Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re:Carlyle Income Plus, Ltd.
Commission File No. 000-16975
Form 10-Q
Gentlemen:
Transmitted, for the above-mentioned registrant, is the
electronically filed executed copy of registrant's current report
on Form 10-Q/A for the quarter ended September 30, 1995.
Thank you.
Very truly yours,
CARLYLE INCOME PLUS, LTD.
By:JMB Realty Corporation
Corporate General Partner
By:-------------------------------
Gailen J. Hull
Senior Vice President and
Principal Accounting Officer
GJH:et
Enclosures
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
Filed Pursuant to Section 12, 13, or 15(d) of the
the Securities Exchange Act of 1934
CARLYLE INCOME PLUS, LTD.
(Exact name of registrant as specified in its charter)
Commission File number IRS Employer Identification
No.
000-16975 36-3439532
The undersigned registrant hereby amends the following
sections of its Report for September 30, 1995 on Form 10-Q as set
forth in the pages attached hereto:
Item 1. Financial Information. Pages 3 through 17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. Pages 18
through 23
Pursuant to the requirements of the Securities Exchanges Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CARLYLE INCOME PLUS, LTD.
By: JMB Realty Corporation
(Corporate General Partner)
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Dated: November 20, 1995
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
A S S E T S
-----------
<CAPTION> SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1). . . . . . . . . . $ 4,103,935 3,185,145
Short-term investments (note 1) . . . . . . . . . . . -- 931,575
Rents and other receivables (net of
allowance for doubtful accounts of
$85,577 in 1995 and $64,511 in 1994) . . . . . . . . 1,195,651 838,463
Prepaid expenses. . . . . . . . . . . . . . . . . . . 82,053 44,660
------------- ------------
Total current assets. . . . . . . . . . . . . 5,381,639 4,999,843
------------- ------------
Investment properties, at cost (note 2):
Land. . . . . . . . . . . . . . . . . . . . . . . . . . 12,276,993 16,562,593
Buildings and improvements. . . . . . . . . . . . . . . 33,375,839 42,261,760
------------- ------------
45,652,832 58,824,353
Less accumulated depreciation . . . . . . . . . . . . . 9,705,804 8,644,412
------------- ------------
Total investment properties, net of
accumulated depreciation. . . . . . . . . . . . . . . 35,947,028 50,179,941
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
Investments in unconsolidated ventures, at
equity (notes 1, 3 and 6). . . . . . . . . . . . . 9,443,546 11,308,593
Deferred expenses . . . . . . . . . . . . . . . . . 73,186 84,186
Accrued rents receivable. . . . . . . . . . . . . . 490,282 475,873
------------- ------------
$ 51,335,681 67,048,436
============= ============
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . $ 103,309 108,465
Amounts due to affiliates (note 5). . . . . . . . 8,557 30,665
Unearned rents. . . . . . . . . . . . . . . . . . 22,382 98,595
Accrued real estate taxes . . . . . . . . . . . . 1,431,133 954,528
------------- ------------
Total current liabilities . . . . . . . . 1,565,381 1,192,253
Tenant security deposits. . . . . . . . . . . . . . 209,725 215,804
------------- ------------
Commitments and contingencies (notes 3 and 5)
Total liabilities . . . . . . . . . . . . 1,775,106 1,408,057
------------- ------------
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONCLUDED
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . 25,000 25,000
Cumulative net earnings . . . . . . . . . . . . 548,786 1,189,183
Cumulative cash distributions . . . . . . . . . (1,630,099) (1,466,505)
------------ ------------
(1,056,313) (252,322)
------------ ------------
Limited partners (88,808.058 interests):
Capital contributions, net of offering
costs. . . . . . . . . . . . . . . . . . . . . 77,762,167 77,762,167
Cumulative net earnings . . . . . . . . . . . . 7,504,176 19,671,707
Cumulative cash distributions . . . . . . . . . (34,649,455) (31,541,173)
------------- ------------
50,616,888 65,892,701
------------- ------------
Total partners' capital accounts. . . . . 49,560,575 65,640,379
------------- ------------
$ 51,335,681 67,048,436
============= ============
<FN>
See accompanying notes to financial statements
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . $ 1,685,484 1,657,184 4,942,673 5,111,643
Interest income . . . . . . 61,853 40,976 187,957 80,993
