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, 1997
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 incorporation I.R.S. Employer Identification No.
or organization
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, 1997.
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.
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. On February 17, 1994, the Partnership entered into a loan
modification agreement with People's (the "First Loan Modification"), which
reduced the interest rate on the loan, reduced the principal balance and
eliminated the interest reserve line item. On May 15, 1997, the Partnership
entered into a second modification of the mortgage loan with People's (the
"Second Loan Modification") which, among other provisions, extended the
maturity date until June 1, 2004, split the mortgage into two components and
established certain escrows. For the terms of the First and Second Loan
Modifications, see Note 7 to the Financial Statements contained in the
Partnership's 1997 Annual Report to Unitholders, incorporated herein by
reference to Exhibit 13 in Item 14. As of December 31, 1997, the principal
balance of the loan was $18,365,631 plus interest payable of $116,775 for a
total balance of $18,482,406.
(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 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.
During the third quarter of 1997, the General Partner decided to commence
marketing the Property for sale. This determination was made after
consideration of a number of factors including, among others, the following:
the recently improved operating performance of the Property; the overall health
of the economy; the strengthening of national real estate and capital markets;
and a number of proposals for the new development of buildings in Stamford that,
if completed, would directly compete with the Property. On March 17, 1998, the
Partnership entered into an agreement to sell the Property (the "Purchase
Agreement") to Reckson Operating Partnership, L.P. (the "Buyer"), a Delaware
limited partnership unaffiliated with the Partnership. Pursuant to the terms of
the Purchase Agreement, the Buyer agreed to acquire the Property for
consideration in the amount of $61,315,000 in cash (the "Purchase Price"),
subject to adjustments in respect of certain closing costs (the "Sale").
The proposed Sale is subject to the satisfaction of certain conditions. Pursuant
to the terms of the Partnership Agreement, Limited Partners holding a majority
of limited partnership interests will have the right to disapprove of the Sale.
An information statement will be mailed to the Limited Partners shortly
detailing information concerning the proposed Sale and subsequent distribution
by the Partnership.
There can be no assurance that the Sale will be completed. Upon completion of
the sale of the Property, the General Partner intends to dissolve the
Partnership and will make one or more liquidating distributions in accordance
with the terms of the Partnership Agreement. It is anticipated, however, that
certain reserves will need to be maintained for a period of time following the
sale of the Property for certain contingent liabilities of the Partnership.
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., and the
name of the firm was changed to Insignia/ESG.
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 Property's overall occupancy was 79% at December 31, 1997, compared to 72%
at December 31, 1996. A breakdown of the Property's tenants, occupied square
footage and leasing activity during 1997 is incorporated herein by reference to
the "Property Profile" section of the Partnership's 1997 Annual Report to
Unitholders contained in Exhibit 13 under Item 14.
Citicorp North America, Inc. ("Citicorp") leases approximately 136,000 rentable
square feet in the Property's North Tower. For information regarding the lease
with Citicorp, refer to Note 5 "Lease Agreement with Citicorp North America,
Inc." of the Notes to the Financial Statements of the Partnership's 1997 Annual
Report to Unitholders, contained in Exhibit 13 under Item 14.
ITEM 3. Legal Proceedings
The Partnership had been involved in litigation with the Property's former
construction manager, Gilbane Building Company ("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") awarded Gilbane $770,070 and Moliterno $155,000. All remaining claims,
including the Partnership's counterclaims, were dismissed. On October 24, 1997,
the Court entered a final judgment containing the foregoing awards and further
awarding Gilbane and Moliterno interest and attorneys' fees of approximately
$469,000. In December 1997, the Partnership paid $1,171,758 to Gilbane and
$200,000 to Moliterno in settlement of all amounts due pursuant to the final
judgment.
The Partnership entered into a development contract with an unaffiliated party,
Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman
("Feldman"). Following construction of the Property, the Partnership commenced
an arbitration proceeding in January 1989 against the Developer to resolve
various disputes and seeking certain monetary recoveries. On January 24, 1993,
the arbitration panel issued its decision awarding approximately $8.1 million
to the Partnership, as well as certain declaratory relief. Subsequently, the
Partnership obtained a judgment from a court of the State of New York for the
full amount of arbitration award in the sum of approximately $8.1 million
against the Developer and also against Feldman pursuant to his guaranty.
On or about January 21, 1997, Feldman and his wife commenced a voluntary case
for liquidation pursuant to chapter 7 of the United States Bankruptcy Code.
On July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans'
chapter 7 case in the amount of $11,313,232, which includes interest of
approximately $2.7 million on the $8.1 million judgment. The summary of the
assets and liabilities filed by Feldman and his wife with the Bankruptcy Court
in their chapter 7 case indicates that their assets are less than 1.5% of the
scheduled liabilities. Based upon such schedules, it is likely that after
payment of the expenses of the administration of Feldmans' chapter 7 case,
little or no distribution will be made to the Partnership as a holder of a
general unsecured claim.
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, 1997, there were 8,535 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, 1997, which is
filed as an exhibit under Item 14.
