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 June 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. . . . . . . 13
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 17
<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
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 15,127,787 14,791,381
Interest, rents and other receivables, net of allowances for
doubtful accounts of approximately $816,043 and $939,124 at
June 30, 1997 and December 31, 1996, respectively. . . . . . . . . 50,398 286,024
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 8,901 132,414
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . 15,187,086 15,209,819
------------ ------------
Investment properties, at cost:
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . 60,180,104 60,103,528
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 17,035,395 16,031,335
------------ ------------
Total investment properties, net of accumulated depreciation. 43,144,709 44,072,193
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 1,874,034 1,962,277
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 537,492 567,296
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . 114,643 171,623
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 2,473,605 2,535,978
------------ ------------
$ 63,331,569 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)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1997 1996
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 430,649 405,690
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 669,229 735,053
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 168,611
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 412,886 414,854
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . 1,512,764 1,724,208
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 50,918 66,518
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . 1,236,788 1,267,991
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 12,201,287 11,341,551
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 40,857,922 41,079,673
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 55,859,679 55,479,941
Venture partners' subordinated equity in ventures . . . . . . . . . . 3,532,240 3,740,111
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (3,428,019) (3,373,900)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (1,443,873) (1,432,178)
------------ ------------
(4,851,892) (4,786,078)
------------ ------------
Limited partners:
Capital contributions, net of offering
costs and purchase discounts. . . . . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (60,894,434) (59,897,441)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (50,855,377) (50,558,700)
------------ ------------
8,791,542 10,085,212
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . . 3,939,650 5,299,134
------------ ------------
$ 63,331,569 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 SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . $ 2,351,876 2,539,464 5,009,765 5,257,273
Interest income . . . . . . . . . . . . . . . 183,090 171,130 355,003 405,243
----------- ---------- ---------- ----------
2,534,966 2,710,594 5,364,768 5,662,516
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . 1,278,957 1,272,264 2,521,586 2,525,911
Depreciation. . . . . . . . . . . . . . . . . 502,133 501,826 1,004,060 1,003,653
Property operating expenses . . . . . . . . . 935,616 1,313,951 2,069,534 2,558,514
Professional services . . . . . . . . . . . . 56,563 44,481 125,552 132,637
Amortization of deferred expenses . . . . . . 33,710 28,519 67,420 56,772
Management fees to corporate general
partner . . . . . . . . . . . . . . . . . . 19,492 7,044 19,492 31,675
General and administrative. . . . . . . . . . 130,976 91,262 242,483 219,563
----------- ---------- ---------- ----------
2,957,447 3,259,347 6,050,127 6,528,725
----------- ---------- ---------- ----------
Operating earnings (loss) . . . . . . . (422,481) (548,753) (685,359) (866,209)
Partnership's share of earnings (loss)
from operations of unconsolidated
ventures. . . . . . . . . . . . . . . . . . . (374,046) (736,232) (706,954) (4,321,527)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . 121,935 194,656 207,871 301,738
----------- ---------- ---------- ----------
Net operating earnings (loss) . . . . . (674,592) (1,090,329) (1,184,442) (4,885,998)
Gain on sale of Partnership's investments
in unconsolidated ventures. . . . . . . . . . 332,187 4,417,527 402,477 4,514,685
Loss on liquidation of unconsolidated venture . (269,147) -- (269,147) --
----------- ---------- ---------- ----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
Net operating earnings (loss)
before extraordinary item . . . . . . (611,552) 3,327,198 (1,051,112) (371,313)
Extraordinary item:
Partnership's share of unconsolidated
venture debt prepayment penalty . . . . . . -- (175,007) -- (175,007)
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . $ (611,552) 3,152,191 (1,051,112) (546,320)
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss). . . . $ (4.61) (7.46) (8.10) (33.42)
Gain on sale of Partnership's
investments in unconsolidated
ventures. . . . . . . . . . . . . . 2.34 31.16 2.84 31.85
Loss on liquidation of venture . . . (1.84) -- (1.84) --
Extraordinary item . . . . . . . . . -- (1.23) -- (1.23)
----------- ---------- ---------- ----------
$ (4.11) 22.47 (7.10) (2.80)
=========== ========== ========== ==========
Cash distributions per
limited partnership
interest. . . . . . . . . . . . . . . $ 2.11 5.00 2.11 5.00
=========== ========== ========== ==========
<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
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,051,112) (546,320)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,060 1,003,653
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 67,420 56,772
Partnership's share of (earnings) loss from operations of
unconsolidated ventures, net of distributions . . . . . . . . . . . . 706,954 4,557,563
Venture partners' share of ventures' operations . . . . . . . . . . . . (207,871) (301,738)
Gain on sale of Partnership's investments in
unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (402,477) (4,514,685)
Loss on liquidation of unconsolidated venture . . . . . . . . . . . . . 269,147 --
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 175,007
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 235,626 203,115
Other prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . 123,513 100,204
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,980 33,226
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 62,373 (70,652)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,824) 58,484
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168,611) --
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,968) 18,852
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (15,600) 6,501
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . (31,203) 35,326
----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . . . . . . . . . . . 581,407 815,308
----------- -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (76,576) (3,205)
Partnership's distributions from unconsolidated ventures. . . . . . . . . 374,355 33,484
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (37,616) (78,265)
----------- -----------
Net cash provided by (used in) investing activities . . . . . . . . 260,163 (47,986)
----------- -----------
<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. . . . . . . . . . . . . . . . . . . (196,792) (174,643)
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (296,677) (692,167)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (11,695) (19,005)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . (505,164) (885,815)
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . 336,406 (118,493)
Cash and cash equivalents, beginning of the year. . . . . . . . . . 14,791,381 13,734,366
----------- -----------
Cash and cash equivalents, end of the period. . . . . . . . . . . . $15,127,787 13,615,873
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 2,523,554 2,507,059
=========== ===========
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
JUNE 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.
