respectively.
260 FRANKLIN
Occupancy of the property at September 30, 1996 has dropped to 96%
from 98% at year-end 1995 and, in the remaining portion of 1996, the leases
of tenants occupying approximately 13,000 square feet (approximately 4% of
the property) expire. There can be no assurance that these leases will
renew.
The long-term mortgage loan in the original principal amount of
approximately $75,000,000 matured January 1, 1996. 260 Franklin, as of
such date, began submitting the net operating cash flow of the property to
the lender while seeking an extension or refinancing of the loan. However,
there can be no assurance that the joint venture will be able to obtain any
such modification or extension. If 260 Franklin is unable to refinance or
extend the mortgage loan, the Partnership may decide not to commit any
significant additional funds. This may result in 260 Franklin and the
Partnership no longer having an ownership interest in the property. This
would result in 260 Franklin and the Partnership recognizing a gain for
financial reporting and Federal income tax purposes with no distributable
proceeds.
260 Franklin recorded a provision for value impairment of $11,145,446
as of January 1, 1996, of which the Partnership's share is approximately
$3,343,634.
VILLAGES NORTHEAST
On May 7, 1996, the Partnership sold (through the Villages Northeast
venture) the Dunwoody apartment complex to the unaffiliated venture
partner, pursuant to such venture partner's right of first refusal, for
$47,000,000 less brokerage commissions, transfer taxes and legal fees of
approximately $470,000. Approximately $30,900,000 of the sales proceeds
was utilized to retire the mortgage debt including a prepayment penalty of
approximately $435,000 (of which the Partnership's share of approximately
$130,500 was reported as an extraordinary item in the 1996 consolidated
financial statements). Additionally, approximately $787,000 (of which the
Partnership's share was approximately $236,000) was paid to the State of
Georgia on behalf of the Holders of Interests for withholding tax related
to the sale. As a result of the sale, the Partnership recognized a gain of
approximately $4,300,000 for financial reporting purposes for the nine
months ended September 30, 1996 and expects to recognize a gain of
approximately $8,000,000 for Federal income tax purposes in 1996. The
Partnership made a distribution of $30 per Interest from the net sales
proceeds of this sale in August 1996.
The property was classified as held for sale or disposition as of
January 1, 1996 and therefore has not been subject to continued
depreciation. The unconsolidated venture had revenues of $2,728,011 and
$5,067,924 and operating expenses of $2,106,524 and $5,162,348 for the nine
months ended September 30, 1996 and 1995, of which the Partnership's share
of income (loss) was $186,446 and ($28,327), respectively. The property
had a net carrying value of $35,681,989 at December 31, 1995.
10
PALM DESERT TOWN CENTER
Occupancy at the portion of the shopping center in which the
Partnership owns an interest increased to 95% at September 30, 1996 from
93% at December 31, 1995. Sales at the center have been negatively
impacted during the last several quarters by new competition in the
center's trade area. The center will continue to be subject to increased
competition from new developments that are expected to be opening in the
vicinity in the near future. In addition, the property's operations have
been affected by tenant bankruptcies during the past year. The property is
operating at an approximately break-even level.
The joint venture continues to consider a possible expansion of the
mall and restructuring of the ground lease and loan. In the event that the
joint venture decides to proceed, the Partnership would utilize a portion
of its available funds to pay for its share of costs.
NEWPARK MALL
As a result of the recent acquisition by Federated Department Stores
of the company which owns the Emporium Capwell store at NewPark Mall,
Federated, which also owns the Macy's store at NewPark, has approached the
NewPark joint venture regarding the possible sale of the Emporium building
to the NewPark joint venture. This would be accompanied by the closing of
the Emporium Capwell operations at the mall. In the event that the New
Park joint venture decides to proceed with this transaction, the
Partnership would utilize a portion of its available funds to pay for its
share of the costs of acquiring the building and re-merchandising the store
with a replacement operator.
