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, 1998 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. . . . . . . . . . . . . . . . . 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, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 18,664,223 16,214,633
Interest, rents and other receivables, net of allowances for
doubtful accounts of approximately $23,727 and $710,000 at
September 30, 1998 and December 31, 1997, respectively . . . . . . . . 46,815 68,335
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 111,897
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 18,711,038 16,394,865
------------ ------------
Investment property held for sale or disposition. . . . . . . . . . . . . 43,172,293 43,146,694
------------ ------------
Total investment properties . . . . . . . . . . . . . . . . . . . 43,172,293 43,146,694
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . . 1,049,227 1,904,784
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,793 518,228
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,621 108,362
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . 2,697,914 2,755,038
------------ ------------
$ 66,256,886 64,827,971
============ ============
<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,
1998 1997
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 499,971 457,144
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,588,312 987,066
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 218,929
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 180,591 --
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 407,420 410,797
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 2,676,294 2,073,936
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 54,758 66,157
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,348,959 1,377,521
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . . 113,976 12,771,462
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 40,242,011 40,622,529
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 44,435,998 56,911,605
Venture partners' subordinated equity in ventures . . . . . . . . . . . . 4,023,319 3,751,845
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . . (3,196,501) (3,413,841)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (1,455,567) (1,443,873)
------------ ------------
(4,632,068) (4,837,714)
------------ ------------
Limited partners:
Capital contributions, net of offering costs and purchase discounts . 120,541,353 120,541,353
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . . (44,004,034) (60,675,076)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . (54,107,682) (50,864,042)
------------ ------------
22,429,637 9,002,235
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . . . . 17,797,569 4,164,521
------------ ------------
$ 66,256,886 64,827,971
============ ============
<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, 1998 AND 1997
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 3,005,655 2,827,416 7,712,345 7,837,181
Interest income . . . . . . . . . . . . . . . . 256,165 191,793 749,783 546,796
Other income. . . . . . . . . . . . . . . . . . 126,644 -- 425,683 --
----------- ---------- ---------- ----------
3,388,464 3,019,209 8,887,811 8,383,977
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 1,223,427 1,285,724 3,680,510 3,807,310
Depreciation. . . . . . . . . . . . . . . . . . -- -- -- 1,004,060
Property operating expenses . . . . . . . . . . 1,281,355 1,247,760 2,978,492 3,317,294
Professional services . . . . . . . . . . . . . 3,133 4,869 108,869 130,421
Amortization of deferred expenses . . . . . . . 38,603 33,710 115,811 101,130
Management fee to corporate
general partner . . . . . . . . . . . . . . . -- -- 19,492 19,492
General and administrative. . . . . . . . . . . 97,466 77,821 270,493 320,304
----------- ---------- ---------- ----------
2,643,984 2,649,884 7,173,667 8,700,011
----------- ---------- ---------- ----------
744,480 369,325 1,714,144 (316,034)
Partnership's share of earnings (loss)
from operations of unconsolidated
ventures. . . . . . . . . . . . . . . . . . . . 58,539 (172,178) 287,112 (879,132)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . (174,946) (118,194) (386,077) 89,677
----------- ---------- ---------- ----------
Earnings (loss) before gains on sale or
disposition of investment properties. . 628,073 78,953 1,615,179 (1,105,489)
Gain on sale or disposition of Partnership's
investments in unconsolidated ventures. . . . . 107,486 10,037,662 509,963
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
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
Earnings (loss) before Partnership's
share of extraordinary item from
unconsolidated venture. . . . . . . . . 628,073 186,439 11,652,841 (864,673)
Partnership's share of unconsolidated
venture's forgiveness of indebtedness . . . . -- -- 5,235,541 --
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . . $ 628,073 186,439 16,888,382 (864,673)
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gains on sale
or disposition of investment
properties . . . . . . . . . . . . . $ 4.29 .54 11.05 (7.56)
Gain on sale or disposition of
Partnership's investments in
