SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
September 30, 1997 Commission file number 0-16516
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(Exact Name of registrant as specified in its charter)
Illinois 36-3437938
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 14
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 18
<PAGE>
<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, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 15,285,688 14,791,381
Interest, rents and other receivables, net of allowances for
doubtful accounts of approximately $797,073 and $939,124 at
September 30, 1997 and December 31, 1996, respectively . . . . . . 153,584 286,024
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 166,391 132,414
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . 15,605,663 15,209,819
------------ ------------
Investment properties:
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . -- 60,103,528
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . -- 16,031,335
------------ ------------
Total properties held for investment,
net of accumulated depreciation . . . . . . . . . . . . . . -- 44,072,193
Properties held for sale or disposition . . . . . . . . . . . . . . . 43,144,709 --
------------ ------------
Total investment properties . . . . . . . . . . . . . . . . . 43,144,709 44,072,193
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 2,043,478 1,962,277
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 531,230 567,296
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . 110,894 171,623
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 2,649,218 2,535,978
------------ ------------
$ 64,085,192 64,519,186
============ ============
<PAGE>
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,
1997 1996
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 443,698 405,690
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 859,005 735,053
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 168,611
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 411,856 414,854
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . 1,714,559 1,724,208
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 59,657 66,518
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . 1,324,595 1,267,991
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 12,484,541 11,341,551
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 40,741,982 41,079,673
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 56,325,334 55,479,941
Venture partners' subordinated equity in ventures . . . . . . . . . . 3,650,434 3,740,111
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (3,423,785) (3,373,900)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (1,443,873) (1,432,178)
------------ ------------
(4,847,658) (4,786,078)
------------ ------------
Limited partners:
Capital contributions, net of offering
costs and purchase discounts. . . . . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (60,712,229) (59,897,441)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (50,872,042) (50,558,700)
------------ ------------
8,957,082 10,085,212
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . . 4,109,424 5,299,134
------------ ------------
$ 64,085,192 64,519,186
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . $ 2,827,416 2,755,051 7,837,181 8,012,324
Interest income . . . . . . . . . . . . . . . 191,793 199,215 546,796 604,458
----------- ---------- ---------- ----------
3,019,209 2,954,266 8,383,977 8,616,782
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . 1,285,724 1,248,303 3,807,310 3,774,214
Depreciation. . . . . . . . . . . . . . . . . -- 501,882 1,004,060 1,505,535
Property operating expenses . . . . . . . . . 1,247,760 1,167,897 3,317,294 3,726,411
Professional services . . . . . . . . . . . . 4,869 8,652 130,421 141,289
Amortization of deferred expenses . . . . . . 33,710 34,216 101,130 90,988
Management fees to corporate general
partner . . . . . . . . . . . . . . . . . . -- -- 19,492 31,675
General and administrative. . . . . . . . . . 77,821 100,104 320,304 319,667
----------- ---------- ---------- ----------
2,649,884 3,061,054 8,700,011 9,589,779
----------- ---------- ---------- ----------
Operating earnings (loss) . . . . . . . 369,325 (106,788) (316,034) (972,997)
Partnership's share of earnings (loss)
from operations of unconsolidated
ventures. . . . . . . . . . . . . . . . . . . (172,178) (412,554) (879,132) (4,734,081)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . (118,194) 66,517 89,677 368,255
----------- ---------- ---------- ----------
Net operating earnings (loss) . . . . . 78,953 (452,825) (1,105,489) (5,338,823)
Gain on sale of Partnership's investments
in unconsolidated ventures. . . . . . . . . . 107,486 100,609 509,963 4,615,294
Loss on liquidation of unconsolidated venture . -- -- (269,147) --
----------- ---------- ---------- ----------
<PAGE>
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
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
Net operating earnings (loss)
before extraordinary item . . . . . . 186,439 (352,216) (864,673) (723,529)
Extraordinary item:
Partnership's share of unconsolidated
venture debt prepayment penalty . . . . . . -- -- -- (175,007)
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . $ 186,439 (352,216) (864,673) (898,536)
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . $ .54 (3.10) (7.56) (36.52)
Gain on sale of Partnership's