---------- ---------- ---------- ----------
1,747,337 1,698,160 5,130,630 5,192,636
---------- ---------- ---------- ----------
Expenses:
Depreciation. . . . . . . . 358,083 353,823 1,061,392 1,054,358
Property operating
expenses . . . . . . . . . 677,648 558,569 1,912,095 1,809,978
Professional services . . . -- 2,129 62,631 60,892
Amortization of
deferred expenses. . . . . 9,284 8,066 27,207 23,879
General and
administrative . . . . . . 101,524 23,688 185,686 96,008
Provisions for
value impairment
(notes 1 and 2). . . . . . 13,400,000 -- 13,400,000 --
---------- ---------- ---------- ----------
14,546,539 946,275 16,649,011 3,045,115
---------- ---------- ---------- ----------
Operating
earnings (loss) . . . . (12,799,202) 751,885 (11,518,381) 2,147,521
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS-CONCLUDED
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Partnership's share
of operations of
unconsolidated
ventures (notes 1,
3 and 6). . . . . . . . . . . . (1,606,679) (2,198,084) (1,289,547) (1,933,338)
---------- ---------- ---------- ----------
Net earnings (loss). . . . $ (14,405,881) (1,446,199) (12,807,928) 214,183
========== ========== ========== ==========
Net earnings (loss)
per limited
partnership
interest
(note 1) . . . . . . . . $ (154.10) (15.47) (137.01) 2.29
========== ========== ========== ==========
Cash distributions
per limited
partnership interest . . $ 10.00 10.00 35.00 30.00
========== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . $ (12,807,928) 214,183
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 1,061,392 1,054,358
Amortization of deferred expenses. . . . . . . . . . . . . 27,207 23,879
Provisions for value impairment (notes 1 and 2). . . . . . 13,400,000 --
Partnership's share of operations of
unconsolidated ventures, net of
distributions (notes 1 and 3) . . . . . . . . . . . . . . 1,289,547 2,121,032
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . (357,188) 93,175
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . (37,393) (20,317)
Accrued rents receivable . . . . . . . . . . . . . . . . . . (14,409) (19,559)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . (5,156) 66,578
Amounts due to affiliates. . . . . . . . . . . . . . . . . . (22,108) (47,918)
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . (76,213) (52,704)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . 476,605 25,868
Tenantt security deposits . . . . . . . . . . . . . . . . . . (6,079) 816
------------ ------------
Net cash provided by operating activities. . . . . . . . 2,928,277 3,459,391
------------ ------------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . . . . . . 931,575 (2,227,628)
Additions to investment properties. . . . . . . . . . . . . (228,479) (122,347)
Partnership's distributions from
unconsolidated ventures. . . . . . . . . . . . . . . . . . 575,500 1,206,806
Payment of deferred expenses. . . . . . . . . . . . . . . . (16,207) (32,378)
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONCLUDED
1995 1994
----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . . . 1,262,389 (1,175,547)
----------- -----------
Cash flows from financing activities:
Distributions to limited partners . . . . . . . . . . . (3,108,282) (2,664,243)
Distributions to general partners . . . . . . . . . . . (163,594) (140,223)
----------- -----------
Net cash used in financing activities . . . . . (3,271,876) (2,804,466)
----------- -----------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . . . $ 918,790 (520,622)
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . . 3,185,145 745,394
----------- -----------
Cash and cash equivalents, end of period. . . . $ 4,103,935 224,772
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . $ -- --
=========== ===========
Non-cash investing and financing activities. . . . . . $ -- --
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year
ended December 31, 1994 which are included in the Partnership's
1994 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited
financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The equity method of accounting has been applied in the
accompanying financial statements with respect to the
Partnership's interests in the two joint ventures known as
JMB/Landings Associates ("JMB/Landings") and CIP/Ashby Partners
("CIP/Ashby") (see note 3). Accordingly, the accompanying
financial statements do not include the accounts of JMB/Landings
or CIP/Ashby.