unconsolidated ventures. . . . . . . -- .76 70.81 3.60
Loss on liquidation of venture . . . . -- -- -- (1.84)
Partnership's share of
extraordinary item from
unconsolidated venture . . . . . . . -- -- 36.93 --
----------- ---------- ---------- ----------
$ 4.29 1.30 118.79 (5.80)
=========== ========== ========== ==========
Cash distributions per limited
partnership interest. . . . . . . . . . $ 21.00 .12 23.11 2.23
=========== ========== ========== ==========
<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, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,888,382 (864,673)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,004,060
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 115,811 101,130
Partnership's share of (earnings) loss from operations of
unconsolidated ventures, net of distributions . . . . . . . . . . . . (287,112) 879,132
Venture partners' share of ventures' operations . . . . . . . . . . . . 383,284 (89,677)
Gains on sale or disposition of Partnership's investments in
unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (10,037,662) (509,963)
Loss on liquidation of unconsolidated venture . . . . . . . . . . . . . -- 269,147
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . (5,235,541) --
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 21,520 132,440
Other prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . 111,897 (33,977)
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,741 60,729
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 57,124 (113,240)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 601,244 123,952
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218,928) (168,611)
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 180,591 --
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,377) (2,998)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (11,399) (6,861)
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . (28,562) 56,604
----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . . . . . . . . . . . 2,545,013 837,194
----------- -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . (25,599) (76,576)
Partnership's distributions from unconsolidated ventures and
proceeds from sale of investment property . . . . . . . . . . . . . . . 4,211,425 423,473
Partnership's contributions to unconsolidated ventures. . . . . . . . . . (453,039) --
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (123,376) (65,064)
----------- -----------
Net cash provided by (used in) investing activities . . . . . . . . 3,609,411 281,833
----------- -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (337,690) (299,683)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (111,810) --
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (3,243,640) (313,342)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . (11,694) (11,695)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . (3,704,834) (624,720)
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . 2,449,590 494,307
Cash and cash equivalents, beginning of the year. . . . . . . . . . 16,214,633 14,791,381
----------- -----------
Cash and cash equivalents, end of the period. . . . . . . . . . . . $18,664,223 15,285,688
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 3,683,887 3,810,308
=========== ===========
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, 1998 AND 1997
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1997, which
are included in the Partnership's 1997 Annual Report on Form 10-K (File No.
0-16516) dated on March 21, 1998, 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 1997 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, 1998, the Partnership and its
consolidated venture have or have previously 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 $696,320 and ($161,738),
respectively, for the nine months ended September 30, 1998 and 1997.
In addition, the accompanying consolidated financial statements
include $287,112 and ($490,211), respectively, of the Partnership's share
of total property operations of $3,324,870 and ($560,469) for
unconsolidated properties for the nine months ended September 30, 1998 and
1997, respectively, all of which are held for sale or disposition or have
been sold or disposed of during the past two years.
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, $16,000 representing such withholding was remitted
in 1998 to the state of Maryland on behalf of the Holders of Interests
during the first quarter of 1998.
<PAGE>
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,
1998 and for the nine months ended September 30, 1998 and 1997 were as
follows:
Unpaid at
September 30,
1998 1997 1998
-------- ------- -------------
Management fees to
Corporate General Partner. . $ 19,492 19,492 --
Insurance commissions . . . . 31,468 29,843 --
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. . . . 65,702 31,857 9,823
-------- ------- ------
$116,662 81,192 9,823
======== ======= ======
An affiliate of the General Partners was entitled to payment of
property management and leasing fees relating to 260 Franklin through
November 1994 and subsequently JMB guaranteed payment to the unaffiliated
third party property manager for the property management and leasing fees.
