UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the transition period from to
Commission file number: 33-8105
STAMFORD TOWERS LIMITED PARTNERSHIP
and
STAMFORD TOWERS DEPOSITARY CORP.
Exact name of registrant as specified in its charter
State or other jurisdiction I.R.S. Employer Identification No.
of incorporation
Stamford Towers
Limited Partnership - Delaware 13-3392080
Stamford Towers
Depositary Corp. - Delaware 13-3392081
3 World Financial Center, 29th Floor,
New York, New York 10285
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Depositary Units of Limited Partnership Interest
Title of Class
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
- Not Applicable
Documents Incorporated by Reference: None
PART I
ITEM 1. Business
(a) General Development of Business.
Stamford Towers Limited Partnership (the "Partnership") is a Delaware limited
partnership which was formed on August 14, 1986. The general partner of the
Partnership is Stamford Towers Inc., a Delaware corporation (the "General
Partner") and an affiliate of Lehman Brothers Inc. The sole limited partner of
the Partnership is Stamford Towers Depositary Corp., a Delaware corporation
(the "Assignor Limited Partner") and also an affiliate of Lehman Brothers Inc.
The control and management of the Partnership's business and affairs are vested
solely in the General Partner.
On November 19, 1986, the Partnership began an offering of 7,826,300 depositary
units ("Units") representing assignments of the limited partnership interests
in the Partnership. The offering was on a "best efforts" basis through
Shearson Lehman Brothers Inc. ("Shearson") at a price of $10 per Unit. On June
30, 1987, a supplement to the prospectus for the offering of the Units was
issued for the purpose of updating, modifying and amending certain information
contained in the original prospectus.
On July 30, 1987, the Partnership commenced operations with the acceptance of
subscriptions for 4,562,075 Units ($45,620,750). The remaining Units were sold
pursuant to eight additional Partnership closings occurring on a monthly basis
from August 1987 through March 1988. Net proceeds to the Partnership from the
public offering of the Units were $71,808,474, after deducting offering and
organizational costs and setting aside funds for a working capital reserve.
The Partnership was formed to acquire, construct, develop, own and operate two
parcels of land located in Stamford, Connecticut (the "Land") and two
commercial office buildings together with ancillary facilities (the
"Buildings") constructed thereon which contain 325,416 net rentable square feet
(the Land and the Buildings are collectively referred to as the "Project").
See Item 2.
The Partnership entered into a development agreement dated September 17, 1986
as modified by a modification dated June 5, 1987 (collectively, the
"Development Agreement") with an unaffiliated party, Edlar, Inc., a Delaware
corporation (the "Developer") pursuant to which the Developer agreed to convey
the Land to the Partnership and construct the Buildings.
Under the terms of the Development Agreement, the Developer was obligated,
among other things, to (1) cause substantial completion of the Buildings to
occur within 550 days of the commencement of construction (subject to
extensions for force majeure work delays and approved change orders), (2)
complete construction of the Buildings for a guaranteed maximum cost (including
Land and Miscellaneous carrying costs) of $59,384,922 (subject to increases
attributable to approved change orders and costs resulting from force majeure
work delays) and (3) complete the tenant finish pursuant to a standard work
letter for all initial leases entered into prior to the date 550 days after
substantial completion of the Buildings, for a guaranteed maximum cost. The
Developer, in connection with carrying out its construction obligations under
the Development Agreement, entered into a construction management agreement
dated May 28, 1987 with Gilbane Building Company ("Gilbane"), a Rhode Island
corporation , and assigned a construction supervisor to the Project to work
with Gilbane.
Edward Feldman, the principal shareholder of the Developer, executed a personal
guaranty in favor of the Partnership (the "Guaranty"), guaranteeing the
Developer's payment obligations under the Development Agreement, including
those relating to failure to complete performance of the work in a timely
fashion and funding of cost overruns. In the Guaranty, Mr. Feldman agreed to
maintain a personal net worth of at least $15,000,000 for so long as his
obligations thereunder remained outstanding. Because of Mr. Feldman's
substantial financial commitments with respect to other projects, as well as
his substantial contingent liabilities, it was understood that there could be
no assurance that Mr. Feldman would be able to make any required payments under
the Guaranty.
Construction of the Buildings commenced in July 1987. However, Certificates of
Occupancy were not received from the City of Stamford until February of 1990,
representing a substantial delay from the originally scheduled completion date
of February 1989. Moreover, during the course of the construction, substantial
cost overruns were incurred. Because the Developer denied responsibility for
the delays and overruns, the Partnership commenced an arbitration in January
1989 to resolve the dispute. In the arbitration, the Partnership contended
that the Developer was responsible for all cost overruns (except for the cost
of three approved change orders which represented a total cost of less than
$20,000) incurred in connection with the construction of the buildings. In
addition, the Partnership contended that the Developer was obligated to make
certain liquidated damage payments as a result of the unjustified delays in the
completion of construction, and that the Developer's failure to m ake those
payments entitled the Partnership to terminate the Developer. The Developer,
in turn, filed numerous claims against the Partnership principally designed to
establish the Partnership's responsibility for the cost overruns incurred on
the Project.
As a result of a ruling by the New York State Supreme Court, the Partnership's
arbitration with the Developer was combined with the Developer's separate
arbitration with the Project's construction manager, Gilbane. Hearings in the
consolidated arbitration commenced in the fall of 1989 and continued
periodically until the summer of 1992. On January 27, 1993, the arbitration
panel issued its decision, awarding the Partnership approximately $8.1 million
in monetary relief and granting certain additional, declaratory relief. The
arbitrators also decided in favor of Gilbane Building Company with respect to
its separate dispute with the Developer. See Items 3 and 7 for a discussion of
the arbitration award and its significance.
Because of the delays and cost overruns which occurred in the course of
construction of the Buildings, funds in addition to those budgeted have been
required to complete the construction of the Buildings. Furthermore, due to
soft market conditions in Stamford, additional funds have been required to fund
increases in the Partnership's leasing budget which are described in Item 2.
Accordingly, on July 19, 1990, the Partnership closed a mortgage loan (the
"Financing") with People's Bank ("People's") to provide mortgage financing to
the Partnership. The Financing consisted of a $25 million, seven-year,
revolving loan payable, secured by a non-recourse first mortgage on the
Project. For the specific terms of the Financing, see Note 7 "Mortgage Note
Payable" of the Notes to Financial Statements contained in Item 8 of this
report.
On February 17, 1994, the Partnership entered into a loan modification
agreement with People's (the "Loan Modification"). The Loan Modification: (i)
reduced the interest rate on the loan from 11.5% to 7.43% commencing February
1, 1994 and continuing until the first adjustment date on July 19, 1995; (ii)
reduced the principal balance of the loan from $25 million to $24,449,795; and
(iii) eliminated the interest reserve line item. Payments of interest are due
monthly in arrears and are required to be paid from the Partnership's own
funds. Loan proceeds may continue to be used on an "as needed" basis to fund
all other approved line items. As of December 31, 1994, the principal balance
of the loan was $15,407,772 plus interest payable of $95,400 for a total
balance of $15,503,172.