The Partnership's records are maintained on the accrual
basis of accounting as adjusted for Federal income tax reporting
purposes. The accompanying financial statements have been
prepared from such records after making appropriate adjustments
to reflect the Partnership's accounts in accordance with
generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Partnership.
The net effect of these items is summarized as follows for the
nine months ended September 30:
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
1995 1994
-------------------------- ------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net earnings (loss) . . . . . . . . $ (12,807,928) 2,455,548 214,183 2,527,537
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . . $ (137.01) 26.27 2.29 27.04
=========== ========= ========== =========
</TABLE>
The net earnings (loss) per limited partnership interest
("Interest") is based upon the number of Interests outstanding
at the end of each period (88,808.058).
At September 30, 1994, the CIP/Ashby Partners joint venture
had substantially completed a significant (approximately
$3,400,000) renovation project. At such time, the venture
assessed its recoverable value against its revised carrying
costs and revised estimated holding period. Based on these
assessments and due to the uncertainty relating to CIP/Ashby
Partners joint venture's ability to recover the net carrying
value of the Ashby at McLean Apartments investment property
through future operations or sale, the CIP/Ashby Partners joint
venture, as a matter of prudent accounting practice and for
financial reporting purposes, recorded a provision for value
impairment at September 30, 1994 in the amount of $7,572,479 (of
which the Partnership's share was $2,347,468). Such provision
was recorded to reduce the net basis of the investment property
to its then estimated recoverable value.
In response to the uncertainty relating to the JMB Landings
Associates joint venture's ability to recover the net carrying
value of The Landings Shopping Center investment property
through future operations or sale, as the joint venture has
shortened its intended holding period for this investment to not
later than 1999, the JMB/Landings Associates joint venture, as
a matter of prudent accounting practice and for financial
reporting purposes, has recorded a provision for value
impairment at September 30, 1995 in the amount of $3,500,000 (of
which the Partnership's share was $1,750,000). Such provision
was recorded to reduce the net basis of the investment property
to its then estimated recoverable value.
In response to the uncertainty relating to the Partnership's
ability to recover the net carrying value of the Carson and
Costa Mesa Industrial Parks, the Rancho Franciscan Apartments,
and the Sunrise Town Center investment properties through future
operations or sale, as the Partnership has shortened its
intended holding period for these investments to not later than
1999, the Partnership, as a matter of prudent accounting
practice and for financial reporting purposes, has recorded
provisions for value impairment at September 30, 1995 of
$4,300,000, $3,400,000, $1,400,000, and $4,300,000,
respectively, for these properties. Such provisions, totaling
$13,400,000, were recorded to reduce the net basis of the
investment properties to their then estimated recoverable
values.
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Partnership distributions from unconsolidated ventures are
considered cash flow from operating activities only to the
extent of the Partnership's cumulative share of net earnings.
In addition, the Partnership records amounts held in U.S.
Government obligations at cost, which approximates market. For
the purposes of these statements, the Partnership's policy is to
consider all such amounts held with original maturities of three
months or less ($4,084,439 at September 30, 1995 and $3,166,098
at December 31, 1994) as cash equivalents, with any remaining
amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
(2) INVESTMENT PROPERTIES
The Partnership has acquired, either directly or through
joint ventures, interests in three shopping centers, two
industrial parks and two apartment buildings, all of which are
operating at September 30, 1995. The cost of the investment
properties represents the total cost to the Partnership,
including certain acquisition costs.
The Partnership, for financial reporting purposes, has
recorded provisions for value impairment at September 30, 1995
aggregating $13,400,000 for certain of these properties.