investments in unconsolidated
ventures. . . . . . . . . . . . . . .76 .71 3.60 32.56
Loss on liquidation of venture . . . -- -- (1.84) --
Extraordinary item . . . . . . . . . -- -- -- (1.23)
----------- ---------- ---------- ----------
$ 1.30 (2.39) (5.80) (5.19)
=========== ========== ========== ==========
Cash distributions per
limited partnership
interest. . . . . . . . . . . . . . . $ .12 29.93 2.23 34.93
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (864,673) (898,536)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,060 1,505,535
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 101,130 90,988
Partnership's share of (earnings) loss from operations of
unconsolidated ventures, net of distributions . . . . . . . . . . . . 879,132 4,968,017
Venture partners' share of ventures' operations . . . . . . . . . . . . (89,677) (368,255)
Gain on sale of Partnership's investments in
unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (509,963) (4,615,294)
Loss on liquidation of unconsolidated venture . . . . . . . . . . . . . 269,147 --
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 175,007
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 132,440 161,079
Other prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . (33,977) (26,828)
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,729 38,782
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (113,240) (346,153)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,952 274,731
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168,611) 153,796
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,998) 17,939
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (6,861) 12,501
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . 56,604 173,076
----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . . . . . . . . . . . 837,194 1,316,385
----------- -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (76,576) (3,205)
Partnership's distributions from unconsolidated ventures. . . . . . . . . 423,473 4,710,000
Partnership's contributions to unconsolidated ventures. . . . . . . . . . -- (4,422)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (65,064) (128,522)
----------- -----------
Net cash provided by (used in) investing activities . . . . . . . . 281,833 4,573,851
----------- -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (299,683) (265,953)
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (313,342) (4,902,314)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (11,695) (19,005)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . (624,720) (5,187,272)
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . 494,307 702,964
Cash and cash equivalents, beginning of the year. . . . . . . . . . 14,791,381 13,734,366
----------- -----------
Cash and cash equivalents, end of the period. . . . . . . . . . . . $15,285,688 14,437,330
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 3,810,308 3,756,275
=========== ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1996, which
are included in the Partnership's 1996 Annual Report on Form 10-K (File No.
0-16516) dated on March 21, 1997, 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 1996 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.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell or dispose of such property and active marketing activity has
commenced or is expected to commence in the near term or the Partnership
has concluded that it may dispose of the property by no longer funding
operating deficits or debt service requirements of the property thus
allowing the lender to realize upon its security. In accordance with SFAS
121, any properties identified as "held for sale or disposition" are no
longer depreciated. As of September 30, 1997, the Partnership and its
consolidated venture has committed to plans to sell or dispose of their
remaining investment property. Accordingly, the property has been
classified as held for sale or disposition in the accompanying consolidated
financial statements. The results of operations, net of venture partners'
share, for this property and for properties sold or disposed of in the past
two years were ($161,738) and ($664,175), respectively, for the nine months
ended September 30, 1997 and 1996.
In addition, the accompanying consolidated financial statements
include ($1,058,484) and ($4,486,511), respectively, of the Partnership's
share of total property operations of ($3,528,281) and ($14,995,038) for
unconsolidated properties for the nine months ended September 30, 1997 and
1996, respectively, which are held for sale or disposition or have been
sold or disposed of during the past two years.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. As the Partnership's
capital structure only has general and limited partnership interests, the
Partnership does not expect any significant impact on its consolidated
financial statements upon adoption of these standards when required at the
end of 1997.
Certain amounts in the 1996 consolidated financial statements have
been reclassified to conform with the 1997 presentation.
<PAGE>
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, and
will be, required under applicable law to remit directly to the taxing
authorities amounts representing withholding from distributions paid to
partners. Due to this, approximately $32,700 representing such withholding
was remitted to various states on behalf of the Limited Partners.