ITEM 6. Selected Financial Data
Set forth below is the selected financial data for the years ended December 31,
1997 1996 1995 1994 1993
Rental Income $ 5,074,594 $ 4,144,475 $ 2,947,857 $ 2,486,730 $ 2,392,211
Interest Income 252,763 256,063 319,278 192,911 182,101
Provision for
Loss on Real
Estate Held for
Disposition (3,310,365) _ _ _ _
Net Loss (4,322,230) (2,660,356) (3,017,904) (3,711,936) (4,387,694)
Net Loss per
Unit (1) (.55) (.34) (.38) (.47) (.56)
Total Assets 64,935,053 69,645,169 69,670,348 70,989,125 74,328,520
Revolving loan
payable 18,365,361 17,798,291 16,483,152 15,407,772 14,951,320
(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
The Partnership is currently preserving its funds to lease and operate two
parcels of land located in Stamford, Connecticut with two commercial office
buildings constructed thereon containing a total of 325,416 RSF (the "Project").
Through December 31, 1997, the Partnership's sources of liquidity have been net
proceeds from the public offering of limited partnership units, rental receipts,
proceeds from the mortgage loan discussed below and interest earned on the
Partnership's cash balance.
In order to meet the Partnership's liquidity requirements during the Project's
leasing phase, the Partnership obtained a revolving first mortgage loan from
People's Bank ("People's") in July 1990. On February 17, 1994, the Partnership
entered into a modification of the loan's terms with People's which, among
other things, reduced the principal balance of the loan from $25 million to
$24,449,795, and eliminated the interest reserve line item. Another provision
of the loan provided that when occupancy at the Project reached 50% or greater,
the interest rate on the loan would be reduced by 25 basis points. During the
first quarter of 1996, the Partnership signed a 10-year lease with Cardmember
Publishing Corporation ("Cardmember Publishing") for approximately 18,650
square feet in the South Tower. The Cardmember Publishing lease in the South
Tower commenced on March 15, 1996 which brought the Project's overall occupancy
to approximately 54%. 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 leasing
costs.
On May 15, 1997, the Partnership entered into a second modification of the
First Mortgage Loan with People's which extends the maturity date until June 1,
2004 (the "Modified Mortgage"). The Modified Mortgage is split into two
components: (i) the permanent portion (the "Permanent Portion") which is
comprised of the existing balance of the First Mortgage Loan, closing costs
associated with the Modified Mortgage and any future drawdowns, and (ii) the
development portion (the "Development Portion") from which the Partnership may
request the drawdown of funds with People's approval to fund the costs of
leasing the Property. At closing, the balance of the Permanent Portion was
$18,491,473 which included recent drawdowns for leasing costs and the closing
costs associated with the Modified Mortgage and the balance of the Development
Portion was $5,958,322. Annually, any borrowings under the Development Portion
of the Modified Mortgage will be added to the Permanent Portion and reduce the
funds available for future drawdowns by a commensurate amount. The Permanent
Portion currently bears interest at an initial rate of 7.63% and is amortized
over a 25 year period and the Development Portion currently bears interest at
an initial rate of 7.83%. Interest rates on both the Permanent Portion and the
Development Portion are adjusted annually on June 1, beginning June 1, 1998.
As of December 31, 1997, the principal balance of the loan was $18,365,631 plus
interest payable of $116,775 for a total balance of $18,482,406, as compared to
a total balance of $17,932,371 as of December 31, 1996. The increase is due to
additional borrowings in 1997 to fund tenant improvements relating to new
leases signed at the Project.
Another condition of the second modification is the establishment of a real
estate tax escrow account set up with the Lender into which monthly deposits
equal to 1/12th of the annual real estate taxes will be made. In addition, a
deposit representing an amount equal to the 10% holdback on the contested tax
years of July 1994 through May 31, 1997 was made prior to the closing. As of
December 31, 1997 the balance in the real estate tax escrow account was
$656,626.
The Property's overall occupancy was 79% at December 31, 1997, compared to 72%
at December 31, 1996.
During the third quarter of 1997, the General Partner decided to commence
marketing the Property for sale. This determination was made after
consideration of a number of factors including, among others, the following:
the improved operating performance of the Property; the overall health of the
economy; the strengthening of national real estate and capital markets; and a
number of proposals for the new development of buildings in Stamford that, if
completed, would directly compete with the Property. On March 17, 1998, the
Partnership entered into an agreement to sell the Property (the "Purchase
Agreement") to Reckson Operating Partnership, L.P. (the "Buyer"), a Delaware
limited partnership unaffiliated with the Partnership. Pursuant to the terms
of the Purchase Agreement, the Buyer agreed to acquire the Property for
consideration in the amount of $61,315,000 in cash (the "Purchase Price"),
subject to adjustments in respect of certain closing costs (the "Sale").
The proposed Sale is subject to the satisfaction of certain conditions. Pursuant
to the terms of the Partnership Agreement, Limited Partners holding a majority
of limited partnership interests will have the right to disapprove of the Sale.
An information statement will be mailed to the Limited Partners shortly
detailing information concerning the proposed Sale and subsequent distribution
by the Partnership.
There can be no assurance that the Sale will be completed. The General Partner
intends to dissolve the Partnership and will make one or more liquidating
distributions in accordance with the terms of the Partnership Agreement. It is
anticipated, however, that certain reserves will need to be maintained for a
period of time following the sale of the Property for certain contingent
liabilities of the Partnership.
In light of the Partnership's marketing efforts, the Partnership's real estate
assets, deferred rent receivable and prepaid leasing commissions were
reclassified on the balance sheet at September 30, 1997 to "Real estate assets
held for disposition." Effective October 1, 1997, the Partnership suspended
depreciation and amortization in accordance with the Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In addition, the
partnership recognized a one time expense of $3,310,365 as a provision for
loss on real estate held for disposition.