The General Partner, at this time, cannot determine whether or when cash flow
from operations will be available for distribution to holders of Units ("Unit
Holders").
(b) Financial Information About Industry Segments.
The Partnership's sole business is the ownership and operation of the Project.
All of the Partnership's revenues, operating profit or loss and assets relate
solely to its interest as the owner of the Project.
(c) Narrative Description of Business.
The Partnership's sole business is the ownership and operation of the Project.
The Partnership currently intends to hold the Project until such time as the
General Partner, pursuant to the terms of the Partnership Agreement, deems it
prudent to sell the Project. The principal objectives of the Partnership are
to:
(i) provide long-term capital appreciation;
(ii) provide cash distributions from operation following
lease-up of the Project subsequent to the repayment of
the financing; and
(iii) preserve and protect Partnership capital.
There can be no assurance that the Partnership will achieve its objectives.
The Partnership has no employees. CB Commercial Real Estate Group Inc. ("CB
Commercial"), provides full-time property management services with respect to
the Project and Rostenberg-Doern & Company serves as the Project's exclusive
leasing agent.
ITEM 2. Properties
On July 30, 1987, the Developer, pursuant to the terms of the Development
Agreement, caused its affiliate, a trust controlled by Edward Feldman, to
convey the Land to the Partnership. The Land has been developed with two
architecturally integrated, eleven-story, multi-tenant office buildings
(comprised of four levels of parking and seven levels of office space), one of
which contains approximately 192,939 square feet of rentable floor space (the
"North Tower"), and the other of which contains approximately 132,477 square
feet of rentable floor space (the "South Tower"). The Project is located on
two parcels of land, totalling approximately 3.63 acres, in the central
business district of Stamford, Connecticut. The Partnership owns no real
property other than the Land and the Buildings. A 3,000 square foot cafeteria
available for the use of all tenants was completed in December 1990, on the 5th
floor of the North Tower.
The Partnership entered into a lease with Citicorp POS Information Services,
Inc. ("Citicorp POS") which became effective on May 15, 1990 (the "Lease
Agreement"). For information regarding the lease with Citicorp POS, refer to
Note 5 "Lease Agreement with Citicorp POS Information Services" of the Notes to
the Financial Statements contained in Item 8 of this report. Occupancy at the
Project remained at 46% as of December 31, 1994, unchanged from December 31,
1993. In addition to Citicorp POS, there are four other tenants occupying space
in the Project. Three of these tenants occupy approximately 12,750 square feet
of office space. The fourth tenant occupies approximately 500 square feet of
retail space.
According to leasing reports prepared by CB Commercial, the total office
inventory available for lease in Stamford, Connecticut was 2.9 million square
feet at December 31, 1994. This represents a decline from the prior year and
reflects absorption of approximately 200 thousand square feet. The Stamford
market remained stable as reflected by the vacancy rate which declined slightly
from 20.6% at year-end 1993 to 19.9% at the end of 1994. Average asking gross
rental rates for class A office space in Stamford was approximately $22 per
square foot. The increase in leasing activity is beginning to reduce the
availability of class A space in Stamford and the surrounding areas and may
lead to an increase in rental rates during 1995.
One of the most significant developments in Stamford during 1994 was the
announcement that Swiss Bank Corporation ("Swiss Bank") would be constructing a
20-story North American headquarters building across the street from the
Project. While construction is scheduled to commence in mid-1995 and take
several years to complete, Swiss Bank's commitment is evidence of major
corporations' continuing interest in Stamford as an alternative to New York.
Swiss Bank's plans call for the relocation of approximately 1,300 employees
from its current Manhattan location to Stamford by late 1997 or early 1998.
ITEM 3. Legal Proceedings
In early 1993, the Partnership received the decision of a five-member
arbitration board impaneled to determine numerous disputes between and among
the Partnership, the Developer and Gilbane arising from the development and
construction of the Project. In their decision, the arbitrators awarded the
Partnership approximately $8.1 million in damages and costs on its claims
against the Developer and awarded the Developer no amounts on its claims
against the Partnership. The arbitrators also awarded Gilbane approximately
$2.6 million in damages and costs on its claims against the Developer, and
ordered that the Developer hold the Partnership harmless with respect to any
mechanics liens filed against the Partnership's property in connection with the
Project. The Partnership has obtained a judgment in New York for the full
amount of the arbitrator's award against Edlar and Edward Feldman, pursuant to
the Guaranty.
However, the General Partner's preliminary investigation indicates that the
Developer has no significant assets from which the Partnership's arbitration
award could be satisfied. Moreover, Mr. Feldman has advised the Partnership
that he has no significant liquid assets from which to satisfy the judgment
against him, and that he has outstanding debts to other creditors in the
approximate amount of $53,000,000. Mr. Feldman has proposed that his
creditors, including the Partnership, enter into a non-judicial workout
arrangement whereby his debts might be partially satisfied in the event that
his real estate investments appreciate in value in future years. Currently,
those investments appear to be over leveraged and without significant market
value. The Partnership along with Mr. Feldman's other creditors are in the
process of evaluating and potentially proposing alternatives to Mr. Feldman's
proposal. Berkshire Bank, one of Mr. Feldman's creditors has thus far not
participated in this process.
On February 1, 1991, Gilbane filed a mechanic's lien against the property in
the sum of $4,583,481. On August 9, 1991, Gilbane commenced an action entitled
Gilbane Building Co. v. Stamford Towers Limited Partnership, et. al., in the
Connecticut Superior Court for the Judicial District of Stamford/Norwalk at
Stamford (the "Gilbane Action"). The defendants include the Partnership.
Gilbane alleges breach of various contracts and unfair trade practices and
seeks foreclosure of its mechanic's lien, monetary damages, attorney fees,
punitive damages, possession of the premises, and the appointment of a
receiver. The Partnership expects to vigorously defend against each of the
plaintiff's claims. On May 17, 1993, at the request of the Partnership,
Gilbane reduced the amount of the lien to $2,650,018.
On September 21, 1993, Gilbane filed a motion for Partial Summary Judgment as
to Liability Only. The Partnership successfully opposed this motion, and the
motion was denied by the court on November 4, 1993. On October 28, 1993, the
Partnership filed a Motion for Summary Judgment which has not yet been acted
upon by the court. On October 21, 1993, the Partnership filed its Answer,
Special Defenses and Counterclaims to Gilbane's action. The Partnership's
Counterclaim against Gilbane alleges breach of various contracts, unfair trade
practices and slander of title. On November 10, 1993, Gilbane filed its reply
to Stamford Towers' Special Defenses and Answer to Stamford Towers'
Counterclaim and claimed the action to the jury trial list.