The accompanying consolidated financial statements include $0 and
$93,434, respectively, of the Partnership's share of total property
operations of $0 and $311,446 for unconsolidated properties for the six
months ended June 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.
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 June 30, 1997
and for the six months ended June 30, 1997 and 1996 were as follows:
<PAGE>
Unpaid at
June 30,
1997 1996 1997
------- ------- -------------
Management fees to
Corporate General
Partner. . . . . . . . . . . $19,492 31,675 --
Insurance commissions . . . . 29,843 27,254 --
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. . . . 21,238 51,565 21,238
------- ------- ------
$70,573 110,494 21,238
======= ======= ======
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 June 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.
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 is unlikely the loan will be extended beyond January 1,
1998. If 260 Franklin is unable, upon ultimate maturity of the loan, to
refinance the loan to the property, 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.
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.
<PAGE>
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 decreased to 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 an
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. Accordingly, 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.
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 six months ended June 30, 1997 and 1996 was $547,716 and
$652,366, respectively.
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.
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 $100,000. 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.
<PAGE>
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.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for 260 Franklin for the six
months ended June 30, 1997 and 1996 is as follows:
1997 1996
---------- ----------
Total income . . . . . . . . . $5,027,636 5,187,622
Expenses applicable to
operating loss . . . . . . . 7,775,465 18,881,648
---------- ----------
Operating loss . . . . . . . . $2,747,829 13,694,026
========== ==========
Partnership's share of loss. . $ 824,349 4,108,208
========== ==========
<PAGE>
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 June 30, 1997 and for the three and six months
ended June 30, 1997 and 1996.
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, 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 1.78% of the Interests have
been purchased by such unaffiliated third parties either pursuant to such
tender offers or through negotiated purchases. It is possible that other
offers for Interests may be made in the future, although 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 June 30, 1997, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $15,128,000. 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. 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 June 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
$645,000 (which includes approximately $220,000 for the 260 Franklin Street
office building which will be paid out of the restricted reserve account),
of which approximately $293,000 has been spent as of June 30, 1997
(approximately $212,000 of which was paid out of the restricted reserve
account for the 260 Franklin Street office building).
<PAGE>
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 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 in New Park Mall and Palm Desert
Town Center are currently not distributing cash flow to the Partnership or
the other venture partners as both properties are reviewing redevelopment
scenarios which could require substantial capital investments. 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 as well as the
terms of sale for the Partnership's remaining investment properties (or its
interest 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 June 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 decrease in prepaid expenses at June 30, 1997 as compared to
December 31, 1996 is primarily due to the timing of payment of insurance
premiums at Palm Desert Town Center.
The decrease in accounts payable at June 30, 1997 as compared to
December 31, 1996 is primarily due to the timing of payment of professional
fee expenses.
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 three and six months ended June
30, 1997 as compared to the three and six months ended June 30, 1996 is due
to a decrease in occupancy at the Palm Desert Town Center.
The decrease in property operating expenses for the three and six
months ended June 30, 1997 as compared to the three and six months ended
June 30, 1996 is primarily due to an increase in the allowance for doubtful
accounts at June 30, 1996 and a decrease in the allowance for doubtful
accounts at June 30, 1997 at Palm Desert Town Center.
<PAGE>
The decrease in Partnership's share of loss from operations of
unconsolidated ventures for the six months ended June 30, 1997 as compared
to the six months ended June 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
June 30, 1997 as compared to the three months ended June 30, 1996 is due to
the sale of Dunwoody Crossing Apartments in May 1996.
The gain on sale of Partnership's investments in unconsolidated
ventures of $332,187 and $402,477 for the three and six months ended June
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 for the three and six months ended June 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 loss on liquidation of joint venture for the three and six months
ended June 30, 1997 represents loss recognized after the liquidation of the
Partnership's interest in Villages Northeast Associates.
PART II. OTHER INFORMATION
<PAGE>
<TABLE>
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%
2. NewPark Mall
Newark (Alameda County),
California . . . . . . . . . 79% 79% 77% 78% 75% 75%
3. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . . . 91% 92% 88% 89% 88% 86%
</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 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 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 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 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 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 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 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 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 filed herewith.
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter 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: August 8, 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: August 8, 1997
EXHIBIT 10-G
- ------------
(Carlyle-XVI)
PREPARED BY AND UPON
RECORDING RETURN TO:
WILLIAM H. GOEBEL, ESQ.