Cash and cash equivalents totaled $3,960,408 at December 31, 1997 as compared
to $5,668,459 at December 31, 1996. The decrease was primarily due the payment
of settlement costs associated with the Gilbane/Moliterno litigation (see
Item 3), and to the funding of real estate improvements at the Property.
Restricted cash at December 31, 1997 totaled $1,213,209 as compared to
$337,676 at December 31, 1996. The increase is primarily the result of the
funding of the real estate tax escrow pursuant to the terms of the Modified
Mortgage, and security deposits received from new tenants by the Partnership.
At December 31, 1997, deferred charges net of accumulated amortization, were
$139,336, compared to $53,896 at December 31, 1996. The increase is the result
of capitalized fees associated with the Modified Mortgage, offset partially by
amortization of these fees.
Accounts payable and accrued expenses totaled $1,903,249 at December 31, 1997,
compared to $2,793,018 at December 31, 1996. The decrease is primarily
attributable to the payment of settlements awarded to Gilbane and Moliterno in
December 1997 (see Item 3). The decrease was partially offset by an increase
in security deposits received for recent leases signed at the Property.
Due to affiliates totaled $80,110 at December 31, 1997, compared to $128,262 at
December 31, 1996. The decrease is primarily due to the payment of fees and
compensation in connection with the organization, syndication and acquisition
services rendered at the inception of the Partnership which had been deferred.
Results of Operations
1997 vs. 1996
The Partnership incurred a net loss of $4,322,230 for the year ended
December 31, 1997, compared with a net loss of $2,660,356 in 1996. The higher
net loss in 1997 is primarily the result of a provision for loss on real estate
held for disposition in the amount of $3,310,365 in compliance with Statement
of Financial Accounting Standards No. 121.
Rental income totaled $5,074,594 for the year ended December 31, 1997, compared
to $4,144,475 for the year ended December 31, 1996. The increase is primarily
due to the increase in the Property's occupancy.
For year ended December 31, 1997, other income was $392,117, compared to
$474,457 in 1996. The decrease is primarily due to higher tenant improvement
reimbursements in the 1996 period, and was partially offset by an increase in
lease payment escalations in the 1997 period due to an increase in occupancy.
Total expenses for the year ended December 31, 1997 were $10,041,704 compared
with $7,535,351 in 1996. The increase is primarily attributable to the
provision for loss on real estate held for disposition. Depreciation and
amortization for the year ended December 31, 1997 was $1,633,948, compared to
$2,070,391 in 1996. Effective October 1, 1997, the Partnership suspended
depreciation and amortization in accordance with the Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." Property operating
expenses were $2,502,410 for the year ended December 31, 1997, compared to
$2,584,730 in 1996. The decrease is primarily attributable to a decline in
repairs and maintenance expense, advertising and promotion costs, and real
estate taxes. The decrease was partially offset by an increase in cleaning
expenses. Settlement costs totaled $446,688 for the year ended December 31,
1997, compared to $925,070 for the year ended December 31, 1996. Amounts in
both periods consist of amounts awarded to Gilbane and Moliterno, including
interest and attorneys' fees, pursuant to the litigation settlement (see
Item 3). Interest expense totaled $1,483,868 for the year ended December 31,
1997, compared with $1,549,523 in 1996. The decrease was due to the lower
interest rate on the Modified Mortgage which became effective May 15, 1997.
Partnership service fees totaled $282,816 for the year ended December 31, 1997,
compared with $115,406 for the year ended December 31, 1996. Effective as of
January 1, 1997, the Partnership began reimbursing certain expenses incurred by
the General Partner and its affiliates in servicing the Partnership to the
extent permitted by the partnership agreement. In prior years, affiliates of
the General Partner had voluntarily absorbed these expenses. Such amounts
totaled $143,799 for the year ended December 31, 1997. General and
administrative expenses totaled $136,685 for the year ended December 31, 1997,
compared to $31,707 for the year ended December 31, 1996. During the 1997
period, certain expenses incurred by the General Partner and its affiliates in
servicing the Partnership, which were voluntarily absorbed by affiliates of the
General Partner in the prior periods, were reimbursable to the General Partner
and its affiliates.
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 was 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 was 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 was 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 was 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 was attributable to lower legal fees in 1996 associated with the
Gilbane litigation.
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, 1997, 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, 1997. Each such officer and director holds a similar position in
the General Partner and the Assignor Limited Partner.
Name Office
Rocco F. Andriola Director
Jeffrey C. Carter Director, President & Chief Financial Officer
Timothy E. Needham Vice President
Rocco F. Andriola, 39, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996. Since
joining Lehman 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 to 1989, 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, Mr. Andriola practiced corporate and
securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola
received a B.A. from Fordham University, a J.D. from New York University School
of Law, and an LLM in Corporate Law from New York University's Graduate School
of Law.
Jeffrey C. Carter, 52, 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, 29, is an Assistant Vice President of Lehman Brothers Inc.
and assists in the management of commercial real estate in the Diversified Asset
Group. Mr. Needham joined Lehman in September 1995. Prior to joining Lehman,
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 1993. Mr. Needham is currently a
candidate for the designation of Chartered Financial Analyst, Level III.