On November 3, 1994, the Partnership filed a Request for Leave to File Amended
Special Defenses, Counterclaims, Set-Offs and Recoupment. On January 25, 1995,
this request was granted by the Court over Gilbane's objection. The
Partnership's Amended Counterclaim against Gilbane adds, in addition to the
allegations of its original Counterclaim, additional allegations of negligence,
breach of warranty, breach of contract, products liability and unfair trade
practices. Gilbane has not yet answered the Partnership's Amended
Counterclaim. The parties are currently engaged in discovery, and a trial has
been tentatively scheduled to begin on August 1, 1995.
On March 7, 1995, Gilbane filed a Motion to Implead Beer Precast Concrete,
Ltd., one of Gilbane's subcontractors on the Project. On March 20, 1995, that
Motion was granted. As of March 21, 1995, Beer had not yet responded to
Gilbane's Third-Party Complaint against them.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unit Holders at a meeting or
otherwise during the fourth quarter in the year for which this report is filed.
PART II
ITEM 5. Market for the Partnership's Limited Partnership Interests and Related
Security Holder Matters
(a) Market Price Information. There is no established trading market for the
Units. The Partnership originally intended to apply to include the Units on
NASDAQ or another quoted securities market upon the completion of the lease-up
of the Project. However, an application is not anticipated at this time.
(b) Holders. As of December 31, 1994, there were 8,852 Unit Holders.
(c) Distribution of Net Cash Flow. For information regarding the
Partnership's policy with respect to distribution of net cash flow, refer to
Note 3 "The Partnership Agreement" of the Notes to the Financial Statements
contained in Item 8 of this report.
ITEM 6. Selected Financial Data
Set forth below is the selected financial data for the referenced periods.
For the years ended December 31,
1994 1993 1992 1991 1990
Rental Income $ 2,486,730 $ 2,392,211 $ 2,359,242 $ 2,200,820 $ 1,098,598
Interest Income 192,911 182,101 259,422 489,484 746,884
Net Income
(Loss) (3,711,936) (4,387,694) (4,180,101) (5,001,682) (4,178,429)
Net Income
(Loss) per
Unit (1) (.47) (.56) (.53) (.63) (.53)
Total Assets 70,989,125 74,328,520 76,917,606 79,778,759 83,516,926
Revolving loan
payable 15,407,772 14,951,320 13,312,685 11,465,501 8,862,860
Cash
Distributions
per Unit -0- -0- -0- -0- -0-
(1) Based upon the weighted average number of Units (7,826,300) outstanding
at year end.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Initially, the principal source of the Partnership's liquidity was the proceeds
from the offering of Units which was completed in March 1988 and totalled
$78,263,000. After paying offering expenses and syndication costs of the
Partnership and establishing a working capital reserve, the Partnership had
approximately $71,808,474 available to invest in the acquisition of the Land
and the construction, lease up and operation of the Buildings. On July 30,
1987, the Partnership acquired the Land for $14,714,483. As of December 31,
1994, $59,155,584 had been invested in the construction of the Buildings and
tenant improvements.
The Partnership is currently preserving its funds to lease and operate the
Project. Through December 31, 1994, the Partnership's sources of liquidity
have been net proceeds from the public offering of the Units, rental payments
under the terms of the leases discussed in Item 2, proceeds from the Financing
discussed in Item 1 and Note 7, "Mortgage Note Payable", of the Notes to the
Financial Statements contained in Item 8 of this report, and interest earned on
the Partnership's cash balance.
Because of delays and cost overruns which occurred in the course of
construction of the Buildings and due to soft market conditions in the Stamford
real estate market, additional funds have been required to fund cost overruns,
operating deficits and leasing costs. See Item 1. While the Partnership
sought to recover the amount of the construction overruns from the Developer
and eventually prevailed on most of its claims at the arbitration (see Item 3),
it currently appears that neither the Developer nor Edward Feldman, the
Developer's principal shareholder, have any significant liquid assets from
which to pay the Partnership. While the General Partner intends to pursue,
with all prudent measure, payment of the $8.1 million arbitration award, it
seems unlikely that any substantial sums will be realized in the foreseeable
future with respect to the arbitration award.
In order to fund cost overruns, operating deficits and leasing commissions to
date, the Partnership obtained a $25 million, seven-year, revolving loan
payable from People's in July 1990. On February 17, 1994, the Partnership
entered into the Loan Modification with People's which: (i) reduced the
interest rate on the loan from 11.5% to 7.43% commencing February 1, 1994 and
continuing until the first adjustment date on July 19, 1995; (ii) reduced the
principal balance of the loan from $25 million to $24,449,795; and (iii)
eliminated the interest reserve line item. Payments of interest are due
monthly in arrears and are required to be paid from the Partnership's own
funds. Loan proceeds may continue to be used on an "as needed" basis to fund
all other approved line items. The $456,452 increase in principal from December
31, 1993 was due to the borrowing of funds to pay for capital expenditures and
interest expense draw downs.
Cash and cash equivalents totalled $5,768,902 and $6,552,078 at December 31,
1994 and 1993, respectively. The decrease was primarily due to interest
payments on the Financing and the funding of property operating deficits and
building improvements.
Accounts receivable increased from $70,970 at December 31, 1993 to $103,201 at
December 31, 1994, primarily due to an increase in outstanding reimbursable
amounts due from tenants.
The Partnership has made no cash distributions to date. See Item 1 for a
discussion of the adverse impact which the placement of the Financing on the
Project will have on the amount and the timing of any distributions of cash
flow to Unit Holders in the future.
Results of Operations
1994 vs. 1993
The Partnership incurred a net loss of $3,711,936 for the year ended December
31, 1994 compared with a net loss of $4,387,694 for the year ended December 31,
1993. The reduction in the net loss is primarily the result of increases in
rental and other income, as well as decreases in interest expense and
professional fees.
Rental income totalled $2,486,730 in 1994, up 4% from 1993, due to rental
income received from the signing of two leases representing 4,150 square feet
in July and November 1993. Other income increased from $224,612 in 1993 to
$293,767 in 1994, reflecting an increase in tenant reimbursements for
electricity and other building costs, as well as income generated from
cafeteria operations at the Property.
Total expenses for the year ended December 31, 1994 were $6,685,344 compared
with $7,186,618 in 1993. Property operating expenses decreased to $2,313,161
from $2,380,642 in 1993, primarily due to lower building service expense and
real estate taxes, partially offset by higher repairs and maintenance and
payroll costs at the Property. Interest expense relating to the revolving loan
payable decreased to $1,188,986 in 1994 from $1,627,333 in 1993. Interest
expense decreased, despite the increase in the outstanding loan balance, due to
the Loan Modification discussed above.
Professional fees totaled $146,489 in 1994 compared with $188,344 in 1993. The
decrease is attributable to lower legal fees.