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 and certain of its officers, and for
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,
1997 and for the nine months ended September 30, 1997 and 1996 were as
follows:
Unpaid at
September 30,
1997 1996 1997
------- ------- -------------
Management fees to
Corporate General
Partner. . . . . . . . . . . $19,492 31,675 --
Insurance commissions . . . . 29,843 28,153 --
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. . . . 31,857 24,293 24,412
------- ------- ------
$81,192 84,121 24,412
======= ======= ======
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. Beginning in January
1996, the unaffiliated property manager is being paid management and
leasing fees by the property. As of September 30, 1997, $1,510,132 of
management and leasing fees payable to the affiliate of the General
Partners (as a result of the escrowing of certain 1995 and prior management
and leasing fees payable to an affiliate of the General Partner and its
payment guarantees to the unaffiliated property manager) were unpaid, of
which the Partnership's share is $453,040.
260 FRANKLIN
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 re-leasing have been substantially below the rates
which were received under the previous leases for the same space. The
property is currently expected to operate at a deficit for 1997 and for
several years thereafter.
<PAGE>
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. The
joint venture reached agreements with the lender for extensions of the
mortgage loan through January 1, 1997 and again through January 1, 1998.
In addition to substantially the same terms as were in effect prior to such
extensions, the agreement requires that the property submit net operating
cash flow of the property to the lender. In addition, the lender has
indicated that it will not extend the loan beyond January 1, 1998. 260
Franklin and the Partnership believe that the value of the office building
is less than the mortgage loan, and the Partnership does not intend to
expend any additional funds of its own on the property. Accordingly, 260
Franklin is in negotiations with the lender and an unaffiliated third party
regarding the transfer of its ownership interest to the unaffiliated third
party in 1998. This would result in 260 Franklin and the Partnership no
longer having an ownership interest in the property. In such event, 260
Franklin and the Partnership would recognize a net 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
(of which the Partnership's share is approximately $3,343,634) as of
January 1, 1996, to reflect the then estimated fair value of the property
based upon the use of an appropriate capitalization rate applied to the
property's net operating income. Due to the lender negotiations described
above, the property has been classified as held for sale or disposition as
of July 1, 1997, and therefore, will not be subject to continued
depreciation.
PALM DESERT TOWN CENTER
The Partnership received (through a joint venture with an affiliate)
its specified cash return relating to Palm Desert Town Center, which was
being funded in part by the unaffiliated venture partner through December
31, 1994 pursuant to the terms of the applicable joint venture agreement.
Since the unaffiliated venture partner's funding obligation expired at the
end of 1994, the Partnership's share of cash is dependent upon the
operations of the property. Occupancy at the portion of the shopping
center in which the Partnership owns an interest increased to 87% at
September 30, 1997 up from 86% at June 30, 1997. Sales at the center have
been negatively impacted during the last several quarters by new
competition in the center's trade area. The increased competition has
resulted in lower effective rents upon re-leasing of space. 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
approximately break-even level. The Partnership is discussing the
possibility of the sale of its interest in the joint venture to the
unaffiliated venture partner. However, there can be no assurance that a
sale transaction on acceptable terms can be arranged.
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 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 rent
expense for the nine months ended September 30, 1997 and 1996 was $914,664
and $990,245, respectively.
<PAGE>
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 may utilize a portion of
its available funds to pay for its share of costs. However, as discussed
above, the Partnership is also discussing with the unaffiliated venture
partner the possibility of a sale of the Partnership's interest in the
joint venture. In the event of such sale, the Partnership would not be
required to pay a share of the restructuring and mall expansion costs.
NEWPARK MALL
As a result of the 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, approached the NewPark joint
venture regarding a sale of the Emporium building. Simultaneously with its
negotiations to acquire the Emporium Capwell building, the NewPark joint
venture negotiated to sell the building to a national retail store owner.
The transactions closed on April 22, 1997 and the joint venture received
net proceeds of approximately $2,000,000, of which the Partnership's share
was approximately $110,000. The Partnership recognized a gain of
approximately $110,000 for financial reporting purposes. The Partnership
expects to recognize a small gain for Federal income tax purposes in 1997.
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 based upon an analysis of the discounted
estimated future cash flows over the projected holding period.