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, 1997, which is filed as an exhibit
under Item 14.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1997, 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, 1997, 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, 1997, $80,110 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. Effective as of
January 1, 1997, the Partnership began reimbursing certain expenses incurred by
the General Partner and its affiliates in servicing the Partnership to the
extent permitted by the partnership agreement. In prior years, affiliates of
the General Partner had voluntarily absorbed these expenses. Such amounts
totaled $143,799 for the year ended December 31, 1997.
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, 1997 and 1996 (1)
Statements of Partners' Capital (Deficit) for the years
ended December 31, 1997, 1996 and 1995 (1)
Statements of Operations for the years ended December 31,
1997, 1996 and 1995 (1)
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995 (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, 1997, filed as an exhibit
under Item 14.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three months ended December 31,
1997.
(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, 1997.
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.
STAMFORD TOWERS DEPOSITARY CORP.
STAMFORD TOWERS LIMITED PARTNERSHIP
BY: Stamford Towers, Inc.
General Partner
Date: March 30, 1998 BY: /s/ Jeffrey C. Carter
Name: Jeffrey C. Carter
Title: Director, President and Chief Financial
Officer
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, 1998 BY: /s/Jeffrey C. Carter
Name: Jeffrey C. Carter
Title: Director, President and Chief Financial
Officer
Date: March 30, 1998 BY: /s/Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director
Date: March 30, 1998 BY: /s/Timothy E. Needham
Name: Timothy E. Needham
Title: Vice President
Exhibit 13
Stamford Towers Limited Partnership
1997 Annual Report
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 approximately 325,000 square feet of office space,
four levels of parking, and space for several retail tenants.
Property Profile (at December 31, 1997)
North Tower
Leasable Area 193,000 square feet
Percentage Leased 94%
Tenants:
Citicorp North America, Inc. 135,909 square feet
Millsport, Inc. 10,930 square feet
Memberworks Incorporated 8,976 square feet
Culinart Inc. 3,353 square feet
Life Extension Institute, Inc. 5,688 square feet
Telco Holdings, Inc. 5,238 square feet
Robert Half International, Inc. 3,362 square feet
Sirrom Capital Corporation 3,337 square feet
M.D. Revenues, Inc. 2,495 square feet
Dow Jones & Company, Inc. 2,101 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
Memberworks Incorporated 18,650 square feet
Tradition Financial Services, Inc. 11,605 square feet
Consolidated-Hydro, Inc. 8,612 square feet
Total Percentage Leased 79%
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 1997 Annual Report for Stamford Towers Limited
Partnership (the "Partnership"). This letter includes an update on the
Partnership's efforts to sell Stamford Towers (the "Property"), an analysis of
the Partnership's financial performance during the past year and information on
the status of the Partnership's legal proceedings. Also included are the
Partnership's audited financial statements for the year ended December 31, 1997.
Property Sales Update
On March 17, 1998, the Partnership entered into an agreement (the "Purchase
Agreement") to sell the Property to Reckson Operating Partnership, L.P., an
unaffiliated entity. Pursuant to the terms of the Purchase Agreement, the
Buyer agreed to acquire the Property for consideration in the amount of
$61,315,000 in cash (the "Purchase Price"), subject to certain closing
adjustments (the "Sale"). The proposed Sale is also subject to the satisfaction
of certain conditions. Additionally, pursuant to the terms of the Partnership
Agreement, Limited Partners holding a majority of limited partnership interests
will have the right to disapprove of the Sale. An information statement will
be mailed to the Limited Partners shortly detailing information concerning the
proposed Sale and subsequent distribution by the Partnership.
Assuming the Sale closes on the proposed terms, it is estimated that the
Limited Partners will receive distributions in excess of $5.00 per Unit,
representing the net proceeds from the Sale and the Partnership's remaining
cash reserves, less provisions for any remaining obligations and contingent
liabilities. Although there can be no guarantee that the Sale will occur on
the terms currently contemplated, we are optimistic that the Sale will close
prior to the end of the second quarter of 1998.
Leasing Update
The Stamford real estate market continued to steadily improve during 1997,
resulting in an increase in rental rates and a decrease in rental concessions.
During the year, we executed six new leases for a total of 31,988 square feet,
bringing overall occupancy to 79% at December 31, 1997, compared to 72% at
year-end 1996. The General Partner is currently negotiating with two potential
tenants for the remainder of the Property's vacant space.
Financial Highlights
Years ended December 31, 1997 1996
Rental Income $ 5,074,594 $ 4,144,475
Interest & Other Income 644,880 730,520
Total Income 5,719,474 4,874,995
Property Operating Expenses 2,502,410 2,584,730
Interest Expense 1,483,868 1,549,523
Settlement Costs 446,688 925,070
Professional Fees 244,924 258,524
Depreciation and Other Expenses 2,053,449 2,217,504
Total Expenses 6,731,339 7,535,351
Adjusted Net Loss* $ (1,011,865) $ (2,660,3556)
Net Cash Used for Operating
Activities (including interest
expenses) $ (1,557,204) $ (328,864)
* Adjusted net loss is determined by adding back the provision for loss
on real estate assets held for disposition, recognized by the
Partnership as a one time expense.
* Rental income increased 22% due primarily to the increase in the
Property's occupancy.
* Interest and other income decreased from 1996, reflecting lower tenant
improvement reimbursements. This was partially offset by an increase
in 1997 in tenant reimbursable income relating to utility usage, which
increased due to the Property's higher occupancy.
