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
For the fiscal year ended December 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 of I.R.S. Employer
incorporation or organization Identification No.
Stamford Towers Limited Partnership - Delaware 13-3392080
Stamford Towers Depositary Corp. - Delaware 13-3392081
Attention: Andre Anderson
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: Portions of Parts I, II, III, IV are
incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1996.
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 totaling approximately 3.63 acres located in the central
business district of 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 "Property"). 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 Property 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. Certificates of
Occupancy were not received from the City of Stamford until February 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 make 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 Property.
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 Property'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 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 were
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.
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
Property. For the specific terms of the Financing, see Note 7 "Mortgage Note
Payable" of the Notes to the Financial Statements, included in the
Partnership's Annual Report for the year ended December 31, 1996, which is
filed as an exhibit under Item 14.
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, at
which time the interest rate was reset to 9.03%; (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, 1996, the principal balance of the loan was
$17,798,291 plus interest payable of $134,080 for a total balance of
$17,932,371. The Partnership is exploring its options with respect to
refinancing the Financing which matures in August 1997.
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 Property. All of the
Partnership's revenues, operating profit or loss and assets relate solely to
its interest as the owner of the Property.
(c) Narrative Description of Business. The Partnership's sole business is the
ownership and operation of the Property. The Partnership currently intends to
hold the Property until such time as the General Partner, pursuant to the terms
of the Partnership Agreement, deems it prudent to sell the Property. The
principal objectives of the Partnership, in no particular order of priority,
are to:
(i) provide long-term capital appreciation;
(ii) provide cash distributions from operations following lease-up of
the Property 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. Until October 1996, full-time property
management services were provided by CB Commercial Real Estate Group Inc. In
October 1996, the Partnership changed property management firms to
Rostenberg-Doern & Company, which also serves as the Property's exclusive
leasing agent. In March 1997, Rostenberg-Doern & Company was acquired by the
Edward S. Gordon Co., which is owned by Insignia Financial Group, Inc.
ITEM 2. Properties
The Land has been developed with two architecturally integrated, 11-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 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.
Leasing Status
The Partnership entered into a lease with Citicorp POS Information Services,
Inc. ("Citicorp POS") which became effective on May 15, 1990 (the "Original
Lease") for approximately 136,000 rentable square feet in the Property's North
Tower. On June 28, 1995, the Partnership executed the First Amendment (the
"Citicorp Lease Extension") to the Original Lease with Citicorp North America,
Inc. ("Citicorp"). For information regarding the lease with Citicorp and the
Citicorp Lease Extension, refer to Note 5 "Lease Agreement with Citicorp POS
Information Services" of the Notes to the Financial Statements, which is filed
as an exhibit under Item 14. The Property was 72% leased as of December 31,
1996, as compared to 49% leased at December 31, 1995. In addition to Citicorp,
there are nine other tenants leasing space in the Property as of December 31,
1996. Eight of these tenants lease approximately 96,784 square feet of office
space. The ninth tenant leases approximately 500 square feet of retail space.
During the first quarter of 1996, the Partnership signed a 10-year lease with
MemberWorks (formerly Cardmember Publishing Corp.) for approximately 18,650
square feet in the Property's South Tower. The tenant took occupancy on March
15, 1996. The cost of the tenant improvements necessitated by the lease were
funded from drawdowns on the Financing.
During the second quarter of 1996, the Partnership signed a lease with Learning
International, Inc. ("Learning") for 36,720 square feet covering two floors in
the South Tower. Learning took occupancy on July 1, 1996. The terms of the
lease required Learning to fund the necessary improvements for the space and
related leasing commissions in exchange for a reduced rental rate.
Additionally, Millsport L.L.C., expanded its leased space by 2,341 square feet
during the second quarter of 1996 to 10,941 square feet. The tenant occupied
the expanded space in the third quarter of 1996.
During the third quarter of 1996, the Partnership signed a lease agreement with
Tradition Financial Services, Inc. for 11,605 square feet in the South Tower.
The new tenant took occupancy late in the fourth quarter of 1996. The cost of
the tenant improvements and leasing commissions necessitated by the lease will
be funded from drawdowns on the Partnership's revolving loan payable.
During the fourth quarter of 1996, the Partnership signed a 10-year lease
agreement with the Life Extension Institute ("Life Extension") for 5,688 square
feet in the North Tower. The tenant is expected to take occupancy early in the
second quarter of 1997. The cost of the tenant improvements and leasing
commissions necessitated by the lease will be funded from drawdowns on the
Financing.
Stamford Market
The Stamford commercial real estate market continued to recover in 1996. As
reported by Rostenberg-Doern & Company, the market vacancy rate for commercial
office space declined from 12.5% at year-end 1995 to 11.0% at the end of 1996.
The average market lease rate for class A office space in Stamford increased to
$23.50 per square foot in the fourth quarter of 1996, from $20 per square foot
in the fourth quarter of 1995. The improving conditions prompted a rise in new
construction proposals for several new office properties. If such construction
does in fact occur, and demand does not keep pace with the delivery of any new
space to the market, leasing activity and rental rates may be negatively
impacted.
One of the most significant developments in Stamford in recent years was the
announcement in 1994 that Swiss Bank Corporation ("Swiss Bank") would be
constructing a 20-story North American headquarters building directly across
the street from the Property. Construction commenced in January 1996 and is
expected to be completed in 1998. Swiss Bank's commitment is an indication of
the continuing interest of major corporations in Stamford as an alternative to
New York. Swiss Bank's plans call for the relocation of approximately 1,200
employees from its current Manhattan location to Stamford upon the completion
of the construction.
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 Property. 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
Property. The Partnership has obtained a judgment in New York for the full
amount of the arbitration award against Edlar and Edward Feldman, pursuant to
the Guaranty.
