SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CLOVER INCOME PROPERTIES, L.P.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interest ("Units")
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: 15,000 Units
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): Reduced from $276 to $270,
calculated by dividing the aggregate value of the transaction set forth
under (4) below ($4,143,130) by the aggregate number of Units outstanding
on May 28, 1996 (15,000)
- --------------------------------------------------------------------------------
(4) The proposed maximum aggregate value of transaction: $4,143,130, estimated
solely for the purpose of calculating the filing fee required by Rule 0-11
and computed by adding (a) $3,990,630, the amount expected to be received
by the Registrant from The Willowbrook Joint Venture as a result of the
Sale described in the accompanying Proxy Statement, which will subsequently
be distributed to the Limited Partners, and (b) $152,500, the amount of
cash currently held by the Partnership which is expected to be distributed
to the Limited Partners in the liquidation of the Partnership (excluding
$50,000 in estimated reserves). The proposed maximum aggregate value
represents the maximum amount under the three Proposals presented in the
Proxy Statement.
- --------------------------------------------------------------------------------
(5) Total fee paid: $830, equal to 1/50th of 1% of the proposed maximum
aggregate value of the transaction set forth under (4) above.
- --------------------------------------------------------------------------------
/X/ Fee paid previously with filing of preliminary materials on March 12, 1996.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $830
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: Schedule 14A
- --------------------------------------------------------------------------------
(3) Filing Party: Clover Income Properties, Inc., L.P.
- --------------------------------------------------------------------------------
(4) Date Filed: May 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
[CLOVER INCOME PROPERTIES, L.P. LETTERHEAD]
June 1, 1996
To the Limited Partners of
Clover Income Properties, L.P.:
Dear Limited Partner:
You are cordially invited to attend a special meeting (the 'Special
Meeting') of limited partners (the 'Limited Partners') of Clover Income
Properties, L.P. (the 'Partnership'), called by the general partner of the
Partnership, C.I.P. Management Corp., a New Jersey corporation (the 'General
Partner'), to be held at 23 West Park Avenue, Merchantville, New Jersey 08109,
on June 28, 1996 at 2:00 p.m., local time, and at any adjournment thereof.
At this Special Meeting, you will be asked to consider and vote upon three
separate proposals, two of which concern the sale of The Willowbrook Apartments
(the 'Willowbrook Property') by The Willowbrook Joint Venture (the 'Joint
Venture'). The third proposal concerns the financing of the Willowbrook
Property. The Partnership owns a 42.91% interest in the Joint Venture. Clover
Income Properties II, L.P. ('CIP II') and Clover Income Properties III, L.P.
('CIP III'), each affiliates of the Partnership, own the remaining interests in
the Joint Venture.
The first proposal is to approve a specific sale of the Willowbrook
Property to Berwind Property Group, Inc. and First Montgomery Properties, Ltd.
(the 'Buyers'), pursuant to the terms of an Agreement of Sale between the Joint
Venture and the Buyers entered into on February 7, 1996, as amended, for a
purchase price of $9,850,000 (the 'Sale'). Upon distribution of the net Sale
proceeds to the Partnership, CIP II and CIP III by the Joint Venture, the
General Partner will distribute the Partnership's share of the net proceeds and
remaining cash (after reserves) to the Limited Partners. If the Sale is approved
and certain other conditions are satisfied, the Sale will be completed and the
Partnership will be terminated and dissolved. Therefore, approval of the Sale
will also be deemed a consent to the termination and dissolution of the
Partnership (upon the completion of the Sale).
At the Special Meeting, you will also be asked to consider a second
proposal which will authorize the sale of the Willowbrook Property to another
buyer ('Alternative Sale'), if approved by the General Partner. An Alternative
Sale only will be authorized if the Sale is approved, but is not completed for
any reason. In addition, an Alternative Sale will have to be completed prior to
December 31, 1997 for a purchase price not less than the fair market value of
the Willowbrook Property (as set forth in an appraisal dated within nine months
of the execution of an Alternative Sale agreement), and the purchaser in such
transaction cannot be an affiliate of the General Partner. Approval of an
Alternative Sale will also be a consent to the termination and dissolution of
the Partnership (upon the completion of an Alternative Sale). No additional vote
of the Limited Partners will be sought with respect to any particular
Alternative Sale.
You will also be asked to consider a third proposal to authorize the Joint
Venture, on or before December 31, 1997, to borrow up to $7,000,000 (the 'Loan')
and to grant a non-recourse, first priority mortgage and security interest on
the Willowbrook Property as security for the Loan, if the
<PAGE>
Sale is not approved or is not completed. Upon distribution of the net Loan
proceeds to the Partnership, CIP II and CIP III by the Joint Venture, the
General Partner will distribute the Partnership's share of the net proceeds to
the Limited Partners. The debt service payments which would be required in
connection with the Loan would result in a significant reduction in the Joint
Venture's net operating income. As a result, subsequent cash distributions to
the Limited Partners would likely be eliminated although Limited Partners would
likely continue to have taxable income. This proposal is not conditioned upon
the approval of the Sale or the Alternative Sale. If the Alternative Sale is
also approved, an Alternative Sale may be completed after the Loan is obtained,
without any additional approval from the Limited Partners. No additional vote of
the Limited Partners will be sought with respect to any particular Financing
transaction.
Each of the three proposals must be approved by the holders of more than
50% of the outstanding units of limited partnership interests ('Units') in the
Partnership and also by the holders of more than 50% of the outstanding units of
limited partnership interest in each of CIP II and CIP III. The approvals of the
limited partners of CIP II and CIP III are being solicited contemporaneously
herewith.
If either a Sale, an Alternative Sale or a Financing is completed, Allstate
Management Corp., an affiliate of the General Partner, will be paid
approximately $326,000 from the net proceeds of such transaction for accrued and
unpaid property management fees and reimbursable costs. No other net proceeds
from a Sale, Alternative Sale or Financing will be distributed to the General
Partner or its affiliates.
Attached hereto is a Proxy Statement, dated June 1, 1996, which contains
information relating to the three proposals, together with a Proxy which
authorizes the General Partner to vote Units with respect to the three proposals
at the meeting and any adjournment thereof. In view of the importance of the
three proposals, you are urged to review the enclosed Proxy Statement promptly
and carefully, and to discuss it with your financial, legal and tax advisors.
Regardless of whether you expect to be present at the Special Meeting in
person, please complete and promptly return the enclosed Proxy in the
accompanying envelope so that your Unit(s) may be represented and voted at the
Special Meeting. Proxies in the form enclosed, properly executed and duly
returned, will be voted in accordance with the instructions thereon.
Additionally, the Proxy delegates discretionary authority to the General Partner
with respect to any other business which may properly come before the Special
Meeting or any adjournment or postponement thereof, including, without
limitation, any proposal to adjourn or postpone the Special Meeting. A Limited
Partner who has given a Proxy may revoke it by filing an instrument revoking it,
by submitting a duly executed Proxy bearing a later date or by voting in person
at the Special Meeting. Properly executed Proxies that are returned, but in
which no direction on a proposal is given, will be voted for the proposal and in
the discretion of the General Partner upon such other matters as may properly
come before the Special Meeting.
Please return the enclosed Proxy in the pre-addressed and stamped envelope
as promptly as possible. Questions and requests for assistance may be directed
to Beacon Hill Partners, Inc., a proxy solicitation firm, at 800-755-5001.
Very truly yours,
C.I.P. MANAGEMENT CORP.,
General Partner of Clover
Income Properties, L.P.
By: __________________________________
Donald N. Love
President
Merchantville, New Jersey
Dated: June 1, 1996
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
OF CLOVER INCOME PROPERTIES, L.P.
TO BE HELD JUNE 28, 1996
NOTICE IS HEREBY GIVEN, that a special meeting ('Special Meeting') of the
limited partners (the 'Limited Partners') of Clover Income Properties, L.P. (the
'Partnership') called by the general partner of the Partnership, C.I.P.
Management Corp. (the 'General Partner'), will be held be at 23 West Park
Avenue, Merchantville, New Jersey 08109, on June 28, 1996 at 2:00 p.m., local
time, for the following purposes:
1. To approve the proposed sale (the 'Sale Proposal') of The
Willowbrook Apartments (the 'Willowbrook Property') by the Willowbrook
Joint Venture (the 'Joint Venture'). The Partnership owns a 42.91% interest
in the Joint Venture. Clover Income Properties II, L.P. ('CIP II') and
Clover Income Properties III, L.P. ('CIP III'), each affiliates of the
Partnership, own the remaining interests in the Joint Venture. The General
Partner proposes that the Willowbrook Property be sold to Berwind Property
Group, Inc. and First Montgomery Properties, Ltd. (the 'Buyers'), pursuant
to the terms of an Agreement of Sale between the Joint Venture and the
Buyers entered into on February 7, 1996 (as amended, the 'Sale Agreement'),
for a purchase price of $9,850,000 (the 'Sale'), and that the General
Partner be authorized to agree on behalf of the Partnership to any
modifications, amendments and waivers to the Sale Agreement which the
General Partner determines to be necessary or appropriate, including
changes in the amount and type of consideration to be received by the Joint
Venture. As a consequence thereof, you are being asked to authorize the
Joint Venture to sell all of the Partnership's interest in the Willowbrook
Property. The Sale Proposal must be approved by the holders of more than
50% of the outstanding units of limited partnership interests (each a
'Unit') in the Partnership ('Majority Vote'). The Sale Proposal must also
be approved by the holders of more than 50% of the outstanding units of
limited partnership interests in each of CIP II and CIP III ('Affiliate
Majority Vote'), which are being solicited contemporaneously herewith. Upon
distribution of the net Sale proceeds to the Partnership, CIP II and CIP
III by the Joint Venture, the General Partner will distribute the
Partnership's share of the net proceeds and remaining cash (after reserves)
to the Limited Partners. If the Sale Proposal is approved by a Majority
Vote of the Limited Partners and by an Affiliate Majority Vote, and the
other conditions to the closing have been met, the Sale will be completed
and the Partnership will be terminated and dissolved. Therefore, approval
of the Sale Proposal will also be deemed to be a consent to the termination
and dissolution of the Partnership (upon the completion of the Sale).
2. To approve a second proposal (the 'Alternative Sale Proposal')
which would authorize the sale of the Willowbrook Property by the Joint
Venture to another buyer ('Alternative Sale'), if approved by the General
Partner. However, an Alternative Sale only would be authorized if (i) the
Sale Proposal is approved by a Majority Vote, but the Sale is not completed
for any reason, (ii) the Alternative Sale is completed by December 31, 1997
for cash consideration not less than the fair market value of the
Willowbrook Property (as set forth in an appraisal dated within nine months
of the execution of an Alternative Sale agreement) and (iii) the buyer in
the Alternative Sale is not an affiliate of the General Partner. The
Alternative Sale Proposal must be approved by a Majority Vote and must also
be approved by an Affiliate Majority Vote. If the Sale to the Buyers does
not close for any reason and an Alternative Sale is completed, the
Partnership will be terminated and dissolved. Therefore, approval of the
Alternative Sale Proposal will also be deemed to be a consent to the
termination and dissolution of the Partnership (upon the completion of an
Alternative Sale). No additional vote of the Limited Partners will be
sought with respect to any particular Alternative Sale.
3. To approve a third proposal (the 'Financing Proposal') to authorize
the Joint Venture, on or before December 31, 1997, to borrow up to
$7,000,000 (the 'Loan') and to grant a non-recourse, first priority
mortgage and security interest on the Willowbrook Property as security for
<PAGE>
the Loan (the 'Financing'), if the Sale Proposal is not approved by a
Majority Vote or if the Sale is not completed for any reason. Approval of
the Financing Proposal is not conditioned upon the approval of the Sale
Proposal or the approval of the Alternative Sale Proposal. No additional
vote of the Limited Partners will be sought with respect to any particular
Financing transaction. Upon distribution of the net Loan proceeds to the
Partnership, CIP II and CIP III by the Joint Venture, the General Partner
will distribute the Partnership's share of the net proceeds to the Limited
Partners.
Matters incidental to the conduct of the Special Meeting which are properly
brought before the Special Meeting may also be voted upon at the Special
Meeting. The General Partner has fixed the close of business on May 28, 1996 as
the record date for determination of the Limited Partners entitled to notice of
and to vote at the Special Meeting. The presence in person or by proxy of
holders of a majority of the Units will constitute a quorum at the Special
Meeting. Abstentions will be counted in determining whether a quorum is present.
Whether or not a quorum is present or represented at the Special Meeting, the
holders of a majority of the Units present or represented by proxy may adjourn
the Special Meeting from time to time without further notice to the Limited
Partners.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR THE ABOVE THREE PROPOSALS
AND URGES YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. THE
PROXY SHOULD BE RETURNED IN THE ENCLOSED ENVELOPE. IT IS IMPORTANT THAT YOUR
UNITS BE REPRESENTED AT THE SPECIAL MEETING. EVEN IF YOU PLAN TO ATTEND THE
SPECIAL MEETING, THE GENERAL PARTNER REQUESTS THAT YOU PROMPTLY SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROXIES IN THE FORM
ENCLOSED, PROPERLY EXECUTED AND DULY RETURNED, WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS THEREON. ADDITIONALLY, THE PROXY DELEGATES DISCRETIONARY
AUTHORITY TO THE GENERAL PARTNER WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY PROPOSAL TO ADJOURN OR POSTPONE THE
SPECIAL MEETING. A LIMITED PARTNER WHO HAS GIVEN A PROXY MAY REVOKE IT BY FILING
AN INSTRUMENT REVOKING IT, BY SUBMITTING A DULY EXECUTED PROXY BEARING A LATER
DATE OR BY VOTING IN PERSON AT THE SPECIAL MEETING. PROPERLY EXECUTED PROXIES
THAT ARE RETURNED, BUT IN WHICH NO DIRECTION ON A PROPOSAL IS GIVEN, WILL BE
VOTED FOR THE PROPOSAL AND IN THE DISCRETION OF THE GENERAL PARTNER UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
A complete list of Limited Partners entitled to vote at the Special Meeting
will be open to the examination of any Limited Partner, upon reasonable request
and notice, during ordinary business hours at the executive offices of the
General Partner, located at 23 West Park Avenue, Merchantville, New Jersey
08109.
Information concerning the matters to be acted upon at the Special Meeting
is set forth in the accompanying Proxy Statement.
C.I.P. MANAGEMENT CORP.,
General Partner of Clover
Income Properties, L.P.
By: __________________________________
Donald N. Love
President
Merchantville, New Jersey
Dated: June 1, 1996
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
23 WEST PARK AVENUE
MERCHANTVILLE, NEW JERSEY 08109
------------------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF LIMITED PARTNERS
OF
CLOVER INCOME PROPERTIES, L.P.