Reference is made to note 1.
(3) VENTURE AGREEMENTS
(a) General
The Partnership is a party to two joint venture agreements
at September 30, 1995. The Partnership has acquired, through
these ventures, a shopping center and an apartment building.
Pursuant to such agreements, the Partnership made initial
capital contributions totaling approximately $15,400,000 (before
legal and other acquisition costs). Under certain
circumstances, either pursuant to the venture agreements or due
to the Partnership's obligations as a general partner, the
Partnership may be required to make additional cash
contributions to the ventures.
(b) JMB/Landings
In August 1988, the Partnership, through JMB/Landings, a
joint venture partnership with Carlyle Income Plus, L.P.-II
("CIP-II"), another partnership sponsored by the General
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Partners of the Partnership, acquired a 50% interest in a
shopping center located in Sarasota, Florida and known as
The Landings Shopping Center. The Partnership contributed
$6,550,000 to JMB/Landings for its 50% interest. The terms of
the JMB/Landings partnership agreement provide generally that
annual cash flow, sale proceeds and tax items will be
distributed or allocated based on the capital contributions made
by each partner. Distributions and allocations to date have
been made (and any obligations to make additional capital
contributions will be made) 50% to the Partnership.
Earlier in the year, the Partnership negotiated a three-year
lease renewal (through May 31, 1998) with a tenant occupying
9,211 square feet (approximately 10%) of the owned leasable
space at the Landings Shopping Center . In July 1995, this
tenant's parent company filed for Chapter 11 bankruptcy
protection. As of the date of this report, this tenant is
approximately $40,000 in arrears with respect to its lease
obligations. The Partnership is currently negotiating a
possible restructuring of this tenant's lease. Additionally,
the Partnership is pursuing potential replacement tenants for
this space. Occupancy at the property decreased to 88% at
September 30, 1995, from 91% at June 30, 1995, primarily as a
result of the vacating by a tenant occupying approximately 2,200
square feet. However, the Partnership has negotiated a five-
year lease with a tenant which will occupy 6,167 square feet
(approximately 6.5%) of the leasable space at the property. The
JMB/Landings Associates joint venture, for financial reporting
purposes, has recorded a provision for value impairment at
September 30, 1995 in the amount of $3,500,000 (of which the
Partnership's share was $1,750,000). Reference is made to note
1. An affiliate of the General Partners of the Partnership
manages the property for a fee equal to 4% of the property's
gross receipts. Such property management fees for the nine
months ended September 30, 1995 and 1994 aggregated $34,354 and
$34,366, respectively.
(c) CIP/Ashby
In February 1990, the Partnership, through CIP/Ashby, a
joint venture partnership with CIP-II, acquired a 31% interest
in an apartment building located in McLean, Virginia and known
as The Ashby at McLean Apartments ("The Ashby"). The Ashby has
250 units, commercial space and related parking facilities.
CIP/Ashby purchased The Ashby for $25,327,132, which was
paid in cash at closing. In addition, the joint venture has
incurred approximately $3,380,000 for certain renovation,
leasing and maintenance costs, with the work related to such
costs completed at December 31, 1994. The majority of these
costs were contemplated at the time of the initial acquisition
of the property. CIP/Ashby's total cash investment in The Ashby
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
is $28,705,000, of which the Partnership's share is
approximately $8,899,000.
The terms of the CIP/Ashby partnership agreement provide
generally that annual cash flow, sale proceeds and tax items
will be distributed or allocated based on the capital
contributions made by each partner. Distributions and
allocations to date have been made (and any obligations to make
additional capital contributions will be made) 31% to the
Partnership.
The CIP/Ashby Partners joint venture, as a matter of prudent
accounting practice and for financial reporting purposes,
recorded a provision for value impairment at September 30, 1994
in the amount of $7,572,479 (of which the Partnership's share
was $2,347,468). Reference is made to note 1.