* Property operating expenses remained largely unchanged from 1996, as an
increase in cleaning expenses was more than offset by decreases in repairs
and maintenance expense, advertising and promotion costs, and real estate
taxes.
* Interest expense decreased primarily as a result of the completion of the
modification of the First Mortgage, which lowered the interest rate.
* Settlement costs for both 1996 and 1997 are associated with the settlement
of the Gilbane and Moliterno litigation (see below).
* The decrease in depreciation and other expenses is primarily due to a
reduction in depreciation due to the re-classification of the Property on
October 1, 1997 to Real Estate Assets Held for Disposition.
Arbitration and Legal Proceedings
As previously reported, the Partnership had been involved in litigation with
the Property's former construction manager, Gilbane Building Company
("Gilbane"), and a subcontractor, Moliterno Stone Sales, Inc. ("Moliterno").
In December 1997, the Partnership paid $1,171,758 to Gilbane and $200,000 to
Moliterno in settlement of all amounts due pursuant to the final judgment.
The Partnership entered into a development contract with an unaffiliated party,
Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman
("Feldman"). Following construction of the Property, the Partnership commenced
an arbitration proceeding in January 1989 against the Developer to resolve
various disputes and seeking certain monetary recoveries. On January 24, 1993,
the arbitration panel issued its decision awarding approximately $8.1 million
to the Partnership, as well as certain declaratory relief. Subsequently, the
Partnership obtained a judgment from a court of the State of New York for the
full amount of arbitration award in the sum of approximately $8.1 million
against the Developer and also against Feldman pursuant to his guaranty.
On or about January 21, 1997, Feldman and his wife commenced a voluntary case
for liquidation pursuant to chapter 7 of the United States Bankruptcy Code. On
July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans' chapter
7 case in the amount of $11,313,232, which includes interest of approximately
$2.7 million on the $8.1 million judgment. The summary of the assets and
liabilities filed by Feldman and his wife with the Bankruptcy Court in their
chapter 7 case indicates that their assets are less than 1.5% of the scheduled
liabilities. Based upon such schedules, it is likely that after payment of the
expenses of the administration of Feldmans' chapter 7 case, little or no
distribution will be made to the Partnership as a holder of a general unsecured
claim.
Summary
We hope to conclude the Sale of the Property during the second quarter. Upon
completion of the Sale, the General Partner intends to dissolve the Partnership
and will make one or more liquidating distributions to the Limited Partners.
In the interim, we will continue to make every effort to lease the remaining
vacant space at the Property at competitive market rates.
Questions regarding the Partnership's performance should be directed to your
Financial Consultant or First Data Investor Services Group. All requests for
transfer of ownership or change of address must be submitted in writing to the
Partnership's transfer agent, Service Data Corporation, 2424 South 130th Circle,
Omaha, Nebraska 68144-2596. Both First Data Investor Services Group and
Service Data Corporation can be reached at (800) 223-3464.
Very truly yours,
Stamford Towers, Inc.
General Partner
/s/Jeffrey C. Carter
Jeffrey C. Carter
President
March 30, 1998
Balance Sheets At December 31, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $ _ $14,714,483
Buildings and improvements _ 52,933,678
Tenant improvements _ 8,191,558
Furniture, fixtures and equipment _ 293,864
_ 76,133,583
Less accumulated depreciation _ (16,104,668)
_ 60,028,915
Real estate assets held for disposition 59,532,125 _
Cash and cash equivalents 3,960,408 5,668,459
Restricted cash 1,213,209 337,676
Accounts receivable 65,764 80,245
Deferred rent receivable _ 1,843,289
Deferred charges, net of accumulated
amortization of $12,667 in 1997 and
$701,187 in 1996 139,336 53,896
Prepaid expenses, net of accumulated
amortization of $-0- in 1997 and
$934,564 in 1996 24,211 1,632,689
Total Assets $64,935,053 $69,645,169
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $1,903,249 $2,793,018
Interest payable 116,775 134,080
Due to affiliates 80,110 128,262
Revolving loan payable 18,365,631 17,798,291
Total Liabilities 20,465,765 20,853,651
Partners' Capital (Deficit):
General Partner (273,292) (230,070)
Limited Partners (7,826,300 units
outstanding) 44,742,580 49,021,588
Total Partners' Capital 44,469,288 48,791,518
Total Liabilities and Partners' Capital $64,935,053 $69,645,169
Statement of Partners' Capital (Deficit)
For the years ended December 31,
1997, 1996 and 1995
General Limited
Partner Partners Total
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
Net Loss (43,222) (4,279,008) (4,322,230)
Balance at December 31, 1997 $(273,292) $44,742,580 $44,469,288
Statements of Operations
For the years ended December 31, 1997 1996 1995
Income
Rental $5,074,594 $4,144,475 $2,947,857
Interest 252,763 256,063 319,278
Other 392,117 474,457 331,828
Total Income 5,719,474 4,874,995 3,598,963
Expenses
Depreciation and amortization 1,633,948 2,070,391 2,446,866
Property operating 2,502,410 2,584,730 2,308,093
Settlement costs 446,688 925,070 _
Provision for loss on real estate
held for disposition 3,310,365 _ _
Interest 1,483,868 1,549,523 1,289,309
Professional fees 244,924 258,524 434,597
Partnership service fees 282,816 115,406 104,289
General and administrative 136,685 31,707 33,713
Total Expenses 10,041,704 7,535,351 6,616,867