Pursuant to a loan modification for the property, property management and
leasing fees were required to be escrowed through December 1995. Beginning
in January 1996, the unaffiliated property manager was paid management and
leasing fees by the property. As of September 30, 1998, $1,510,132 of
management and leasing fees remained payable (as a result of the escrowing
of certain 1995 and prior years' management and leasing fees payable to an
affiliate of the General Partners and JMB's payment pursuant to its
guarantee of the fees to the unaffiliated property manager) of which the
Partnership's share is $453,039. In connection with the sale of the 260
Franklin Street building, the Partnership assumed the liability for its
prorata share of the unpaid fees, which amount was transferred to the
accounts of the Partnership upon the sale of 260 Franklin.
260 FRANKLIN
On January 2, 1998, 260 Franklin, through a trust, disposed of the
land, building and related improvements of the 260 Franklin Street
Building. 260 Franklin transferred title to the land, building and
improvements, and all other assets and liabilities related to the property
in consideration of a discharge of the mortgage loan and receipt of $200 in
cash. 260 Franklin recognized a gain on disposal of approximately
$23,200,000 in 1998, in part as a result of previous impairment losses
recognized by the joint venture in 1996 aggregating $11,145,446, and an
extraordinary gain on forgiveness of indebtedness of approximately
$17,500,000 for financial reporting purposes, of which the Partnership's
share is approximately $7,000,000 and $5,000,000, respectively. In
addition, 260 Franklin expects to recognize a gain of approximately
$24,400,000 for Federal income tax reporting purposes, of which the
Partnership's share is approximately $7,400,000, with no distributable
proceeds in 1998. 260 Franklin and the Partnership have no future
liability for any representations, warranties or covenants to the purchaser
as a result of the sale.
<PAGE>
PALM DESERT TOWN CENTER
Occupancy at the portion of the shopping center in which the
Partnership owns an interest decreased to 84% at September 30, 1998 down
from 88% at December 31, 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. The property has been
operating at an approximately break-even level. The joint venture
continues to consider a possible expansion of the mall and restructuring of
the ground lease and mortgage loan.
The Partnership and Carlyle-XVII entered into an agreement with the
unaffiliated venture partner, effective January 1, 1998, pursuant to which
the Partnership and Carlyle-XVII granted the unaffiliated venture partner
an option to acquire their interests in the joint venture (the "Option
Agreement") . Pursuant to the Option Agreement, the unaffiliated venture
partner had the right (but not the obligation) to purchase all (but not
less than all) of the Partnership's and Carlyle-XVII's interests in the
joint venture by giving notice of its exercise of the option during the
term of the option, which was originally scheduled to expire July 15, 1998
but was extended through August 14, 1998 pursuant to a first amendment to
the Option Agreement with substantially the same terms as the original
agreement. The Option Agreement terminated and expired on August 14, 1998
with the unaffiliated venture partner failing to exercise this option. In
consideration for the option, the unaffiliated venture partner was required
to pay $58,333 for each month of the option term. The Partnership and
Carlyle-XVII received their allocable shares of the consideration for the
option of which the Partnership's share was approximately $427,000.
Concurrently with the execution of the Option Agreement, the joint venture
made a distribution to the Partnership and Carlyle-XVII in the aggregate
amount of approximately $740,000 (of which the Partnership's share was
approximately $635,000), which represented undistributed net cash flow of
the joint venture through the end of 1997. All other funds and net cash
flow of the joint venture during the term of the option were held by the
joint venture for its use. Upon the expiration of the Option Agreement,
the rights and obligations of the parties subsequent to expiration of the
Option Agreement are governed by the terms of the joint venture partnership
agreement without regard to changes previously affected by the terms of the
Option Agreement. The Partnership and Carlyle-XVII are continuing
negotiations with the unaffiliated venture partner and the lender for the
property (who is also the ground lessor) with respect to a restructuring of
the ground lease and loan for the property and a sale of the Partnership's
and Carlyle-XVII's interests in the joint venture, although there can be no
assurance that a sale of the interests will be completed or, if completed,
will be on terms similar to those contemplated by the Option Agreement.