In response to uncertainty concerning the NewPark joint venture's
ability to recover the net carrying value of the NewPark Mall investment
property through future operations or sale and since the NewPark joint
venture has shortened its intended holding period for this investment to
not later than 1999, the NewPark joint venture, in accordance with SFAS
121, recorded a provision for value impairment at June 30, 1996 in the
amount of $8,600,000 of which the Partnership's share is $430,000. Such
provision was recorded to reduce the venture's carrying value of the
investment property to its then estimated fair market value.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for 260 Franklin for the nine
months ended September 30, 1996 and 1995 is as follows:
1996 1995
----------- ----------
Total income . . . . . . . . . $ 7,578,933 8,467,516
Expenses applicable to
operating loss . . . . . . . 23,155,458 12,338,021
----------- ----------
Operating loss . . . . . . . . $15,576,525 3,870,505
=========== ==========
Partnership's share of loss. . $ 4,672,957 1,161,152
=========== ==========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1996 and for the three and nine months ended September 30, 1996 and 1995.
11
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investment properties. Capitalized terms used in this report and not
otherwise defined have the same meaning as in the Partnership's 1995 Annual
Report on Form 10-K.
During the second quarter some of the Holders of Interests in the
Partnership received from an unaffiliated third party an unsolicited offer
to purchase up to 12,150 Interests in the Partnership at between $80 and
$100 per Interest. The Partnership recommended against acceptance of this
offer on the basis that, among other things, the offer price was
inadequate. In June such offer expired with approximately 1,549 Interests
being purchased by such unaffiliated third party pursuant to such offer.
In addition, the Partnership has, from time to time, received inquiries
from other third parties that may consider making offers for Interests,
including requests for the list of Holders of Interests in the Partnership.
These inquiries are generally preliminary in nature. There is no assurance
that any other third party will commence an offer for Interests, the terms
of any such offer or whether any such offer, if made, will be consummated,
amended or withdrawn. The board of directors of JMB Realty Corporation
("JMB"), the corporate general partner of the Partnership, has established
a special committee (the "Special Committee") consisting of certain
directors of JMB to deal with all matters relating to tender offers for
Interests in the Partnership, including any and all responses to such
tender offers. The Special Committee has retained independent counsel to
advise it in connection with any potential tender offers for Interests and
has retained Lehman Brothers Inc. as financial advisor to assist the
Special Committee in evaluating and responding to any additional potential
tender offers for Interests.
On May 7, 1996, the joint venture through which the Partnership owned
an interest in the Dunwoody Crossing Apartments sold the property to the
unaffiliated venture partner for $47,000,000. The Partnership made a
distribution of $30.00 per Interest from the net sale proceeds of this sale
in August 1996.
At September 30, 1996, the Partnership and its consolidated venture
had cash and cash equivalents of approximately $14,437,000. Such cash and
cash equivalents are available for distributions to partners, capital
improvements and working capital requirements. Anticipated operating
deficits at the 260 Franklin Street office building are expected to be paid
out of the unconsolidated joint venture's restricted reserve account.
In 1996, in an effort to reduce Partnership operating expenses, the
Partnership elected to make semi-annual, rather than quarterly,
distributions of operating cash flow in May and November. In November, the
Partnership expects to make a semi-annual distribution of cash generated
from operations. Future distributions from sales or property operations
will depend upon a combination of operating cash flow from the remaining
investment properties and the longer term capital requirements of the
Partnership.
After reviewing the remaining properties and the marketplaces in which
they operate, the General Partners of the Partnership expect to be able to
conduct an orderly liquidation of its remaining investment portfolio as
quickly as practicable. As a result, the affairs of the Partnership are
expected to be wound up no later than December 31, 1999 (sooner if the
properties are sold in the near term), barring unforeseen economic
developments. The Partnership's goal of capital appreciation will not be
achieved. Moreover, although the Partnership expects to distribute sale
proceeds from the disposition of certain of the Partnership's remaining
12
investments in Palm Desert Town Center, NewPark Mall and 260 Franklin,
aggregate sale distributions received by Holders of Interests over the
entire term of the Partnership will be significantly less than their
original investment. However, in connection with sales or other
dispositions (including transfers of title to a lender) of properties (or
interests therein) owned by the Partnership or its joint ventures, the
Holders of Interests may be allocated substantial gain for Federal income
tax purposes regardless of whether any proceeds are distributable from such
sales or other dispositions.