(4) MANAGEMENT AGREEMENTS
All of the Partnership's properties are managed by
affiliates of the General Partners or their assignees for fees
computed as a percentage of certain rents received by the
properties. In December 1994, one of the affiliated property
managers sold substantially all of its assets and assigned its
interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the
property manager became management personnel of the purchaser
and its affiliates. The successor to the affiliated property
manager's assets is acting as the property manager of the Carson
and Costa Mesa Industrial Parks and the Rancho Franciscan and
Ashby at McLean Apartments after the sale on the same terms that
existed prior to the sale.
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to the General
Partners and their affiliates as of September 30, 1995, and for the nine months ended September
30, 1995 and 1994, are as follows:
<CAPTION>
Unpaid at
September 30,
1995 1994 1995
-------- ---------- --------------
<S> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . . $ 70,029 161,036 4,464
Insurance commissions . . . . . . . 15,604 14,347 --
Reimbursement (at cost)
for out-of-pocket
expenses . . . . . . . . . . . . . 3,073 2,336 1,006
Reimbursement (at cost) for
administrative, accounting
and legal services . . . . . . . . 136,339 37,421 3,087
--------- --------- -------------
$ 225,045 215,140 8,557
========= ========= =============
<FN>
All amounts payable to the General Partners and their affiliates do not bear interest and were
paid subsequent to September 30, 1995.
The Corporate General Partner of the Partnership has determined to use independent third
parties to perform certain administrative services beginning in the fourth quarter of 1995. Use
of such third parties is not expected to have a material effect on the operations of the
Partnership.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONCLUDED
(6) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for JMB/Landings and CIP/Ashby (see notes 3(b) and 3(c),
respectively) for the nine months ended September 30, 1995 and 1994 is as follows:
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Total income. . . . . . . . . . $ 3,435,362 3,342,906
========== ==========
Operating loss. . . . . . . . . $ (2,264,551) (6,466,651)
========== ==========
Partnership's share of
loss . . . . . . . . . . . . . $ (1,289,547) (1,933,338)
========== ==========
<FN>
(7) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation have been made to the accompanying
figures as of September 30, 1995 and for the three and nine months ended September 30, 1995 and
1994.
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Financial
Statements contained in this report.
The Partnership has invested in income-producing real
properties, primarily existing commercial properties. The
Partnership invested in such real estate on an unleveraged all-
cash acquisition basis. In future periods, the General Partners
do not intend to incur any indebtedness secured by a mortgage or
otherwise unless it is determined by the General Partners that
it is in the best interests of the Holders of Interests to incur
such indebtedness. Subject to such determination, if
Partnership reserves prove to be insufficient, the Partnership
may consider obtaining unsecured interim bank lines of credit to
fund certain significant repair or replacement expenditures of
the Partnership's investment properties. At September 30, 1995,
the Partnership had cash and cash equivalents of approximately
$4,104,000. Such funds are available for leasing costs, for
distributions to the partners and for working capital
requirements. The Partnership has currently budgeted
approximately $370,000 in 1995 for tenant improvements and other
capital expenditures. The Partnership's share of similar items
for its unconsolidated ventures in 1995 is currently budgeted to
be approximately $50,000. Actual amounts expended in 1995 may
vary depending on a number of factors including actual leasing
activity, results of property operations, liquidity
considerations and other market conditions over the course of
the year. The source of capital for such items and for both
short-term and long-term future liquidity and distributions is
expected to be from net cash generated by the Partnership's
investment properties and from the sales of such investments.
In such regard, reference is made to the Partnership's property
specific discussions below.
In response to the uncertainty relating to the Partnership's
ability to recover the net carrying value of the Carson and
Costa Mesa Industrial Parks, the Rancho Franciscan Apartments,
and the Sunrise Town Center investment properties through future
operations or sale, as the Partnership has shortened its
intended holding period for these investment to not later than
1999, the Partnership, as a matter of prudent accounting
practice and for financial reporting purposes, has recorded
provisions for value impairment at September 30, 1995 of
$4,300,000, $3,400,000. $1,400,000 and $4,300,000, respectively,
for these properties. Such provisions, totaling $13,400,000,
were recorded to reduce the net basis of the investment
properties to their estimated recoverable values.