Reaching a mutually acceptable arrangement with the lender with respect to
a restructuring of the ground lease and loan is the primary remaining issue
to be resolved in order for the Partnership and Carlyle-XVII to reach an
agreement for the sale of their interests to the unaffiliated venture
partner.
In the event of such sale, the Partnership could distribute a majority of
the funds it currently holds in reserve, as well as any distributable
proceeds from such sale. In the event that such sale does not occur, the
Partnership may use a portion of the funds held in reserve to pay for its
share of the costs of a possible expansion of the mall and a restructuring
of the ground lease and loan at the property.
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, 1998 and 1997 was $838,078
and $914,664, respectively.
<PAGE>
NEWPARK MALL
At September 30, 1998, occupancy of the portion of the shopping center
in which the Partnership owns an interest remained at 77%. 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 Capwell 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.
These transactions closed in 1997 and the joint venture received net
proceeds of approximately $2,000,000. The property is producing cash flow
for the joint venture.
The Partnership and its affiliated venture partner have reached an
agreement in principle to sell their interests in the NewPark joint venture
to the unaffiliated joint venture partner by the end of 1998. However, the
sale is subject to various contingencies including final documentation, and
therefore, there can be no assurance that such sale will be completed. If
the sale of the property is completed on the proposed terms, the
Partnership would expect to recognize a gain for both financial reporting
and Federal income tax purposes. In the event that such sale does not
occur, the Partnership may use a portion of the funds held in reserve to
pay its share of the costs for a possible mall enhancement program at
NewPark Mall, although there are no specific plans currently for such a
program.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for 260 Franklin during 1998
until disposition (on January 2, 1998) and for the nine months ended
September 30, 1997 is as follows:
1998 1997
----------- ----------
Total income . . . . . . . . . $ 107,704 $7,813,000
Expenses applicable to
operating income (loss). . . 39,932 11,341,281
----------- ----------
Operating income (loss). . . . 67,772 (3,528,281)
Gain on sale . . . . . . . . . 23,212,184 --
Extraordinary item . . . . . . 17,451,802 --
----------- ----------
Net earnings (loss). . . . . . $40,731,758 (3,528,281)
=========== ==========
Partnership's share
of income (loss) . . . . . . $12,243,970 (1,058,484)
=========== ==========
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 1997
Annual Report) necessary for a fair presentation have been made to the
accompanying figures as of September 30, 1998 and for the three and nine
months ended September 30, 1998 and 1997.
<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.
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 previously
retained Lehman Brothers Inc. as financial advisor to assist the Special
Committee in evaluating and responding to potential tender offers for
Interests.
From 1996 through the first half of 1998, some of the Holders of
Interests in the Partnership received from unaffiliated third parties
unsolicited offers to purchase up to 4.9% of the outstanding Interests in
the Partnership at prices of $50 and $105 per Interest, respectively. Such
offers have expired. Early in the fourth quarter of 1998, 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 prices between $48 and $80 per Interest.
Such offers have expired. The Special Committee recommended against
acceptance of these offers on the basis that, among other things, the offer
prices were inadequate. As of the date of this report, the Partnership is
aware that 4.2% of the outstanding Interests have been purchased by all
unaffiliated third parties who have made unsolicited offers for Interests,
either pursuant to all such tender offers or through negotiated purchases.
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, 1998, the Partnership and its consolidated venture
had cash and cash equivalents of approximately $18,664,000. 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. The Partnership and its consolidated
venture have currently budgeted in 1998 approximately $177,000 (excluding
costs of the possible expansion and restructuring) of which approximately
$26,000 has been spent as of September 30, 1998 for tenant improvements and
other capital expenditures. The Partnership's share of such items,
including its share of such items for its unconsolidated venture, is
currently budgeted to be approximately $275,000 of which approximately
$36,500 has been spent as of September 30, 1998. Actual amounts expended
in 1998 may vary depending on a number of factors including actual leasing
activity, results of operations, liquidity considerations and other market
conditions over the course of the year and whether the Palm Desert joint
venture proceeds with the possible expansion of the mall and restructuring
of the ground lease and mortgage loan.