1993 vs. 1992
The Partnership incurred a net loss of $4,387,694 for the year ended December
31, 1993 compared with a net loss of $4,180,101 for the year ended December 31,
1992. The increased net loss was primarily due to higher property operating
and interest expenses in 1993, as well as lower interest income in 1993.
Rental income totalled $2,392,211 in 1993, up 1% from 1992, primarily as a
result of the leasing of approximately 1,560 additional square feet to
Millsport, Inc. during the third quarter of 1992. Interest income totalled
$182,101 in 1993 compared with $259,422 in 1992. The decrease is due to the
Partnership's lower cash balance and lower interest rates in 1993. Other
income increased from $206,317 in 1992 to $224,612 in 1993, reflecting an
increase in tenant reimbursements for electricity and other building costs
primarily as a result of the execution of the Dow Jones & Company, Inc. and
M.D. Revenues, Inc. leases.
Total expenses for the year ended December 31, 1993 were $7,186,618 compared
with $7,005,082 in 1992. The $181,536 increase was primarily due to higher
property operating expenses and interest expense. Property operating expenses
increased $380,553 from 1992, primarily due to higher real estate tax expense.
Also contributing to increased operating expenses were higher utility and
administrative expenses, which were directly related to increased leasing
activity efforts. Professional fees totaled $188,344 in 1993 compared with
$239,111 in 1992. The decrease is the result of lower legal fees related to
the conclusion of the arbitration. Depreciation and amortization expense
decreased $252,599 or 8% from 1992, reflecting the full amortization of certain
deferred charges. Interest expense related to the revolving loan payable
totaled $1,627,333 in 1993 compared with $1,440,519 in 1992. The increase is
the result of interest being calculated on a higher average principal balance
in 1993. General and administrative expense decreased from $79,833 in 1992 to
$15,769 in 1993, due primarily to lower printing and postage expense in 1993.
ITEM 8. Financial Statements and Supplementary Data
See Item 14 for a listing of the financial statements and supplementary data
filed with this report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The Partnership has no Directors or Executive Officers. The affairs of the
Partnership are conducted through the General Partner. Certain officers and
directors of the General Partner are now serving (or in the past have served)
as officers and directors of entities which act as general partners of a number
of real estate limited partnerships which have sought protection under the
provisions of the Federal Bankruptcy Code. The partnerships which have filed
for bankruptcy petitions own real estate which has been adversely affected by
the economic condition in the markets in which the real estate is located and,
consequently, the partnerships sought protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of
its domestic retail brokerage and asset management businesses to Smith Barney,
Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to this sale,
Shearson changed its name to Lehman Brothers Inc. ("Lehman"). The transaction
did not affect the ownership of the Partnership or the General Partner.
Set forth below are the names, ages, positions and offices held, and a brief
account of the business experience during the past five years of each Director
and Executive Officer of the General Partner and the Assignor Limited Partner
as of December 31, 1994. Each such officer and director holds a similar
position in the General Partner and the Assignor Limited Partner.
Name Age Office
Regina M. Hertl 36 President
Rocco F. Andriola 36 Vice President, Director and Chief
Financial Officer
Regina M. Hertl is a First Vice President of Lehman Brothers in its Diversified
Asset Group and is responsible for the investment management of commercial and
residential real estate, and a venture capital portfolio. From January 1988
through December 1988, Ms. Hertl was Vice President of the Real Estate
Accounting Group within the Controller's Department of Shearson Lehman
Brothers. From September 1986 through December 1987, she was an Assistant Vice
President responsible for real estate accounting analysis within the
Controller's Department at Shearson. From September 1981 to September 1986,
Ms. Hertl was employed by the accounting firm of Coopers & Lybrand. Ms. Hertl,
who is a Certified Public Accountant, graduated from Manhattan College in 1981
with a B.S. degree in Accounting.
Rocco F. Andriola is a Senior Vice President of Lehman Brothers in its
Diversified Asset Group. Since joining Lehman Brothers in 1986, Mr. Andriola
has been involved in a wide range of restructuring and asset management
activities involving real estate and other direct investment transactions.
From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman Brothers, Mr. Andriola practiced corporate and
securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola
received a B.A. degree from Fordham University, a J.D. degree from New York
University School of Law, and an LL.M degree in Corporate Law from New York
University's Graduate School of Law.
ITEM 11. Executive Compensation
The Directors and Officers of the General Partner and the Assignor Limited
Partner do not receive any salaries or other compensation from the Partnership
or the Assignor Limited Partner.
The General Partner is entitled to varying percentages of Net Cash Flow
distributed in any fiscal year and to varying percentages of the Net Proceeds
of capital transactions. See Item 5 hereof for a description of such
arrangements.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1994, the only entity known by the Partnership to be the
beneficial owner of more than five percent of the Units was Chrysler Master
Pension Trust, U/A/D 5/28/56, 12,000 Chrysler Drive, Highland Park, Michigan,
which was the beneficial owner of 450,000 Units or approximately 5.74% of the
total outstanding Units.
As of December 31, 1994, neither the General Partner nor any of its officers or
directors held any Units.
ITEM 13. Certain Relationships and Related Transactions
The General Partner or its affiliates earned fees and compensation in
connection with the syndication, acquisition, and organization services
rendered to the Partnership. As of December 31, 1994, $127,921 remained
unpaid.
Under the terms of the Partnership Agreement, the General Partner and certain
affiliates may be reimbursed by the Partnership for certain operational
expenses, including but not limited to audit, appraisal, legal and tax
preparation fees as well as costs of data processing. The Shareholder Services
Group provides partnership accounting and investor relations services for the
Registrant. Prior to May 1993, these services were provided by an affiliate of
the General Partner. The Registrant's transfer agent and certain tax reporting
services are provided by Service Data Corporation, an unaffiliated company.
For the amounts paid to affiliates for the three years ended December 31, 1994,
see Note 4 "Transactions with Related Parties" of the Notes to the Financial
Statements included in Item 8 of this report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules.
Page
Report of Independent Auditors F-1
Balance Sheets at December 31, 1994 and 1993 F-2
Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 F-3
Statements of Partners' Capital (Deficit)
for the years ended December 31, 1994, 1993 and 1992 F-4
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 F-5
Notes to Financial Statements F-6
Schedule III - Real Estate and
Accumulated Depreciation F-10
No other schedules are presented because the information is not
applicable or is included in the Financial Statements or the notes
thereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1994.
(c) Exhibits
Subject to Rule 12b-32 of the Securities and Exchange Act of 1934 regarding
incorporation by reference, listed below are the exhibits which are filed as
part of this report:
3. The Partnership's Amended and Restated Agreement of Limited
Partnership, dated as of November 1, 1986, is hereby incorporated by
reference to Exhibit A to the Prospectus contained in Registration
Statement No. 33-8105, which registration statement (the "Registration
Statement") was declared effective by the SEC on November 19, 1986.