JMB/125
In November 1994, JMB/125 and certain affiliates of Olympia & York
Developments, Ltd. ("O&Y") reached an agreement to settle their dispute
regarding 125 Broad and its property. Under the terms of the agreement,
JMB/125 assigned its interest in 125 Broad to an affiliate of O&Y and
released its venture partners (the "O&Y partners") from any claims related
to 125 Broad. In return, JMB/125 received an unsecured promissory note in
the principal amount of $5 million bearing simple interest at 4.5% per
annum with all principal and accrued interest due at maturity in October
1999, subject to mandatory prepayments of principal and interest or
acceleration of the maturity date under certain circumstances. In
addition, JMB/125 received a release from any claims of certain O&Y
affiliates and generally was to be indemnified against any liability as a
general partner of 125 Broad. JMB/125 was also relieved of any obligation
to contribute cash to 125 Broad in the amount of its deficit capital
account balance. Affiliates of O&Y subsequently filed a pre-arranged
bankruptcy plan for reorganization of 125 Broad under Chapter 11 of the
Bankruptcy Code in order to facilitate 125 Broad's transfer of the office
building to the mortgage lender in satisfaction of the mortgage debt and
other claims. In January 1995, the plan for reorganization was approved by
the bankruptcy court, was consummated, and the bankruptcy was concluded.
In October 1995, the makers of the $5 million promissory note payable to
JMB/125 filed for protection from creditors under Chapter 11 of the
Bankruptcy Code. Pursuant to the bankruptcy reorganization of the makers
of the note, JMB/125, as an unsecured creditor, received limited
partnership interests and a convertible note in a reorganized entity that
has majority or controlling interests in six office buildings in New York,
New York and Boston, Massachusetts. The assigned value, as of the
bankruptcy confirmation date, of the interests and note received by JMB/125
was approximately $400,000. The convertible note was fully reserved due to
the uncertainty of the realizable value of the note. In June 1997, the
convertible note receivable for $297,000 was collected on by JMB/125
resulting in the recognition of gain, of which the Partnership's share is
$116,436.
<PAGE>
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for 260 Franklin for the nine
months ended September 30, 1997 and 1996 is as follows:
1997 1996
----------- ----------
Total income . . . . . . . . . $ 7,813,000 7,578,933
Expenses applicable to
operating loss . . . . . . . 11,341,281 23,155,458
----------- ----------
Operating loss . . . . . . . . $ 3,528,281 15,576,525
=========== ==========
Partnership's share of loss. . $ 1,058,484 4,672,957
=========== ==========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments and adjustments to
reflect the treatment given certain transactions in the Partnership's 1996
Annual Report) necessary for a fair presentation have been made to the
accompanying figures as of September 30, 1997 and for the three and nine
months ended September 30, 1997 and 1996.
<PAGE>
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.
During the second quarter of 1996 some of the Holders of Interests in
the Partnership received from an unaffiliated third party an unsolicited
offer to purchase up to 4.86% of the Interests in the Partnership at
amounts ranging from $80 to $100 per Interests. The Partnership
recommended against acceptance of this offer on the basis that, among other
things, the offer price was inadequate. In June 1996, such offer expired.
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.
During the first quarter of 1997, some of the Holders of Interests in
the Partnership received from an unaffiliated third party an unsolicited
offer to purchase up to 4.9% of the outstanding Interests in the
Partnership at $105 per Interest. Such offer expired in March 1997. The
Special Committee recommended against acceptance of this offer on the basis
that, among other things, the offer price was inadequate. As of the date
of this report, the Partnership is aware that 2.28% of the Interests have
been purchased by all unaffiliated third parties either pursuant to such
tender offers or through negotiated purchases. The Partnership has been
notified that an unaffiliated third party intends to commence an offer for
approximately 6,100 Interests (approximately 4.3% of the outstanding
Interests) for $105 per Interest, and it is possible that other offers for
Interests may be made in the future. However, there is no assurance that
any such offer will be made, the terms of any such offer or whether any
such offer will be consummated, amended or withdrawn.
At September 30, 1997, the Partnership and its consolidated venture
had cash and cash equivalents of approximately $15,286,000. Such cash and
cash equivalents are available for capital improvements and other working
capital requirements, including the Partnership's share of the costs for a
possible expansion of the mall and restructuring of the ground lease and
loan at Palm Desert Town Center if satisfactory sale of the property or the
Partnership's interest therein cannot be arranged in the near term.