During the second quarter the Partnership and Carlyle-XV commenced
marketing their interests in the NewPark joint venture for sale. As
reported in the notes to the accompanying financial statements, the
Partnership and Carlyle-XV have reached an agreement in principle to sell
their interests in the NewPark joint venture to the unaffiliated joint
venture partner by the end of 1998, although there is no assurance that a
sale of the interests will occur. In the event such sale does not occur,
the Partnership may use a portion of its reserves to pay its share of the
costs for a possible mall enhancement program at NewPark Mall, although
there are no specific plans currently for such a program.
<PAGE>
In addition, although the Option Agreement, pursuant to which the
Partnership and Carlyle-XVII granted an option to the unaffiliated venture
partner to acquire their interests in the Palm Desert joint venture, has
expired, the Partnership, Carlyle-XVII, the unaffiliated venture partner
and the lender (who is also the ground lessor) for Palm Desert Town Center
continue to negotiate with respect to a restructuring of the ground lease
and loan for the property and a sale of the Partnership's and Carlyle-
XVII's interests in the joint venture. Reaching a mutually acceptable
arrangement with the lender with respect to a restructuring of the ground
lease and loan is the primary remaining issue to be resolved in order for
the Partnership and Carlyle-XVII to reach an agreement for the sale of
their interests to the unaffiliated venture partner. In the event of such
sale, the Partnership could distribute a majority of the funds it currently
holds in reserve, as well as any distributable proceeds from such sale. In
the event that such sale does not occur, as discussed above, the
Partnership may use a portion of the funds held in reserve to pay for its
share of the costs of a possible expansion of the mall and restructuring of
the ground lease and loan for the property.
On June 30, 1998, JMB/Owings collected approximately $5,598,000, of
which the Partnership's share is approximately $2,800,000, on the remaining
principal balance of the purchase price note received in the sale of its
interest in Owings Mills Shopping Center in 1993. The collection of the
remaining principal balance of the purchase price note resulted in an
approximate $3,000,000 gain on sale to the Partnership for financial
reporting purposes in 1998. The Partnership expects to recognize a gain on
sale of approximately $3,100,000 for Federal income tax purposes in 1998.
The source of capital for tenant improvements and other capital
expenditures and for both short-term and long-term future liquidity and
distributions is expected to be through net cash generated by the
investment properties, the Partnership's working capital reserve and from
the sale of such properties (or the Partnership's interest therein). Any
working capital reserves of the Partnership not ultimately used for tenant
improvements, other capital expenditures or working capital requirements
(including those relating to Palm Desert) would be available for future
distributions.
In May 1998, the Partnership made an annual distribution of cash
generated from operations of $2 per Interest. In September 1998, the
Partnership made a distribution of $21 per Interest of cash generated
primarily from the collection of the remaining principal balance of the
purchase price note received in the sale of its interest in Owings Mills
Shopping Center.
After reviewing the remaining properties and the marketplaces in which
they operate, the General Partners of the Partnership expect to be able to
sell 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 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 investment
properties, 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. However, as a result of sale or other disposition of
properties (including a transfer to a lender) or of the Partnership's
interest in the properties, Holders of Interests will be allocated gain for
Federal income tax purposes, regardless of whether any proceeds are
distributable to the Holders of Interests from such sale or other
disposition. In this regard, the Partnership expects to recognize a gain
in 1998 of approximately $7,400,000 for Federal income tax purposes from
the disposition in January 1998 of the 260 Franklin Street building with no
distributable proceeds from such disposition.