4. The form of Unit Certificate is hereby incorporated by
reference to Exhibit 4.1 to the Registration Statement.
10.1 Subscription Agreement and Signature Page is included as
Exhibits B and C to the Prospectus contained in the Registration
Statement, and is incorporated herein by reference.
10.2 Escrow Agreement between the Partnership and United States
Trust Company of New York is hereby incorporated by reference to
Exhibit 10.3 to the Registration Statement.
10.3 Property Management Agreement between the Partnership and
Feldman Realty relating to the Project is hereby incorporated by
reference to Exhibit 10.3 to the Registration Statement.
10.4 Supervisory Leasing and Management Agreement between the
Partnership and the Manager relating to the Project is hereby
incorporated by reference to Exhibit 10.4 to the Registration
Statement.
10.5 Demand Promissory Note from Shearson to the General Partner is
hereby incorporated by reference to Exhibit 10.5 to the Registration
Statement.
10.6 Contract of Sale, as amended to date, relating to the land
portion of the Project and all exhibits thereto is included as Exhibit
L to the Development Agreement, and is hereby incorporated herein by
reference to Exhibit 10.6 to the Registration Statement.
10.7 Development Agreement between the Developer and the Partnership
is hereby incorporated by reference to Exhibit 10.7 to the Registration
Statement.
10.8 Guaranty of the Developer's obligations is hereby incorporated
by reference to Exhibit 10.8 to the Registration Statement.
10.9 Form of Letter Agreement between Edward Feldman and the
Partnership relating to the Guaranty is hereby incorporated by
reference to Exhibit 10.9 to the Registration Statement.
10.10 Modification of Development Agreement between the Developer and
the Partnership is hereby incorporated by reference to Exhibit 10.10 to
the Registration Statement.
10.11 Commitment Letter from Shearson Lehman Brothers Holdings Inc.
to the Partnership is hereby incorporated by reference to Exhibit 10.11
to the Registration Statement.
10.12 Agreement Regarding Securities Law Liability between Developer,
Feldman Realty & Management Corp., Edward Feldman, Shearson, Registrant
and the General Partner is hereby incorporated by reference to Exhibit
10.14 to the Registration Statement.
10.13 Modification of Supervisory Leasing and Management Agreement
between the Partnership and the Manager is hereby incorporated by
reference to Exhibit 10.15 to the Registration Statement.
10.14 Commercial Revolving Loan Agreement between the Partnership and
People's Bank dated July 19, 1990 is hereby incorporated by reference
to Exhibit 10.14 to the Partnership's report on Form 10-K for the year
ended December 31, 1990.
10.15 Modification of Loan Agreement, Mortgage, Collateral Assignment
of Leases and Other Loan Documents, between the Partnership and Peoples
Bank, dated February 17, 1994, is hereby incorporated by reference to
Exhibit 10.15 to the Partnership's report on Form 10-K for the year
ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 30, 1995 STAMFORD TOWERS LIMITED PARTNERSHIP
BY: Stamford Towers, Inc.
General Partner
BY: /S/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, Chief Financial Officer
and Vice President
STAMFORD TOWERS DEPOSITARY CORP.
BY: /S/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, Chief Financial Officer
and Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capabilities and on the dates indicated.
STAMFORD TOWERS, INC. and
STAMFORD TOWERS DEPOSITARY CORP.
General Partner
Date: March 30, 1995 BY: /S/ Rocco F. Andriola
Rocco F. Andriola
Vice President, Director and
Chief Financial Officer
Date: March 30, 1995 BY: /S/ Regina Hertl
Regina Hertl
President
Report of Independent Auditors
General and Limited Partners
Stamford Towers Limited Partnership
We have audited the accompanying balance sheets of Stamford Towers Limited
Partnership as of December 31, 1994 and 1993, and the related statements of
operations, partners' capital (deficit), and cash flows for each of the three
years in the period ended December 31, 1994. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Note 2 to the financial statements discusses the Partnership's real estate
investments and Note 5 discusses the Partnership's lease agreement with its
major tenant.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Stamford Towers Limited
Partnership at December 31, 1994 and 1993, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 25, 1995
Balance Sheets
December 31, 1994 and 1993
Assets 1994 1993
Real estate investments,
at cost:
Land $ 14,714,483 $ 14,714,483
Buildings and improvements 52,537,022 52,365,750
Tenant improvements 6,618,562 6,590,665
Furniture, fixtures and
equipment 372,541 372,541
74,242,608 74,043,439
Less-accumulated depreciation (12,226,266) (9,585,930)
62,016,342 64,457,509
Cash and cash equivalents 5,768,902 6,552,078
Restricted cash 89,294 82,592
5,858,196 6,634,670
Accounts receivable 103,201 70,970
Deferred rent receivable 2,381,869 2,408,725
Deferred charges, net of accumulated
amortization of $445,587 in 1994
and $322,034 in 1993 309,496 295,427
Prepaid expenses, net of accumulated
amortization of $636,235 in 1994
and $487,246 in 1993 320,021 461,219
Total Assets $ 70,989,125 $ 74,328,520
Liabilities and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 857,084 $ 888,450
Interest payable 95,400 142,876
Due to affiliates 159,091 164,160
Revolving loan payable 15,407,772 14,951,320
Total Liabilities 16,519,347 16,146,806
Partners' Capital (Deficit):
General Partner (173,287) (136,168)
Limited Partners 54,643,065 58,317,882
Total Partners' Capital 54,469,778 58,181,714
Total Liabilities and
Partners' Capital $ 70,989,125 $ 74,328,520
See accompanying notes to the financial statements.
Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
Income 1994 1993 1992
Rental $ 2,486,730 $ 2,392,211 $ 2,359,242
Interest 192,911 182,101 259,422
Other 293,767 224,612 206,317
Total Income 2,973,408 2,798,924 2,824,981
Expenses
Depreciation and
amortization 2,912,878 2,860,958 3,113,557
Property operating 2,313,161 2,380,642 2,000,089
Interest 1,188,986 1,627,333 1,440,519
Professional fees 146,489 188,344 239,111
Partnership service fees 99,724 113,572 131,973
General and administrative 24,106 15,769 79,833
Total Expenses 6,685,344 7,186,618 7,005,082
Net Loss $ (3,711,936) $ (4,387,694) $ (4,180,101)
Net Loss Allocated:
To the General Partner $ (37,119) $ (43,877) $ (41,801)
To the Limited Partners (3,674,817) (4,343,817) (4,138,300)
$ (3,711,936) $ (4,387,694) $ (4,180,101)
Per limited partnership unit
(7,826,300 outstanding) $ (.47) $ (.56) $ (.53)
See accompanying notes to the financial statements.