Net Loss $(4,322,230) $(2,660,356) $(3,017,904)
Net Loss Allocated:
To the General Partner $(43,222) $(26,604) $(30,179)
To the Limited Partners (4,279,008) (2,633,752) (2,987,725)
$(4,322,230) $(2,660,356) $(3,017,904)
Per limited partnership unit
(7,826,300 outstanding) $(0.55) $(.34) $(.38)
Statements of Cash Flows
For the years ended December 31, 1997 1996 1995
Cash Flows From Operating Activities:
Net Loss $(4,322,230) $(2,660,356) $(3,017,904)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Depreciation 1,420,092 1,783,769 2,179,559
Amortization 213,856 286,622 267,307
Provision for loss on real
estate held for disposition 3,310,365 _ _
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Restricted cash (875,533) (246,218) (2,164)
Accounts receivable 14,481 (9,193) 32,149
Deferred rent receivable 107,381 12,381 526,199
Prepaid expenses (239,779) (392,148) (1,218,849)
Accounts payable and accrued
expenses (1,120,380) 886,419 438,889
Interest payable (17,305) 10,044 28,636
Due to affiliates (48,152) (184) 382
Net cash used for operating activities (1,557,204) (328,864) (765,796)
Cash Flows From Investing Activities:
Additions to real estate (566,184) (1,191,798) (204,504)
Net cash used for investing activities (566,184) (1,191,798) (204,504)
Cash Flows From Financing Activities:
Deferred charges (152,003) _ _
Mortgage principal payments (125,842) _ _
Borrowings under the revolving
loan payable 693,182 1,315,139 1,075,380
Net cash provided by financing
activities 415,337 1,315,139 1,075,380
Net increase (decrease) in cash
and cash equivalents (1,708,051) (205,523) 105,080
Cash and cash equivalents, beginning
of year 5,668,459 5,873,982 5,768,902
Cash and cash equivalents, end of year $3,960,408 $5,668,459 $5,873,982
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $1,501,173 $1,539,479 $1,260,673
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated
building and improvements $ _ $ 84,926 $ -
Write-off of fully depreciated
furniture, fixtures, and equipment 61,911 _ _
Write-off of fully depreciated
tenant improvements 76,285 _ _
Write-off of fully amortized
mortgage costs 755,083 _ _
Building improvements funded
through accounts payable 23,216 _ _
Tenant improvements funded through
accounts payable $207,395 $ 423,759 $ 155,840
Supplemental Disclosure of Non-Cash Operating Activities
In connection with the General Partner's intent to sell the Property in 1997,
deferred rent receivable and prepaid leasing commissions in the amounts of
$1,735,908 and $1,700,963, respectively, were reclassified to real estate
assets held for disposition.
Notes to the Financial Statements
December 31, 1997, 1996 and 1995
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. A detailed discussion is incorporated by reference to Note 9
"Arbitration Proceedings with Developer" contained herein.
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 January 30, 1998, the Partnership executed a letter of intent for the sale
of the Property to Reckson Operating Partnership, L.P. for gross proceeds of
$61,315,000 (the "Letter of Intent"). On March 17, 1998, the Partnership
entered into a purchase and sale agreement substantively in accordance with the
terms and conditions specified in the Letter of Intent. The sale is expected
to close in the second quarter of 1998.
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.
Real Estate Assets Held for Disposition - Real estate assets held for
disposition are carried at the lower of carrying value or fair market value
less costs to sell. At September 30, 1997, the Partnership's real estate
assets were reclassified as held for disposition and the Partnershipsuspended
depreciation and amortization in accordance with 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").
Contemporaneously, the Partnership recognized a one-time expense of $16,893,005
as provision for loss on real estate held for disposition. However, in light
of the pending sale of the Property, the Partnership revised the carrying value
of real estate assets held for disposition at December 31, 1997 and provision
for loss on real estate held for disposition for the year ended December 31,
1997 was decreased to $3,310,365.
Accounting for Impairment - The Partnership adopted the provisions of FAS 121
in the fourth fiscal quarter of 1995. FAS 121 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.
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 and mortgage escrows.
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 consisted of rental income
which was recognized on a straight-line basis over the non-cancelable portion
of the leases which would not have been received until later periods as a
result of rental concessions. In connection with the General Partner's intent
to sell the Property, deferred rent receivable was reclassified to real
estate assets held for disposition.
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 were
being amortized over the term of the non-cancelable portions of the leases.
In connection with the General Partner's intent to sell the Property in 1997,
leasing commissions were reclassified to real estate assets held for
disposition.
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
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 and throughout 1997, no cash and cash equivalents were on deposit with an
affiliate of the General Partner or the Partnership.
Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by the General Partner and its affiliates in servicing the
Partnership to the extent permitted by the partnership agreement. In prior
years, affiliates of the General Partner had voluntarily absorbed these
expenses. As of December 31, 1997, such amounts paid or accrued totaled
$143,799.