However, the General Partner's investigation indicated that the Developer has
no significant assets from which the Partnership's arbitration award could be
satisfied. Moreover, Mr. Feldman 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.
On February 1, 1991, Gilbane filed a mechanic's lien against the Property in
the sum of $4,583,481. This amount was subsequently reduced by Gilbane to
$2,650,018 at the request of the Partnership. 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, approximately $2.65 million in monetary damages, interest, costs,
attorneys' fees, punitive damages, possession of the Property, and the
appointment of a receiver.
On October 21, 1993, the Partnership filed its Answer, Special Defenses and
Counterclaims to Gilbane's Action, which alleged breach of various contracts,
unfair trade practices and slander of title. On September 13, 1995, the
Partnership filed a Substituted Answer, Special Defenses, Counterclaims,
Set-offs and Recoupment which, in addition to the allegations of its original
counterclaim, brought additional claims of negligence, breach of warranty,
breach of contract, products liability and unfair trade practices. The
Partnership, by way of its counterclaims, seeks approximately $1.7 million in
damages in addition to interest, costs, punitive damages and attorneys' fees.
On December 31, 1990, a subcontractor of the Property, 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, monetary damages, and possession of the Property. An
application to discharge Moliterno's mechanic's lien was filed by the
Partnership on April 30, 1993. On September 1, 1995, the Partnership filed its
answer, special defenses and counterclaims to Moliterno's cross-claim, alleging
that Moliterno was negligent, breached its contract and an implied warranty,
and engaged in unfair trade practices in performing its work on the Property.
On November 18, 1996, Judge Ryan of the Connecticut Superior Court (the
"Court") entered a final judgment in this proceeding. The judgment awarded
Gilbane $770,070 and Moliterno $155,000. All remaining claims, including the
Partnership's counterclaims, were dismissed. The Partnership has sufficient
cash to pay the amounts awarded which will not have a material impact on the
Partnership's financial condition. Although post-judgment motions to alter the
judgment were denied by the Court on March 13, 1997, it is anticipated that
Gilbane may appeal.
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 Property. However, an application is not anticipated at this time.
(b) Holders. As of December 31, 1996, there were 8,826 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,
included in the Partnership's Annual Report for the year ended December 31,
1996, which is filed as an exhibit under Item 14.
ITEM 6. Selected Financial Data
Set forth below is the selected financial data for the referenced periods.
For the years ended December 31,
1996 1995 1994 1993 1992
Rental Income $ 4,144,475 $ 2,947,857 $ 2,486,730 $ 2,392,211 $ 2,359,242
Interest Income 256,063 319,278 192,911 182,101 259,422
Net Loss (2,660,356) (3,017,904) (3,711,936) (4,387,694) (4,180,101)
Net Loss per
Unit (1) (.34) (.38) (.47) (.56) (.53)
Total Assets 69,645,169 69,670,348 70,989,125 74,328,520 76,917,606
Revolving loan
payable 17,798,291 16,483,152 15,407,772 14,951,320 13,312,685
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 totaled
$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,
1996, $61,125,236 had been invested in the construction of the Buildings and
tenant improvements.
The Partnership is currently preserving its funds to lease and operate the
Property. Through December 31, 1996, 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, included in the Partnership's Annual Report for the
year-ended December 31, 1996, which is filed as an exhibit under Item 14, 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 meet the Partnership's liquidity requirements during the Property's
leasing phase, the Partnership obtained the Financing. 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, at
which time the interest rate was reset to 9.03%; (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 $1,315,139 increase in principal from December 31, 1995 was
attributable to funds drawn to pay for costs associated with leasing costs and
tenant improvements associated with the new leases signed for the South Tower.
The Partnership is exploring its options with respect to refinancing the
Financing which matures in August 1997.
Cash and cash equivalents totaled $5,668,459 and $5,873,982 at December 31,
1996 and 1995, respectively. The decrease is attributable to net cash used for
operating activities and additions to real estate exceeding net cash provided
by borrowings under the revolving loan payable. The Partnership's restricted
cash balance increased to $337,676 at December 31, 1996 from $91,458 at
year-end 1995. The increase is primarily attributable to security deposits
received from two new tenants in the South Tower.
Deferred charges net of accumulated amortization declined to $53,896 at
December 31, 1996 from $181,696 at year-end 1995. The decrease is due to the
amortization of capitalized fees related to the Loan Modification.
Prepaid expenses increased from $1,399,363 at December 31, 1995 to $1,632,689
at December 31, 1996. The increase is primarily attributable to the payment of
leasing commissions related to the Citicorp Lease Extension and the leasing
activity in the South Tower, partially offset by the continued amortization of
leasing commissions.
Accounts payable and accrued expenses increased from $1,482,840 at December 31,
1995 to $2,793,018 at December 31, 1996. The increase is primarily
attributable to accruals for the judgments awarded to Gilbane and Moliterno
resulting from the November 18, 1996 judgment. The increase is also due to
accruals for costs relating to tenant improvements in the South Tower and the
receipt of security deposits from MemberWorks and Consolidated Hydro, partially
offset by a decrease in prepaid rent in 1996 due to the recognition of prepaid
rental payments made by Citicorp in 1995.
The Partnership has made no cash distributions to date.
On February 16, 1996, based upon, among other things, the advice of legal
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change of
Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner, and no partner will be entitled to receive any
distribution, until the General Partner has declared the distribution and
established a record date and distribution date for the distribution.
Results of Operations
1996 vs. 1995
The Partnership incurred a net loss of $2,660,356 for the year ended December
31, 1996 compared with a net loss of $3,017,904 for the year ended December 31,
1995. The reduction in the net loss in 1996 is primarily attributable to the
increase in rental income resulting from the addition of new tenants in the
South Tower and the Citicorp Lease Extension, partially offset by the accrual
of the November 18, 1996 judgment amounts awarded to Gilbane and Moliterno.