At September 30, 1994, the CIP/Ashby Partners joint venture
had substantially completed a significant (approximately
$3,400,000) renovation project. At such time, the venture
assessed its recoverable value against its revised carrying
costs and revised estimated holding period. Based on these
assessments and due to the uncertainty relating to CIP/Ashby
Partners joint venture's ability to recover the net carrying
value of the Ashby at McLean Apartments investment property
through future operations or sale, the CIP/Ashby Partners joint
venture, as a matter of prudent accounting practice and for
financial reporting purposes, recorded a provision for value
impairment as of September 30, 1994 in the amount of $7,572,479
(of which the Partnership's share was $2,347,468). Such
provision was recorded to reduce the net basis of the investment
property to its then estimated recoverable value. Additionally,
two apartment complexes (one to contain 624 units, the other 600
units) are being developed in the submarket. These new
properties are expected to compete directly with The Ashby upon
their completion in the latter part of 1996, which could
adversely affect future cash flow.
Earlier in the year, the Partnership negotiated a three-year
lease renewal (through May 31, 1998) with a tenant occupying
9,211 square feet (approximately 10%) of the owned leasable
space at the Landings Shopping Center. In July 1995, this
tenant's parent company filed for Chapter 11 bankruptcy
protection. As of the date of this report, this tenant is
approximately $40,000 in arrears with respect to its lease
obligations. The Partnership is currently negotiating a
possible restructuring of this tenant's lease. Additionally,
the Partnership is pursuing potential replacement tenants for
this space. Occupancy at the property decreased to 88% at
September 30, 1995, from 91% at June 30, 1995, primarily as a
result of the vacating by a tenant occupying approximately 2,200
square feet. However, the Partnership has negotiated a five-
year lease with a tenant which will occupy 6,167 square feet
(approximately 6.5%) of the leasable space at the property. In
response to the uncertainty relating to the JMB/Landings
Associates joint venture's ability to recover the net carrying
value of The Landings Shopping Center investment property
through future operations or sale, as the joint venture has
shortened its intended holding period for this investment to not
later than 1999, the JMB/Landings Associates joint venture, as
a matter of prudent accounting practice and for financial
reporting purposes, has recorded a provision for value
impairment at September 30, 1995 in the amount of $3,500,000
(of which the Partnership's share was $1,750,000). Such
provision was recorded to reduce the net basis of the investment
property to its then estimated recoverable value.
A significant tenant (which comprised 5% of the
Partnership's leasable space at the Sunrise Town Center) had
notified the Partnership that it intended to vacate upon the
expiration of its lease in July 1994. Such tenant was
terminated by the Partnership in January 1994 to accommodate a
replacement tenant which occupies 3.5% of the Partnership's
leasable space at the property and whose lease expires June 30,
1999. Occupancy at the property decreased to 90% at September
30, 1995, from 95% at June 30, 1995, as a result of the vacating
by tenants occupying approximately 6,300 square feet.
At the Carson Industrial Park, current tenant leases
representing approximately 22% and 35% of the property's
leasable space are due to expire in 1995 and 1996, respectively.
The Partnership is currently holding discussions regarding
renewal options with two major tenants, one occupying
approximately 40,000 square feet (approximately 20%) of the
property's leasable space and whose current lease is to expire
November 30, 1995, the other tenant occupying approximately
32,000 square feet (approximately 16%) of the property's
leasable space and whose current lease is to expire in early
January, 1996. Not all of these leases scheduled to expire in
1995 and 1996 are expected to renew.