TO BE HELD JUNE 28, 1996
------------------------------
This Proxy Statement and the accompanying Notice of Special Meeting of
Limited Partners and form of Proxy are first being mailed to limited partners
(each a 'Limited Partner', and collectively, the 'Limited Partners') of Clover
Income Properties, L.P. (the 'Partnership'), a limited partnership formed in
July 1986 under the Revised Uniform Limited Partnership Act of the State of
Delaware ('Delaware Act'), on or about June 1, 1996. A special meeting of
Limited Partners ('Special Meeting') called by the general partner of the
Partnership, C.I.P. Management Corp., a New Jersey corporation (the 'General
Partner' and, with the Limited Partners, the 'Partners') will be held at 23 West
Park Avenue, Merchantville, New Jersey 08109, on June 28, 1996, at 2:00 p.m.,
local time, to consider three proposals concerning the sale and financing of The
Willowbrook Apartments (the 'Willowbrook Property'), owned by The Willowbrook
Joint Venture (the 'Joint Venture'). The Partnership owns a 42.91% interest in
the Joint Venture. Clover Income Properties II, L.P. ('CIP II') and Clover
Income Properties III, L.P. ('CIP III'), both affiliates of the Partnership, own
the remaining interests in the Joint Venture.
INTRODUCTION
In the first proposal (the 'Sale Proposal'), the General Partner proposes
that the Willowbrook Property be sold to Berwind Property Group, Inc. and First
Montgomery Properties, Ltd. (the 'Buyers'), pursuant to the terms of an
Agreement of Sale between the Joint Venture and the Buyers entered into on
February 7, 1996 (as amended, the 'Sale Agreement'), for a purchase price (the
'Purchase Price') of $9,850,000 (the 'Sale'). Neither of the Buyers is an
affiliate of the General Partner. As a consequence thereof, you are being asked
to authorize the Joint Venture to sell all of the Partnership's interest in the
Willowbrook Property. The Sale Proposal must be approved by the holders of more
than 50% of the outstanding units of limited partnership interests (each a
'Unit') in the Partnership ('Majority Vote'). The Sale Proposal must also be
approved by the holders of more than 50% of the outstanding units of limited
partnership interests in each of CIP II and CIP III ('Affiliate Majority Vote').
If the Sale Proposal is approved by a Majority Vote of the Limited Partners and
by an Affiliate Majority Vote, and the other conditions to the closing have been
met (as set forth in the Sale Agreement and discussed in this Proxy Statement),
the Sale will be completed and the Partnership will be terminated and dissolved.
Therefore, approval of the Sale Proposal will also be deemed a consent to the
termination and dissolution of the Partnership (upon the completion of the
Sale). Upon distribution of the net Sale proceeds to the Partnership, CIP II and
CIP III by the Joint Venture, the General Partner will distribute the
Partnership's share of the net proceeds and remaining cash (after reserves) to
the Limited Partners, estimated to amount to $270 per Unit.
At the Special Meeting, you will be asked to consider a second proposal
('Alternative Sale Proposal') which will authorize a sale of the Willowbrook
Property by the Joint Venture to another
i
<PAGE>
buyer ('Alternative Sale'), if approved by the General Partner. However, an
Alternative Sale only will be authorized if (i) the Sale Proposal is approved by
a Majority Vote, but the Sale is not completed for any reason, (ii) the
Alternative Sale is completed by December 31, 1997 for cash consideration not
less than the fair market value of the Willowbrook Property (as set forth in an
appraisal dated within nine months of the execution of an Alternative Sale
agreement) and (iii) the buyer in an Alternative Sale is not an affiliate of the
General Partner. The Alternative Sale Proposal must be approved by a Majority
Vote and must also be approved by an Affiliate Majority Vote. If the Sale to the
Buyers does not close for any reason and an Alternative Sale is completed, the
Partnership will be terminated and dissolved. Therefore, approval of the
Alternative Sale Proposal will also be deemed to be a consent to the termination
and dissolution of the Partnership (upon the completion of an Alternative Sale).
In addition, you will also be asked to consider a third proposal (the
'Financing Proposal') at the Special Meeting to authorize the Joint Venture, on
or before December 31, 1997, to borrow up to $7,000,000 (the 'Loan') and to
grant a non-recourse, first priority mortgage and security interest on the
Willowbrook Property as security for the Loan (the 'Financing'), if the Sale
Proposal is not approved by a Majority Vote or if the Sale is not completed for
any reason. The Financing Proposal must be approved by a Majority Vote and must
be approved by an Affiliate Majority Vote. APPROVAL OF THE FINANCING PROPOSAL IS
NOT CONDITIONED UPON THE APPROVAL OF THE SALE PROPOSAL OR THE APPROVAL OF THE
ALTERNATIVE SALE PROPOSAL. Upon distribution of the net Loan proceeds to the
Partnership, CIP II and CIP III by the Joint Venture, the General Partner will
distribute the Partnership's share of the net proceeds to the Limited Partners,
estimated to amount to $172 per Unit. If the Alternative Sale Proposal is also
approved, an Alternative Sale may be completed after the Loan is obtained,
without any additional approval from the Limited Partners.
In considering and voting upon the proposals, Limited Partners should
carefully consider that, even if the Sale Proposal, the Alternative Sale
Proposal and the Financing Proposal (collectively, the 'Proposals') are adopted:
1. There can be no assurance that the Sale will be completed on the
terms set forth in the Sale Agreement, or at all.
2. Approval of the Sale Agreement and the transactions contemplated
thereby by a Majority Vote will also authorize the General Partner, without
further Limited Partner notice and approval, to agree on behalf of the
Partnership to any modifications, amendments and waivers to the terms and
conditions of the Sale Agreement which the General Partner determines to be
necessary or appropriate, including changes in the amount and type of
consideration to be received by the Joint Venture.
3. If the Sale is not completed, the General Partner will not, by
virtue of the Alternative Sale Proposal, the Financing Proposal or
otherwise, be under any obligation to obtain and complete an Alternative
Sale or a Financing.
4. There can be no assurance that an Alternative Sale or a Financing
will be obtained or completed, that the terms (including price) of any
Alternative Sale will be as favorable to the Partnership as those of the
Sale, or that the terms of a Financing will be favorable to the
Partnership.
5. Neither a specific Alternative Sale nor a specific Financing will
require or be submitted for Limited Partners' approval at a later date.
6. The debt service payments which would be required in connection
with the Loan would result in a significant reduction in the Joint
Venture's net operating income. As a result, subsequent cash distributions
to the Limited Partners would likely be eliminated although Limited
Partners would likely continue to have taxable income. In addition, a
Financing will impose restrictions and limitations on the Joint Venture and
will subject the Joint Venture and therefore the Partnership to the risk of
foreclosure and loss of the Willowbrook Property in the event the Joint
Venture is unable to comply with its financial and other obligations under
the Financing.
ii
<PAGE>
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE GENERAL PARTNER TO BE
VOTED AT THE SPECIAL MEETING. In addition to the original solicitation by mail,
the proxies may be solicited in person or by telephone. All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement,
will be paid by the Joint Venture.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Additionally, the Proxy
delegates discretionary authority to the General Partner with respect to any
other business which may properly come before the Special Meeting or any
adjournment or postponement thereof, including, without limitation, any proposal
to adjourn or postpone the Special Meeting. A Limited Partner who has given a
Proxy may revoke it by filing an instrument revoking it, by submitting a duly
executed Proxy bearing a later date or by voting in person at the Special
Meeting. Properly executed Proxies that are returned, but in which no direction
on a Proposal is given, will be voted for the Proposal, and in the discretion of
the General Partner, for such other matters as may properly come before the
Special Meeting.
The Partnership has only one class of limited partners and no Limited
Partner has a right of priority over any other Limited Partner. The
participation of the Limited Partners is divided into Units, and each Limited
Partner owns one Unit for each $1,000 of capital contributed by such Limited
Partner to the Partnership. Each of the Proposals will be adopted only if
approved by a Majority Vote. Each Unit is entitled to one vote on each of the
Proposals. An Affiliate Majority Vote to approve all three Proposals is being
solicited contemporaneously herewith.
As of May 28, 1996 (the 'Record Date'), the Partnership had 15,000 Units
outstanding, held by 1,311 holders. There is no established trading market for
the Units. The Partnership is not aware of any person or group of persons who
owns more than 5% of the outstanding Units. Only Limited Partners on the Record
Date will be entitled to notice of and to vote at the Special Meeting.
THE GENERAL PARTNER BELIEVES THAT THE SALE OF THE WILLOWBROOK PROPERTY IS
IN THE BEST INTERESTS OF THE LIMITED PARTNERS AND RECOMMENDS THAT THE LIMITED
PARTNERS VOTE FOR THE SALE TO THE BUYERS AND VOTE FOR AN ALTERNATIVE SALE TO
ANOTHER BUYER, IF THE SALE PROPOSAL IS APPROVED, BUT FOR ANY REASON THE SALE IS
NOT COMPLETED. IN ADDITION, THE GENERAL PARTNER BELIEVES THAT IF THE SALE IS NOT
COMPLETED, THE FINANCING IS ALSO IN THE BEST INTERESTS OF THE LIMITED PARTNERS
AND THEREFORE RECOMMENDS THAT THE LIMITED PARTNERS ALSO VOTE FOR THE FINANCING
PROPOSAL.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION.............................................................................................. i
PROXY STATEMENT SUMMARY................................................................................... 1
The Special Meeting..................................................................................... 1
Matters to be Considered................................................................................ 1
Sale Proposal........................................................................................... 1
Structure of the Sale................................................................................... 2
Alternative Sale Proposal............................................................................... 2
Financing Proposal...................................................................................... 2
Dissenters' or Appraisal Rights......................................................................... 3
Recommendation of the General Partner................................................................... 3
Material Factors to be Considered....................................................................... 3
Voting Requirements..................................................................................... 4
Consequences if Proposals Not Approved.................................................................. 5
Income Tax Consequences................................................................................. 5
SPECIAL MEETING OF LIMITED PARTNERS....................................................................... 8
Meeting Information Regarding Proxies................................................................... 8
Procedures for Completing Proxies....................................................................... 8
Voting Requirements..................................................................................... 9
Dissenters' or Appraisal Rights......................................................................... 9
THE PARTNERSHIP........................................................................................... 10
Business of the Partnership............................................................................. 10
Property of the Partnership............................................................................. 10
Security Ownership of Directors and Officers of the General Partner..................................... 11
BACKGROUND AND REASONS FOR THE PROPOSED SALE AND FINANCING................................................ 12
The Buyers.............................................................................................. 12
Background of the Sale.................................................................................. 12
Material Factors to be Considered in Connection with the Sale Proposal and the Alternative Sale
Proposal.............................................................................................. 12
Material Factors to be Considered in Connection with the Financing Proposal............................. 13
DESCRIPTION OF THE PROPOSALS.............................................................................. 14
General Discussion of Proposed Sale and the Proposed Alternative Sale................................... 14
General Discussion of Proposed Financing................................................................ 16
Regulatory Compliance................................................................................... 16
Consequences If Proposals Are Not Approved.............................................................. 16
DISTRIBUTIONS TO LIMITED PARTNERS......................................................................... 17
Sale.................................................................................................... 17
Alternative Sale........................................................................................ 18
Financing............................................................................................... 18
ACCOUNTING TREATMENT...................................................................................... 19
Sale and Alternative Sale Proposals..................................................................... 19
Financing Proposal...................................................................................... 19
INCOME TAX CONSEQUENCES................................................................................... 20
Sale Proposal........................................................................................... 20
Alternative Sale Proposal............................................................................... 22
Financing Proposal...................................................................................... 22
OTHER RELEVANT INFORMATION................................................................................ 23
SELECTED HISTORICAL FINANCIAL DATA INFORMATION............................................................ 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................... 25
INDEX TO FINANCIAL STATEMENTS............................................................................. 28
</TABLE>
iv
<PAGE>
PROXY STATEMENT SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT AND DOES NOT PURPORT TO BE COMPLETE. THIS SUMMARY IS
QUALIFIED IN ALL RESPECTS BY THE REMAINDER OF THIS PROXY STATEMENT, WHICH SHOULD
BE READ IN ITS ENTIRETY.
THE SPECIAL MEETING.................The Special Meeting will be held on June 28,
1996, commencing at 2:00 p.m., at 23 West
Park Avenue, Merchantville, New Jersey
08109. Holders of Units at the close of
business on the Record Date are entitled to
notice of and to vote at the Special
Meeting.
Each Unit entitles the holder thereof to one
vote. On the Record Date, 15,000 Units were
outstanding, held by 1,311 holders.
MATTERS TO BE CONSIDERED............At the Special Meeting, Limited Partners
will be asked to consider and vote upon
three separate Proposals, two of which
involve the sale of the Willowbrook Property
by the Joint Venture and the third of which
involves a financing of the Willowbrook
Property by the Joint Venture. The
Partnership owns a 42.91% interest in the
Joint Venture. CIP II and CIP III, each an
affiliate of the Partnership, own the
remaining interests in the Joint Venture.
The three Proposals are discussed further
below.
SALE PROPOSAL.......................The General Partner proposes that the
Willowbrook Property be sold by the Joint
Venture to the Buyers pursuant to the terms
of the Sale Agreement for a purchase price
of $9,850,000, and that the General Partner
be authorized to agree on behalf of the
Partnership to modifications, amendments and
waivers to the Sale Agreement which the
General Partner determines to be necessary
or appropriate, including changes in the
amount and type of consideration to be
received by the Joint Venture. As a
consequence thereof, you are being asked to
authorize the Joint Venture to sell all of
the Partnership's interest in the
Willowbrook Property. The Sale Proposal must
be approved by a Majority Vote and an
Affiliate Majority Vote. If the Sale
Proposal is approved by a Majority Vote and
an Affiliate Majority Vote, and the other
conditions to the closing have been met (as
set forth in the Sale Agreement and
discussed in this Proxy Statement), the Sale
will be completed and the Partnership will
be terminated and dissolved. Therefore,
approval of the Sale Proposal will also be
deemed a consent to the termination and
dissolution of the Partnership (upon the
completion of the Sale).
1
<PAGE>
The Buyers have entered into 12 additional
sale agreements with affiliates of the
General Partner. See 'Background and Reasons
for the Proposed Sale and Financing --
Background of the Sale'.
STRUCTURE OF THE SALE...............The Sale is structured as an all cash 'as
is' sale of the Willowbrook Property, which
constitutes all of the assets of the
Partnership, CIP II and CIP III. The Sale
will allow the Limited Partners to obtain a
cash distribution based upon the
Partnership's interest in the current value
of the Willowbrook Property, which cash can
be invested in alternative investments, and
will eliminate the further expense of
operating the Partnership as a publicly-held
entity.