Rental income increased by 41%, to $4,144,475 in 1996, from $2,947,857 in 1995,
primarily due to increased occupancy in the South Tower and a reduction in the
amortization of deferred rent relating to the Citicorp Lease Extension.
Interest income for the year ended December 31, 1996 was $256,063 as compared
to $319,278 for the year ended December 31, 1995. The decrease is the result
of the Partnership maintaining lower average cash balances in 1996. Other
income increased to $474,457 in 1996 from $331,828 in 1995, primarily due to
the reimbursement of tenant improvements in 1996.
Total expenses for the year ended December 31, 1996 were $7,535,351 compared
with $6,616,867 in 1995. The increase is primarily attributable to the
$925,070 judgment awarded to Gilbane and Moliterno and an increase in interest
expense and property operating expenses, partially offset by lower depreciation
and amortization and professional fees. Depreciation and amortization for the
year ended December 31, 1996 was $2,070,391 compared to $2,446,866 in 1995. The
decrease in depreciation and amortization is attributable to the Citicorp Lease
Extension which extended the length of Citicorp's lease and the corresponding
asset life of the tenant improvements. Property operating expenses increased
to $2,584,730 from $2,308,093 in 1995, primarily due to increases in utilities,
cleaning, security and repairs and maintenance expenses arising from increased
occupancy in the South Tower. Interest expense relating to the revolving loan
payable increased to $1,549,523 in 1996 from $1,289,309 in 1995. Interest
expense increased due to a drawdown in July 1995 to fund leasing commissions
associated with the Citicorp Lease Extension, the additional borrowings in 1996
to fund leasing commissions and tenant improvements associated with the new
leases in the South Tower and, to a lesser extent, an increase in the average
interest rate as discussed above. Professional fees totaled $258,524 in 1996
compared with $434,597 in 1995. The decrease is attributable to lower legal
fees in 1996 associated with the Gilbane litigation.
1995 vs. 1994
The Partnership incurred a net loss of $3,017,904 for the year ended December
31, 1995 compared with a net loss of $3,711,936 for the year ended December 31,
1994. The reduction in the net loss was primarily the result of increases in
rental income due to the Citicorp Lease Extension and, to a lesser extent, an
increase in interest income.
Rental income totaled $2,947,857 in 1995, up 19% from 1994, primarily due to a
rent step-up in 1995 and a reduction in the amortization of deferred rent
relating to the Citicorp Lease Extension. Other income increased from $293,767
in 1994 to $331,828 in 1995, reflecting an increase in tenant reimbursements
for HVAC improvements for Citicorp and, to a lesser extent, income received
from the rental of storage space to Citicorp. Partially offsetting these
increases was a reduction in tenant reimbursements for electricity costs,
resulting primarily from a reduction in the number of employees occupying the
Citicorp space. Interest income for the year ended December 31, 1995 was
$319,278 as compared to $192,911 for the year ended December 31, 1994. The
increase was the result of an increase in the Partnership's average cash
balance due to a drawdown on the first mortgage loan in July 1995, as well as
an increase in the interest rate earned on the balance.
Total expenses for the year ended December 31, 1995 were $6,616,867 compared
with $6,685,344 in 1994. Depreciation and amortization for the year ended
December 31, 1995 was $2,446,866 compared to $2,912,878 in 1994. The decline in
depreciation and amortization was attributable to the Citicorp Lease Extension
which extended the length of Citicorp's lease and the corresponding asset life
of the tenant improvements. As a result, the annual depreciation expense was
reduced. Property operating expenses decreased to $2,308,093 from $2,313,161
in 1994, primarily due to lower real estate taxes, advertising and promotion
expenses. Real estate taxes were reduced as a result of a reduction in the
City of Stamford's real estate tax rate and a reduction in the assessed value
of the South Tower, partially offset by a slight increase in the assessed value
of the North Tower. Partially offsetting these reductions was an increase in
construction costs related to HVAC improvements for Citicorp. These expenses
were reimbursed to the Partnership by Citicorp and are reflected under other
income. Interest expense relating to the revolving loan payable increased to
$1,289,309 in 1995 from $1,188,986 in 1994. Interest expense increased due to
the additional borrowings and an increase in the interest rate discussed above.
Professional fees totaled $434,597 in 1995 compared with $146,489 in 1994. The
increase was attributable to legal and engineering consulting fees associated
with the Gilbane litigation, and to a lesser extent, an increase in legal fees
associated with new leases.
ITEM 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the fiscal year ended December 31, 1996, which is filed as an exhibit under
Item 14. Supplementary data is incorporated by reference to page F-1 of 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, 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, 1996. Each such officer and director holds a similar position in
the General Partner and the Assignor Limited Partner.
Name Office
Regina M. Hertl President
Rocco F. Andriola Vice President, Director and Chief Financial Officer
Jeffrey C. Carter Vice President
Timothy Needham Vice President
Kenneth Boyle Vice President
Regina M. Hertl, 38, 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, 38, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996. 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 June 1991 through September 1996,
Mr. Andriola held the position of Senior Vice President in Lehman's Diversified
Asset Group. From June 1989 through May 1991, Mr. Andriola held the position
of First Vice President in Lehman's Capital Preservation and Restructuring
Group. 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 LLM degree in Corporate Law from New York
University's Graduate School of Law.
Jeffrey C. Carter, 51, is a Senior Vice President of Lehman Brothers in the
Diversified Asset Group. Mr. Carter joined Lehman Brothers in September 1988.
From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear
Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including
Director of Consulting Services at both firms. From 1982 through 1987, Mr.
Carter was President of Keystone Hospitality Services, an independent hotel
consulting and brokerage company. Mr. Carter received his B.S. degree in Hotel
Administration from Cornell University and an M.B.A. degree from Columbia
University.