Statements of Partners' Capital (Deficit)
For the years ended December 31, 1994, 1993 and 1992
General
Partner's Limited Total
Capital Partners' Partners'
(Deficit) Capital Capital
Balance at December 31, 1991 $ (50,490) $ 66,799,999 $ 66,749,509
Net loss (41,801) (4,138,300) (4,180,101)
Balance at December 31, 1992 (92,291) 62,661,699 62,569,408
Net loss (43,877) (4,343,817) (4,387,694)
Balance at December 31, 1993 (136,168) 58,317,882 58,181,714
Net loss (37,119) (3,674,817) (3,711,936)
Balance at December 31, 1994 $ (173,287) $ 54,643,065 $ 54,469,778
See accompanying notes to the financial statements.
Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
Cash Flows from Operating Activities:
1994 1993 1992
Net loss $ (3,711,936) $ (4,387,694) $ (4,180,101)
Adjustments to reconcile
net loss to net cash
used for operating activities:
Depreciation and amortization 2,912,878 2,860,958 3,113,557
Increase (decrease) in
cash arising from changes
in operating assets and
liabilities:
Restricted cash (6,702) (2,079) 683,294
Accounts
receivable (32,231) (10,355) (14,475)
Deferred rent
receivable 26,856 (704,396) (698,375)
Prepaid expenses (7,791) (61,729) (1,062)
Accounts payable and
accrued expenses (31,366) 144,701 (325,240)
Due to affiliates (5,069) (587) 2,596
Interest payable (47,476) 15,859 17,486
Net cash used for
operating activities (902,837) (2,145,322) (1,402,320)
Cash Flows from Investing Activities:
Additions to real
estate assets (199,169) (152,409) (436,314)
Net cash used for investing
activities (199,169) (152,409) (436,314)
Cash Flows from Financing Activities:
Borrowings under the
revolving loan payable 456,452 1,638,635 1,847,184
Deferred Charges (137,622) -- --
Net cash provided by financing
activities 318,830 1,638,635 1,847,184
Net increase (decrease) in cash
and cash equivalents (783,176) (659,096) 8,550
Cash and cash equivalents at
beginning of year 6,552,078 7,211,174 7,202,624
Cash and cash equivalents at
end of year $ 5,768,902 $ 6,552,078 $ 7,211,174
Supplemental Disclosure:
Write-off of excess Real
Estate Tax Capitalization $ -- $ -- $ 223,078
Cash paid for Interest $ 949,390 $ -- $ --
See accompanying notes to the financial statements.
Notes to the Financial Statements
December 31, 1994, 1993 and 1992
1. Organization and Business
Stamford Towers Limited Partnership (the "Partnership"), a Delaware limited
partnership, was formed on August 14, 1986 for the purpose of acquiring two
parcels of land, aggregating 3.63 acres, located in Stamford, Connecticut and
developing, owning and operating two class A office buildings (the "Buildings")
to be constructed thereon (collectively the "Project"). The Buildings contain
approximately 325,000 square feet of rentable space.
The general partner of the Partnership is Stamford Towers, Inc. (the "General
Partner") is an affiliate of Lehman Brothers Inc. (see below).
Construction of the Buildings commenced in July 1987. However, certificates of
occupancy were not received from the City of Stamford until February 6, 1990,
representing a substantial delay from the originally scheduled completion date
of February 1989. Moreover, during the course of construction, substantial
cost overruns were incurred. The Partnership initiated an arbitration
proceeding against Edlar, Inc., a Delaware corporation, ("Edlar") in order to
establish Edlar's responsibility for certain cost overruns, delays, expenses
and liquidated damages in connection with the construction phase of the
Project. In January 1993, the arbitrators issued their decision which, in
substance, awards the Partnership approximately $8.1 million in damages and
costs against Edlar. However, the General Partner's preliminary investigation
indicates that Edlar has no significant assets from which the Partnership's
arbitration award could be satisfied. Moreover, Edward Feldman, the principal
of E dlar, has advised the Partnership that he has no significant, liquid
assets from which to satisfy the judgment against him pursuant to his personal
guaranty of Edlar's obligation to the Partnership. Mr. Feldman has proposed
that his creditors, including the Partnership, enter into a non-judicial
workout arrangement whereby his debts might be partially satisfied in the event
that his real estate investments appreciate in value in future years.
Currently, those investments appear to be over leveraged and without
significant market value. The Partnership is in the process of evaluating Mr.
Feldman's proposal. (see Note 9).
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated. Subsequent to the sale, Shearson Lehman Brothers Inc.
changed its name to Lehman Brothers Inc. The transaction did not affect the
ownership of the general partner.
The Partnership will terminate on December 31, 2036 unless dissolved sooner as
provided within the Agreement.
2. Significant Accounting Policies
Cash Equivalents - Cash equivalents consist of short-term highly liquid
investments which have maturities of three months or less from the date of
purchase. Substantially all the Partnership's cash balances are invested with
an affiliate of the General Partner.
Offering Costs - Offering costs of $6,454,526 are non-amortizable and have been
deducted from the limited partners' capital.
Deferred Charges - Costs incurred in connection with obtaining mortgage
financing are included in deferred charges. These costs are amortized over the
life of the related mortgage loan.
Leasing Commissions - Leasing commissions included in prepaid expenses are
being amortized over the term of the non-cancelable portions of the leases.
Deferred Rent Receivable - Deferred rent receivable consists of rental income
which is recognized on a straight-line basis over the non-cancelable portion of
the leases which will not be received until later periods as a result of rental
concessions.
Real Estate Investments - Real estate investments, which consist of buildings
and improvements, tenant improvements and furniture, fixtures and equipment,
are recorded at cost less accumulated depreciation. Cost of the buildings
includes the initial purchase price of the property plus closing costs,
acquisition and legal fees and capital improvements. Depreciation on the
buildings and improvements is computed using the straight-line method based on
estimated useful lives of 35 years. Tenant improvements are depreciated by the
straight-line method over the terms of the related leases. Furniture, fixtures
and equipment are depreciated over their estimated useful lives.
The current estimated value of the real estate investments as of December 31,
1994 is comparable to 1993, however, down significantly from prior years. This
decline in value has resulted in a current market value that is lower than what
is expected over the long term holding period for the investment. The real
estate investments will be carried at cost less accumulated depreciation unless
facts and circumstances arise in future periods that indicate the carrying
value of the real estate investments is permanently impaired.
Income Taxes - No provision for income taxes has been made in the financial
statements since such taxes are the responsibility of the individual partners
rather than that of the Partnership.
3. The Partnership Agreement
Pursuant to the terms of the Partnership Agreement, all net income from
operations of the Partnership will be allocated in substantially the same
manner as cash distributions from operations. All net losses from operations
of the Partnership generally will be allocated 99% to the limited partners and
1% to the General Partner.