ALTERNATIVE SALE PROPOSAL...........At the Special Meeting, you will also be
asked to consider the Alternative Sale
Proposal, which would authorize the sale of
the Willowbrook Property by the Joint
Venture to another buyer, if approved by the
General Partner. The Alternative Sale
transaction only will be authorized if (i)
the Sale Proposal is approved by a Majority
Vote, but the Sale is not completed for any
reason, (ii) the Alternative Sale is
completed by December 31, 1997 for cash
consideration not less than the fair market
value of the Willowbrook Property (as set
forth in an appraisal dated within nine
months of the execution of an Alternative
Sale agreement) and (iii) the buyer in an
Alternative Sale is not an affiliate of the
General Partner. The Alternative Sale
Proposal must be approved by a Majority Vote
and must also be approved by an Affiliate
Majority Vote. If the Sale to the Buyers
does not close for any reason and an
Alternative Sale is completed, the
Partnership will be terminated and
dissolved. Therefore, approval of this
Alternative Sale Proposal will also be
deemed a consent to the termination and
dissolution of the Partnership (upon the
completion of an Alternative Sale). No
additional vote of the Limited Partners will
be sought with respect to any particular
Alternative Sale.
FINANCING PROPOSAL..................In addition, you will also be asked to
consider the Financing Proposal at the
Special Meeting, which would authorize the
Joint Venture, on or before December 31,
1997, to borrow up to $7,000,000 and to
grant non-recourse, first priority mortgage
and security interest on the Willowbrook
Property as security for the Loan, if the
Sale Proposal is not approved by a Majority
Vote or if the Sale does not close for any
reason. APPROVAL OF THE FINANCING PROPOSAL
IS NOT CONDITIONED UPON THE APPROVAL OF THE
SALE PROPOSAL OR THE APPROVAL OF THE
ALTERNATIVE SALE PROPOSAL. If the
Alternative Sale Proposal is also approved,
an Alternative Sale may be completed after
the Financing, without any additional
approval from the Limited Partners.
2
<PAGE>
DISSENTERS' OR APPRAISAL RIGHTS.....Limited Partners who vote against any of the
Proposals will not be entitled to
dissenters' or appraisal rights under
Delaware law or under the Partnership
Agreement between the General Partner and
the Limited Partners, dated March 31, 1986,
as amended and restated (the 'Partnership
Agreement').
RECOMMENDATION OF THE GENERAL
PARTNER............................The General Partner is soliciting proxies
from the Limited Partners to be used at the
Special Meeting, and at any adjournments
thereof.
AFTER REVIEWING ALL RELEVANT INFORMATION,
THE GENERAL PARTNER BELIEVES THAT THE TERMS
OF ALL THREE PROPOSALS ARE FAIR AND
REASONABLE TO THE PARTNERSHIP AND THE
LIMITED PARTNERS, AND IS RECOMMENDING THAT
THE LIMITED PARTNERS VOTE FOR ALL THREE
PROPOSALS.
MATERIAL FACTORS TO BE CONSIDERED...The General Partner considered the following
material factors that weigh in favor of the
Sale Proposal and the Alternative Sale
Proposal: (1) certain risks of continuing to
own the Willowbrook Property, including
competition from other rental apartment and
townhouse developments in the Baltimore area
and adverse local market conditions due to
changes in the Baltimore market; (2) the
potential for increased operating and
maintenance expenses required in future
years as the Willowbrook Property ages,
resulting in reduced cash flow distributions
to the Limited Partners; (3) certain other
risks applicable generally to the ownership
of apartment complexes, including adverse
local market conditions due to changes in
the economic conditions in the Mid-Atlantic
region or nationally; (4) the administrative
costs necessary to operate the Partnership
as a public entity; (5) the potential for
Limited Partners to realize higher returns
on the cash distributed from the Sale than
they otherwise would receive if the
Willowbrook Property were not sold; (6) the
lack of an established trading market for
the Units; and (7) the tax return
requirements and associated expenses as a
result of owning the Units.
The General Partner considered the following
material factors that weigh against the Sale
Proposal and the Alternative Sale Proposal:
(1) the possibility of substantial
improvement in the metropolitan Baltimore
apartment market; (2) the possibility that
future rental income could more than offset
future operating and maintenance costs and,
as a result, cash flow distributions to the
Limited Partners could thereby increase; and
(3) the possibility of eventually obtaining
a higher purchase price for the Willowbrook
Property if it is not sold in the
foreseeable future.
3
<PAGE>
The General Partner has concluded that, on
balance, the sale of the Willowbrook
Property is in the best interests of the
Limited Partners, and therefore recommends
that the Limited Partners consent to the
Sale Proposal and the Alternative Sale
Proposal.
The General Partner considered the following
material factors that weigh in favor of the
Financing Proposal: (1) the ability to
distribute cash to the Limited Partners from
the proceeds of the Financing; and (2) the
potential to make an Alternative Sale of the
Willowbrook Property more attractive to a
buyer (because the Willowbrook Property
could remain subject to the Financing,
thereby providing financing to the buyer and
reducing its cash requirements at closing).
The General Partner considered the following
material factors that weigh against the
Financing Proposal: (1) the creation of debt
service obligations of the Joint Venture
which would not otherwise exist and which
would likely eliminate cash flow available
for subsequent distributions to the Limited
Partners from the Partnership; and (2) the
risk of foreclosure and loss of the
Willowbrook Property in the event the Joint
Venture would be unable to comply with its
financial and other obligations under the
Financing.
The General Partner has concluded that, on
balance, a Financing is also in the best
interests of the Limited Partners, and
therefore recommends that the Limited
Partners consent to the Financing Proposal.
VOTING REQUIREMENTS.................A Majority Vote of the Limited Partners is
required to approve each of the Proposals.
Abstentions with respect to any Proposal
will have the same effect as votes against
the Proposal, because approval requires a
vote in favor of the Proposal. Approval of
the Alternative Sale Proposal is conditioned
upon a Majority Vote in favor of the Sale
Proposal. APPROVAL OF THE FINANCING PROPOSAL
IS NOT CONDITIONED UPON THE APPROVAL OF THE
SALE PROPOSAL OR UPON THE APPROVAL OF THE
ALTERNATIVE SALE PROPOSAL. Limited Partners
at the close of business on the Record Date
are entitled to notice of the Special
Meeting and to vote with respect to the
three Proposals.
The presence at the Special Meeting in
person or by proxy of at least a majority of
the Units is necessary to constitute a
quorum. Abstentions will be counted in
determining whether a quorum is present.
Whether or not a quorum is present or
represented at the Special Meeting, the
holders of a majority of the Units present
or represented by proxy may adjourn the
Special Meeting from time to time without
further notice to the Limited Partners.
4
<PAGE>
CONSEQUENCES IF PROPOSALS NOT
APPROVED...........................If none of the Proposals is approved by a
Majority Vote, the Joint Venture would
continue to operate the Willowbrook Property
and the General Partner would consider other
sale or financing opportunities if and as
they became available. In addition, the
General Partner would be required to solicit
the approval of the Limited Partners with
respect to any subsequent sale or financing
of the Willowbrook Property and to incur the
additional costs necessary to solicit the
approval of the Limited Partners at such
later point in time.
INCOME TAX CONSEQUENCES.............If the Sale is completed, the General
Partner anticipates that the Joint Venture
will report a loss from the Sale, a portion
of which will be allocated to the
Partnership and further allocated to the
Limited Partners. Since the Willowbrook
Property is real property used in a trade or
business, the character of the loss on the
Sale is determined under Section 1231
('Section 1231') of the Internal Revenue
Code of 1986, as amended (the 'Code'). A
taxpayer's gains and losses from all
property subject to the provisions of
Section 1231 in any taxable year are
combined and, in general, a net gain is
treated as a capital gain while a net loss
is treated as an ordinary loss. The loss
realized from the Sale would be treated as a
passive activity loss subject to the
provisions of Section 469 of the Code.
The Sale by the Joint Venture and the
subsequent distribution by the Partnership
of its share of the net proceeds of the Sale
and the liquidation of the Partnership will
constitute a complete disposition by a
Limited Partner of his interest in the
Partnership (unless he has elected to
aggregate his limited partnership interest
with other similar interests). Consequently,
the excess of (1) the sum of any loss from
the Partnership for the 1996 taxable year
(including losses carried over from prior
years, if any) plus any losses realized on
the Sale, over (2) a Limited Partner's net
income or gain for such taxable year from
all passive activities (including income or
gain from the Partnership or resulting from
the Sale or dissolution of the Partnership)
may be deducted by a Limited Partner against
nonpassive income.
If a cash distribution from a liquidation
and dissolution exceeds a Limited Partner's
adjusted tax basis in his Units, such excess
will be treated as a gain realized by the
Limited Partner on the Sale of his Unit.
Similarly, the excess of a Limited Partner's
adjusted tax basis in his Unit over the
amount distributed to the Limited Partner
will be treated as a loss realized by the
Limited Partner on the Sale of his Unit.
Such gains or losses will be treated as long
term capital gains or losses in the cases of
Units held for more than 12 months; provided
that the Limited Partner is not
5
<PAGE>
considered to be a 'Dealer' with respect to
the Units. A 'Dealer' is one who holds
property, primarily for sale to customers in
the ordinary course of business. Gains or
losses on the liquidation of the Partnership
in respect of a Unit must be reported
separately by each Limited Partner and will
depend on each Limited Partner's basis in
his own Units.
With respect to a Financing, the
distribution by the Partnership of its
allocable share of the Loan proceeds to the
Limited Partners would be non-taxable to the
extent it does not exceed the Limited
Partner's adjusted tax basis in his Unit. To
the extent the distribution does exceed this
adjusted basis, the excess would be treated
as an amount received for the sale or
exchange of the Unit and taxable as a
capital gain (provided the Limited Partner
is not deemed to be a Dealer in the Units).
A Limited Partner's adjusted tax basis in
his Unit consists of the amount paid for the
Unit, increased by Partnership income
allocated to the Unit plus the Limited
Partner's allocable share of non-recourse
debt of the Partnership and decreased by any
Partnership losses allocated to the Unit and
distributions made to the Limited Partner.
Because the Loan would be non-recourse, it
would be allocated to Limited Partners and
would increase their adjusted basis in their
Partnership interest. As a result, it is
unlikely that a distribution to a Limited
Partner of his allocable share of the excess
Loan proceeds would be taxable to him.
However, such distribution would reduce his
adjusted tax basis in his Unit and would
increase the gain that would ultimately be
reported by the Limited Partner upon the
sale of the Willowbrook Property by the
Joint Venture. Depending upon the amount of
this distribution and the eventual sale
price of the Willowbrook Property, a Limited
Partner's share of taxable gain from the
sale may exceed his share of the net
proceeds of the sale and liquidation of the
Partnership.
To the extent that the Loan proceeds
distributed to Limited Partners exceed the
Partnership's allocable share of the Joint
Venture's gross operating expenditures and
the Partnership's gross operating
expenditures in the year of the Financing,
the interest expense allocable to such
distributions would be separately reported
by each Limited Partner receiving such
distributions and would not be deducted by
the Joint Venture or the Partnership. Since
the Partnership's annual gross operating
expenditures aggregate approximately $75,000
and the Joint Venture's annual gross
operating expenses aggregate approximately
$1,300,000, a Loan to the Joint Venture of
$7,000,000 would require that a substantial
portion of the interest expense be
separately reported by the Limited Partners
and not deducted by the Joint Venture or the
Partnership. As a result, a Limited Partner
will likely continue to report income from
the Partnership although it is unlikely that
he
6
<PAGE>
will receive any subsequent distributions of
Partnership cash flow. A Limited Partner's
separately stated share of the interest
expense on the Loan may or may not be
deductible by the Limited Partner depending
on his use of his share of the Loan
proceeds.
Based on the complexities of the federal
income tax laws and because the tax
consequences may vary depending upon a
holder's individual circumstances or tax
status, it is recommended that each Limited
Partner consult his tax advisor concerning
the Federal (and any applicable state, local
or other) tax consequences of the
liquidation and dissolution of the
Partnership pursuant to a Sale or
Alternative Sale or the tax consequences of
a Financing transaction. See 'Income Tax
Consequences.'
7
<PAGE>
SPECIAL MEETING OF LIMITED PARTNERS
MEETING INFORMATION REGARDING PROXIES
This Proxy Statement is being furnished to the Limited Partners on the
Record Date in connection with the three Proposals described herein.
Accompanying this Proxy Statement is a Proxy solicited by and on behalf of
the General Partner for use at the Special Meeting of Limited Partners to be
held on June 28, 1996, at 23 West Park Avenue, Merchantville, New Jersey 08109,
at 2:00 p.m., local time, and at any adjournments thereof. Even those Limited
Partners intending to attend are requested to complete and return their Proxies
promptly. All Limited Partners are invited to attend the Special Meeting.
Proxies in the form enclosed, properly executed and duly returned, will be voted
in accordance with the instructions thereon. Additionally, the Proxy delegates
discretionary authority to the General Partner with respect to any other
business which may properly come before the Special Meeting or any adjournment
or postponement thereof, including, without limitation, any proposal to adjourn
or postpone the Special Meeting.
All questions as to the form of documents and the validity of Proxies will
be determined by the General Partner, which determinations will be final and
binding. The General Partner reserves the right to waive any defects or
irregularities in any Proxy. The Limited Partners will be notified promptly in
writing before the Special Meeting of any material changes in the terms of the
Proposals that are made after the date of this Proxy Statement.
Questions and requests for assistance or for additional copies of the Proxy
Statement and Proxy may be directed to Beacon Hill Partners, Inc., a proxy
solicitation firm, at 800-755-5001. In addition to soliciting Proxies by mail,
Proxies may be solicited in person and by telephone. The anticipated fees to be
paid by the Joint Venture on behalf of the Partnership, CIP II and CIP III to
Beacon Hill Partners, Inc. are $9,000 plus reasonable out of pocket expenses,
estimated to approximate $8,500. BEACON HILL PARTNERS, INC.'S RESPONSIBILITIES
SHALL INCLUDE CONTACTING LIMITED PARTNERS BY TELEPHONE TO SOLICIT PROXIES AND
PROVIDING THE GENERAL PARTNER WITH STATISTICAL RESULTS OF VOTES.
BDO Seidman, LLP is the Partnership's independent auditor. Representatives
of BDO Seidman, LLP are expected to be available for the Special Meeting. Such
representatives will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
PROCEDURES FOR COMPLETING PROXIES
Limited Partners are requested to complete and return their Proxy as soon
as possible. If Units stand in the names of two or more persons, all such
persons must sign the Proxy. A Limited Partner who has given a Proxy may revoke
it by filing an instrument revoking it, by submitting a duly executed Proxy
bearing a later date or by voting in person at the Special Meeting. Properly
executed Proxies that are returned, but in which no direction on a Proposal is
given, will be voted for the Proposal and in the discretion of the General
Partner upon such other matters as may properly come before the Special Meeting.