<PAGE>
RESULTS OF OPERATIONS
The decrease in allowance for doubtful accounts at September 30, 1998
as compared to December 31, 1997 and the decrease in rental income and
property operating expenses for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997 is primarily due to
the resolution of litigation with a former tenant which resulted in the
reversal, in the first quarter of 1998, of a tenant receivable balance
which had been recognized in prior years and fully reserved for. The
decrease was also due to the collection, in the first quarter of 1998, of
certain tenant accounts receivable balances which were reserved for in
prior years.
The decrease in prepaid expenses at September 30, 1998 as compared to
December 31, 1997 is primarily due to the timing of payment of insurance
premiums at Palm Desert Town Center.
The decrease in investment in unconsolidated ventures, at equity, at
September 30, 1998 as compared to December 31, 1997 is primarily due to the
distribution to the Partnership of approximately $4,033,000 of previously
undistributed operating cash flow and proceeds from the sale of JMB/Owings'
interest in Owings Mills, partially offset by the recognition of previously
deferred gain in conjunction with the collection of the remaining principal
balance of the purchase price note received in such sale.
The increase in accounts payable at September 30, 1998 as compared to
December 31, 1997 is primarily due to the Partnership's assumption of its
prorata share of the unpaid management and leasing fees payable to an
affiliate of the General Partners and to JMB (as a result of JMB's payment
under a guarantee of such fees to the unaffiliated property manager), which
amount was transferred to the accounts of the Partnership upon the sale of
260 Franklin.
The unearned rents at December 31, 1997 is due to the prepayment of
rents at Palm Desert Town Center.
The accrued real estate taxes at September 30, 1998 is due to the
timing of payment of real estate taxes at the Palm Desert property.
The decreased deficit in investment in unconsolidated ventures, at
equity, at September 30, 1998 as compared to December 31, 1997 is primarily
due to the disposition of the 260 Franklin Street property in the first
quarter of 1998.
The other income reported for the three and nine months ended
September 30, 1998 represents the Partnership's share of the consideration
paid by the unaffiliated venture partner of the Palm Desert Town Center
during 1998 pursuant to the Option Agreement.
The decrease in depreciation expense for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1997
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 increase in Partnership's share of earnings from operations of
unconsolidated ventures for the three and nine months ended September 30,
1998 as compared to the three and nine months ended September 30, 1997 is
primarily due to the disposition of the 260 Franklin Street building on
January 2, 1998.
<PAGE>
The increase in venture partners' share of ventures' operations for
the three and nine months ended September 30, 1998 as compared to the three
and nine months ended September 30, 1997 is due to an increase in net
operating earnings at the Palm Desert Town Center primarily as a result of
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 for the nine months ended September 30, 1998 represents
recognition of deferred gain on sale of JMB/Owings' interest in Owings
Mills and gain on the disposition of the 260 Franklin Street building.
The extraordinary item for the nine months ended September 30, 1998
represents the Partnership's share of the gain on forgiveness of
indebtedness resulting from the loan modification agreement with the lender
of the 260 Franklin Street building, pursuant to which the lender waived
accrued unpaid interest for the period prior to January 1, 1998.
<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 1998:
<CAPTION>
1997 1998
-------------------------------------- -------------------------------
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% 97% 98% 98% N/A N/A N/A
2. NewPark Mall
Newark (Alameda County),
California . . . . . . . . . 75% 75% 76% 79% 77% 77% 77%
3. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . . . 88% 86% 87% 88% 85% 84% 84%
- --------------------
<FN>
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
</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.
10-A. First Amendment to Palm Desert Option Agreement by the
Partnership and Carlyle-XVII relating to the unaffiliated venture partner's
option to purchase the Partnership and Carlyle-XVII's interest in the joint
venture dated July 15, 1998 is filed herewith.