5. Lease Agreement with Citicorp North America, Inc.
Citicorp North America, Inc. ("Citicorp") leases approximately 136,000 rentable
square feet ("RSF") of the North Tower representing 41% of the Property,
pursuant to a lease originally scheduled to expire in June 2001 (the "Original
Lease"). 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) reduced 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; (ii) extended the term
of the Original Lease for an additional five years, through June 30, 2006, at
an annual rental rate of $24 per RSF; and (iii) ensures Citicorp's continued
occupancy at the Property through June 30, 2006 (The Original Lease provided
an option to terminate the lease after June 30, 1996, subject to certain terms
and conditions). 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 31, 1997, substantially all of the Citicorp space in the North Tower
is occupied by Citicorp and its affiliates.
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, 1997 are as follows:
Year Amount
1998 $ 6,701,599
1999 6,661,300
2000 6,653,240
2001 6,653,240
2002 6,388,462
Thereafter 17,343,100
$50,400,941
Terms of the non-cancelable portion of the existing operating leases range
from five to ten 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 (the "First
Mortgage Loan"). The First Mortgage Loan was a $25 million, seven year,
non-recourse 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.
On February 17, 1994, the Partnership entered into a modification of the First
Mortgage Loan with People's Bank 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.
Pursuant to the terms of the First Mortgage Loan, as modified, when occupancy
at the Property reaches 50% or greater, the interest rate on the First
Mortgage 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.
Pursuant to the terms of the First Mortgage Loan, as modified, a real estate
tax escrow account was established with People's Bank into which monthly
deposits equal to 1/12th of the annual real estate taxes will be made. In
addition, a deposit representing an amount equal to the 10% holdback on the
contested tax years of July 1994 through May 31, 1997 was made prior to the
closing. As of December 31, 1997 the balance in the real estate tax escrow
account was $656,626.
On May 15, 1997, the Partnership entered into a second modification of the
First Mortgage Loan with People's Bank which extended the maturity date until
June 1, 2004 (the "Modified Mortgage"). The Modified Mortgage is split into
two components: (i) the permanent portion (the "Permanent Portion") which is
comprised of the existing balance of the First Mortgage Loan, closing costs
associated with the Modified Mortgage and any future drawdowns, and (ii) the
development portion (the "Development Portion") from which the Partnership
may request the drawdown of funds with the Lender's approval to fund the costs
of leasing the Property. At closing, the balance of the Permanent Portion was
$18,491,473 which included recent drawdowns for leasing costs and the closing
costs associated with the Modified Mortgage and the balance of the Development
Portion was $5,958,322. Annually, any borrowings under the Development Portion
of the Modified Mortgage will be added to the Permanent Portion and reduce the
funds available for future drawdowns by a commensurate amount. The Permanent
Portion currently bears interest at an initial rate of 7.63% and is amortized
over a 25 year period and the Development Portion currently bears interest
at an initial rate of 7.83%. Interest rates on both the Permanent Portion and
the Development Portion are adjusted annually on June 1, beginning June 1, 1998.
Proceeds available at December 31, 1997 under the Development Portion of the
Modified Mortgage via drawdown of a credit line were $5,958,322, and may be
used on an "as needed" basis to fund certain capital expenditures. Payment of
the outstanding principal amount is due at the end of the seven-year term.
The Modified Mortgage may be prepaid in whole or in part at any time without
penalty. As of December 31, 1997, the principal balance of the Modified
Mortgage was $18,365,631 plus interest payable of $116,775 for a total balance
of $18,482,406.
In 1997, prior to the second modification of the First Mortgage Loan, and 1996,
the Partnership drew down on the First Mortgage Loan for tenant improvements
in the amounts of $406,175 and $1,315,139, respectively. In 1995, the
Partnership drew down $1,075,380 for leasing commissions associated with the
Citicorp Lease Extension.
Annual principal maturities of the Modified Mortgage over the next five years
are as follows:
Year Amount
1998 $ 266,508
1999 287,569
2000 310,294
2001 334,816
2002 361,275
Thereafter 16,805,169
$18,365,631
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, 1997, net loss reported in the financial
statements exceeded the tax loss by $1,861,328. 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. 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
The Partnership entered into a development contract with an unaffiliated party,
Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman
("Feldman"). Following construction of the Property, the Partnership commenced
an arbitration proceeding in January 1989 against the Developer to resolve
various disputes and seeking certain monetary recoveries. On January 24, 1993,
the arbitration panel issued its decision awarding approximately $8.1 million
to the Partnership, as well as certain declaratory relief. Subsequently, the
Partnership obtained a judgment from a court of the State of New York for the
full amount of arbitration award in the sum of approximately $8.1 million
against the Developer and also against Feldman pursuant to his guaranty.
On or about January 21, 1997, Feldman and his wife commenced a voluntary case
for liquidation pursuant to chapter 7 of the United States Bankruptcy Code.
On July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans'
chapter 7 case in the amount of $11,313,232, which includes interest of
approximately $2.7 million on the $8.1 million judgment. The summary of the
assets and liabilities filed by Feldman and his wife with the Bankruptcy Court
in their chapter 7 case indicates that their assets are less than 1.5% of the
scheduled liabilities. Based upon such schedules, it is likely that after
payment of the expenses of the administration of Feldmans' chapter 7 case,
little or no distribution will be made to the Partnership as a holder of a
general unsecured claim.