A Proxy or its revocation will be deemed to have been submitted to the
Partnership on the date it is either given personally or mailed to the General
Partner at the following address:
CLOVER INCOME PROPERTIES, L.P.
c/o IFGP Corporation
P.O. Box 2347
Greenville, S.C. 29602
Attention: George Buchanan
8
<PAGE>
VOTING REQUIREMENTS
If a Majority Vote in favor of the Sale Proposal is received and certain
other conditions are satisfied (including an Affiliate Majority Vote), the Sale
will be completed. In the event that a Majority Vote is obtained in support of
the Sale Proposal, but the Sale to the Buyers does not close for any reason, and
a Majority Vote is received in favor of the Alternative Sale Proposal, the
Willowbrook Property may be sold to another buyer. Upon the completion of the
Sale or an Alternative Sale, the Partnership will be terminated and dissolved.
If a Majority Vote in favor of the Sale Proposal is not received, or if the
Sale to the Buyers does not close for any reason, and a Majority Vote in favor
of the Financing Proposal is received, the General Partner will also be
authorized to effectuate the Financing. Before and after a Financing, the Joint
Venture will still be authorized to pursue and complete an Alternative Sale, if
the Sale Proposal and Alternative Sale Proposal are each approved by a Majority
Vote.
The Record Date for determining the Limited Partners entitled to notice of
and to vote at the Special Meeting is May 28, 1996. On the Record Date, the
Partnership had 15,000 Units outstanding, held by 1,311 holders.
The presence at the Special Meeting in person or by proxy of at least a
majority of the Units is necessary to constitute a quorum. Abstentions will be
counted in determining whether a quorum is present. Whether or not a quorum is
present or represented at the Special Meeting, the holders of a majority of the
Units present or represented by proxy may adjourn the Special Meeting from time
to time without further notice to the Limited Partners. Abstentions with respect
to any Proposal will have the same effect as a vote against such Proposal.
DISSENTERS' OR APPRAISAL RIGHTS
Limited Partners who vote against any of the Proposals will not be entitled
to dissenters' or appraisal rights under Delaware law or under the Partnership
Agreement.
9
<PAGE>
THE PARTNERSHIP
BUSINESS OF THE PARTNERSHIP
The Partnership is a limited partnership formed in July 1986 under the
Delaware Act, to invest in existing income-producing residential real estate
properties. C.I.P. Management Corp., a New Jersey corporation which is a
wholly-owned subsidiary of Clover Financial Corporation, a New Jersey
corporation, is the General Partner of the Partnership. The Partnership sold
$14,891,940 of Units in a public offering.
On July 1, 1994, the Partnership sold the Holly Tree Park Apartments
('Holly Tree'), a 144-unit garden apartment complex located in Waldorf, Charles
County, Maryland, to United Dominion Realty Trust, Inc. for a cash purchase
price of $6,500,000. The Partnership had acquired the Holly Tree Park Apartments
in December 1986, at a purchase price of $5,000,000.
The Partnership continues to own a 42.91% interest in the Joint Venture, a
joint venture among the Partnership, CIP II and CIP III. The Joint Venture owns
the Willowbrook Property, a 299-unit mid-rise residential apartment complex
located in Baltimore, Maryland, which it acquired on December 17, 1987, at a
purchase price of $12,500,000.
The Partnership and CIP II each acquired a 50% interest in the Joint
Venture in December 1987 for an investment by each of $6,450,000. In April 1992,
the interest of each of the Partnership and CIP II in the Joint Venture was
reduced to 42.91% as a result of a purchase by CIP III, an affiliate of the
Partnership, of a 14.18% interest for a cash purchase price of $2,200,000. In
the transaction, the Partnership and CIP II each received a distribution from
the Joint Venture in the amount of $1,100,000.
PROPERTY OF THE PARTNERSHIP
As a result of the sale of Holly Tree, the Partnership's only remaining
interest in real estate is a 42.91% interest in the Joint Venture which owns the
Willowbrook Property.
The Willowbrook Property, located at 6310 Greenspring Avenue, Baltimore,
Maryland, was built in 1968 and consists of 299 apartment units in 8 five story
buildings on 19.371 acres of land. The property includes 470 parking spaces. The
unit mix at the Willowbrook Property is as follows:
<TABLE>
<CAPTION>
NUMBER TOTAL
OF UNITS TYPE SQ. FT. SQ. FT.
- --------- -------------------------------------------------- ---------------------- ---------
<S> <C> <C> <C>
3 Efficiency........................................ 450 1,350
80 1 BR.............................................. 950 76,000
107 2 BR.............................................. 1,100 117,700
55 2 BR Deluxe....................................... 1,350 74,250
52 3 BR Deluxe....................................... 1,500 78,000
2 Commercial Suites................................. 1,100 + 1,500 2,600
- --------- ---------
299 349,900
</TABLE>
The average occupancy rates at the Willowbrook Property for the five years
ended December 31, 1991, 1992, 1993, 1994 and 1995 were 94.1%, 90.1%, 88.7%,
93.3% and 93.9%, respectively, and the average effective annual rentals per unit
for those five years were $7,128, $7,350, $7,270, $7,218 and $7,180,
respectively. The average effective quarterly rental rates for the three month
periods ended March 31, 1996 and 1995 were $1,839 and $1,787, respectively, and
the average quarterly occupancy rate was 93.0% for the three month period ended
March 31, 1996 and 92.6% for the three month period ended March 31, 1995. The
realty tax rates for the Willowbrook Property for the periods ended June 30,
1994, June 30, 1995 and June 30, 1996 were $61.10, $60.60 and $60.60,
respectively, per $1,000 of assessed value, resulting in annual taxes of
$298,778, $267,996 and $267,996, respectively. The General Partner believes that
the Willowbrook Property is adequately covered by insurance.
Major projects planned for 1996, at an estimated total cost of $188,000,
include the replacement of carpets and tiles, the resurfacing of the parking lot
and the painting of certain hallways. Funding for these projects is being
provided by the Willowbrook Property's operating cash flow.
10
<PAGE>
Effective February 21, 1995, the General Partner and certain of its
affiliates entered into an agreement with NPI-CL Management L.P. ('NPI'), an
entity unaffiliated with the Partnership or its General Partner, pursuant to
which NPI began providing day-to-day asset management services for the
Partnership as well as property management services for the Joint Venture. NPI
replaced Allstate Management Corp. ('Allstate'), an affiliate of the General
Partner. The Joint Venture remains indebted to Allstate for accrued and unpaid
property management fees and reimbursable costs of approximately $326,000, which
would be paid from the net proceeds of the Sale, an Alternative Sale or a
Financing.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. ('Insignia'). According to Commercial Property News and the National
Multi-Housing Council, Insignia is the largest property manager in the United
States. The General Partner does not believe this transaction will have a
significant impact on the Partnership.
As a result of the acquisition of NPI, Insignia now prepares quarterly and
annual reports for the Partnership, CIP II and CIP III, responds to questions
pertaining to property and investment performance, maintains the investor data
base and serves as the transfer agent for the Partnership. In consideration for
the services of Insignia, the Joint Venture pays fees equal to 5% of the gross
revenues from the Willowbrook Property.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS OF THE GENERAL PARTNER
As of the Record Date, the Partnership had 15,000 Units outstanding, held
by 1,311 holders. There is no established trading market for the Units. The
Partnership is not aware of any person or group of persons who owns more than 5%
of the outstanding Units.
The General Partner has the sole right to manage the business of the
Partnership and make any and all decisions with respect thereto. The Limited
Partners are allowed to vote or consent only in limited circumstances as
permitted by the Delaware Act and as specifically set forth in the Partnership
Agreement. The General Partner has ultimate authority in all Partnership
business decisions.
The General Partner has the right to delegate management functions. Limited
Partners have no right to participate in the management of the Partnership.
As of April 30, 1996, the directors and officers of the General Partner and
the directors and officers of the General Partner as a group beneficially owned
the following number of Units of the Partnership:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME OWNERSHIP OF UNITS INTEREST
---- ----------------------- -------------
<S> <C> <C>
Steven R. Zalkind..................................................... 10 *
Donald N. Love........................................................ 21 *
Stanley E. Borucki.................................................... 1 *
Dianne P. Duggan...................................................... 2 *
All directors and officers as a group (4 persons)..................... 34 *
</TABLE>
- ------------------
* Less than one percent
11
<PAGE>
BACKGROUND AND REASONS FOR THE
PROPOSED SALE AND FINANCING
THE BUYERS
The principal executive offices of Berwind Property Group, Inc. are located
at 3000 Centre Square West, 1500 Market Street, Philadelphia, Pennsylvania 19102
and its telephone number is (215) 563-2800. The principal executive offices of
First Montgomery Properties, Ltd. are located at 160 Clubhouse Road, King of
Prussia, Pennsylvania 19406 and its telephone number is (610) 265-2800.
Both of the Buyers' businesses include real estate investment and
management activities. Neither of the Buyers is affiliated with the Partnership
or the General Partner.
BACKGROUND OF THE SALE
The Joint Venture previously agreed to sell the Willowbrook Property to
another buyer, Lambsons Lane, Inc. ('Lambsons'), pursuant to an Agreement of
Sale, dated May 22, 1995 for a purchase price of $9,715,000 (after a $285,000
credit for repairs and replacements) (the 'Prior Agreement'). Before the sale
was submitted to the Limited Partners for approval, Lambsons exercised its right
to terminate the sale pursuant to the terms of the Prior Agreement.
On November 22, 1995, the Buyers commenced discussions with the Joint
Venture of a potential purchase of the Willowbrook Property. On December 12,
1995, the Buyers and the Joint Venture orally agreed to negotiate sale
agreements for the Willowbrook Property and certain other related properties.
The Joint Venture also considered a sale of the Willowbrook Property to other
potential buyers (other than Lambsons), none of which offered a purchase price
as high as the Purchase Price offered by the Buyers.
The Buyers and the Joint Venture executed the Sale Agreement on February 7,
1996 and executed amendments to the Sale Agreement on February 7, 1996, May 6,
1996 and May 16, 1996. In negotiating the May 16th amendment, Buyers required
that the Purchase Price be reduced to reflect the following factors: (i) their
analysis of additional deferred maintenance costs respecting the Willowbrook
Property and (ii) the increase in interest rates since the execution of the
original Sale Agreement on February 7, 1996. Consequently, the Purchase Price
was reduced from $10,500,000 (less a $315,000 credit for capital improvements)
to $9,850,000.
In addition, the Buyers entered into 12 sale agreements on February 7,
1996, as amended, with affiliates of the General Partner relating to the sale of
the following properties to the Buyers at the indicated cash purchase prices:
Glen Mar Apartments ($5,150,000), Glen Ridge Apartments ($8,500,000), Ross Ridge
Apartments ($4,600,000), Briarwood Apartments ($6,500,000), Brookmont Apartments
($7,800,000), Squires Manor Apartments ($3,850,000), Steeplechase Apartments
($8,650,000), Whitestone Apartments ($5,200,000), Burnt Mill Apartments
($3,200,000), Moorestown Apartments ($10,150,000), Roberts Mill Apartments and
Shopping Center ($17,800,000) and Vineland Village Apartments ($2,750,000).
The General Partner considered, but rejected as not in the best interests
of the Limited Partners, retaining its interest in the Willowbrook Property for
the foreseeable future with the expectation of achieving greater capital
appreciation. This alternative was rejected because of the factors discussed
below.
MATERIAL FACTORS TO BE CONSIDERED IN CONNECTION WITH THE SALE PROPOSAL AND
THE ALTERNATIVE SALE PROPOSAL
In order to assist the Limited Partners in determining whether to consent
to the Sale Proposal and/or the Alternative Sale Proposal, this Proxy Statement
contains information relating to the business and financial history of the
Partnership, and certain tax considerations if a sale of the Willowbrook
Property is completed. Although no attempt has been made to discuss herein all
factors which might be
12
<PAGE>
considered in reviewing such information, the General Partner believes that the
principal factors discussed below should be considered by each Limited Partner.
The General Partner considered the following material factors that weigh in
favor of the Sale Proposal and the Alternative Sale Proposal: (1) certain risks
of continuing to own the Willowbrook Property, including competition from other
rental apartment and townhouse developments in the Baltimore area and adverse
local market conditions due to changes in the Baltimore market; (2) the
potential for increased operating and maintenance expenses required in future
years as the Willowbrook Property ages, resulting in reduced cash flow
distributions to the Limited Partners; (3) certain other risks applicable
generally to the ownership of apartment complexes, including adverse local
market conditions due to changes in the economic conditions in the Mid-Atlantic
region or nationally; (4) the costs necessary to operate the Partnership as a
public entity; (5) the potential for Limited Partners to realize higher returns
on the cash distributed from the Sale than they otherwise would receive if the
Willowbrook Property were not sold; (6) the lack of an established trading
market for the Units; and (7) the tax return requirements and associated
expenses as a result of owning the Units.
The General Partner considered the following material factors that weigh
against the Sale Proposal and the Alternative Sale Proposal: (1) the possibility
of substantial improvement in the metropolitan Baltimore apartment market; (2)
the possibility that future rental income could more than offset future
operating and maintenance costs and, as a result, cash flow distributions to the
Limited Partners could thereby increase; and (3) the possibility of eventually
obtaining a higher purchase price for the Willowbrook Property if it is not sold
in the foreseeable future.
Generally, in the initial years after the construction of an apartment
complex, maintenance costs are low. As an apartment property ages, maintenance
costs increase in order to preserve the physical quality of the property and to
compete with newer complexes. The Willowbrook Property is approximately 28 years
in age. Although the General Partner believes there are currently no structural
maintenance concerns at the Willowbrook Property, the General Partner expects
that the Willowbrook Property will require, through 2001, substantial
maintenance and improvement expenditures which will be necessary to maintain the
competitive position of the Willowbrook Property, including the following at an
estimated total cost of approximately $775,000: the replacement of three roofs;
the complete rebuilding of one elevator; the annual replacement of certain
appliances; the annual replacement of carpets; the repair of sidewalks and
concrete; the painting of hallways and lobbies; and the replacement of heaters.
There are no assurances that the actual costs of completing the repair and
replacement projects discussed above will not be more or less than the estimate
provided or that additional maintenance expenses will not be required.
With respect to the Sale Proposal, the General Partner also considered the
fairness of the Purchase Price. Based on its experience in the real estate
industry and on the Joint Venture's consideration of the sale of the Willowbrook
Property to other prospective buyers, including Lambsons, the General Partner
believes that the Purchase Price represents a fair price to the Partnership.
With respect to the Alternative Sale Proposal, the General Partner believes
that the conditions that must be satisfied in connection with an Alternative
Sale ensure that such a transaction will be fair to the Limited Partners. The
General Partner also considered that, if the Sale is not completed, approval of
the Alternative Sale Proposal will enable the Willowbrook Property to be sold
without the time and cost involved in soliciting the approval of the Limited
Partners to a specific Alternative Sale.
Balancing all of the material factors listed above, but without attaching
relative weight to them, the General Partner determined that both the Sale
Proposal and the Alternative Sale Proposal are fair and in the best interests of
the Limited Partners.