INVESTMENT LAW DEPARTMENT
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NY 10017
FOURTH MORTGAGE MODIFICATION
AND
EXTENSION AGREEMENT
THIS AGREEMENT, executed as of the 22nd day of May, 1997,
but effective as of the 1st day of January, 1997, by and
between NORMAN S. GELLER, THOMAS M. BENNETT, JEFFREY GLUSKIN
and NEIL G. BLUHM, BRIAN K. ELLISON and JULIA C. PARKS, as
Trustees of 260 FRANKLIN STREET ASSOCIATES TRUST under a
Declaration of Trust dated May 16, 1986, duly recorded with
the Suffolk County Registry of Deeds in Book 12510, Page 64
and filed with the Suffolk County Registry District of the
Land Court as Document No. 405198, as amended in accordance
with Certificate of Trustee as to Appointment of Additional
Trustees and First Amendment to Declaration of Trust
establishing 260 Franklin Street Associates Trust, dated
September 12, 1986, duly recorded with Suffolk County Registry
of Deeds as Instrument No. 374 of September 26, 1986, and
filed with the Suffolk County Registry District of the Land
Court as Document No. 411174, and as further amended by
Certificate of Trustee as to removal of certain Trustees and
appointment of additional Trustees dated July 23, 1990, duly
recorded with the Suffolk County Registry of Deeds in Book
16416, Page 342, and Document No. 467674, with appointment of
six Trustees registered as Documents Nos. 467675 through
467680 with the Suffolk County Registry District of the Land
Court, as further amended in accordance with a Certificate of
Trustee as to Removal of Certain Trustees and Appointment of
Additional Trustees, dated May 20, 1992, duly recorded with
the Suffolk County Registry of Deeds as Document No. 487549,
having a mailing address c/o JMB Realty Corporation, 900 North
Michigan Avenue, Chicago, Illinois 60611-1575 ("Mortgagor"),
and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, a
New York corporation having a mailing address of 730 Third
Avenue, New York, New York 10017 ("Mortgagee").
<PAGE>
Appl. #MA-374
Mtge. #000207800
WHEREAS, pursuant to the terms of that certain Second
Mortgage Modification and Consolidation Agreement between the
parties hereto dated as of January 1, 1991, and recorded with
the Suffolk County Registry of Deeds as Instrument No. 308 of
December 31, 1991, in Book 17222, Page 286 and filed with
Suffolk County Registry District of the Land Court as Document
No. 482106, Mortgagor is justly indebted to Mortgagee in the
consolidated principal amount (the "Consolidated Principal
Indebtedness") of SEVENTY - FOUR MILLION EIGHT HUNDRED NINETY
- - ONE THOUSAND TWELVE AND 83/100THS ($74,891,012.83) DOLLARS,
plus interest thereon from date, which Agreement consolidated
the indebtedness evidenced by those two certain Mortgage
Notes, (a) the first being that certain Note payable to the
order of Mortgagee in the original sum principal sum of SIXTY
- - FIVE MILLION AND NO/100THS ($65,000,000.00) DOLLARS dated
December 18, 1985, made originally by 260 Franklin
Incorporated, the repayment obligation for which has been
assumed by Mortgagor by that certain agreement captioned "NOTE
MODIFICATION AGREEMENT WITH RESPECT TO $56,000,000 NOTE DATED
DECEMBER 18, 1985" (collectively, "Note No. 1"); (b) the other
being that certain Note made by Mortgagor payable to the order
of Mortgagee in the original principal sum of TEN MILLION AND
NO/100THS ($10,000,000.00) DOLLARS, dated September 24, 1986
("Note No. 2");
WHEREAS, pursuant to the terms of that certain Third
Mortgage Modification and Extension Agreement between the
parties hereto dated as of December 4, 1996, and recorded with
the Suffolk County Registry of Deeds as Instrument No. 257 on
December 24, 1996, in Book 21097, Page 074 and filed with
Suffolk County Registry District of the Land Court as Document
No. 547285, the parties hereto agreed to extend the term of
said Mortgage to January 1, 1997, and to modify certain terms
of the loan;
WHEREAS, the Consolidated Principal Indebtedness
evidenced by both Notes are secured by that certain Security
Agreement and Mortgage ("the $65,000,000.00 Mortgage") dated
December 18, 1985, and recorded with the Suffolk County
Registry of Deeds in Book 12143, Page 249 and filed with
Suffolk County Registry District of the Land Court as Document
No. 399401 and that certain Security Agreement and Mortgage
Deed ("the $10,000,000.00 Mortgage") dated September 24, 1986,
and recorded with the Suffolk County Registry of Deeds in Book
12902, Page 302 and filed with Suffolk County Registry
District of the Land Court
2
<PAGE>
Appl. #MA-374
Mtge. #000207800
as Document No. 411176; as such Mortgages have been
consolidated and modified by (i) that certain Mortgage
Modification and Consolidation Agreement between Mortgagor and
Mortgagee dated September 24, 1986 and recorded with the
Suffolk County Registry of Deeds in Book 12902, Page 347 and
filed with the Suffolk County Registry District of the Land
County as Document No. 411178, (ii) the aforesaid Second
Mortgage Modification and Consolidation Agreement, and (iii)
the aforesaid Third Mortgage Modification and Extension
Agreement. Both the $65,000,000.00 Mortgage and the
$10,000,000.00 Mortgage as consolidated and modified by the
aforesaid Mortgage Modification and Consolidation Agreement,
Second Mortgage Modification and Consolidation Agreement and
Third Mortgage Modification and Extension Agreement are
collectively called the "Consolidated Mortgage" and both such
mortgages encumber and mortgage, as security for Consolidated
Principal Indebtedness, those certain lots, parcels and pieces
of land with the buildings and improvement erected thereon
situate, lying and being in the City of Boston, County of
Suffolk, Commonwealth of Massachusetts described in the
mortgages and on EXHIBIT A attached hereto and forming a part
hereof (hereinafter called "the Premises");
WHEREAS, the Consolidated Principal Indebtedness is also
secured by, among other things, (a) a certain Assignment of
Lessor's Interest in Lease(s) from 260 Franklin Incorporated
to Mortgagee dated December 18, 1985, and recorded with the
Suffolk County Registry of Deeds on December 19, 1985, as
Instrument No. 503 and filed with the Suffolk County Registry
District of the Land Court as Document No. 399403 as
supplemented by the certain Supplemental Assignment of
Lessor's Interest in Lease(s) from Mortgagor to Mortgagee
dated September 24, 1986, and recorded with the Suffolk County
Registry of Deeds as Instrument No. 379 filed with the Suffolk
County Registry District of the Land Court as Document No.