10. Litigation
The Partnership had been involved in litigation with the Property's former
construction manager, Gilbane Building Company ("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") awarded Gilbane $770,070 and Moliterno $155,000. All remaining claims,
including the Partnership's counterclaims, were dismissed. On October 24, 1997,
the Court entered a final judgment containing the foregoing awards and further
awarding Gilbane and Moliterno interest and attorneys' fees of approximately
$469,000. In December 1997, the Partnership paid $1,171,758 to Gilbane and
$200,000 to Moliterno in settlement of all amounts due pursuant to the final
judgment.
11. Subsequent Event
On March 17, 1998, the Partnership entered into an agreement to sell the
Property (the "Purchase Agreement") to Reckson Operating Partnership, L.P.
(the "Buyer"), a Delaware limited partnership unaffiliated with the Partnership.
Pursuant to the terms of the Purchase Agreement, the Buyer agreed to acquire
the Property for consideration in the amount of $61,315,000 in cash (the
"Purchase Price"), subject to adjustments in respect of certain closing costs
(the "Sale").
The proposed Sale is subject to the satisfaction of certain conditions.
Pursuant to the terms of the Partnership Agreement, Limited Partners holding a
majority of limited partnership interests will have the right to disapprove of
the Sale. An information statement will be mailed to the Limited Partners
shortly detailing information concerning the proposed Sale and subsequent
distribution by the Partnership.
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, 1997 and 1996, and the related statements of
operations, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1997. 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 at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 17, 1998, except for Note 1 & Note 11,
as to which the date is March 17, 1998
Net Asset Valuation
Determination of Net Asset Value Per $10.00 Unit at December 31,
1997 (Unaudited)
Partnership's
Share of
December 31,
1997 Appraised
Property Value (1)
North Tower $36,789,000 (1)
South Tower 24,526,000 (1)
Less: Revolving loan payable (18,365,631)
42,949,369
Cash and cash equivalents 3,960,408
Restricted cash 1,213,209
Accounts receivable 65,764
Prepaid expenses 24,211
48,212,961
Less:
Total liabilities (1,983,359)
Interest payable (116,775)
Partnership Net Asset Value (2) $46,112,827
Net Asset Value Allocated:
Limited Partners $45,651,699
General Partner 461,128
$46,112,827
Net Asset Value Per Unit
(7,826,300 Units outstanding) $5.83
(1) Assumes a sale price of approximately $61,315,000. Amount is split
60/40 between the North and South Towers respectively based upon
square footage. The estimated value, based upon recent bids received
from prospective third party purchasers, differs from the December 31,
1997 financial statements primarily due to the exclusion of selling
costs.
(2) The Net Asset Value assumes a hypothetical sale on December 31, 1997
of the Partnership's property at a price based upon its value 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.
Limited Partners should note that the above figures are estimates of current
value and actual values realizable upon sale may be significantly different.
The estimated 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 estimated 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, 1997
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 $11,019,379 7,346,252 $18,365,631
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 8,540,475 1,833,638 10,374,113
Retirements (333,519) (112,681) (446,200)
Gross amount at which
carried at close of
period (2):
Land $8,828,690 5,885,793 $14,714,483
Buildings and
improvements 39,496,828 22,580,872 62,077,700
$48,325,518 $28,466,665 $76,792,183
Accumulated
depreciation (3) (12,578,280) (4,808,284) (17,386,564)
Prepaid Leasing
Commissions 1,265,814 435,149 1,700,963
Deferred Rent 1,400,496 335,412 1,735,908
Net write down adjustment (2,003,920) (1,306,445) (3,310,365)
Real estate held for sale $36,409,628 $23,122,497 $59,532,125
(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, 1997 and 1996 is $77,476,650 and $76,625,475, respectively.
(3) For Federal income tax purposes, the amount of accumulated depreciation at
December 31, 1997 and 1996 is $15,144,365 and $13,154,443, respectively.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1997, 1996, and 1995 follows:
1997 1996 1995
Real estate investments:
Beginning of year $ 76,133,583 $74,602,952 $74,242,608
Additions 796,796 1,615,557 360,344
Retirements (138,196) (84,926) _
Prepaid Leasing Commissions 1,700,963 _ _
Deferred Rent 1,735,908 _ _
Net write down adjustment (3,310,365) _ _
End of year $ 76,918,689 $76,133,583 $74,602,952
Accumulated depreciation:
Beginning of year $16,104,668 $14,405,825 $12,226,266
Depreciation expense 1,420,092 1,783,769 2,179,559
Retirements (138,196) (84,926) _
End of year $ 17,386,564 $16,104,668 $14,405,825
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 February 17, 1998,
except for Note 1 and Note 11 as to which the date is March 17, 1998,included
in the 1997 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
therein.
ERNST & YOUNG LLP
Boston, Massachusetts
March 17, 1998
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 5,173,617
<SECURITIES> 000
<RECEIVABLES> 65,764
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 59,532,125
<DEPRECIATION> 000
<TOTAL-ASSETS> 64,935,053
<CURRENT-LIABILITIES> 20,465,765
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 44,469,288
<TOTAL-LIABILITY-AND-EQUITY> 64,935,053
<SALES> 5,074,594
<TOTAL-REVENUES> 5,719,474
<CGS> 000
<TOTAL-COSTS> 2,502,410
<OTHER-EXPENSES> 2,745,061
<LOSS-PROVISION> 3,310,365
<INTEREST-EXPENSE> 1,483,868
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<INCOME-TAX> 000
<INCOME-CONTINUING> (4,322,230)
<DISCONTINUED> 000
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<NET-INCOME> (4,322,230)
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