MATERIAL FACTORS TO BE CONSIDERED IN CONNECTION WITH THE FINANCING PROPOSAL
In order to assist the Limited Partners in determining whether to consent
to the Financing Proposal, this Proxy Statement contains additional information
relating to certain tax considerations if the Financing occurs. Although no
attempt has been made to discuss herein all factors which might be
13
<PAGE>
considered in connection with the Financing Proposal, the General Partner
believes that the principal factors discussed below should be considered by each
Limited Partner.
The General Partner considered the following material factors that weigh in
favor of the Financing Proposal: (1) the ability to distribute cash to the
Limited Partners from the proceeds of the Financing; and (2) the potential to
make an Alternative Sale of the Willowbrook Property more attractive to a buyer
(because the Willowbrook Property could remain subject to the Financing, thereby
providing financing to the buyer and reducing its cash requirements at closing).
The General Partner considered the following material factors that weigh
against the Financing Proposal: (1) the creation of debt service obligations of
the Joint Venture which did not previously exist and which would likely
eliminate cash flow available for subsequent distributions to the Limited
Partners from the Partnership; and (2) the risk of foreclosure and loss of the
Willowbrook Property in the event the Joint Venture were unable to comply with
its financial and other obligations under the Financing.
Balancing all of the material factors listed above, but without attaching
relative weight to them, the General Partner determined that the Financing
Proposal is fair and in the best interests of the Limited Partners.
DESCRIPTION OF THE PROPOSALS
GENERAL DISCUSSION OF PROPOSED SALE AND THE PROPOSED ALTERNATIVE SALE
Pursuant to the Sale Agreement, the Buyers agreed to pay to the Joint
Venture a cash payment of $9,850,000. In connection with the Sale Agreement, the
Buyers deposited into escrow a total of $200,000 (the 'Deposit').
The Sale Agreement provides that certain items are to be apportioned pro
rata between the Joint Venture and the Buyers including: current collected rents
and prepaid rents; real estate taxes; water and sewer charges; amounts due on
service contracts assigned by the Joint Venture to Buyers pursuant to the Sale
Agreement; fees for all transferable state or local licenses required in the
operation of the Willowbrook Property; and any other current charges incurred in
connection with the normal operation of the Willowbrook Property.
The closing of the Sale (the 'Closing') is scheduled to take place on or
before July 31, 1996 (the 'Closing Date'). The Joint Venture's obligation to
close under the Sale Agreement is subject to and conditioned upon, among other
things, the receipt of any and all approvals and consents necessary for the
Joint Venture to complete the Sale (including a Majority Vote and an Affiliate
Majority Vote). The Joint Venture is required to use its best efforts to
endeavor to obtain all approvals and consents. If all approvals and consents are
not received on or before June 30, 1996, the Sale Agreement (unless it is
amended or extended) will automatically terminate and the Deposit delivered by
the Buyers and interest thereon will be returned to the Buyers.
In addition, the Sale Agreement is conditioned upon Dorman & Wilson,
Inc./Freddie Mac (the 'Purchase Money Lender') issuing, and the Buyers
accepting, in Buyers' sole discretion, a commitment (the 'Commitment') for a
purchase money mortgage loan. In the event the Purchase Money Lender does not
issue, and the Buyers do not accept, in Buyers' sole discretion, the Commitment
on or before July 1, 1996, then the Sale Agreement shall be canceled and
terminated and the Deposit shall be returned to the Buyers.
In the event that the Purchase Money Lender issues and the Buyers accept
the Commitment, Buyers are required to lock-in the interest rate on the purchase
money mortgage loan on or before July 10, 1996. Buyers' failure to do so shall
be deemed a default by Buyers of the Sale Agreement and the Joint Venture shall
be entitled to retain all Deposit money as liquidated damages and the Sale
Agreement shall be terminated. Moreover, if Buyers lock-in the interest rate on
or before July 10, 1996, but the Purchase Money Lender fails to fund the
purchase money mortgage loan due solely to Buyers' inability to comply with a
condition in the Commitment after Buyers use their best
14
<PAGE>
efforts, then Closing shall be extended for a period of ninety (90) days during
which time Buyers are required to use their best efforts to comply with and/or
otherwise satisfy such condition. If such condition is complied with and/or
otherwise satisfied within the ninety (90) day period, then Closing shall be
completed in accordance with the terms of the Sale Agreement on the expiration
of the ninety (90) day period. If such condition cannot be complied with and/or
otherwise satisfied within said ninety (90) day period, then the Sale Agreement
shall be canceled and terminated and the Deposit, together with interest earned
thereon, shall be returned to the Buyers.
The Joint Venture also will have the right to terminate the Sale Agreement
for the following reasons:
o In the event the Buyers fail to comply with or otherwise default in
any of the provisions of the Sale Agreement (in which case all
Deposit money delivered by the Buyers to the Joint Venture pursuant
to the Sale Agreement, will be retained by the Joint Venture as
liquidated damages).
o A third party action is commenced against the Joint Venture by any
person other than the Buyers or an affiliate of the Buyers which
enjoins or restrains the Joint Venture from closing under the Sale
Agreement.
In addition, the Sale Agreement provides that Buyers will have the right to
terminate the Sale Agreement upon the occurrence of any of the events summarized
below:
o The Willowbrook Property is damaged by fire or other casualty and
the cost of restoration exceeds ten percent of the Purchase Price
(or if the Purchase Money Lender determines to not close solely as a
result of the fire or other casualty).
o A portion of the Willowbrook Property is taken pursuant to a
condemnation proceeding resulting in an award in condemnation in
excess of ten percent of the Purchase Price (or if the Purchase
Money Lender determines to not close solely as a result of the
taking).
o The Joint Venture is unable to deliver title to the Willowbrook
Property in accordance with the Sale Agreement.
o The Joint Venture commits a willful and intentional breach of any of
its covenants or warranties under the Sale Agreement, or makes a
willful or intentional, material misrepresentation in the Sale
Agreement.
o A Commitment for financing is not issued by the Purchase Money
Lender or, if issued, is not accepted by the Buyers, in their sole
discretion, before July 1, 1996.
o An action is commenced against the Joint Venture by any person other
than the Buyers or an affiliate of the Buyers which enjoins or
restrains the Joint Venture from closing under the Sale Agreement.
Because the Closing is subject to contingencies set forth in the Sale
Agreement, there can be no assurance that the proposed Sale will occur. If all
conditions precedent to the Buyers' obligation to close are not satisfied by the
Closing, the Buyers' obligation to purchase the Willowbrook Property will
terminate and all Deposit money will be returned, unless the Buyers and the
Joint Venture agree to extend the date of the Closing.
In addition, by voting in favor of the Sale Proposal, the Limited Partners
authorize the General Partner to agree on behalf of the Partnership to any
modifications, amendments and waivers to the Sale Agreement which the General
Partner determines to be necessary or appropriate, including changes in the
amount and type of consideration to be received by the Joint Venture.
Although the terms of an Alternative Sale transaction may be similar to the
terms of the Sale Agreement set forth above, the General Partner will be
authorized to agree on behalf of the Partnership to any modifications or
variations to the terms of the Sale Agreement in negotiating an Alternative Sale
15
<PAGE>
which the General Partner determines to be necessary or appropriate, including
changes in the amount and type of consideration to be received by the Joint
Venture.
GENERAL DISCUSSION OF PROPOSED FINANCING
The specific terms of the Loan, the principal amount of which will not
exceed $7,000,000, will be subject to negotiation with a particular lender.
Customary loan provisions which may be included in a particular Loan include the
following:
o Monthly payments of principal and interest.
o Limitations on ability of Joint Venture to grant any subordinate
mortgages on the Willowbrook Property without the lender's consent.
o Limitations on the ability to transfer the Willowbrook Property
without the lender's consent (i.e., such limitations may require
that the transferee be credit-worthy and that an assumption fee be
paid to the lender in connection with the transfer).
o Limitations on the use of proceeds from the Loan.
o Provisions for the application of condemnation/casualty insurance
proceeds to repay the Loan.
o Monthly escrow reserves for taxes and insurance on the Willowbrook
Property.
o Possible restrictions or prohibitions on distributions of cash flow
from the Joint Venture to the Partnership (and thus to the Limited
Partners). It is likely that subsequent cash flow distributions to
the Limited Partners will be eliminated.
o The establishment of reserves for deferred maintenance expenses and
ongoing replacements and repairs at the Willowbrook Property.
o Provisions prohibiting a prepayment of the Loan and/or requiring a
penalty to be paid with any prepayment of the Loan.
REGULATORY COMPLIANCE
Other than the applicable rules and regulations of the Securities and
Exchange Commission, the General Partner knows of no other Federal or State
regulatory requirements with which the Partnership or the Buyers must comply in
order to complete the Sale, an Alternative Sale or a Financing. However, the
Partnership will be required to comply with certain filing requirements under
Delaware law in order to effect the termination and dissolution of the
Partnership subsequent to a Sale or an Alternative Sale.
CONSEQUENCES IF PROPOSALS ARE NOT APPROVED
If the Sale Proposal is not approved by a Majority Vote and an Affiliate
Majority Vote, (i) the Sale will not be completed; (ii) an Alternative Sale will
not be authorized; and (iii) the Partnership will continue to own a 42.91%
interest in the Willowbrook Property. If the Sale Proposal is approved by a
Majority Vote but is not completed for any reason and the Alternative Sale
Proposal is approved by Majority Vote and an Affiliate Majority Vote, the Joint
Venture will be authorized to sell the Willowbrook Property to another buyer
without further approval from the Limited Partners pursuant to the terms of the
Alternative Sale Proposal.
In addition, if the Sale Proposal is not approved or the Sale is not
completed for any reason, and the Financing Proposal is approved by a Majority
Vote and an Affiliate Majority Vote, the Joint Venture will be authorized to
obtain the Financing without additional approval of the Limited Partners.
If none of the Proposals is approved by a Majority Vote, the Joint Venture
would continue to operate the Willowbrook Property and the General Partner would
consider other sale or financing opportunities if and as they became available.
In addition, the General Partner would be required to
16
<PAGE>
solicit the approval of the Limited Partners with respect to any subsequent sale
or financing of the Willowbrook Property and to incur the additional costs
necessary to solicit the approval of the Limited Partners at such later point in
time.
DISTRIBUTIONS TO LIMITED PARTNERS
SALE
If the Sale is completed, the Partnership will terminate and dissolve.
After receiving the Partnership's share of the net proceeds from the Sale, the
General Partner will distribute the net Sale proceeds and the Partnership's
existing cash in accordance with the terms of the Partnership Agreement.
The Partnership Agreement provides that upon the sale of all of the
Partnership's interests in real property or upon any other event resulting in
the termination, winding up and liquidation of the Partnership, all proceeds
from a sale and all other amounts available for distribution are to be
distributed to the General Partner and the Limited Partners in accordance with
their positive capital account balances, as determined after taking into account
all capital account adjustments for the taxable year of the Partnership during
which such liquidation occurs. Since the General Partner will have a negative
capital account balance on the Closing Date, it will not receive any of the
proceeds from the Sale.
All Limited Partners are encouraged to review carefully the following chart
which summarizes the calculation of the estimated distribution per Unit in
connection with the proposed Sale. The calculations in this chart are based upon
estimates, assuming a Closing Date of July 31, 1996. Actual results will likely
differ from these estimates.
The estimated distribution amounts in the following chart differ from the
distribution amounts set forth in the 'Unaudited Pro Forma Financial Statements'
of the Partnership included elsewhere in this Proxy Statement because the pro
forma condensed balance sheets give effect to the Sale and the resulting
distribution of net cash proceeds as if they had occurred on December 31, 1995
and March 31, 1996.
JOINT VENTURE
<TABLE>
<CAPTION>
TOTAL
-------------
<S> <C>
ESTIMATED SOURCES OF FUNDS
Purchase Price................................................................................... $ 9,850,000
Operating Cash Balance........................................................................... 82,000
-------------
ESTIMATED TOTAL SOURCES OF FUNDS................................................................... $ 9,932,000
-------------
-------------
ESTIMATED USES OF FUNDS
Closing Costs.................................................................................... $ 154,000
Accounts Payable of the Joint Venture............................................................ 46,000
Accrued Management Fees and Reimbursable Costs Due to Allstate................................... 326,000
Proxy Statement Costs (including filing fee, printing and mailing costs)......................... 55,000
Legal Expenses................................................................................... 85,000
Accounting Expenses.............................................................................. 30,000
Reserves for Post-Closing Expenses............................................................... 136,000
-------------
ESTIMATED TOTAL USES OF FUNDS...................................................................... $ 832,000
-------------
-------------
ESTIMATED NET PROCEEDS DISTRIBUTED TO PARTNERSHIP, CIP II AND CIP III.............................. $ 9,100,000
</TABLE>
17
<PAGE>
PARTNERSHIP
<TABLE>
<CAPTION>
TOTAL
-------------
<S> <C>
ESTIMATED AMOUNT OF NET PROCEEDS FROM SALE DISTRIBUTED TO PARTNERSHIP.............................. $ 3,904,810
ESTIMATED CASH BALANCE AT CLOSING.................................................................. $ 202,500
Estimated Reserves (to cover any subsequent liabilities and dissolution costs)..................... $ (50,000)
-------------
TOTAL ESTIMATED DISTRIBUTION TO LIMITED PARTNERS................................................... $ 4,057,310
-------------
-------------
ESTIMATED DISTRIBUTION PER UNIT.................................................................... $ 270
-------------
-------------
</TABLE>
ALTERNATIVE SALE
If the Partnership received net proceeds from an Alternative Sale similar
to the estimated net proceeds from the Sale set forth above, the estimated
distribution per Unit would approximate the amount calculated above in
connection with the proposed Sale. There can, however, be no assurances that a
sale to another buyer in an Alternative Sale will be on as favorable terms to
the Partnership as the terms of the Sale.
FINANCING
If a Financing is completed, the Partnership will not terminate and
dissolve. After receiving the Partnership's share of the net proceeds of the
Financing, the General Partner will distribute such net proceeds in accordance
with the terms of the Partnership Agreement. The Joint Venture's and the
Partnership's existing cash will not be distributed to the Limited Partners as
part of the distribution to Limited Partners from the proceeds of a Financing.
The debt service payments which would be required in connection with a
Financing would result in a significant reduction in the Joint Venture's net
operating income. As a result, subsequent cash distributions to the Limited
Partners would likely be eliminated.
The Partnership Agreement provides that the proceeds from the Financing are
to be distributed first to the Limited Partners, up to the aggregate amount of
the adjusted capital contributions of all Limited Partners immediately prior to
such distribution. If the Loan is in the principal amount of $7,000,000, the
proceeds from the Partnership's allocable share of the Loan will not exceed the
aggregate amount of the adjusted capital contributions of the Limited Partners
and, consequently, the General Partner will not receive any of the proceeds from
a Financing.
All Limited Partners are encouraged to review carefully the following chart
which summarizes the calculation of the estimated distribution per Unit in
connection with the proposed Financing if it were completed during 1996, in the
principal amount of $7,000,000. Actual results will likely differ from these
estimates.