411179 (hereinafter collectively called the "$65,000,000.00
Assignment of Lessor's Interest in Lease(s)"); (b) that
certain Assignment of Lessor's Interest in Lease(s) from
Mortgagor to Mortgagee dated September 24, 1986, and recorded
with the Suffolk County Registry of Deeds as Instrument No.
377 of September 26, 1986, and filed with the Suffolk County
Registry District of the Land Court as Document No. 411177
(hereinafter called the $10,000,000 Assignment of Lessor's
Interest in Leases"); and (c) that certain Supplemental
Assignment of Lessor's Interest in Leases (the "1991
Supplemental Assignment") dated as of January 1, 1991, and
recorded with the Suffolk County Registry of Deeds as
Instrument No. 309 of December 31, 1991, in
3
<PAGE>
Appl. #MA-374
Mtge. #000207800
Book 17222, Page 308 and filed with Suffolk County Registry
District of the Land Court as Document No. 482107;
WHEREAS, Mortgagor continues to be the owner of the
Premises and does hereby warrant and represent that the
Consolidated Mortgages continue to be first and superior liens
on the Premises in accordance with their terms (subject to
only those encumbrances set forth in that certain title policy
bearing title insurance No. 616157M bearing effective date
equal to the date on which this Agreement is recorded held by
Mortgagee from Ticor Title Insurance Company) for the
Consolidated Principal Indebtedness of SEVENTY - FOUR MILLION
EIGHT HUNDRED NINETY - ONE THOUSAND TWELVE AND 83/100THS
($74,891,012.83) DOLLARS, plus interest, as evidenced by Note
No. 1 and Note No. 2, as such indebtedness has been
consolidated by the terms of the Second Mortgage Modification
and Consolidation Agreement and modified by the terms of the
Third Mortgage Modification and Extension Agreement; that it
has no defense or offset to its liability thereunder and all
the provisions are unmodified and in full force and effect of
the Consolidated Mortgages, Note No. 1, Note No. 2, the
$65,000,000 Assignment of Lessor's Interest in Lease(s), the
$10,000,000 Assignment of Lessor's Interest in Leases, the
1991 Supplemental Assignment and all other documents held by
Mortgagee in connection with the indebtedness evidenced by
Note No. 1 and Note No. #2;
WHEREAS, Mortgagor has requested that the date on which
the Consolidated Principal Indebtedness is to be paid in full
under the aforesaid Second Mortgage modification and
Consolidation Agreement, as the same was modified and extended
by the aforesaid Third Mortgage Modification and Extension
Agreement be extended to January 1, 1998 (the new "Scheduled
Maturity Date"), subject to Mortgagee having the right to
accelerate such maturity date upon thirty (30) days' prior
written notice to Mortgagor, which request is agreeable to
Mortgagee provided there are certain other modifications as
hereinafter provided;
WHEREAS, the Consolidated Principal Indebtedness is
further secured by that certain Reserve Pledge Agreement dated
January 1, 1991, as modified by that certain Modification to
Reserve Escrow Agreement dated January 1, 1994, as further
modified and restated by that certain Reserve Pledge Agreement
dated December 4, 1996, and as further extended by that
certain
4
<PAGE>
Appl. #MA-374
Mtge. #000207800
Extension Agreement of even date herewith, which extends the
stated maturity date to January 1, 1998;
NOW, THEREFORE, in consideration of the Premises, the
covenants and conditions herein contained, and the sum of TEN
($10.00) DOLLARS and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby covenant and agree as follows:
1. The date of January 19, 1997, set forth in the
Second Mortgage Modification and Consolidation Agreement, as
modified and extended by the said Third Mortgage Modification
and Extension Agreement, on which the entire Consolidated
Principal Indebtedness, plus all accrued fixed interest, there
hereinafter defined Yield Maintenance Amount, the hereinafter
defined Residual Interest Amount, and such other sums due
thereon pursuant thereto are to be paid in full, is hereby
extended to January 1, 1998, and the respective liens of the
Consolidated Mortgages are hereby extended thereby to cover
such date of January 1, 1998, subject to such date being
accelerated at Mortgagee's election to an earlier date (the
"Acceleration Date") that Mortgagee may select (Mortgagee's
Election to Accelerate") upon thirty (30) days' prior written
notice sent to Mortgagor in accordance with Paragraph 33 of
the $10,000,000 Mortgagee at Mortgagor's address set forth and
in such event, the entire Consolidated Principal Indebtedness,
plus all accrued fixed interest, the Yield Maintenance Amount,
the Residual Interest Amount, and the other sums owed thereon
pursuant thereto shall immediately become due and payable and
shall be paid by Mortgagor on the Acceleration Date.