Timothy E. Needham, 28, is an Associate of Lehman Brothers and assists in the
management of commercial real estate in the Diversified Asset Group. Mr.
Needham joined Lehman Brothers in September 1995. Prior to joining Lehman
Brothers Mr. Needham was a consultant with KPMG Peat Marwick LLP in the Banking
and Investment Services Group from 1994-1995. Mr. Needham received his
master's degree in international management from the American Graduate School
of International Management in December of 1993. Previous to entering graduate
school, Mr. Needham worked in Tokyo, for approximately one year doing market
research for a Japanese firm (1991). In addition, Mr. Needham is currently a
candidate for the designation of Chartered Financial Analyst, Level III.
Kenneth Boyle, 33, is a Vice President of Lehman Brothers in the Diversified
Asset Group. Mr. Boyle joined Lehman in January 1991. Mr. Boyle is a
Certified Public Accountant and was employed by the accounting firm of KPMG
Peat Marwick LLP from 1985 to 1990. Mr. Boyle graduated from the State
University of New York at Binghamton with a B.S. degree in Accounting.
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 Note 3 "The Partnership Agreement" of the Notes
to the Financial Statements, included in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1996, which is filed as an exhibit
under Item 14.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1996, the only entity known by the Partnership to be the
beneficial owner of more than 5% 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, 1996, 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, 1996, $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. First Data Investor
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. Both First
Data Investor Services Group and Service Data Corporation are unaffiliated
companies. For the amounts paid to affiliates for the three years ended
December 31, 1996, 1995, and 1994, see Note 4 "Transactions with Related
Parties" of the Notes to the Financial Statements, included in the
Partnership's Annual Report to Unitholders for the year ended December 31,
1996, which is filed as an exhibit under Item 14.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements and Schedules.
Page
Balance Sheets at December 31, 1996 and 1995 (1)
Statements of Partners' Capital (Deficit)
for the years ended December 31, 1996, 1995 and 1994 (1)
Statements of Operations
for the years ended December 31, 1996, 1995 and 1994 (1)
Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 (1)
Notes to the Financial Statements (1)
Report of Independent Auditors (1)
(a)(2) Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation F-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission have been omitted since
(1) the information required is disclosed in the financial statements and the
notes thereto; (2) the schedules are not required under the related
instructions; or (3) the schedules are inapplicable.
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ending December 31, 1996, filed as an exhibit
under Item 14.
(b) Reports on Form 8-K.
On November 26, 1996, the Partnership filed a Form 8-K on the Court's decision
regarding the legal proceedings with Gilbane Building Company and Moliterno
Stone Sales, Inc. See Item 3 for more information about the Court's decision.
(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 Property 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 Property 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 Property 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.
13. Annual Report to Unitholders for the year ended December 31,
1996.
23. Consent of Ernst & Young LLP, Independent Auditors
27. Financial Data Schedule.
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 27, 1997
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 27, 1997
BY: /S/ Rocco F. Andriola
Rocco F. Andriola
Vice President, Director and
Chief Financial Officer
Date: March 27, 1997
BY: /S/ Regina Hertl
Regina Hertl
President
Stamford Towers Limited Partnership
1996 Annual Report
Exhibit 13
Stamford Towers Limited Partnership
Stamford Towers Limited Partnership is a Delaware limited partnership
formed in 1986 for the purpose of developing, owning and operating two
class A office buildings located in Stamford Connecticut. The two
buildings consist of 325,000 square feet of office space, four levels of
parking, and space for several retail tenants.
Property Profile (at December 31, 1996)
North Tower
Leasable Area 193,000 square feet
Percentage Leased 82%
Tenants:
Citicorp North America, Inc. 136,000 square feet
Millsport, Inc. 10,941 square feet
Life Extension Institute 5,688 square feet
M.D. Revenues, Inc. 2,500 square feet
Dow Jones & Company, Inc. 2,100 square feet
Tower Connections, Ltd. 500 square feet
South Tower
Leasable Area 132,000 square feet
Percentage Leased 57%
Tenants:
Learning International, Inc. 36,720 square feet
Cardmember Publishing Corp. 18,650 square feet
Tradition Financial Services, Inc. 11,605 square feet
Consolidated-Hydro, Inc. 8,600 square feet
Total Percentage Leased 72%
Contents
1 Message to Investors
3 Financial Statements
6 Notes to the Financial Statements
12 Report of Independent Auditors
13 Net Asset Valuation
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 800-223-3464
Message to Investors
Presented for your review is the 1996 Annual Report for Stamford Towers Limited
Partnership (the "Partnership"). This letter includes an update on the
Stamford commercial real estate market, an update on the significant leasing
progress made at Stamford Towers (the "Property") during 1996, an analysis of
the Partnership's financial performance during the past year and information on
the status of the Partnership's legal proceedings. Attached to this letter are
the Partnership's audited financial statements for the year ended December 31,
1996.
Stamford Market Update
The Stamford commercial real estate market continued to recover in 1996. As
reported by Rostenberg-Doern & Company, the market vacancy rate for commercial
office space declined from 12.5% at year-end 1995 to 11% at the end of 1996. As
a result, average market rents for class A office space in Stamford increased
to $23.50 per square foot by year-end 1996 from $20 per square foot at year-end
1995. The improved conditions have prompted a number of construction proposals
for new office properties. If such construction does in fact occur and demand
does not keep pace with the delivery of any new space to the market, leasing
activity and rental rates may be negatively impacted.
The construction of Swiss Bank Corporation's new U.S. headquarters, located
directly across the street from the Property, continues to progress. It is
expected that Swiss Bank's presence, representing the addition of approximately
1,200 employees to the area, will have a positive impact on the Stamford
economy. The construction is scheduled to be completed in 1998.