The estimated distribution amounts in the following chart differ from the
distribution amounts set forth in the 'Unaudited Pro Forma Financial Statements'
of the Partnership included elsewhere in this Proxy Statement because the pro
forma condensed balance sheets give effect to the Financing and the resulting
distribution of net cash proceeds as if they had occurred on December 31, 1995
and March 31, 1996.
18
<PAGE>
JOINT VENTURE
<TABLE>
<CAPTION>
TOTAL
-------------
<S> <C>
ESTIMATED SOURCES OF FUNDS
Principal Amount of Loan......................................................................... $ 7,000,000
ESTIMATED TOTAL SOURCES OF FUNDS................................................................... $ 7,000,000
-------------
-------------
ESTIMATED USES OF FUNDS
Closing Costs.................................................................................... $ 204,000
Accrued Management Fees and
Reimbursable Costs Due to Allstate............................................................ 326,000
Proxy Statement Costs (including filing fee, printing and mailing costs)......................... 55,000
Legal Expenses................................................................................... 85,000
Accounting Expenses.............................................................................. 30,000
Reserves......................................................................................... 300,000
ESTIMATED TOTAL USES OF FUNDS...................................................................... $ 1,000,000
-------------
-------------
ESTIMATED NET PROCEEDS DISTRIBUTED TO PARTNERSHIP, CIP II AND CIP III.............................. $ 6,000,000
</TABLE>
PARTNERSHIP
<TABLE>
<S> <C>
ESTIMATED AMOUNT OF NET
PROCEEDS DISTRIBUTED TO PARTNERSHIP.............................................................. $ 2,574,600
TOTAL ESTIMATED DISTRIBUTION TO LIMITED PARTNERS................................................... $ 2,574,600
-------------
-------------
ESTIMATED DISTRIBUTION PER UNIT.................................................................... $ 172
-------------
-------------
</TABLE>
ACCOUNTING TREATMENT
SALE AND ALTERNATIVE SALE PROPOSALS
Upon the Closing of the Sale, the Partnership currently estimates that it
will realize a gain for accounting purposes. The amount of the gain will differ
from the gain reflected in the 'Unaudited Pro Forma Financial Statements' of the
Partnership included elsewhere in this Proxy Statement, due to results of
operations after December 31, 1995 and March 31, 1996, the dates of which such
pro forma financial information assumes the Sale to have occurred, and through
the anticipated date of Closing of the Sale.
FINANCING PROPOSAL
The distribution of the Financing proceeds to the Partnership, CIP II and
CIP III (based on their respective percentage ownership) would be treated on the
books of the Joint Venture as a return of equity. The distribution of the
Partnership's share of the Financing proceeds would be treated on the books of
the Partnership as a return on the Partnership's investment which would reduce
the Partnership's investment in the Joint Venture by the amount received. The
distribution by the Partnership to the Limited Partners would be accounted for
as a return of each Limited Partners' equity.
19
<PAGE>
INCOME TAX CONSEQUENCES
The following discussion of Federal income tax consequences is intended to
inform Limited Partners of the anticipated Federal income tax consequences to
the Limited Partners resulting from the Sale, an Alternative Sale or a
Financing. This discussion is based upon information compiled by the General
Partner and is not based upon the advice or an opinion of counsel. The following
discussion should not be considered tax advice. Based on the complexities of the
Federal income tax laws and because the tax consequences may vary depending upon
a holder's individual circumstances or tax status, it is recommended that each
Limited Partner consult his tax advisor concerning the Federal (and any
applicable state, local or other) tax consequences of the liquidation and
dissolution of the Partnership pursuant to a Sale or Alternative Sale and the
tax consequences of a Financing transaction.
SALE PROPOSAL
The General Partner anticipates that the Sale will result in a loss to the
Joint Venture for federal income tax purposes. The amount of the loss will be
the excess of the Joint Venture's adjusted basis in the Willowbrook Property
over the amount realized on the Sale. The amount realized will be the Purchase
Price less the expenses of Sale, such as transfer taxes and expenses incurred or
allowances made to repair the property or otherwise put it in acceptable
condition to the Buyers. The Joint Venture's adjusted basis in the Willowbrook
Property is the cost of such property when purchased plus capital improvements
reduced by depreciation deductions taken with respect to the property. The
Partnership will receive and report an allocable share of the Joint Venture's
loss and such share will be further allocated among the Limited Partners in the
manner discussed below. The character of any loss allocable to Limited Partners
will be the same as the character of the loss reported to the Partnership by the
Joint Venture.
The Willowbrook Property is real property used in a trade or business. Such
property is excluded from the definition of capital assets under Section 1221(2)
of the Code. Instead, the character of gain or loss from the sale or exchange of
such property is governed by the provisions of Section 1231 of the Code and such
property is referred to herein as a 'Section 1231 asset.' In general, if
property sold is a Section 1231 asset, gains and losses from the sale allocable
to a taxpayer are combined with any other Section 1231 gains or losses of such
taxpayer and a net gain is treated as a capital gain while a net loss is treated
as an ordinary loss. There is an exception in the case of gains recognized on a
sale or exchange of Section 1231 assets where a taxpayer has incurred losses on
such sales or exchanges during the preceding five taxable years if such losses
were treated as ordinary losses.
The Partnership's share of the loss from the Joint Venture to be allocated
among the Limited Partners on the Sale of the Willowbrook Property will be
characterized as a loss under Section 1231 of the Code, which would be an
ordinary loss unless such loss is used to offset Section 1231 capital gains of
the Limited Partners. Partnership losses are allocated 99% to the Limited
Partners and 1% to the General Partner.
In addition to the loss from the Sale by the Joint Venture, the General
Partner also anticipates that the Partnership's share of the Joint Venture's
operating income combined with the Partnership's operating loss will result in a
net loss from operations for 1996 being allocated to the Limited Partners. The
net loss from operations would be characterized as an ordinary loss and also as
a passive activity loss under Section 469 of the Code as discussed below.
Section 469 of the Code provides special rules for the treatment of income
and loss from 'passive activities.' A passive activity, for purposes of this
section, includes any rental activity, and therefore a Limited Partner's
distributive share of Partnership income or loss is treated as income or loss
from a passive activity. Losses from passive activities, to the extent they
exceed income from all such activities (exclusive of interest, dividends,
royalties, and similar items which are referred to as 'portfolio income'),
generally may not be deducted against other income of the taxpayer, including
wages, active business income, and the taxpayer's own portfolio income.
Suspended losses are carried forward and treated as deductions from passive
activities in the next taxable year. An exception exists, however, if during the
taxable year a taxpayer disposes of his entire interest in a passive activity in
20
<PAGE>
a fully taxable transaction (i.e., one in which all realized gains and losses
are recognized). In such cases, any excess losses for the activity may be used
to offset nonpassive income.
Since the Partnership's only asset consists of its interest in the Joint
Venture and the Joint Venture's only asset consists of the Willowbrook Property,
the sale by the Joint Venture of the Willowbrook Property and the distribution
of the net proceeds of the Sale to the Partnership followed by the liquidation
of the Partnership and its distribution of available cash to the Limited
Partners will constitute a complete disposition by a Limited Partner of his
interest in the Partnership (unless he has elected to aggregate his limited
partnership interest with other similar interests). As a result, the excess of
(1) the sum of any loss from the Partnership for the taxable year in which the
Sale occurs (including losses carried over from prior years) plus any losses
realized on the Sale, over (2) net income or gain for such taxable year from all
passive activities (including the Partnership) will not be treated as a loss
from a passive activity. Thus, such excess loss, if any, may be used by a
Limited Partner to offset nonpassive income.
Upon the liquidation of the Partnership, Limited Partners may receive a
distribution of cash from the Partnership. If such distribution exceeds a
Limited Partner's basis in his Partnership interest, after such basis has been
adjusted for losses from operations for the Partnership's 1996 taxable year and
losses from the Sale, such excess will be treated as a gain realized by the
Limited Partner on the sale of his Unit. Similarly, the excess of a Limited
Partner's basis in his Units (after the allocations described above and
including any non-deductible and non-amortized expenditures such as syndication
costs allocated to the Limited Partners) over the amount distributed to such
Partner will be treated as a loss realized by the Limited Partner on the sale of
his Units. The General Partner anticipates that Limited Partners will realize an
additional loss on the dissolution and termination of the Partnership. However,
whether or not a loss will be obtained or the amount of such loss is based on
each Limited Partner's adjusted tax basis in his Units. Such amounts will be
reported separately by the Limited Partners and not as part of Partnership
income or loss. Gain or loss realized by a Limited Partner (who is not a Dealer
in such property) on the liquidation of the Partnership in respect of a Unit
that has been held for more than 12 months will be treated as a long-term
capital gain or loss as if such Unit had been sold. Limited Partners are urged
to consult their tax advisors with regard to the tax consequences of the
dissolution and termination of the Partnership.
The deduction for capital losses of non-corporate taxpayers is limited,
generally, to the amount of capital gains of such taxpayers and to $3,000 of
other income. Although there is no exclusion for any portion of capital gains
recognized by a taxpayer, for federal income tax purposes, capital gains are
taxed at a rate not greater than 28 percent for non-corporate taxpayers. In the
case of corporate taxpayers, such gains are taxed as ordinary income, and losses
are allowable only to the extent of capital gains but may be carried forward or
carried back as permitted.
Gain on the Sale of the Willowbrook Property would also be treated as
ordinary income if either the Joint Venture or the Partnership were deemed to be
a Dealer in real estate for federal income tax purposes. Under existing law,
whether property is so held is a question of fact and dependent upon all the
facts and circumstances of the particular transaction. Neither the Partnership
nor the Joint Venture has engaged in the business of buying and selling real
properties and, accordingly, the General Partner does not believe that the
Partnership or the Joint Venture will be treated as a Dealer in real property
and will not report any gain from the sale of Partnership property as such.
Gain on the sale of partnership property may also be characterized as
ordinary income rather than capital gain to the extent that certain cost
recovery ('depreciation') deductions are required to be recaptured. Since the
cost of the Joint Venture's real property was recovered using a straight-line
method of depreciation, no portion of the gain on the sale of such property
would be recaptured as ordinary income. However, to the extent there was any
gain on the sale of the Partnership's tangible personal property, such gain
would be recaptured as ordinary income but only to the extent of prior cost
recovery deductions with respect to such property.
Since the Joint Venture anticipates reporting a loss from its operations in
1996 and from the Sale, the General Partner does not expect that Limited
Partners will be subject to any applicable state or
21
<PAGE>
local income tax consequences from the transaction as a result of the
Willowbrook Property being located in Baltimore, Maryland. However, the impact
of the Sale and the dissolution and termination of the Partnership upon an
individual's state or local income tax liabilities may vary depending upon each
Limited Partner's state of residence and his personal income tax situation.
Limited Partners should consult their tax advisors with regard to any potential
state or local income tax consequences as a result of the Sale or the
dissolution and termination of the Partnership.
ALTERNATIVE SALE PROPOSAL
If the Sale is not completed, but subsequently the Joint Venture does sell
the Willowbrook Property, at that time the tax consequences to Limited Partners
should be as described above. If the Willowbrook Property were sold on terms
similar to the Sale, it would be anticipated that the Partnership and the
Limited Partners would recognize a loss on the transaction. However, because the
Joint Venture will continue to report depreciation deductions on the Willowbrook
Property, depending on the time period that elapses until the Willowbrook
Property is sold, a sale even for the same Purchase Price could result in the
Partnership reporting a gain on the transaction.
FINANCING PROPOSAL
If the Partnership borrows money by financing the Willowbrook Property, the
borrowing itself is not a taxable event. The distribution by the Partnership of
the proceeds of the Loan would be treated, for federal income tax purposes, as
any other distribution of cash by the Partnership. Section 731(a)(1) of the Code
provides that in the case of a distribution by a partnership to a partner, gain
is not recognized except to the extent that any money distributed exceeds the
adjusted basis of such partner's interest in the partnership immediately before
the distribution. Any gain so recognized is considered gain from the sale or
exchange of the partnership interest of the distributee partner. If the Joint
Venture finances the Willowbrook Property and the Partnership's allocable share
of the Loan proceeds were distributed, the consequences to a Limited Partner
would be as described above. If the distribution to a Limited Partner does not
exceed his adjusted tax basis in his Unit, the distribution would be non-
taxable. To the extent the distribution does exceed this adjusted basis, the
excess would be treated as an amount received for the sale or exchange of the
Unit and taxable as a capital gain (provided the Limited Partner is not a Dealer
in the Units). A Limited Partner's adjusted tax basis in his Unit consists of
the amount of money paid for the Unit, increased by Partnership income allocated
to the Unit plus the Limited Partner's allocable share of any non-recourse loans
and decreased by any Partnership losses allocated to the Unit and distributions
made to the Partner. Since the Loan would be a non-recourse loan, it would be
allocated to Limited Partners and would increase their adjusted bases in their
Partnership interests. As a result, it is unlikely that a distribution to a
Limited Partner of his allocable share of excess Loan proceeds would be taxable
to him. However, such distribution would reduce his adjusted tax basis in his
Unit and may increase the gain that would ultimately be reported by the Limited
Partner upon the sale of the Willowbrook Property by the Joint Venture.
Depending upon the amount of this distribution and the eventual sale price of
the Willowbrook Property, a Limited Partner's share of taxable gain from the
Sale may exceed his share of the net proceeds of the Sale and liquidation of the
Partnership.
The deductibility of interest payable on a Loan will depend upon the
application of the funds. The Treasury Regulations under Section 163 of the Code
which govern the deductibility of interest expense generally require the tracing
of disbursements of the debt proceeds to specific expenditures to determine
whether or not the interest expense on the debt is deductible or nondeductible.
While those regulations do not address the treatment of debt allocated to
expenditures for interests in pass-through entities, such as partnerships and
joint ventures, the Internal Revenue Service has published Notice 89-35 in
Internal Revenue Bulletin 1989-13 ('Notice 89-35') to provide guidelines in this
area pending the issuance of regulations. In general, if the proceeds of a
partnership loan were used to finance the acquisition or improvement of
partnership property or to refinance existing indebtedness on partnership
property, the interest expense would be deductible as a business expense of the
partnership. Where the proceeds of the financing are distributed to partners,
however, the deductibility of such
22
<PAGE>
interest will depend upon the use of the proceeds made by the distributee
partners. Notice 89-35 does provide some flexibility and, in situations where
there are debt-financed distributions to partners, allows the partnership to
allocate the proceeds among the expenditures (other than distributions) of the
partnership or joint venture during the taxable year that the debt proceeds were
distributed.