2. This Agreement does not create any new, further or
other indebtedness, but secures the same indebtedness
evidenced by Note No. 1 and Note No. 2 as consolidated by the
terms of the Second Mortgage Modification and Consolidation
Agreement and extended and modified by the terms of the Third
Mortgage Modification Agreement, and by this Agreement.
3. IF ANY TERM, COVENANT OR CONDITION OF THIS AGREEMENT
SHALL BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE IN ANY
RESPECT, THIS AGREEMENT SHALL BE CONSTRUED WITHOUT SUCH
PROVISIONS. IN ADDITION, IF THE TRANSACTION EVIDENCED AND
SECURED HEREBY SHALL BE RESCINDED OR OTHERWISE RENDERED
UNENFORCEABLE IN WHOLE OR IN PART ON ACCOUNT OF ANY LAWS
5
<PAGE>
Appl. #MA-374
Mtge. #000207800
RESPECTING CREDITOR'S RIGHTS OR FOR ANY OTHER REASON, THEN, AT
MORTGAGEE'S OPTION, THE ORIGINAL NOTE NO. 1 AND NOTE NO. 2 (AS
CONSOLIDATED HERETOFORE UNDER THE SECOND MORTGAGE MODIFICATION
AND CONSOLIDATION AGREEMENT AND MODIFIED AND EXTENDED BY THE
THIRD MORTGAGE MODIFICATION AND EXTENSION AGREEMENT) AND
ORIGINAL CONSOLIDATED MORTGAGES SHALL BE UNIMPAIRED, AND THEIR
TERMS AND PROVISIONS SHALL BE UNMODIFIED AND IN FULL FORCE AND
EFFECT AS IF THE MODIFICATIONS CONTAINED IN THIS AGREEMENT HAD
NEVER BEEN EXECUTED.
4. Mortgagor shall promptly cause this Agreement to be
filed, registered or recorded in such manner and in such
places as may be required by any present or future law in
order to publish notice of and fully to protect the liens of
the Consolidated Mortgages upon, and the interest of Mortgagee
in, the Premises. Mortgagor shall pay all filing,
registration and recording fees, all expenses incident to the
preparation, execution and acknowledgment of this Agreement
and all federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in
connection with the filing, registration, recording, executing
and delivery of this Agreement, and Mortgagor shall hold
harmless and indemnify Mortgagee against any liability
incurred by reason of the imposition of any tax on the
issuance, making, filing, registration or recording of this
Agreement; provided, however, Mortgagor shall not be
responsible for Mortgagee's income, franchise or similar such
taxes.
5. Mortgagor represents, warrants and covenants that
(a) there are no offsets, counterclaims or defenses against
the Consolidated Principal Indebtedness, Note No. 1, Note No.
2, the Consolidated Mortgages, the $65,000,000 Assignment of
Lessor's in Leases, the $10,000,000.00 Assignment of Lessor's
in Leases, or the 1991 Supplemental Assignment and (b)
Mortgagor (and its respective undersigned representatives)
have full power, authority and legal right to execute this
Agreement and to keep and observe all of the terms of this
Agreement on all such parties' part to be observed or
performed, and (c) this Agreement is valid and binding upon
all such parties and enforceable against all such parties in
accordance with its terms.
6. This Agreement shall be binding upon Mortgagor and
Mortgagee and their respective successors and assigns and
shall inure to the benefit of Mortgagor and Mortgagee and
their permitted successors and assigns.
6
<PAGE>
Appl. #MA-374
Mtge. #000207800
7. This Agreement may be executed in any number of
duplicate originals and each such duplicates original shall be
deemed to constitute but one and the same instrument.
8. MORTGAGOR HEREBY ACKNOWLEDGES THAT THE MORTGAGOR AND
THE BENEFICIARIES OF THE TRUST ARE KNOWLEDGEABLE BORROWERS OF
COMMERCIAL FUNDS AND EXPERIENCED REAL ESTATE DEVELOPERS OR
INVESTORS, (ii) THEY AND THEIR ATTORNEYS FULLY UNDERSTAND THE
EFFECT OF THE ABOVE PROVISIONS, (iii) MORTGAGEE WOULD NOT
MAKE THE LOAN SECURED HEREBY WITHOUT SUCH PROVISIONS AND (iv)
SUCH LOAN IS A COMMERCIAL OR BUSINESS LOAN, NEGOTIATED BY
MORTGAGEE AND MORTGAGOR AND THEIR RESPECTIVE ATTORNEYS AT ARMS
LENGTH. NOTHING CONTAINED IN THIS AGREEMENT SHALL BE
CONSTRUED AS CREATING A JOINT VENTURE OR PARTNERSHIP
RELATIONSHIP BETWEEN THE PARTIES HERETO.
9. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
10. It is specifically agreed that the time is of the
essence of this Agreement and that the waiver of options or
obligations secured by this Agreement shall not at any time be
held to be abandonment of such rights. Notice of the exercise
of any option granted to Mortgagee herein is not required to
be given unless expressly provided to the contrary herein.
The Trustees of 260 Franklin Street Associates Trust
hereby certify pursuant to Paragraph 6 of said Trust that the
execution and delivery of this Instrument has been duly
authorized and directed by all of the beneficiaries of said
Trust and said Trust is in full force and effect as of the
date hereof. The foregoing authorization has not been
altered, amended or rescinded and is in full force and effect
as of the date hereof.
The party or parties executing this Agreement as
Mortgagor are executing the same as the Trustees and not in
any individual capacity. As such, they are not personally
liable for fulfilling any of their obligations under this
Agreement and Mortgagee shall look to and be entitled to
succeed to the Premises and the other assets of the trust for
a breach by Mortgagor of its obligations under this Agreement.
Without limitation on the foregoing, but in addition
thereto, neither Mortgagor nor any Trustee, advisor or any
other entity shall be personally liable in any manner or to
any extent
7
<PAGE>
Appl. #MA-374
Mtge. #000207800
under or in connection with this Agreement (including, but
without limitation, the items set forth as exceptions to
Paragraph 36 of the Consolidated Mortgages) or any other
agreement or instrument entered into in connection herewith;
provided, however, that the forgoing shall not affect or
impair the lien of the Consolidated Mortgage, the rights of
Mortgagee to proceed against the Premises, or any obligations
under a certain Indemnity and Payment Agreement dated December
27, 1991, given by Carlyle Real Estate Limited Partnership-XVI
to Mortgagee.
IN WITNESS WHEREOF, the Mortgagor and the
Mortgagee have duly signed, sealed and delivered this
Agreement as a sealed instrument the day and the year
hereinabove first written.
executed signature /S/ BRIAN K. ELLISON
- -------------------- ------------------------------
Witness not personally but solely as
Trustee of 260 Franklin Street
Associates Trust as aforesaid,
for self and co-trustees
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
/S/ SUSAN M. DEVER By: /S/ MARK DE PRIMA
- -------------------- --------------------------
Witness Name: Mark De Prima
Title: Associate Director
/S/ DAVID RODRIGUEZ By: /S/ BRIDGET MAC LEAN-LAI
- -------------------- --------------------------
Witness Name: Bridget MacLean-Lai
Title: Assistant Secretary
[ seal ]
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ACKNOWLEDGEMENTS
----------------
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
On this 22ND day of MAY, 1997, before me appeared BRIAN
K. ELLISON, to me personally known, who, being by me duly
sworn, did say that he/she is a trustee of 260 Franklin Street
Associated Trust, and that said instrument was signed in
behalf of said trust, and said BRIAN K. ELLISON, acknowledged
said instrument to be the free act and deed of the trustees on
behalf of said trust.
/S/ LAURA ANN KLENSKE
------------------------------
Notary Public
My commission expires: 6-11-99
[ official seal ]
STATE OF NEW YORK )
) ss: New York,
COUNTY OF NEW YORK )
Before me, the undersigned authority, a Notary in and for
said State, on this day personally appeared MARK DE PRIMA and
BRIDGET MAC LEAN-LAI, known to me to be the persons whose
names are subscribed to the foregoing instrument and known to
me to be the ASSOCIATE DIRECTOR and ASSISTANT SECRETARY,
respectively, of Teachers Insurance and Annuity Association of
America, a New York corporation, and that the seal affixed to
the foregoing instrument is the corporate seal of said
corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of
Trustees, and acknowledged that they executed the said
instrument for the uses, purposes and consideration therein
expressed on behalf of said Teachers Insurance and Annuity
Association of America.
Given under my hand and seal of office this 6TH day of
JUNE, 1997.
/S/ JULIE A. HATHAWAY
------------------------------
Notary Public in the State of New
York
My commission expires: April 7, 1999
[ official seal ]
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EXHIBIT A
---------
A parcel of land situated in Boston, Suffolk County,
Massachusetts, shown on a plan entitled "Plan of Land, Boston,
Massachusetts" prepared by R.E. Cameron & Associates, Inc.,
dated January 26, 1983, revised February 24, 1983, recorded
with Suffolk Registry of Deeds at the end of Book 10281, and
bounded:
SOUTHWESTERLY by Oliver Street, 165.82 feet;
NORTHWESTERLY by land of Thomas J. White, et al,
Trustees, 96.41 feet;
NORTHEASTERLY by the same land, 15.80 feet;
NORTHWESTERLY by the same land, 10.90 feet;
NORTHEASTERLY by Lot C as shown on said plan, 31.29
feet;
NORTHWESTERLY by said Lot C, 12.41 feet;
NORTHEASTERLY by Jenton Way, formerly Hamilton Alley,
122.43 feet; and
SOUTHEASTERLY by Franklin Street, 95.85 feet.