At the Costa Mesa Industrial Park, one tenant (occupying
approximately 33% of the leasable space at the property) renewed
its current lease, which was to expire June 30, 1995, through
December 31, 1997. Another tenant (occupying approximately 16%
of the leasable space at the property) renewed its current
lease, which was to expire June 30, 1995, through March 31,
1998. The property remains 100% occupied at September 30, 1995.
In addition, a tenant occupying approximately 21% of the
leasable space at the property has renewed its current lease,
which expired July 31, 1995, through July 31, 1998. Tenant
leases representing approximately 63% and 37% of the property's
leasable space are due to expire in 1997 and 1998, respectively.
There can be no assurance these tenant leases will be renewed.
In addition, a tenant occupying approximately 30% of the
property's leasable space, whose lease expires June 30, 1997, is
currently undergoing Chapter 11 reorganization. As of April 30,
1995, this tenant was current in its stipulated 1995 monthly
lease obligations, which included payments of 1994 arrearages,
interest and fees, totaling approximately $52,000. The
Partnership did not receive any payments in either May or June,
1995. In July 1995, the Partnership and the tenant executed a
modification agreement which provides for monthly lease payments
and arrearage payments, including interest and fees, commencing
July 1995 through June 1996. The Partnership received the
initial payment (which was due July 21, 1995) under this
modification agreement. However, as of the date of this report,
the Partnership has received only a partial payment which was
due in August 1995 and no scheduled payments thereafter.
Consequently, the Partnership is currently holding discussions
with a potential replacement tenant.
Currently, as leases at the Carson and Costa Mesa Industrial
Parks expire, lease renewals and new leases are likely to be at
rental rates less than the rates on existing leases. Although
the previous decline in rental rates appears to have stabilized
in 1994 and leasing activity has increased, the supply of
industrial space has caused increased competition for tenants.
In addition, new leases will likely require expenditures for
lease commissions and tenant improvements prior to tenant
occupancy. This anticipated decline in rental rates, the
anticipated increase in re-leasing time and the related costs
will result in a decrease in cash flow from operations over the
near term. The Partnership is also evaluating the competitive
positioning of these properties in the market in which they
operate.
The Partnership is carefully scrutinizing the
appropriateness of any discretionary expenditures, particularly
in relation to the amount of working capital it has available.
By conserving working capital, the Partnership will be in a
better position to meet future needs of its properties. In an
effort to reduce Partnership operating expenses, the Partnership
has elected to make semiannual rather than quarterly
distributions of operating cash flow beginning in November 1995.
After reviewing the Partnership's properties and their
competitive marketplace, the General Partners of the Partnership
expect to be able to liquidate these assets as quickly as
practicable. Therefore, the affairs of the Partnership are
expected to be wound up no later than 1999 (sooner if the
properties are sold in the nearer term), barring unforeseen
economic developments.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and the decrease
in short-term investments at September 30, 1995 as compared to
December 31, 1994 is due primarily to all of the Partnership's
investments in U.S. Government obligations being classified as
cash and cash equivalents at September 30, 1995 and only a
portion of the Partnership's investments in U.S. Government
obligations being classified as short-term investments at
December 31, 1994. Reference is made to Note 1.
The increase in rents and other receivables (net of
allowance for doubtful accounts) at September 30, 1995 as
compared to December 31, 1994 is attributable primarily to an
increase in real estate tax recoveries due from tenants at the
Riverview Plaza Shopping Center at September 30, 1995, as a
result of the timing of the property's real estate tax payments
and the timing of related tenants' payments of such recoveries.
An additional increase in rents and other receivables at
September 30, 1995 as compared to December 31, 1994 is
attributable primarily to the timing of collections of base
rents and real estate tax recoveries due from tenants at the
Sunrise Town Center.
The increase in prepaid expenses at September 30, 1995 as
compared to December 31, 1994 is attributable primarily to the
terms of the property insurance premiums (which cover the period
June 1995 through May 1996) at the Partnership's investment
properties.
The decrease in investment properties, at cost at September
30, 1995 as compared to December 31, 1994 is attributable
primarily to the Partnership's recording of provisions for value
impairment totaling $13,400,000 at September 30, 1995 for
certain of the Partnership's investment properties. Reference
is made to Notes 1 and 2.