Property Update
The improvement in market conditions brought about renewed interest in the
Property during 1996. We are pleased to report that the Partnership signed
five new leases totaling 74,984 square feet during the year, bringing the
Property's overall percentage of leased space to 72% as of year-end 1996 as
compared to 49% at year-end 1995. The increase in leased space, coupled with
the improving market conditions, resulted in an increase of approximately $12.5
million in the appraised value of the Property when compared to the prior year.
As a result of such increase, the Partnership's estimate of net asset value
increased from $2.37 per Unit at year-end 1995 to $3.82 per Unit at year-end
1996. We will continue our efforts to market the Property's available space
and are hopeful that additional leases will be executed in 1997.
As previously reported, the Partnership is exploring its options with respect
to refinancing the $17.8 million first mortgage debt maturing in August 1997.
We will update you on our progress in future reports.
Financial Highlights
Year ended Year ended
December 31, December 31,
1996 1995
Rental Income $ 4,144,475 $ 2,947,857
Interest & Other Income 730,520 651,106
Total Income 4,874,995 3,598,963
Property Operating Expenses 2,584,730 2,308,093
Interest Expense 1,549,523 1,289,309
Settlement Costs 925,070 --
Professional Fees 258,524 434,597
Depreciation and Other Expenses 2,217,504 2,584,868
Total Expenses 7,535,351 6,616,867
Net Loss $(2,660,356) $(3,017,904)
Net Cash Used for
Operating Activities $ (328,864) $ (765,796)
(including interest expenses)
- Rental income increased by 41% due primarily to significant leasing
activity in 1996 and a reduction in the amortization of deferred rent
relating to the extension of Citicorp's lease in 1995.
- Overall interest and other income increased due to the reimbursement of
certain tenant improvements which was partially offset by a decrease in
interest income resulting from the Partnership's lower average cash
balance.
- The increase in property operating expenses is primarily due to the
increases in utilities, cleaning, security and repair and maintenance
expenses arising from increased occupancy in the South Tower.
- Interest expense relating to the revolving loan payable increased as a
result of a previous drawdown to fund leasing commissions associated with
the Citicorp lease extension and additional drawdowns in 1996 to fund
leasing commissions and tenant improvements related to the new tenants in
the South Tower. The increase is also due to an increase in the average
interest rate on the loan.
- Professional fees decreased as a result of lower legal fees associated
with the Gilbane litigation.
- The decrease in depreciation and other expenses is primarily due to a
reduction in depreciation due to the extension of the Citicorp lease and
the corresponding extension of the period over which the tenant
improvements are being depreciated.
Legal Proceedings
As discussed in prior correspondence, the Partnership has been involved in
litigation with the Property's former construction manager, Gilbane Building
("Gilbane"), and a subcontractor, Moliterno Stone Sales, Inc. ("Moliterno"). In
this suit, Gilbane and Moliterno, respectively, sought $2.65 million and
$155,000 in damages, plus interest and other relief. On November 18, 1996, the
Connecticut Superior Court (the "Court") entered a final judgment awarding
Gilbane $770,070 and Moliterno $155,000. All remaining claims, including the
Partnership's counterclaims, were dismissed. The Partnership has sufficient
cash to pay the amounts awarded which will not have a material impact on the
Partnership's financial condition. Although post-judgment motions to alter the
judgment were denied by the Court on March 13, 1997, it is anticipated that
Gilbane may appeal.
General Information
As you are probably aware, several third parties have commenced partial tender
offers to purchase units of the Partnership at grossly inadequate prices
substantially below the Partnership's estimate of the net asset value per unit.
In response, we have recommended that investors reject these offers because
they do not reflect the underlying value of the Partnership's assets. To date,
holders of an overwhelming majority of the outstanding units have agreed that
these offers were inadequate and have rejected such offers. Please be assured
that if any additional tender offers are made for your units, we will endeavor
to provide you with our position regarding such offer on a timely basis.
Summary
We are pleased with the increased leasing activity at the Property in 1996 and
are hopeful that the continued improvement in the Stamford real estate market
will lead to the execution of additional leases in 1997.
Very truly yours,
Stamford Towers, Inc.
General Partner
/s/ Regina M. Hertl
Regina M. Hertl
President
March 27, 1997
Balance Sheets At December 31, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 14,714,483 $ 14,714,483
Buildings and improvements 52,933,678 52,729,013
Tenant improvements 8,191,558 6,786,915
Furniture, fixtures and equipment 293,864 372,541
76,133,583 74,602,952
Less accumulated depreciation (16,104,668) (14,405,825)
60,028,915 60,197,127
Cash and cash equivalents 5,668,459 5,873,982
Restricted cash 337,676 91,458
Accounts receivable 80,245 71,052
Deferred rent receivable 1,843,289 1,855,670
Deferred charges, net of
accumulated amortization of
$701,187 in 1996 and $573,387 in 1995 53,896 181,696
Prepaid expenses, net of
accumulated amortization of
$934,564 in 1996 and $775,742 in 1995 1,632,689 1,399,363
Total Assets $ 69,645,169 $ 69,670,348
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 2,793,018 $ 1,482,840
Interest payable 134,080 124,036
Due to affiliates 128,262 128,446
Revolving loan payable 17,798,291 16,483,152
Total Liabilities 20,853,651 18,218,474
Partners' Capital (Deficit):
General Partner (230,070) (203,466)
Limited Partners (7,826,300 units
outstanding) 49,021,588 51,655,340
Total Partners' Capital 48,791,518 51,451,874
Total Liabilities and Partners' Capital $ 69,645,169 $ 69,670,348
Statement of Partners' Capital (Deficit)
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
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
Net Loss (30,179) (2,987,725) (3,017,904)
Balance at December 31, 1995 $ (203,466) $ 51,655,340 $ 51,451,874
Net Loss (26,604) (2,633,752) (2,660,356)
Balance at December 31, 1996 $ (230,070) $ 49,021,588 $ 48,791,518
Statements of Operations
For the years ended December 31, 1996 1995 1994
Income
Rental $ 4,144,475 $ 2,947,857 $ 2,486,730
Interest 256,063 319,278 192,911
Other 474,457 331,828 293,767
Total Income 4,874,995 3,598,963 2,973,408
Expenses
Depreciation and amortization 2,070,391 2,446,866 2,912,878
Property operating 2,584,730 2,308,093 2,313,161
Settlement costs 925,070 -- --
Interest 1,549,523 1,289,309 1,188,986
Professional fees 258,524 434,597 146,489