Distributions of net cash flow from operations, if any, as defined in the
Partnership Agreement, shall be made to the partners quarterly during each year
on the basis of 99% to the limited partners and 1% to the General Partner until
the limited partners have received their Preferred Return (14% per annum), as
defined in the Partnership Agreement, and then 90% to the limited partners and
10% to the General Partner. Cash distributions from operations will be reduced
to the extent of any debt service payable with respect to the financing (see
Note 7).
Upon sale or an interim capital transaction, net proceeds will be distributed
after the close of the calendar quarter in which such a sale or capital
transaction occurs. Such net proceeds will first be distributed 99% to the
limited partners and 1% to the General Partner until the limited partners
receive their Preferred Return Arrearage and Unrecovered Capital, as defined in
the Partnership Agreement, with any remaining proceeds to be distributed 90% to
the limited partners and 10% to the General Partner.
Upon sale or an interim capital transaction, net gains will first be allocated
to the extent of net proceeds distributed to the limited partners and General
Partner from related transactions, then to the limited partners and General
Partner in proportion to their respective negative balances in their capital
accounts; then the remainder of such net gains should be allocated to the
extent possible so that the positive balances in the capital accounts of the
limited partners and the General Partner are in the proportions of 90% and 10%,
respectively. Tax losses from sale or an interim capital transaction will be
allocated to the limited partners and General Partner in proportion to their
respective positive balances in their capital accounts after such allocation,
the remainder of the tax losses should be allocated to the extent possible so
that the negative balances in the capital accounts of the limited partners and
General Partner are in the proportions of 90% and 10%, respectively.
All net gains and tax losses in connection with the sale of all or
substantially all of the assets of the Partnership or any other event causing a
dissolution of the Partnership shall be allocated in substantially the same
manner as net gains and tax losses from sale or an interim capital transaction.
If, as a result of the dissolution of the Partnership, the capital account of
the General Partner is less than zero, the General Partner shall contribute to
the Partnership an amount equal to the lesser of the deficit balance in its
capital account or the excess of one and one one-hundredth percent of the total
capital contribution of the limited partners over the total capital
contributions previously made by the General Partner to the Partnership.
4. Transactions with Related Parties
The General Partner earned fees and compensation in connection with
organization, syndication and acquisition services rendered to the Partnership.
As of December 31, 1994, $127,921 of these amounts remain accrued and unpaid.
Under the terms of the Partnership Agreement, the Partnership reimburses the
General Partner, at cost, for the performance of certain administrative
services provided by a third party. For the years ended December 31, 1994,
1993 and 1992, costs of such services were $51,044, $55,375, and $73,057,
respectively. At December 31, 1994 and 1993, $31,027 and $36,239,
respectively, were due to the General Partner for the performance of these
services.
5. Lease Agreement with Citicorp POS Information Services
The Partnership entered into a lease with Citicorp POS Information Services
("Citicorp POS") on May 15, 1990 (the "Lease Agreement"). Citicorp POS leased
approximately 136,000 rentable square feet of the North Tower, representing 41%
of the Project. The lease term is for eleven years with the option to cancel
after June, 1996. If the option to cancel is elected, Citicorp POS will be
required to pay a substantial penalty to the Partnership. Using occupancy
percentages at December 31, 1994, if Citicorp POS vacated the premises, only
14% of the Project would remain rented. Under the Lease Agreement, the
Partnership is recording a minimum annual rental revenue of $2,197,196,
calculated on a straight-line basis, during the non-cancelable term of the
lease. Citicorp POS's performance of its obligation under the terms of its
lease is guaranteed by Citicorp.
In December, 1992, Citicorp POS discontinued operations, vacated the space and
assigned the Lease Agreement to Citicorp North America, Inc. ("Citicorp N.A.").
As of December 1994, substantially all of the space is occupied by Citicorp
N.A. and its affiliates.
During 1994, 1993 and 1992, Citicorp and other tenants, have reimbursed the
Partnership for tenant electricity, overtime heating and air conditioning
charges and certain other operating expenses, in accordance with their
respective lease agreements, in the total amount of $288,472, $220,012, and
$165,009, respectively. These amounts have been included in other income on
the statement of operations.
6. Future Minimum Lease Rental Payments
Future minimum rental payments (excluding cancellation penalties) to be
received under the non-cancelable portion of the existing operating leases as
of December 31, 1994 are as follows:
1995 $ 3,767,596
1996 2,289,122
1997 280,993
1998 283,741
1999 254,927
Thereafter 687,953
$ 7,564,332
7. Mortgage Note Payable
On July 19, 1990, the Partnership closed a loan with People's Bank ("People's")
to provide mortgage financing to the Partnership. As part of this loan, the
Partnership paid People's a fee equal to one and one-half percent of the
aggregate loan amount. The mortgage note payable was a $25 million, seven
year, non-recourse first mortgage loan with an 11.5% fixed interest rate for
the first five years which was set at three percent over the five year United
States treasury security rate at loan closing.
On February 17, 1994, the Partnership entered into a loan modification
agreement with People's (the "Loan Modification"). The Loan Modification: (i)
reduced the interest rate on the loan from 11.5% to 7.43% commencing February
1, 1994 and continuing until the first adjustment date on July 19, 1995; (ii)
reduced the principal balance of the loan from $25 million to $24,449,795; and
(iii) eliminated the interest reserve line item. Payments of interest are due
monthly in arrears and are required to be paid from the Partnership's own
funds. Loan proceeds may continue to be used on an "as needed" basis to fund
all other approved line items. Payment of the outstanding principal amount is
due at the end of the seven year term. The loan may be prepaid in whole or in
part at any time without penalty. As of December 31, 1994, the principal
balance of the loan was $15,407,772 plus interest payable of $95,400 for a
total balance of $15,503,172.
During 1994, the Partnership drew down on the loan $456,452 for capital
expenditures and interest expenses. In 1993 and 1992, the Partnership drew
down on the loan $1,611,474 and $1,423,023, respectively, for interest expense
only.
8. Reconciliation of Net Loss to Tax Loss
For the year ended December 31, 1994, net loss reported in the financial
statements exceeded the tax loss by $28,358. For the years ended December 31,
1993 and 1992 the tax loss exceeded the net loss reported in the financial
statements by $730,926 and $453,806, respectively. These differences are due
to the differences between the tax basis and financial statement basis of
buildings and improvements and the use of accelerated methods of depreciating
real estate for tax purposes as compared to the straight-line method used for
financial statement purposes. In addition, rental income is recorded on a
straight-line basis over the terms of the leases for financial statement
purposes, and is reportable for tax purposes when received or receivable.
9. Arbitration Proceedings with the Developer
In late January of 1989, the Partnership initiated an arbitration proceeding
against Edlar in order to establish Edlar's responsibility for certain cost
overruns, delays, expenses and liquidated damages in connection with the
construction phase of the Stamford Towers office project (the "Project").
Subsequently, the arbitration was consolidated with a separate arbitration
between Edlar and the Project's construction manager, Gilbane Building Company
("Gilbane").