The decrease in investments in unconsolidated ventures, at
equity at September 30, 1995 as compared to December 31, 1994 is
attributable primarily to the JMB/Landings Associates joint
venture's recording of a provision for value impairment of
$3,500,000 at September 30, 1995 for the Landings Shopping
Center. Reference is made to Notes 1 and 3(b).
The decrease in amounts due to affiliates at September 30,
1995 as compared to December 31, 1994 is attributable primarily
to the payment in 1995 of certain previously unpaid 1994
reimbursable costs.
The decrease in unearned rents at September 30, 1995 as
compared to December 31, 1994 is attributable primarily to the
timing of rental collections at the Riverview Plaza Shopping
Center and the Sunrise Town Center.
The increase in accrued real estate taxes at September 30,
1995 as compared to December 31, 1994 is attributable primarily
to an increase in accrued real estate taxes (from twelve months
to fifteen months) at the Riverview Plaza Shopping Center at
September 30, 1995, due to the late mailing and the extended
payment date granted by the taxing authority for the payment of
the second installment of the 1994 real estate taxes for the
property. An additional increase in accrued real estate taxes
at September 30, 1995 as compared to December 31, 1994 is
attributable primarily to the 1995 real estate tax accrual for
three months at the Carson and Costa Mesa Industrial Parks and
the Rancho Franciscan Apartments and for nine months at the
Sunrise Town Center at September 30, 1995. Such accruals are
due to the real estate tax payment due dates in the jurisdiction
in which these properties operate.
The decrease in rental income for the nine months ended
September 30, 1995 as compared to the nine months ended
September 30, 1994 is attributable primarily to (i) a $50,000
lease termination fee collected from a tenant at the Sunrise
Town Center in February 1994 in order to accommodate a
replacement tenant, as discussed above and (ii) a decrease in
average occupancy and corresponding rental income at the
Riverview Plaza Shopping Center in 1995.
The increases in interest income for the three and nine
months ended September 30, 1995 as compared to the three and
nine months ended September 30, 1994 are due to an increase in
interest earned on the Partnership's short-term investments in
1995 as a result of the Partnership having larger average
invested balances in its short-term investments in 1995.
Reference is made to Note 1.
The increases in property operating expenses for the three
and nine months ended September 30, 1995 as compared to the
three and nine months ended September 30, 1994 are due primarily
to an increase in provision for doubtful accounts at the Sunrise
Town Center in 1995.
The increases in general and administrative expenses for the
three and nine months ended September 30, 1995 as compared to
the three and nine months ended September 30, 1994 are
attributable primarily to an increase in reimbursable costs to
affiliates of the General Partners in 1995 and the recognition
of certain additional prior year reimbursable costs to such
affiliates. Reference is made to Note 5.
Provisions for value impairment totaling $13,400,000 were
recorded for the three and nine months ended September 30, 1995
due to the uncertainty relating to the Partnership's ability to
recover the net carrying values of certain of the Partnership's
investment properties. Reference is made to Notes 1 and 2.
Partnership's share of operations of unconsolidated ventures
for the three and nine months ended September 30, 1995 contain
the Partnership's share ($1,750,000) of the provision for value
impairment recorded by JMB/Landings. Reference is made to Notes
1 and 3(b). Partnership's share of operations of unconsolidated
ventures for the three and nine months ended September 30, 1994
contain the Partnership's share ($2,347,468) of the provision
for value impairment recorded by CIP/Ashby in 1994. An
additional increase in Partnership's share of operations of
unconsolidated ventures for the three and nine months ended
September 30, 1995 as compared to the three and nine months
ended September 30, 1994 is attributable to an increase in the
Partnership's share of operations of CIP/Ashby (which resulted
primarily from reduced depreciation expense at the Ashby at
McLean Apartments in 1995 as a result of the provision for value
impairment recorded at September 30, 1994, as discussed in Notes
1 and 3(c)).