Partnership service fees 115,406 104,289 99,724
General and administrative 31,707 33,713 24,106
Total Expenses 7,535,351 6,616,867 6,685,344
Net Loss $(2,660,356) $(3,017,904) $(3,711,936)
Net Loss Allocated:
To the General Partner $ (26,604) $ (30,179) $ (37,119)
To the Limited Partners (2,633,752) (2,987,725) (3,674,817)
$(2,660,356) $(3,017,904) $(3,711,936)
Per limited partnership unit
(7,826,300 outstanding) $ (.34) $ (.38) $ (.47)
Statements of Cash Flows
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating Activities:
Net Loss $(2,660,356) $(3,017,904) $(3,711,936)
Adjustments to reconcile net
loss to net cash used for
operating activities:
Depreciation 1,783,769 2,179,559 2,640,336
Amortization 286,622 267,307 272,542
Increase (decrease) in cash
arising from changes in
operating assets and liabilities:
Restricted cash (246,218) (2,164) (6,702)
Accounts receivable (9,193) 32,149 (32,231)
Deferred rent receivable 12,381 526,199 26,856
Deferred charges -- -- (137,622)
Prepaid expenses (392,148) (1,218,849) (7,791)
Accounts payable and accrued
expenses 886,419 438,889 (36,578)
Interest payable 10,044 28,636 (47,476)
Due to affiliates (184) 382 143
Net cash used for operating
activities (328,864) (765,796) (1,040,459)
Cash Flows From Investing Activities:
Additions to real estate (1,191,798) (204,504) (199,169)
Net cash used for investing
activities (1,191,798) (204,504) (199,169)
Cash Flows From Financing Activities:
Borrowings under the revolving
loan payable 1,315,139 1,075,380 456,452
Net cash provided by financing
activities 1,315,139 1,075,380 456,452
Net increase (decrease) in cash
and cash equivalents (205,523) 105,080 (783,176)
Cash and cash equivalents,
beginning of year 5,873,982 5,768,902 6,552,078
Cash and cash equivalents,
end of year $ 5,668,459 $ 5,873,982 $ 5,768,902
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year
for interest $ 1,539,479 $ 1,260,673 $ 949,390
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated
building improvements $ 84,926 $ -- $ --
Tenant improvements funded
through accounts payable $ 423,759 $ 155,840 $ --
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
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 "Property"). The Buildings contain
approximately 325,000 square feet of rentable space.
The general partner of the Partnership is Stamford Towers, Inc. (the "General
Partner"), 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 Property.
In January 1993, the arbitrators issued their decision which, in substance,
awarded the Partnership approximately $8.1 million in damages and costs against
Edlar. However, the General Partner's preliminary investigation indicates that
Edlar had no significant assets from which the Partnership's arbitration award
could be satisfied. Moreover, Edward Feldman, the principal of Edlar, 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.
On February 16, 1996, based upon, among other things, the advice of legal
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change of
Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the distribution and
established a record date and distribution date for the distribution.
2. Significant Accounting Policies
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.
Accounting for Impairment - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the accounting
for long- lived assets that are expected to be disposed of. The Partnership
adopted FAS 121 during the fourth fiscal quarter of 1995.
Reclassifications - Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
Cash and Cash Equivalents - Cash and cash equivalents consist of short-term
highly liquid investments which have maturities of three months or less from
the date of purchase. The carrying value approximates fair value because of
the short maturity of these instruments.
Restricted Cash - Restricted cash primarily represents cash held in connection
with tenant security deposits.
Offering Costs - Offering costs of $6,454,526 are non-amortizable and have been
deducted from the Limited Partners' capital.
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.
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.
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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("FAS 107"), requires that the Partnership disclose the estimated fair values
of its financial instruments. Fair values generally represent estimates of
amounts at which a financial instrument could be exchanged between willing
parties in a current transaction other than in forced liquidation.
Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgment regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
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, 1996, $127,921 of these amounts remain accrued and unpaid.
Certain cash and cash equivalents were on deposit with an affiliate of the
General Partner during a portion of 1996 and all of 1995. As of December 31,
1996, no cash and cash equivalents were on deposit with an affiliate of the
General Partner or the Partnership.
5. Lease Agreement with Citicorp POS Information Services
The Partnership entered into a lease with Citicorp POS Information Services
("Citicorp POS") on May 11, 1990 (the "Original Lease"). Citicorp POS leased
approximately 136,000 rentable square feet ("RSF") of the North Tower,
representing 41% of the Property. The lease term was for 11 years with the
option to cancel after June 1996. In December 1992, Citicorp POS discontinued
operations, vacated the space and assigned the Lease Agreement to Citicorp
North America, Inc. ("Citicorp"). On June 28, 1995, the Partnership executed
the First Amendment (the "Citicorp Lease Extension") to the Original Lease
between the Partnership and Citicorp. The Citicorp Lease Extension, which was
effective July 1, 1995, (i) reduces Citicorp's annual rent from $29.50 to $25
per RSF for the initial three years and to $24 per RSF for the next two years,
and (ii) extends the term of the Original Lease for an additional five years,
through June 30, 2006, at an annual rental rate of $24 per RSF. In addition,
there was no tenant improvement allowance provided by the Partnership to
Citicorp in connection with the Citicorp Lease Extension. Although the
Original Lease was for an 11-year term, expiring June 30, 2001, Citicorp had
the option to terminate the Original Lease as of June 30, 1996 by paying $45
per RSF or approximately $6.1 million to the Partnership on or before June 30,
1995. The Citicorp Lease Extension ensures Citicorp's continued occupancy at
the Property through June 30, 2006. As a result of the Citicorp Lease
Extension, the Partnership extended the amortization period of the deferred
rent relating to the Original Lease through June 30, 2006, effective July 1,
1995. As of December 1996, substantially all of the space of the North Tower
is occupied by Citicorp and its affiliates.