27. Financial Data Schedule
(b) No reports on Form 8-K were required to be filed during the last
quarter of the period covered by this quarterly 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 11, 1998
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 11, 1998
EXHIBIT 10-A
- ------------
(Carlyle - XVI)
FIRST AMENDMENT TO PALM DESERT OPTION AGREEMENT & FIRST AMENDMENT TO
PALM DESERT AGREEMENT FOR PURCHASES AND SALE OF PARTNERSHIP INTERESTS
---------------------------------------------------------------------
THIS FIRST AMENDMENT TO PALM DESERT OPTION AGREEMENT & FIRST
AMENDMENT TO PALM DESERT AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP
INTERESTS ("AMENDMENT"), is made and entered into as of the 15th day of
July, 1998, by the following parties, hereinafter referred to as the "JMB
GROUP" or "SELLER":
CARLYLE/PALM DESERT, INC., an Illinois corporation ("MANAGING
PARTNER");
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI, an Illinois
limited partnership ("Carlyle-A"); and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVII, an Illinois
limited partnership ("CARLYLE B");
and also by the following parties, hereinafter referred to as
the "TRIZECHAHN GROUP" or "BUYER";
HAHN/PALM DESERT, INC., a California corporation ("CO-
PARTNER"); and
TRIZECHAHN CENTERS INC., a California corporation, formerly
known as ERNEST W. HAHN, INC., a California corporation ("TRIZECHAHNCO").
R E C I T A L S
---------------
A. Seller and Buyer have entered into that certain agreement,
captioned "PALM DESERT OPTION AGREEMENT", made and entered into on
March 11, 1998, effective as of January 1, 1998 (the "OPTION AGREEMENT").
Unless otherwise defined herein, each capitalized term used herein shall
have the meaning ascribed thereto in the Option Agreement.
B. Seller and Buyer have also entered into that certain agreement,
captioned "PALM DESERT AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP
INTEREST", made and entered into on March 11, 1998, effective as of
January 1, 1998 (the "PURCHASE AGREEMENT").
C. Buyer and Seller desire to amend the Option Agreement to extend
the "term of this Option" (as defined in Section 1.2 of the Option
Agreement) to August 14, 1998, on the terms and subject to the conditions
set forth below.
D. Buyer and Seller desire to amend the Purchase Agreement to
provide a credit to Buyer against the "Purchase Price" (as such term is
defined in the Purchase Agreement) in the amount of Sixty One
<PAGE>
Thousand Six Hundred Sixty Seven Dollars ($61,667) at the closing of the
transactions contemplated by the Purchase Agreement, on the terms and
subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants and conditions contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Seller and Buyer hereby amend the Option Agreement and the
Purchase Agreement, respectively, as follows:
1. EFFECTIVENESS OF AMENDMENT. Buyer shall pay to Seller
concurrently with the Buyer's execution and delivery of this Amendment, the
sum of One Hundred Twenty Thousand Dollars ($120,000) in immediately
available funds (the "EXTENSION CONSIDERATION"). In the event that Buyer
fails to deliver the Extension Consideration (together with a counterpart
original of this Amendment executed by Buyer) to Seller on or before August
4, 1998, then this Amendment shall be null and void and of no further force
or effect. The Extension Consideration shall be non-refundable and deemed
earned by Seller upon receipt.
2. OPTION AGREEMENT AMENDMENTS. Subject to Paragraph 1 above, the
Parties hereby amend the Option Agreement as follows:
2.1 TERM. In Section 1.2, in the first sentence, change the
words "July 15, 1998" to "August 14, 1998".
2.2 OPTION CONSIDERATION. Insert the following at the end of
Section 1.3:
"This Option is extended to August 14, 1998, in consideration for
Buyer's payment of the sum of One Hundred Twenty Thousand Dollars
($120,000) in immediately available funds (the "EXTENSION CONSIDERATION")
to Seller, to be allocated among the parties constituting Seller in
proportion to their respective Seller's Partnership Interest, and no
additional Option Consideration shall be required for the period commencing
on July 16, 1998, and ending on August 14, 1998. If this Option is
exercised in accordance with the terms and conditions of this Option
Agreement, then the sum of Sixty One Thousand Six Hundred Sixty Seven
Dollars ($61,667) (the "OPTION CREDIT AMOUNT") shall be credited to Buyer
against the Purchase Price at the closing of the transactions contemplated
by the Purchase Agreement."