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. The Partnership and its consolidated venture
have currently budgeted in 1997 approximately $489,000, of which
approximately $77,000 has been spent as of September 30, 1997, 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 $618,000 (which
includes approximately $220,000 for the 260 Franklin Street office building
to be paid out of the restricted reserve account), of which approximately
$304,000 has been spent as of September 30, 1997 (approximately $210,000 of
which was paid out of the restricted reserve account for the 260 Franklin
Street office building).
In 1997, in an effort to reduce Partnership operating expenses, the
Partnership elected to make an annual, rather than semi-annual,
distribution of operating cash flow in May. The annual distribution of
operating cash flow has also been reduced to $2 per Interest from the
previous level of $6.50 per Interest as a result of reduced levels of
<PAGE>
operating cash flows by the Partnership resulting from the sale in May 1996
of the Dunwoody Crossing Apartments, as well as previous sales of the
Partnership's investment properties. The joint ventures for New Park Mall
and Palm Desert Town Center are currently not distributing cash flow to the
Partnership or the other venture partners. The joint venture for Palm
Desert Town Center is considering a redevelopment scenario that could
require substantial capital investments. The joint venture for New Park
Mall has retained working capital for potential tenant improvements and
other capital expenditures. Future distributions by the Partnership 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 as well as the terms of sale for
the Partnership's remaining investment properties (or its interests
therein).
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 Palm Desert Town Center and NewPark Mall,
aggregate distributions of sale or refinancing proceeds received by Holders
of Interests over the entire term of the Partnership are expected to be
significantly less than one-half of their original investment. In
connection with sales or other dispositions (including transfers of title
to a lender), the Holders of Interests will 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, and notes
receivable at September 30, 1997 as compared to December 31, 1996 is
primarily due to the timing of collection of certain revenues at Palm
Desert Town Center.
The increase in accounts payable at September 30, 1997 as compared to
December 31, 1996 is primarily due to the timing of payment of real estate
tax payments at Palm Desert Town Center.
The unearned rents at December 31, 1996 is due to the prepayment of
rents at Palm Desert Town Center.
The decrease in rental income for the nine months ended September 30,
1997 as compared to the nine months ended September 30, 1996 is primarily
due to a decrease in occupancy in 1997 at the Palm Desert Town Center. The
increase for the three months ended September 30, 1997 as compared to the
three months ended September 30, 1996 is primarily due to increased tenant
recoveries in 1997 at the Palm Desert Town Center.
The decrease in depreciation expense for the three and nine months
ended September 30, 1997 as compared to the three and nine months ended
September 30, 1996 is due to the Palm Desert Town Center being classified
as held for sale or disposition as of July 1, 1997 and therefore no longer
being subject to continued depreciation.
The decrease in property operating expenses for the nine months ended
September 30, 1997 as compared to the nine months ended September 30, 1996
is primarily due to an increase in the allowance for doubtful accounts at
September 30, 1996 and a decrease in the allowance for doubtful accounts at
September 20, 1997 at Palm Desert Town Center.
<PAGE>
The decrease in Partnership's share of loss from operations of
unconsolidated ventures for the nine months ended September 30, 1997 as
compared to the nine months ended September 30, 1996 is primarily due to
the Partnership's share of 260 Franklin's provision for value impairment
recorded January 1, 1996 at the 260 Franklin venture. The decrease for the
three months ended September 30, 1997 as compared to the three months ended
September 30, 1996 is due to a decrease in 1997 in operating losses at the
260 Franklin property primarily as a result of the property being
classified as held for sale or disposition as of July 1, 1997 and therefore
depreciation expense not being recorded since that date.
The decrease in venture partners' share of ventures' operations for
the three and nine months ended September 30, 1997 as compared to the three
and nine months ended September 30, 1996 is due to an increase in net
operating earnings at the Palm Desert Town Center primarily as a result of
a decrease in the allowance for doubtful accounts at September 30, 1997 and
the property being classified as held for sale or disposition as of July 1,
1997, and therefore, no longer being subject to continued depreciation.