During 1996, 1995 and 1994, 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 $450,327, $326,963 and
$288,472, 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, 1996 are as follows:
Year Amount
1997 $ 5,112,944
1998 5,080,353
1999 4,976,353
2000 5,008,077
2001 5,046,687
Thereafter 22,493,640
$ 47,718,054
Lease terms range from five to sixteen years. The leases allow for increases
in certain property operating expenses to be passed on to the tenants.
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 (the "Financing") 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 3% over the five-year
United States treasury security rate at loan closing.
The General Partner is currently reviewing the Partnership's options with
respect to refinancing the Property's outstanding mortgage loan which matures
in August 1997.
On February 17, 1994, the Partnership entered into modification of the First
Mortgage Loan with People's Bank (the "Loan Modification") which: (i) reduced
the interest rate from 11.5% to 7.43% for the period February 1, 1994 through
the adjustment date on July 19, 1995, at which time the interest rate was reset
to 9.03%, (ii) reduced the principal balance of the First Mortgage Loan from
$25 million to $24,449,795; and (iii) eliminated the interest reserve line
item. Another provision of the Financing was that when occupancy at the
Property reached 50% or greater, the interest rate on the loan would be reduced
by 25 basis points. During 1996, the Property's occupancy exceeded 50% thus
resulting in a 25-basis point reduction in the interest rate. Payments of
interest are due monthly in arrears and are paid from the Partnership's funds.
The remaining First Mortgage Loan proceeds available at December 31, 1996 were
$6,651,504 and 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, 1996, the principal balance of
the loan was $17,798,291 plus interest payable of $134,080 for a total balance
of $17,932,371. During 1996, the Partnership drew down on the loan $1,315,139
for tenant improvements. In 1995 the Partnership drew down on the loan
$1,075,380 for leasing commissions associated with the Citicorp Lease
Extension. In 1994 the Partnership drew down on the loan $456,452 for capital
expenditures and interest expense.
Based on the borrowing rates currently available to the Partnership for
mortgage loans with similar terms and average maturities and considering its
maturity, the fair value of long- term debt approximates its carrying value.
8. Reconciliation of Net Loss to Tax Loss
For the year ended December 31, 1996, net loss reported in the financial
statements exceeded the tax loss by $703,574. For the year ended December 31,
1995, the net loss reported in the financial statements exceeded the tax loss
by $707,321. For the year ended December 31, 1994 the tax loss exceeded the
net loss reported in the financial statements by $28,358. 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 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 Property. Subsequently, the arbitration was
consolidated with a separate arbitration between Edlar and the Property'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 Property. The arbitrators further found that the Partnership
properly terminated Edlar under the Development Agreement. That finding has
the effect of eliminating the residual interest of Edlar's affiliate, Feldco,
Inc., in the Property. 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 for the full amount of the arbitration award.
Based on an 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
In February 1991, Gilbane filed a mechanic's lien against the Property in the
sum of $4,583,481. This amount was subsequently reduced to $2,650,018 at the
request of the Partnership. In August 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, approximately $2.65 million in
monetary damages, interest, costs, attorneys' fees, punitive damages,
possession of the Property, and the appointment of a receiver.
In October 1993, the Partnership filed its Answer, Special Defenses and
Counterclaims to Gilbane's Action, which alleged breach of various contracts,
unfair trade practices and slander of title. In September 1995, the
Partnership filed a Substituted Answer, Special Defenses, Counterclaims,
Set-offs and Recoupment which, in addition to the allegations of its original
counterclaim, brought additional claims of negligence, breach of warranty,
breach of contract, products liability and unfair trade practices. The
Partnership, by way of its counterclaims, sought approximately $1.7 million in
damages in addition to interest, costs, punitive damages and attorneys' fees.
In December 1990, a subcontractor of the Property, Moliterno Stone Sales, Inc.
("Moliterno") filed a mechanic's lien against the Property in the sum of
$155,936. In December 1991, Moliterno filed a cross-claim against the
Partnership in the Gilbane Action. Moliterno seeks foreclosure on its
mechanic's lien, monetary damages, and possession of the Property. An
application to discharge Moliterno's mechanic's lien was filed by the
Partnership in April 1993. In September 1995, the Partnership filed its
answer, special defenses and counterclaims to Moliterno's cross-claim, alleging
that Moliterno was negligent, breached its contract and an implied warranty,
and engaged in unfair trade practices in performing its work on the Property.
The Partnership, Gilbane and Moliterno (collectively, the "Parties")
participated in the trial of the Gilbane Action over the course of
approximately 20 trial days in late 1995. A final trial day was held and the
evidentiary portion of the trial was completed in April 1996. At that time,
the court ordered the parties to file initial post-trial briefs within three
weeks. Subsequently, Gilbane requested two extensions of this deadline. The
parties exchanged post trial briefs in June 1996, followed by reply briefs in
July 1996. Under the court's current order, all submissions to the court have
been completed.
In November 1996, Judge Ryan of the Connecticut Superior Court (the "Court")
entered a final judgment in this proceeding. The judgment awarded Gilbane
$770,070 without interest on one of its claims against the Partnership and
dismissed Gilbane's remaining claims. The Court also awarded Moliterno
$155,000 without interest on its claim against the Partnership. All remaining
claims, including the Partnership's counterclaims, were dismissed.