Included in the above-described parcel is a parcel of
registered land, bounded:
SOUTHWESTERLY by the northeasterly line of Oliver
Street, forty-eight and 42/100 (48.42) feet;
NORTHWESTERLY by lands now or formerly of Daniel M.
Driscoll et al and of Frank Cair Macomber, Jr., the line
running in part through the middle of a sixteen (16) inch
brick wall, one hundred seventeen and 06/100 (117.06) feet;
NORTHEASTERLY by Hamilton Alley, forty-two and 83/100
(42.83) feet; and
SOUTHEASTERLY twenty-five and 73/100 (25.73) feet;
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NORTHEASTERLY seven and 51/100 (7.51) feet; and
SOUTHEASTERLY eighty-two and 85/100 (82.85) feet by land
now or formerly of 30/32 Oliver Street Corporation, the line
running through the middle of a sixteen (16) inch brick wall.
All of the bounds of said registered parcel have been
determined by the Land Court to be located as shown on a plan
drawn by George H. Gilboy, Surveyor, dated February 27, 1946,
as modified and approved by the Court, and filed in the Land
Registration Office as plan No. 200064-A, a copy of a portion
of which is filed with Certificate of Title No. 49443.
Also, one undivided half of the parcel of land situated
in said Boston, adjoining the above described parcel, being
shown as Lot C on the Plan first above referred to and
bounded:
SOUTHWESTERLY on a parcel above described, 31.29 feet;
NORTHWESTERLY in part on land now or formerly of Sherry
Biltmore, Inc. and in part on land now or formerly of Dana, et
al, Trustees, by two lines, one measuring 2.44 feet and the
other 19.75 feet, respectively;
NORTHEASTERLY on other land now or formerly of Dana, et
al, Trustees, 35.78 feet; and
SOUTHEASTERLY in part on Jenton Way, formerly Hamilton
Alley, 9.90 feet, and in part on land formerly of Burrage and
formerly of the Pardee Ellenberger Co. Incorporated, being the
parcel above described, 12.41 feet, respectively.
The above property also has the following appurtenant rights:
1. Rights reserved in a deed from Charles W. Mills, et al,
trustee to James F. Dwinnell et al dated November 16, 1868,
recorded in Box 946, Page 130, referred to in deed from said
trustees to Charlotte R. Whitmore et al dated November 16,
1868, recorded in Book 946, Page 132 as corrected by
11
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deed from said Trustees to Charlotte R. Whitmore dated
January 25, 1871 recorded in Book 1041, Page 126 (Benefits Lot
C on Plan in Book 4193, Page 612 and burdens Lot B on said
Plan).
2. Easement for light and air created by grant from James F.
Dwinnell to Alvah A. Burrage dated August 30, 1872, recorded
in Book 1126, Page 117 as modified by agreement dated August
5, 1910, recorded in Book 3475, Page 482 (benefits
northwesterly 23 feet of Lot A on Plan in Book 4193, Page 612
and burdens Lot B on said Plan).
3. Easements for light, air and passage reserved in a deed
from Alvah H. Burrage to James F. Dwinnell et al dated
September 16, 1872, recorded in Book 1126, Page 116 (benefits
Lot A on plan in Book 4193, Page 612 and burdens Lot C and the
four foot strip on the northeasterly side of Lot C on said
plan).
4. Easement for passage and repassage in Jenton Way
(formerly known as Hamilton Alley).
5. Easements for light and air and building maintenance
granted by Grant and Release of Easements between Ferdinand
Colloredo-Mansfield, et al, the Trustees of CC&F-F&O Property
Trust and 2 Oliver Incorporated dated January 27, 1984,
recorded in Book 11100, Page 001.
12
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EXTENSION AGREEMENT
-------------------
THIS EXTENSION AGREEMENT (hereinafter called "this
Agreement", executed as of the 22ND day of MAY, 1997, but
effective as of the 1st day of January, 1997, by and between
NORMAN S. GELLER, THOMAS M. BENNETT, JEFFERY GLUSKIN and NEIL
G. BLUHM, BRIAN K. ELLISON and JULIA C. PARK, as Trustees of
260 FRANKLIN STREET ASSOCIATES TRUST under a Declaration of
Trust dated May 16, 1986, duly recorded with the Suffolk
County Registry of Deeds in Book 12510, Page 64 and filed with
the Suffolk County Registry District of the Land Court as
Document No. 405198, as amended in accordance with the
Certificate of Trustee as to Appointment of Additional
Trustees and First Amendment to Declaration of Trust
establishing 260 Franklin Street Associates Trust, dated
September 12, 1986, duly recorded with Suffolk County Registry
of Deeds as Instrument No. 374 of September 26, 1986, and
filed with the Suffolk County Registry District of the Land
Court as Document No. 411174, and as further amended
Certificate of Trustee as to removal of certain Trustees and
appointment of additional Trustees dated July 23, 1990, duly
recorded with the Suffolk County Registry of Deeds in Book
16416, Page 342, and Documents No. 467674, with appointment of
six Trustees registered as Document Nos. 467675 through 467680
with the Suffolk County Registry District of the Land Court,
as further amended in accordance with a Certificate of Trustee
as to Removal of Certain Trustees and Appointment of
Additional Trustees, dated May 20, 1992, duly recorded with
the Suffolk County Registry of Deeds as Document No. 487549,
having a mailing address c/o JMB Realty Corporation, 900 North
Michigan Avenue, Chicago, Illinois 60611-1575 (hereinafter
called "Borrower"), TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation having a mailing address of
730 Third Avenue, New York, New York 10017 ("Lender") and THE
BOSTON MORTGAGE CAPITAL CORP., a Massachusetts corporation
having a mailing address of 100 Huntington Avenue, Tower 2,
Fourth Floor, Boston, Massachusetts 02116 (hereinafter called
"Pledge Agent").