The gain on sale of Partnership's investments in unconsolidated
ventures of $509,963 for the nine months ended September 30, 1997
represents recognition of gain on sale of JMB/Owing's interest in Owings
Mills, gain on the sale of the Emporium Capwell building at NewPark Mall,
and recognition of previously deferred gain from collection of principal on
the note receivable relating to the investment in 125 Broad. The gain of
$4,615,294 for the nine months ended September 30, 1996 represents
recognition of gain on the sale of JMB/Owing's interest in Owings Mills and
the sale of Dunwoody Crossing Apartments. The gains of $107,486 and
$100,609 for the three months ended September 30, 1997 and 1996,
respectively, represent gain on the sale of JMB/Owning's interest in Owings
Mills.
The loss on liquidation of joint venture for the nine months ended
September 30, 1997 represents loss recognized after the liquidation of the
Partnership's interest in Villages Northeast Associates.
<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties owned during 1997:
<CAPTION>
1996 1997
-------------------------------------- -------------------------------
At At At At At At At At
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>
1. 260 Franklin Street Building
Boston, Massachusetts. . . . 96% 95% 96% 96% 96% 97% 98%
2. NewPark Mall
Newark (Alameda County),
California . . . . . . . . . 79% 79% 77% 78% 75% 75% 76%
3. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . . . 91% 92% 88% 89% 88% 86% 87%
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A. The Amended and Restated Agreement of Limited Partnership and
the Assignment Agreement set forth as Exhibit B to the Prospectus, copies
of which are hereby incorporated herein by reference to Exhibit 3 and
Exhibit 4-A to the Partnership's Report for December 31, 1992 on Form 10-K
(File No. 0-16516) dated March 19, 1993.
3-B. Acknowledgement of rights and duties of the General Partners of
the Partnership between ABPP Associates, L.P. (a successor Associated
General Partner of the Partnership) and JMB Realty Corporation as of
December 31, 1995 dated November 18, 1996 are hereby incorporated herein by
reference to the Partnership's Report for September 30, 1996 on Form 10-Q
(File No. 0-16516) dated November 8, 1996.
4-A. Documents relating to the loan modification of the mortgage loan
secured by the 260 Franklin Street Building is hereby incorporated herein
by reference to Exhibit 4-B to the Partnership's Report for December 31,
1991 on Form 10-K (File No. 0-16516) dated March 27, 1992.
4-B. Documents dated December 19,1995 relating to the Promissory Note
secured by NewPark Mall are hereby incorporated herein by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-16516)
dated March 25, 1996.
4-C. Documents relating to the third mortgage modification and
extension agreement secured by the 260 Franklin Street Building dated
December 4, 1996 are hereby incorporated herein by reference to the
Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-16516)
dated March 21, 1997.
10-A. 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-B. 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-C. 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-D. 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 herein by
reference to Exhibit 1 to the Partnership's Form 8-K (File No. 0-16516)
dated January 6, 1989.
10-E. Modification to Reserve Escrow Agreement relating to the 260
Franklin Street Building is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-16516)
dated May 11, 1995.
<PAGE>
10-F. Modification Reserve Escrow Agreement relating to the 260
Franklin Street Building dated December 4, 1996 are hereby incorporated
herein by reference to the Partnership's Report for December 31, 1996 on
Form 10-K (File No. 0-16516) dated March 21, 1997.
10-G. Modification to Reserve Escrow Agreement relating to the 260
Franklin Street Building dated May 22, 1997 is incorporated herein by
reference to the Partnership's Report for June 30, 1997 on Form 10-Q (File
No. 0-16516) dated August 8, 1997.
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last quarter of
the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,285,688
<SECURITIES> 0
<RECEIVABLES> 319,975
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,605,663
<PP&E> 43,144,709
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,085,192
<CURRENT-LIABILITIES> 1,714,559
<BONDS> 40,741,982
<COMMON> 0
0
0
<OTHER-SE> 4,109,424
<TOTAL-LIABILITY-AND-EQUITY>64,085,192
<SALES> 7,837,181
<TOTAL-REVENUES> 8,383,977
<CGS> 0
<TOTAL-COSTS> 4,422,484
<OTHER-EXPENSES> 470,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,807,310
<INCOME-PRETAX> (316,034)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,105,489)
<DISCONTINUED> 240,816
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (864,673)
<EPS-PRIMARY> (5.80)
<EPS-DILUTED> (5.80)
</TABLE>