Based upon Notice 89-35, to the extent that the Loan proceeds distributed
to the Limited Partners do not exceed the Partnership's allocable share of the
Joint Venture's gross operating expenditures and the Partnership's gross
operating expenditures for the year in which the Joint Venture obtains the Loan
(including payment of taxes, insurance, utilities, etc.), the Loan proceeds
would be treated as being used for these purposes and interest expense on such
portion of the debt would be deductible by the Joint Venture. To the extent that
such distribution exceeds the Partnership's operating expenses and the
Partnership's allocable share of the Joint Venture's operating expenses for such
year, however, the deductibility of the interest expense attributable to such
excess is subject to the tracing rule of Treasury Regulation Section 1.163-8T.
This rule effectively requires that the interest expense allocable to such
distributions be separately stated for each Limited Partner receiving such
distributions and would not be deducted by the Joint Venture. The appropriate
treatment for a Limited Partner's share of the separately stated interest
expense would depend on the Limited Partner's use of the excess distribution.
Since the Partnership's annual gross operating expenditures aggregate
approximately $75,000 and the Joint Venture's annual gross operating expenses
aggregate approximately $1,300,000, a Loan to the Joint Venture of $7,000,000
would require that a substantial portion of the interest expense be separately
reported by the Limited Partners and not deducted by the Joint Venture or the
Partnership. As a result, a Limited Partner would likely continue to report
income from the Partnership, although it is unlikely that he will receive any
subsequent distributions of cash flow. A Limited Partner's separately stated
share of the interest expense on the Loan may or may not be deductible by the
Limited Partner depending on his use of his share of the Loan proceeds. For
example, if a Limited Partner deposits his distribution into an interest bearing
account, the Limited Partner's separately stated share of the interest expense
would be treated as 'investment interest expense' under Section 163(d) of the
Code and deductible against the Limited Partner's net investment interest
income, if any. On the other hand, if a Limited Partner uses his share of the
loan proceeds to acquire a personal automobile or pay the college expenses of a
child, the Limited Partner's separately stated share of interest expense would
be characterized as personal interest which is non-deductible. Limited Partners
are urged to consult their tax advisors concerning the proper treatment of their
separately stated shares of interest expense.
OTHER RELEVANT INFORMATION
The principal executive offices of the Partnership and the General Partner
are located at 23 West Park Avenue, Merchantville, New Jersey 08109, and their
telephone number is (609) 662-1116.
The Units are registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the 'Exchange Act'). Accordingly, the Partnership
currently is subject to the informational filing requirements of the Exchange
Act and is obligated to file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the 'SEC') relating to
its business, financial condition and other matters. Reports and other
information filed by the Partnership can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC at the SEC's Chicago regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and New York regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the public reference
section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Partnership's registration and reporting requirements under the
Exchange Act will discontinue after the liquidation and dissolution of the
Partnership.
There are no material pending legal proceedings to which the Partnership is
a party or to which the Willowbrook Property is subject.
23
<PAGE>
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership
Agreement. As of the date of this Proxy Statement, 1,311 Limited Partners held
15,000 Units.
There have been no changes in or disagreements with the Partnership's
accountants on accounting and financial disclosure.
CLOVER INCOME PROPERTIES, L.P.
SELECTED HISTORICAL FINANCIAL DATA INFORMATION
The General Partner maintains a policy that the only cash distributions
made to Partners are distributions of 'net cash receipts' (other than
distributions of proceeds from the sale of Partnership property or the
liquidation of the Partnership). The total net cash receipts of the Partnership
from inception through March 31, 1996 were $14,960,955. Total distributions from
inception through March 31, 1996 were $14,640,541. Of that amount, $9,016,345
represents a return of capital and the balance of $5,624,196 represents a
distribution of income. Except for the April 1992 distribution of $1,000,000 of
the proceeds from the reduction of the Partnership's interest in the Joint
Venture and the July 15, 1994 distribution of $6,410,000 of the proceeds from
the sale of Holly Tree, all distributions to Partners have been funded by
current year net cash receipts and undistributed net cash receipts from prior
years and all distributions have been made on a quarterly basis.
The following table presents selected historical financial information of
the Partnership as of the end of and for each of the periods presented below.
The selected historical information has been derived from historical financial
statements and should be read in conjunction with such statements and the
related notes contained elsewhere in this Proxy Statement.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
-------------------- -------------------------------------------------------
3/31/96 3/31/95 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
--------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues................. $ 1,556 $ 992 $ 5,809 $ 602,028 $1,095,241 $1,060,147 $1,068,073
Share of Joint Venture
Income........................ 46,632 45,527 126,666 133,322 107,751 226,577 224,410
Net Income..................... 39,273 26,046 (255,099) 2,707,691 342,883 424,456 504,323
Net Income per Unit............ 2.59 1.69 (16.84) 180.19 22.32 23.01 32.89
Cash distribution per Unit..... 3.65 4.25 15.20 459.58 52.50 131.38 72.55
Total assets at end of
period........................ 4,274,200 4,767,639 4,296,559 4,815,711 9,116,213 9,563,529 10,810,337
Long-term debt................. -- -- -- -- -- -- --
Book Value per Unit............ 284.39 314.94 285.46 317.50 596.89 627.05 717.63
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Partnership's only remaining interest in real estate is a 42.91%
interest in the Joint Venture, which owns the Willowbrook Property.
Consequently, the Partnership's primary remaining source of operating cash flow
will be distributions from the Joint Venture.
On March 31, 1996, the Partnership had cash on hand of $310,761 as compared
to $299,295 on December 31, 1995. These funds, along with future operating cash
flow, will be utilized for working capital needs and for distributions to the
Limited Partners.
The Partnership's net cash flow from operations was $41,879 for 1995 as
compared to $260,375 for 1994 and $613,856 for 1993. The decrease in net cash
flow from operations was primarily due to a decrease in cash received from
rentals and the reduction in cash paid for expenses as a result of the sale of
Holly Tree on July 1, 1994. For the three months ended March 31, 1996, the
Partnership's net cash flow from operations was $32,944 as compared to $39,107
for the same period in 1995. This decrease in net cash flow from operations for
the three month period ended March 31, 1996 as compared to the same period in
1995 was primarily due to an increase in cash paid for operating expenses.
The Joint Venture's net cash flow from operations was $797,919 for 1995 as
compared to $820,992 for 1994 and $715,533 for 1993. The decrease in cash flow
from operations for 1995, as compared to 1994, was due to a decrease in cash
received from rentals, interest and other income. The increase in cash flow from
operations in 1994, as compared to 1993, was primarily due to an increase in
cash received from rentals combined with an increase in other income and a
decrease in cash paid for operating expenses. For the three months ended March
31, 1996, the Joint Venture's net cash flow from operations was $325,851 as
compared to $272,382 for the same period in 1995. The increase was due to an
increase in cash received from rentals and other income, in addition to a
decrease in cash paid for operating expenses.
The General Partner believes that the Partnership's current and future cash
flows will be sufficient to meet the Partnership's liquidity requirements over
the next twelve months and the foreseeable future, absent any unanticipated cost
increases or adverse market conditions.
If the Sale is approved by the Limited Partners and completed, the proceeds
from the Sale distributed by the Joint Venture will be sufficient to cover the
anticipated costs of the Sale, estimated to be $832,000. If the Financing is
approved by the Limited Partners and completed, the proceeds from the Financing
distributed by the Joint Venture will be sufficient to cover the anticipated
costs of the Financing, estimated to be $1,000,000.
As of March 31, 1996, the Partnership had paid all outstanding amounts owed
to the General Partner and its affiliates. As of March 31, 1996, the Joint
Venture, however, owed a total of approximately $326,000 to Allstate, an
affiliate of the General Partner, for accrued and unpaid property management
fees and reimbursable costs. The payment of such amounts will be made from the
Joint Venture's cash flow when available and from the proceeds of any sales or
refinancing of the assets of the Joint Venture.
During 1995, one elevator at the Willowbrook Property was replaced at a
cost of $22,857, air conditioning equipment was purchased at a cost of $18,422
and other capital improvements were made at a cost of $10,810. These amounts are
reflected in the Statement of Cash Flows as cash paid for investing activities.
In addition, common area hallways were recarpeted in 1995. Major projects
planned for 1996 at the Willowbrook Property, at an estimated total cost of
$188,000, include the replacement of carpets and tiles, the resurfacing of the
parking lot and the painting of certain hallways. Funding for these projects
will be provided by the Joint Venture's operating cash flow. It is not
anticipated that these projects will cause any increase in the realty taxes at
the Willowbrook Property.
25
<PAGE>
RESULTS OF OPERATIONS
Until the sale of Holly Tree, the Partnership earned revenues primarily
from rental income from Holly Tree. Revenues from the Willowbrook Property are
not included in the Partnership's revenues.
No rental income was recorded in 1995 or in the first three months of 1996.
Rental income was $526,129 in 1994 as compared to $1,052,502 in 1993. The
decrease in 1995 from 1994 and in 1994 from 1993, was the result of the sale of
Holly Tree on July 1, 1994. No other income was recorded in 1995, compared to
other income of $60,575 in 1994 and $37,237 in 1993. The decrease in 1995 as
compared to 1994 is due to refunds of state tax overpayments recorded in 1994
and the elimination of other income from Holly Tree. The increase in 1994, as
compared to 1993, is due to the state tax refunds recorded in 1994, partially
offset by a decrease in other income due to the sale of Holly Tree.
Operating expenses were $3,858 for 1995, $348,234 for 1994 and $554,505 for
1993. The decrease in 1995 and in 1994 was due to the sale of Holly Tree.
Operating expenses were 66% of rental income in 1994 as compared to 53% in 1993.
The increase from 1993 to 1994, as a percentage of rental income, is primarily
due to increased repairs and maintenance incurred during the first six months of
1994 preparing the Holly Tree property for the sale.
The Partnership's income after amortization for the three months ended
March 31, 1996 was $39,273 compared to $26,046 for the same period in 1995. This
increase was primarily the result of a decrease in general and administrative
and amortization expenses. The Partnership had a net loss of $255,099 in 1995 as
compared to net income of $2,707,691 in 1994 and $342,883 in 1993. The net loss
in 1995, as compared to net income 1994, was primarily due to an impairment loss
on the investment in the Joint Venture and the elimination of operating income
from Holly Tree in 1995, reduced depreciation expense as a result of the sale,
the gain on the sale of Holly Tree in 1994 and legal and accounting fees
incurred during 1995 in connection with efforts to sell the Willowbrook
Property. For a further discussion of the impairment loss, see Note 3 in the
Financial Statements of the Partnership on page F-11. The increase in net income
in 1994, as compared to 1993, was primarily due to the gain on the sale of Holly
Tree in 1994, partially offset by a decrease in operating income and
depreciation expense from Holly Tree as a result of the sale.
Rental income for the Willowbrook Property, as operated by the Joint
Venture, was $2,013,638 in 1995, as compared to $2,013,518 in 1994 and
$1,928,002 in 1993. For the three months ended March 31, 1996, rental income was
$511,753 as compared to $494,733 for the same period in 1995. Other income was
$34,414 in 1995 as compared to $48,416 in 1994 and $34,772 in 1993. For the
three months ended March 31, 1996, other income was $12,181 as compared to
$5,584 for the same period in 1995. Interest income was $1,051 in 1995 as
compared to $3,032 in 1994 and $5,135 in 1993. For the three months ended March
31, 1996, interest income was $138 as compared to $484 for the same period in
1995.
Rental income for 1995 was virtually unchanged from 1994. A slight
improvement in occupancy rates was essentially offset by a slight decrease in
rental rates. The increase in rental income for 1994 as compared to 1993 was
primarily due to an increase in occupancy. The increase in rental income for the
three months ended March 31, 1996 was primarily the result of an increase in
average rental rates as compared to the same period in 1995. The increase in
other income from 1993 to 1994 and the decrease from 1994 to 1995 is primarily
attributable to a $17,000 refund of health benefit overpayments received in
1994. The increase in other income for the three months ended March 31, 1996 was
due to increased miscellaneous charges to tenants, including late fees and
utility reimbursements. Interest income decreased over the periods presented due
to lower cash balances being maintained.
The average effective annual rental rates per unit for the Willowbrook
Property were $7,180 in 1995, $7,218 in 1994 and $7,270 in 1993. The average
effective quarterly rental rates for the three months ended March 31, 1996 and
1995 were $1,839 and $1,787, respectively. The average quarterly occupancy rates
were 93.9% in 1995, 93.3% in 1994, 88.7% in 1993, 93.0% for the three months
ended March 31, 1996 and 92.6% for the three months ended March 31, 1995.
26
<PAGE>
Operating expenses for the Willowbrook Property for 1995 were $1,225,052 as
compared to $1,219,161 for 1994 and $1,186,441 for 1993. The slight increase in
1995 over 1994 was primarily due to increases in advertising expenses and
repairs and maintenance, substantially offset by a decrease in real estate taxes
resulting from a reduction in the property tax rates from the period ended June
30, 1994 to the period ended June 30, 1995. The increase in operating expenses
for 1994 over 1993 was primarily due to increases in salaries and wages, repairs
and maintenance and utilities, partially offset by decreases in advertising and
marketing expenses and decreases in real estate taxes from the period ended June
30, 1993 to the period ended June 30, 1994. For the three months ended March 31,
1996, operating expenses were $284,747 as compared to $261,502 for the same
period in 1995. The increase was primarily the result of increased snow removal,
maintenance and utility expenses.
The Joint Venture's net income was $295,191 for 1995 as compared to
$310,701 for 1994 and $251,109 for 1993. The decrease in net income in 1995 as
compared to 1994 is due to a decrease in other income combined with increases in
operating expenses and professional services, partially offset by a decrease in
general and administrative expenses. The increase in net income in 1994 as
compared to 1993 is due to increases in rental and other income, partially
offset by increases in operating expenses. For the three months ended March 31,
1996, the Joint Venture's income after depreciation was $108,676 as compared to
$106,098 for the same period in 1995. This increase was primarily the result of
increased rental income offset by an increase in operating expenses.
27
<PAGE>
FORM OF PROXY
CLOVER INCOME PROPERTIES, L.P.
23 WEST PARK AVENUE
MERCHANTVILLE, NEW JERSEY 08109
THIS PROXY IS SOLICITED ON BEHALF OF CLOVER INCOME PROPERTIES, L.P.
The undersigned hereby appoints C.I.P. Management Corp. (the 'General
Partner') with full power of substitution, attorney and proxy, and hereby
authorizes it to represent and to vote as designated below all units of limited
partnership interests ('Units') in Clover Income Properties, L.P. (the
'Partnership') at the Special Meeting of the Limited Partners of the
Partnership, to be held on June 28, 1996, at 2:00 p.m., local time at 23 West
Park Avenue, Merchantville, New Jersey 08109 or at any adjournments or
postponements thereof. You are being asked to consider and vote upon the
following three separate proposals:
Please check the appropriate blank box below in blue or black ink.