RESULTS OF OPERATIONS
The decrease in interest, rents and other receivables at September 30,
1996 as compared to December 31, 1995 is primarily due to an increase in
the allowance for doubtful accounts as a result of tenant bankruptcies at
Palm Desert Town Center.
The decrease in investment in unconsolidated ventures, at equity at
September 30, 1996 as compared to December 31, 1995 is primarily due to the
distribution of approximately $4,900,000 of sales proceeds to the
Partnership from the Dunwoody Crossing Apartments, partially offset by the
recognition of gain on the sale of the Dunwoody Crossing Apartments.
The increase in accrued rents receivable at September 30, 1996 as
compared to December 31, 1995 is primarily due to the Partnership
recognizing rental income for certain major tenant leases at Palm Desert
Town Center over the life of the lease on a straight-line basis rather than
as due per the terms of their respective leases.
The increase in accounts payable at September 30, 1996 as compared to
December 31, 1995 is primarily due to the timing of real estate tax
payments at Palm Desert Town Center.
The unearned rents at September 30, 1996 is due to the prepayment of
rents at Palm Desert Town Center.
The increased deficit in investment in unconsolidated ventures, at
equity, at September 30, 1996 as compared to December 31, 1995 and the
increase in Partnership's share of loss from operations of unconsolidated
ventures for the nine months ended September 30, 1996 as compared to the
nine months ended September 30, 1995 is primarily due to the Partnership's
share ($3,343,634) of 260 Franklin's provision for value impairment
recorded at January 1, 1996 at the 260 Franklin venture. With respect to
the increase in Partnership's share of loss from operations of
unconsolidated ventures, the increase is also due to the Partnership's
share ($430,000) of NewPark Mall's provision for value impairment recorded
at June 30, 1996 at the NewPark joint venture.
The decrease in management fees to corporate general partner for the
three and nine months ended September 30, 1996 as compared to the three and
nine months ended September 30, 1995 is due to the change from quarterly to
semi-annual distributions of operating cash flow in 1996 and that the
Partnership's distributions in 1996 were predominately from sales proceeds
whereas the distributions in 1995 were predominately from operations, a
portion of which is in the form of a management fee.
The decrease in venture partners' share of venture operations for the
three and nine months ended September 30, 1996 as compared to the three and
nine months ended September 30, 1995 is primarily due to the change in the
allocation of the losses under the venture agreement for Palm Desert
related to the satisfaction in the fourth quarter of 1995 of the venture
partner's obligations to contribute to the venture for operating deficits
and the Partnership's and the Affiliated Partner's preferred returns.
The increase in gain on sale of Partnership's investment in
unconsolidated ventures for the nine months ended September 30, 1996 as
compared to the nine months ended September 30, 1995 is due primarily to
the recognition of gain on sale of the Partnership's interest in Dunwoody
Crossing Apartments.
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The extraordinary item reported for the nine months ended September
30, 1996 represents the Partnership's share of pre-payment penalties
resulting from the extinguishment of debt related to the 1996 sale of
Dunwoody Crossing Apartments.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The mortgage loan in the current amount of approximately $89,000,000
(including accrued interest) secured by 260 Franklin Street matured on
January 1, 1996. 260 Franklin, as of such date, suspended debt service on
the loan and began submitting the net cash flow of the property to the
lender (Teachers Insurance and Annuity Association of America) while
seeking an extension or refinancing of the loan. As of September 30, 1996,
260 Franklin is current with respect to the accrued interest based on the
current loan agreement.
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