Post judgment motions to alter the judgment were denied by the Court on March
13, 1997. It is anticipated that Gilbane may appeal.
Given the outcome of the November 1996 judgment, the Partnership has accrued
the Gilbane and Moliterno awards of $770,070 and $155,000, respectively. The
amounts are currently reflected within accounts payable and accrued expenses on
the Partnership's December 31, 1996 balance sheet.
Report of Independent Auditors
General and Limited Partners
Stamford Towers Limited Partnership
We have audited the consolidated balance sheets of Stamford Towers Limited
Partnership as of December 31, 1996 and 1995, and the related statements of
operations, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stamford Towers Limited
Partnership as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 27, 1997, except for Note 10,
for which the date is March 13, 1997
Net Asset Valuation
Determination of Net Asset Value Per $10.00 Unit at December 31, 1996
(Unaudited)
Partnership's
Share of
December 31,
1996 Appraised
Property Value (1)
North Tower $ 27,600,000 (1)
South Tower 15,750,000 (1)
Less: Revolving loan payable (17,798,291)
25,551,709
Cash and cash equivalents (3) 5,668,459
Accounts receivable 80,245
Prepaid expenses 1,632,689
32,933,102
Less:
Total liabilities (3) (2,584,130)
Interest payable (134,080)
Partnership Net Asset Value (2) $ 30,214,892
Net Asset Value Allocated:
Limited Partners $ 29,912,743
General Partner 302,149
$ 30,214,892
Net Asset Value Per Unit
(7,826,300 Units outstanding) $3.82
(1) This represents the Partnership's share of the December 31, 1996 Appraised
Values which were determined by an independent property appraisal firm.
(2) The Net Asset Value assumes a hypothetical sale on December 31, 1996 of all
the remaining Partnership properties at a price based upon their value as
determined by an independent property appraisal firm, and the distribution
of the proceeds of such sale, combined with the Partnership's cash after
payment of the Partnership's liabilities, to the Partners.
(3) Cash and cash equivalents includes a reserve of $925,070 in funds withheld
for the judgment awarded to Gilbane & Moliterno regarding the legal
proceedings. The accrual for this judgment is reflected within total
liabilities.
Limited Partners should note that appraisals are estimates of current value and
actual values realizable upon sale may be significantly different. A
significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. In addition,
the appraised value does not reflect the actual costs which would be incurred
in selling the properties. As a result of these factors and the illiquid
nature of an investment in Units, the variation between the appraised value of
the Partnership's properties and the price at which Units of the Partnership
could be sold may be significant. Fiduciaries of Limited Partners which are
subject to ERISA or other provisions of law requiring valuations of Units
should consider all relevant factors, including, but not limited to Net Asset
Value per Unit, in determining the fair market value of the investment in the
Partnership for such purposes.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1996
Office Buildings: North Tower South Tower Total
Location Stamford, CT Stamford, CT na
Construction date began August 1987 August 1987 na
Construction date complete February 1990 February 1990 na
Acquisition date na na na
Life on which depreciation
in latest income statements
is computed 5 - 35 years 5 - 35 years na
Encumbrances $11,143,447 6,654,844 $17,798,291
Initial cost to
Partnership (1):
Land 8,828,690 5,885,793 14,714,483
Buildings and
improvements 31,289,872 20,859,915 52,149,787
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements 7,802,963 1,774,354 9,577,317
Retirements (209,218) (98,786) (308,004)
Gross amount at which
carried at close of period (2):
Land $ 8,828,690 5,885,793 $14,714,483
Buildings and
improvements 38,883,617 22,535,483 61,419,100
$47,712,307 $28,421,276 $76,133,583
Accumulated depreciation (3) $11,863,293 $ 4,241,375 $16,104,668
(1) The initial cost to the Partnership represents the original purchase price
of the properties.
(2) For Federal income tax purposes, the aggregate cost of real estate at
December 31, 1996 and 1995 is $76,625,475 and $75,009,915, respectively.
(3) For Federal income tax purposes, the amount of accumulated depreciation at
December 31, 1996 and 1995 is $13,154,443 and $11,221,111, respectively.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1996, 1995, and 1994 follows:
1996 1995 1994
Real estate investments:
Beginning of year $74,602,952 $74,242,608 $74,043,439
Additions 1,615,557 360,344 199,169
Retirements (84,926) -- --
End of year $76,133,583 $74,602,952 $74,242,608
Accumulated depreciation:
Beginning of year $14,405,825 $12,226,266 $ 9,585,930
Depreciation expense 1,783,769 2,179,559 2,640,336
Retirements (84,926) -- --
End of year $16,104,668 $14,405,825 $12,226,266
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Stamford Towers Limited Partnership of our report dated January 27, 1997,
included in the 1996 Annual Report of Stamford Towers Limited Partnership.
Our audit also included the financial statement schedule of Stamford Towers
Limited Partnership listed in Item 14(a). This schedule is the responsibility
of the Partnership's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule referred
to above, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
herein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 5,668,459
<SECURITIES> 000
<RECEIVABLES> 80,245
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 76,133,583
<DEPRECIATION> (16,104,668)
<TOTAL-ASSETS> 69,645,169
<CURRENT-LIABILITIES> 3,055,360
<BONDS> 17,798,291
<COMMON> 000
000
000
<OTHER-SE> 48,791,518
<TOTAL-LIABILITY-AND-EQUITY> 69,645,169
<SALES> 4,144,475
<TOTAL-REVENUES> 4,874,995
<CGS> 000
<TOTAL-COSTS> 2,584,730
<OTHER-EXPENSES> 3,401,098
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,549,523
<INCOME-PRETAX> (2,660,356)
<INCOME-TAX> 000
<INCOME-CONTINUING> (2,660,356)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (2,660,356)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