W I T N E S E T H:
-----------------
WHEREAS, the parties hereto entered into a certain
Reserve Pledge Agreement dated January 1, 1991, as modified by
1
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that certain Modification to Reserve Escrow Agreement dated
January 1, 1994, as further modified and restated by that
certain Reserve Pledge Agreement dated December 4, 1996, but
effective as of January 1, 1996, pursuant to that certain loan
made by Borrower from Lender of even date therewith
(collectively, the "Reserve Pledge Agreement");
WHEREAS, the borrower has requested an extension of
the maturity date of said loan from January 1, 1997, to
January 1, 1998;
WHEREAS, Lender has agreed to the extension of the
maturity date to January 1, 1998, upon the same terms and
conditions set forth in that certain Fourth Mortgage
Modification and Extension Agreement between the parties
hereto of even date herewith, to be recorded in the
appropriate Records of the County of Suffolk, State of
Massachusetts.
NOW, THEREFORE, the parties hereto agree that the
Reserve Pledge Agreement hereinabove mentioned shall be
extended until January 1, 1998. All other terms of said
Reserve Pledge Agreement shall remain the same and in full
force and effect, except that wherever that date of January 1,
1997, appears in the Reserve Pledge Agreement, the date
"January 1, 1998" shall be substituted. The Tenant Security
Deposit Account, Working Capital Account and the Reserve
Account shall be maintained and terminated as more
particularly provided under the paragraphs captioned "Working
Capital Account," "Duty to Hold Funds," "Tenant Security
Deposit Account," "Termination of Reserve Account" and
"Termination of Tenant Security Deposit Account" of said
Reserve Pledge Agreement, except that no payment shall be made
to JMB Realty Corporation out of the Reserve Account until
January 1, 1998, the new date that was changed as indicated
above.
This Agreement can be executed in one or more
counterparts, each of which shall be an original and all of
which shall constitute one agreement.
The party or parties executing this Agreement for
and on behalf of Borrower are doing so in their capacity of
Trustee and not as individuals. As such, any liability for
breaching any of the Borrower's obligation hereunder shall be
limited to the Premises, trust assets and the monies deposited
in escrow under this Agreement.
2
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Appl. #MA-374
Mtge. #000207800
Without limitation on the foregoing, but in addition
thereto, neither Borrower nor any Trustee, advisor or any
other entity shall be personally liable in any manner or to
any extent under or in connection with this Agreement or any
other agreement or instrument entered into in connection
herewith; provided, however, that the foregoing shall not
affect or impair any obligations under a certain Indemnity and
Payment Agreement dated December 27, 1991, given by Carlyle
Real Estate Limited Partnership XV and Carlyle Real Estate
Limited Partnership XVI to Lender.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first written above.
executed signature /S/ BRIAN K. ELLISON
- --------------------------- --------------------------------
Witness not personally but solely as
Trustee of 260 Franklin Street
Associates Trust as aforesaid
for self and co-trustees
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
/S/ DAVID RODRIGUEZ BY: /S/ MARK DE PRIMA
- --------------------------- ------------------------------
Witness Name: Mark DePrima
Title: Associate Director
[seal]
THE BOSTON MORTGAGE
CAPITAL CORP.
Attest:
/S/ JACQUELINE W. KELLEY BY: HAROLD C. MC KENNA
- --------------------------- ------------------------------
Name: Jacqueline W. Kelley Name: Harold C. McKenna
Title: Office Manager Title: President
[seal]
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,127,787
<SECURITIES> 0
<RECEIVABLES> 59,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,187,086
<PP&E> 60,180,104
<DEPRECIATION> 17,035,395
<TOTAL-ASSETS> 63,331,569
<CURRENT-LIABILITIES> 1,512,764
<BONDS> 40,857,922
<COMMON> 0
0
0
<OTHER-SE> 3,939,650
<TOTAL-LIABILITY-AND-EQUITY>63,331,569
<SALES> 5,009,765
<TOTAL-REVENUES> 5,364,768
<CGS> 0
<TOTAL-COSTS> 3,141,014
<OTHER-EXPENSES> 387,527
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,521,586
<INCOME-PRETAX> (685,359)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,184,442)
<DISCONTINUED> 133,330
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,051,112)
<EPS-PRIMARY> (7.10)
<EPS-DILUTED> (7.10)
</TABLE>