3. PURCHASE AGREEMENT AMENDMENTS. Subject to Paragraph 1 above,
the Parties hereby amend the Purchase Agreement as follows:
3.1 OPTION CREDIT AMOUNT. Insert the following as Section
1.21A:
<PAGE>
"1.21A OPTION CREDIT AMOUNT. The sum of Sixty One Thousand Six
Hundred Sixty Seven Dollars ($61,667)."
3.2 PURCHASE PRICE.
3.2.1. Insert the following at the end of Section 2.2.1:
"Notwithstanding anything in the foregoing to the contrary, if Buyer
exercises the Option pursuant to Section 3.1 of the Option Agreement, the
Option Credit Amount shall be credited to Buyer and applied against the
Purchase Price at the closing of the transactions contemplated by this
Purchase Agreement."
3.2.2. Pursuant to Paragraph 3.2.1 above, in Sections
1.8, 2.2.2, 5.2.1 and 7.2, change the words "Purchase Price" to "Purchase
Price (as adjusted by the Option Credit Amount)".
4. OTHER TERMS UNMODIFIED. Except as otherwise expressly set
forth herein, all terms and conditions of the Option Agreement and the
Purchase Agreement, respectively, are ratified, and remain unchanged and in
full force and effect.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, provided each of the parties hereto executes at least one
counterpart; each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
Amendment. This letter may be executed in facsimile form (and shall be
promptly followed by a hard copy counterpart original).
[ CONTINUED ON NEXT PAGE ]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first written above.
SELLER:
CARLYLE/PALM DESERT, INC.,
an Illinois corporation
By: /s/ GLENN E. EMIG
Name: Glenn E. Emig
Title:
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVI,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: /s/ GLENN E. EMIG
Name: Glenn E. Emig
Title:
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: /s/ GLENN E. EMIG
Name: Glenn E. Emig
Title:
[ SIGNATURES CONTINUED ON NEXT PAGE ]
<PAGE>
BUYER:
HAHN/PALM DESERT, INC.,
a California corporation
By: /s/ DOUGLAS L. HAGEMAN
Name: Douglas L. Hageman
Title: Senior Vice President
and General Counsel
By: /s/ WENDY M. GODOY
Name: Wendy M. Godoy
Title: Senior Vice President
Finance
TRIZECHAHN CENTERS INC.,
a California corporation
By: /s/ DOUGLAS L. HAGEMAN
Name: Douglas L. Hageman
Title: Senior Vice President
and General Counsel
By: /s/ WENDY M. GODOY
Name: Wendy M. Godoy
Title: Senior Vice President
Finance
<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, 1998 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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,664,223
<SECURITIES> 0
<RECEIVABLES> 46,815
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,711,038
<PP&E> 43,172,293
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,256,886
<CURRENT-LIABILITIES> 2,676,294
<BONDS> 40,242,011
<COMMON> 0
0
0
<OTHER-SE> 17,797,569
<TOTAL-LIABILITY-AND-EQUITY> 66,256,886
<SALES> 7,712,345
<TOTAL-REVENUES> 8,887,811
<CGS> 0
<TOTAL-COSTS> 3,094,303
<OTHER-EXPENSES> 398,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,680,510
<INCOME-PRETAX> 1,714,144
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,615,179
<DISCONTINUED> 10,037,662
<EXTRAORDINARY> 5,235,541
<CHANGES> 0
<NET-INCOME> 16,888,382
<EPS-PRIMARY> 118.79
<EPS-DILUTED> 118.79
</TABLE>