In January 1993, the arbitrators issued their decision which, in substance,
awards the Partnership approximately $8.1 million in damages and costs against
Edlar and awards Gilbane approximately $2.6 million in damages and costs
against Edlar. In addition, the arbitrators ordered Edlar to hold the
Partnership harmless with respect to (i) the mechanic's lien filed by Gilbane
against the Partnership, which is presently the subject of an action in
Connecticut state court and (ii) any similar liens filed by subcontractors who
worked on the project. The arbitrators further found that the Partnership
properly terminated Edlar under the Development Agreement. That finding has
the effect of eliminating the residual interest in the Project of Edlar's
affiliate, Feldco, Inc. Edlar was not awarded any amounts on its claims
against the Partnership or Gilbane. The Partnership has entered judgment
against both Edlar and Edward Feldman, pursuant to his personal guaranty of
Edlar's obligation to t he Partnership, for the full amount of the arbitration
award.
Based on preliminary investigation by the General Partner, it appears that
Edlar has no significant assets from which to satisfy the arbitration award.
Moreover, based on the General Partner's discussions with Edward Feldman
concerning his proposal for a non-judicial workout, it would appear that his
assets, consisting largely of illiquid real estate investments, are
insufficient to satisfy his substantial outstanding obligations to his
creditors, including the Partnership.
10. Litigation
On February 1, 1991, the construction manager at the Project, Gilbane, filed a
mechanic's lien against the Project in the sum of $4,583,481. On August 9,
1991, Gilbane commenced an action entitled Gilbane Building Co. v. Stamford
Towers Limited Partnership, et. al., in the Connecticut Superior Court for the
Judicial District of Stamford/Norwalk at Stamford (the "Gilbane Action"). The
defendants include the Partnership. Gilbane alleges breach of various
contracts and unfair trade practices and seeks foreclosure of its mechanic's
lien, monetary damages, attorney fees, punitive damages, possession of the
premises, and the appointment of a receiver. On May 17, 1993, at the request
of the Partnership, Gilbane reduced the amount of the lien to $2,650,018.
On September 21, 1993, Gilbane filed a motion for Partial Summary Judgment as
to Liability Only. The Partnership successfully opposed this motion, and the
motion was denied by the court on November 4, 1993. On October 28, 1993, the
Partnership filed a Motion for Summary Judgment which has not yet been acted
upon by the court. On October 21, 1993, the Partnership filed its Answer,
Special Defences and Counterclaims to Gilbane's action. The Partnership's
Counterclaim against Gilbane alleges breach of various contracts, unfair trade
practices and slander of title. On November 10, 1993, Gilbane filed its Reply
to Stamford Towers' Special Defenses and Answer to Stamford Towers'
Counterclaim and claimed the action to the jury trial list.
On November 3, 1994, the Partnership filed a Request for Leave to File Amended
Special Defenses, Counterclaims, Set-Offs and Recoupment. On January 25, 1995,
this Request was granted by the Court over Gilbane's objection. The
Partnership's Amended Counterclaim against Gilbane adds, in addition to the
allegations of its original Counterclaim, additional allegations of negligence,
breach of warranty, breach of contract, products liability and unfair trade
practices. Gilbane has not yet answered the Partnership's Amended
Counterclaim. The parties are currently engaged in discovery, and a trial has
been tentatively scheduled to begin on August 1, 1995. The Partnership expects
to vigorously defend against each of Gilbane's claims.
On December 31, 1990, a subcontractor of the Project, Moliterno Stone Sales,
Inc. ("Moliterno") filed a mechanic's lien against the Property in the sum of
$155,936. On December 11, 1991, Moliterno filed a cross-claim against the
Partnership in the Gilbane Action. Moliterno seeks foreclosure on its
mechanic's lien and monetary damages, along with possession of the premises.
An application to discharge Moliterno's mechanic's lien was filed by the
Partnership on April 30, 1993. The Partnership expects to vigorously defend
against Moliterno's claim.
STAMFORD TOWERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Cost Capitalized
Initial Subsequent
Cost to Partnership (A) To Acquisition
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements
Office Buildings:
North Tower
Stamford, CT $ 9,244,663 $ 8,828,690 $ 31,289,872 $ 7,404,213
South Tower
Stamford, CT 6,163,109 5,885,793 20,859,915 197,203
$ 15,407,772 $ 14,714,483 $ 52,149,787 $ 7,601,416
STAMFORD TOWERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
(continued)
December 31, 1994
Gross Amount at Which Carried at Close of Period (B, C)
Buildings and Accumulated
Description Land Improvements Total Depreciation
Office Buildings:
North Tower
Stamford, CT $ 8,828,690 $ 38,560,238 $ 47,388,928 $ 9,276,328
South Tower
Stamford, CT 5,885,793 20,967,887 26,853,680 2,949,938
$ 14,714,483 $ 59,528,125 $ 74,242,608 $ 12,226,266
STAMFORD TOWERS LIMITED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
(continued)
December 31, 1994
Life on which
Depreciation
Date Date in Latest
Construction Construction Income Statements
Description Complete Began is Computed
Office Buildings:
North Tower
Stamford, CT February 1990 August 1987 5-35 years
South Tower
Stamford, CT February 1990 August 1987 5-35 years
(A) The initial cost to the Partnership represents the original purchase price
of the properties.
(B) For Federal income tax purposes, the aggregate cost of real estate at
December 31, 1994 and 1993 is $74,649,569 and $74,450,400, respectively.
(C) For Federal income tax purposes, the amount of accumulated depreciation at
December 31, 1994 and 1993 is $9,267,837 and $7,328,080, respectively.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1994, 1993 and 1992:
Real Estate investments: 1994 1993 1992
Beginning of year $ 74,043,439 $ 73,891,030 $ 73,677,794
Additions 199,169 152,409 436,314
Less retirements -- -- (223,078)
End of year $ 74,242,608 $ 74,043,439 $ 73,891,030
Accumulated Depreciation:
Beginning of year $ 9,585,930 $ 6,957,448 $ 4,376,639
Depreciation expense 2,640,336 2,628,482 2,580,809
End of year $ 12,226,266 $ 9,585,930 $ 6,957,448
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,858,196
<SECURITIES> 000
<RECEIVABLES> 2,485,070
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 74,242,608
<DEPRECIATION> 12,226,266
<TOTAL-ASSETS> 70,989,125
<CURRENT-LIABILITIES> 000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 54,469,778
<TOTAL-LIABILITY-AND-EQUITY> 70,989,125
<SALES> 2,486,730
<TOTAL-REVENUES> 2,973,408
<CGS> 000
<TOTAL-COSTS> 2,313,161
<OTHER-EXPENSES> 3,183,197
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,188,986
<INCOME-PRETAX> (3,711,936)
<INCOME-TAX> 000
<INCOME-CONTINUING> (3,711,936)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (3,711,936)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