1. Sale Proposal: Proposal to approve the sale of The Willowbrook Apartments
(the 'Willowbrook Property') by The Willowbrook Joint Venture (the 'Joint
Venture') to Berwind Property Group, Inc. and First Montgomery Properties,
Ltd. (the 'Buyers'), pursuant to the terms of the Agreement of Sale
entered into on February 7, 1996 (as amended, the 'Sale Agreement'), for a
purchase price of $9,850,000 (the 'Sale'), and to authorize the General
Partner to agree on behalf of the Partnership to modifications, amendments
and waivers to the Sale Agreement which the General Partner determines to
be necessary or appropriate, including changes in the amount and type of
consideration to be received by the Partnership. The Partnership owns a
42.91% interest in the Joint Venture which also includes Clover Income
Properties II, L.P. ('CIP II') and Clover Income Properties III, L.P.
('CIP III'). This Sale Proposal must be approved by the holders of more
than 50% of the outstanding Units of the Partnership ('Majority Vote') and
by the holders of more than 50% of the outstanding units of limited
partnership interests in each of CIP II and CIP III ('Affiliate Majority
Vote'). Approval of this Sale Proposal will also be deemed a consent to
the termination and dissolution of the Partnership (upon the completion of
the Sale).
/ / FOR / / AGAINST / / ABSTAIN
2. Alternative Sale Proposal: Proposal to authorize any alternative sale of
the Willowbrook Property (an 'Alternative Sale') approved by the General
Partner. An Alternative Sale only will be authorized if (i) the Sale
Proposal set forth in Item 1 above is approved by a Majority Vote, but is
not completed for any reason, (ii) the Alternative Sale is completed by
December 31, 1997 for cash consideration not less than the fair market
value of the Willowbrook Property (as set forth in an appraisal dated
within nine months of the execution of an Alternative Sale agreement) and
(iii) the purchaser in such transaction is not an affiliate of the General
Partner. The Alternative Sale Proposal must be approved by a Majority Vote
and an Affiliate Majority Vote. Approval of the Alternative Sale Proposal
will also be deemed a consent to the termination and dissolution of the
Partnership (upon the completion of an Alternative Sale).
/ / FOR / / AGAINST / / ABSTAIN
See Reverse Side
<PAGE>
3. Financing Proposal: Proposal to authorize the Joint Venture, on or before
December 31, 1997, to borrow up to $7,000,000 (the 'Loan') and to grant a
non-recourse, first priority mortgage and security interest on the
Willowbrook Property as security for the Loan, if the Sale Proposal is not
approved by a Majority Vote or the Sale is not completed for any reason.
The Financing Proposal must be approved by a Majority Vote and an
Affiliate Majority Vote.
/ / FOR / / AGAINST / / ABSTAIN
The General Partner recommends a vote FOR adoption of each of the above three
proposals. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned Unit holder. If no direction is made, this
Proxy will be voted FOR each of the proposals, and in the discretion of the
General Partner, with respect to such other matters as may properly come before
the Special Meeting or any adjournment or postponement thereof. This Proxy also
delegates discretionary authority to the General Partner with respect to any
other business which may properly come before the Special Meeting or any
adjournment or postponement thereof.
_____________________________________________________
Signature of Unit holder Date
_____________________________________________________
Print Name
_____________________________________________________
Signature of Unit holder, if held jointly Date
_____________________________________________________
Print Name
Please sign exactly as your name appears on the
certificate(s) representing your limited partner
interest(s). When such interest(s) are held by joint
tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please have
signed in full corporate name by the president or
other authorized officer. If a partnership, please
have signed in partnership name by an authorized
person.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants for
Clover Income Properties, LP F-1
Clover Income Properties, LP Balance Sheets as of
December 31, 1995 and 1994 F-2
Clover Income Properties, LP Statements of Operations for
each of the three years in the period ended December
31, 1995 F-3
Clover Income Properties, LP Statements of Partners' Capital
for each of the three years in the period ended December
31, 1995 F-4
Clover Income Properties, LP Statements of Cash Flows
for each of the three years in the period ended December
31, 1995 F-5
Clover Income Properties, LP Summary of Significant
Accounting Policies F-7
Clover Income Properties, LP Notes to the Financial
Statements F-9
Report of Independent Certified Public Accountants for F-17
The Willowbrook Joint Venture
The Willowbrook Joint Venture Balance Sheets as of
December 31, 1995 and 1994 F-18
The Willowbrook Joint Venture Statements of Income for
each of the three years in the period ended December
31, 1995 F-19
The Willowbrook Joint Venture Statements of Partners' Capital
for each of the three years in the period ended December
31, 1995 F-20
The Willowbrook Joint Venture Statements of Cash Flows
for each of the three years in the period ended December
31, 1995 F-21
<PAGE>
INDEX TO FINANCIAL STATEMENTS (continued)
Page
----
The Willowbrook Joint Venture Summary of Significant
Accounting Policies F-23
The Willowbrook Joint Venture Notes to the Financial
Statements F-24
Clover Income Properties, LP Schedule III
Real estate and accumulated depreciation for each of the
three years in the period ended December 31, 1995 F-28
The Willowbrook Joint Venture Schedule III
Real estate and accumulated depreciation for each of the
three years in the period ended December 31, 1995 F-29
Introductory paragraph to Unaudited Pro forma Financial
statements for Clover Income Properties, L.P. relating to the sale
of the Willowbrook Apartments as of December 31, 1995. F-30
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Balance Sheet as of December 31, 1995 F-31
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Statement of Operations for the year ended
December 31, 1995. F-32
Clover Income Properties, L.P. Notes to Unaudited Pro Forma
Condensed Financial Statements F-33
Introductory paragraph to Unaudited Pro Forma Financial
statements for The Willowbrook Joint Venture relating to the
sale of the Willowbrook Apartments as of December 31, 1995 F-35
The Willowbrook Joint Venture unaudited Pro Forma
Condensed Balance Sheet as of December 31, 1995 F-36
The WIllowbrook Joint Venture unaudited Pro Forma
Condensed Statement of Operations for the year ended
December 31, 1995. F-37
The Willowbrook Joint Venture Notes to Unaudited Pro Forma
Condensed Financial Statements F-38
<PAGE>
INDEX TO FINANCIAL STATEMENTS (continued)
Page
----
Introductory paragraph to Unaudited Pro Forma Financial
statements for Clover Income Properties relating to the
borrowing of a first priority mortgage loan of $7,000,000 as F-41
of December 31, 1995
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Balance Sheet as of December 31, 1995 F-42
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Statement of Operations for the year ended
December 31, 1995. F-43
Clover Income Properties, L.P. Notes to Unaudited Pro Forma
Condensed Financial Statements F-44
Introductory paragraph to Unaudited Pro Forma Financial
statements for The WIllowbrook Joint Venture relating to the
borrowing of a first priority mortgage loan of $7,000,000 as F-46
of December 31, 1995
The WIllowbrook Joint Venture Unaudited Pro Forma
Condensed Balance Sheet as of December 31, 1995 F-47
The WIllowbrook Joint Venture unaudited Pro Forma
Condensed Statement of Operations for the year ended
December 31, 1995. F-48
The Willowbrook Joint Venture Notes to Unaudited Pro Forma
Condensed Financial Statements F-49
C.I.P. Management Corporation Independent Accountants' F-50
Report
C.I.P. Management Corporation Balance Sheets as of
November 30, 1995 F-51
C.I.P. Management Corporation Notes to Financial Statements F-52
Introductory paragraph to Unaudited Pro forma Financial
statements for Clover Income Properties relating to the sale
of the Willowbrook Apartments as of March 31, 1996 F-53
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Balance Sheet as of March 31, 1996 F-54
<PAGE>
INDEX TO FINANCIAL STATEMENTS (continued)
Page
----
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Statement of Operations for the three months ended
March 31, 1996. F-55
Clover Income Properties, L.P. Notes to Unaudited Pro Forma
Condensed Financial Statements F-56
Introductory paragraph to Unaudited Pro Forma Financial
statements for The Willowbrook Joint Venture relating to the
sale of the Willowbrook Apartments as of March 31, 1996 F-58
The Willowbrook Joint Venture unaudited Pro Forma
Condensed Balance Sheet as of March 31, 1996 F-59
The WIllowbrook Joint Venture unaudited Pro Forma
Condensed Statement of Operations for the three months ended
March 31, 1996. F-60
The Willowbrook Joint Venture Notes to Unaudited Pro Forma
Condensed Financial Statements F-61
Introductory paragraph to Unaudited Pro Forma Financial
statements for Clover Income Properties relating to the
borrowing of a first priority mortgage loan of $7,000,000 as of F-64
March 31, 1996
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Balance Sheet as of March 31, 1996 F-65
Clover Income Properties, L.P. Unaudited Pro Forma
Condensed Statement of Operations for the three months ended
March 31, 1996 F-66
Clover Income Properties, L.P. Notes to Unaudited Pro Forma
Condensed Financial Statements F-67
Introductory paragraph to Unaudited Pro Forma Financial
statements for The WIllowbrook Joint Venture relating to the
borrowing of a first priority mortgage loan of $7,000,000 as of F-69
March 31, 1996
The WIllowbrook Joint Venture Unaudited Pro Forma
Condensed Balance Sheet as of March 31, 1996 F-70
<PAGE>
INDEX TO FINANCIAL STATEMENTS (continued)
Page
----
The WIllowbrook Joint Venture unaudited Pro Forma
Condensed Statement of Operations for the three months ended
March 31, 1996 F-71
The Willowbrook Joint Venture Notes to Unaudited Pro Forma
Condensed Financial Statements F-72
Clover Income Properties, L.P. Unaudited Balance Sheet
as of March 31, 1996 F-73
Clover Income Properties, L.P. Unaudited Statement
of Operations for the three months ended March 31, 1996
and 1995 F-74
Clover Income Properties, LP Statements of Partners' Capital
for the three months ended March 31, 1996 and 1995 F-75
Clover Income Properties, LP Statements of Cash Flows
for the three months ended March 31, 1996 and 1995 F-76
Clover Income Properties, L.P. Notes to the Financial
Statements F-78
The Willowbrook Joint Venture unaudited Balance Sheet
as of March 31, 1996 F-81
The WIllowbrook Joint Venture unaudited Statements of
of Operations for the three months ended March 31, 1996 and
1995 F-82
The Willowbrook Joint Venture Statements of Partners'
Capital for the three months ended March 31, 1996 and 1995 F-83
The Willowbrook Joint Venture Statements of Cash Flows
for the three months ended March 31, 1996 and 1995 F-84
The Willowbrook Joint Venture Notes to Financial Statements F-86
<PAGE>
Report of Independent Certified Public Accountants
Clover Income Properties, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheets of Clover Income Properties,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1995. 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.
As discussed in Note 2, the 1995 financial statements have been revised.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clover Income Properties, L.P.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Notes 2 and 7 which
are May 16, 1996
F-1
<PAGE>
Clover Income Properties, L.P.
Balance Sheets
================================================================================
December 31, 1995 1994
- --------------------------------------------------------------------------------
Assets
Cash $ 299,295 $ 292,557
State tax refund receivable -- 16,733
Investment in The Willowbrook
Joint Venture, at market in 1995
and equity in 1994 3,997,264 4,506,421
- --------------------------------------------------------------------------------
$ 4,296,559 $ 4,815,711
================================================================================
Liabilities and Partners' Capital
Liabilities
Accrued expenses $ 19,500 $ 50,250
Due to affiliates -- 3,000
- --------------------------------------------------------------------------------
Total liabilities 19,500 53,250
- --------------------------------------------------------------------------------
Partners' capital
General partner (deficiency) (4,854) --
Limited partners 4,281,913 4,762,461
- --------------------------------------------------------------------------------
Total partners' capital 4,277,059 4,762,461
- --------------------------------------------------------------------------------
$ 4,296,559 $ 4,815,711
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-2
<PAGE>
Clover Income Properties, L.P.
Statements of Operations
================================================================================
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Revenues
Rental income $ -- $ 526,129 $1,052,502
Other income -- 60,575 37,237
Interest income 5,809 15,324 5,502
- --------------------------------------------------------------------------------
Total revenues 5,809 602,028 1,095,241
- --------------------------------------------------------------------------------
Expenses
Impairment loss, investment in
The Willowbrook Joint Venture 289,764 -- --
Operating expenses (including affiliate
transactions of $1,383 in 1995,
$33,124 in 1994 and $76,633 in 1993) 3,858 348,234 554,505
Depreciation and amortization 24,231 141,597 257,572
Professional services 64,518 25,171 35,690
General and administrative 5,203 16,179 12,342
- --------------------------------------------------------------------------------
Total expenses 387,574 531,181 860,109
- --------------------------------------------------------------------------------
Operating (loss) income (381,765) 70,847 235,132
Share of income from The Willowbrook
Joint Venture 126,666 133,322 107,751
- --------------------------------------------------------------------------------
(Loss) income before gain on sale of
Holly Tree Park Apts (255,099) 204,169 342,883
Gain on sale of Holly Tree Park Apts -- 2,503,522 --
- --------------------------------------------------------------------------------
Net (loss) income $ (255,099) $2,707,691 $ 342,883
================================================================================
Net (loss) income per limited
partnership unit $ (16.84) $ 180.19 $ 22.32
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-3
<PAGE>
Clover Income Properties, L.P.
Statements of Partners' Capital
================================================================================
General Limited
Partner Partners Total
- --------------------------------------------------------------------------------
Balance, December 31, 1992 $ -- $ 9,405,923 $ 9,405,923
Partners' distributions, $52.50
per limited partnership unit (7,953) (787,500) (795,453)
Net income 7,953 334,930 342,883
- -------------------------------------------------------------------------------
Balance, December 31, 1993 -- 8,953,353 8,953,353
Partners' distributions, $459.58
per limited partnership unit (4,883) (6,893,700) (6,898,583)
Net income 4,883 2,702,808 2,707,691
- -------------------------------------------------------------------------------
Balance, December 31, 1994 -- 4,762,461 4,762,461
Partners' distributions, $15.20
per limited partnership unit (2,303) (228,000) (230,303)
Net (loss) (2,551) (252,548) (255,099)
- -------------------------------------------------------------------------------
Balance, December 31, 1995 $ (4,854) $ 4,281,913 $ 4,277,059
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-4
<PAGE>
Clover Income Properties, L.P.
Statements of Cash Flows
================================================================================
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Operating activities
Cash received from rentals $ -- $ 522,491 $ 1,052,756
Other income received -- 60,575 37,237
Interest income received 5,809 15,324 5,502
Distributions received from The
Willowbrook Joint Venture 126,666 133,322 107,751
Cash paid for expenses (90,596) (471,337) (589,390)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 41,879 260,375 613,856
- --------------------------------------------------------------------------------
Investing activities
Distributions received from
The Willowbrook Joint Venture 195,162 188,506 200,654
Payments made for property -- (52,370) (29,964)
Investment in The Willowbrook
Joint Venture -- (4,116) (30,835)
Proceeds from sale of The Holly Tree
Park Apartments -- 6,500,000 --
Settlement costs paid from sale of
Holly Tree Park -- (71,992) --
- --------------------------------------------------------------------------------
Net cash provided by investing activities 195,162 6,560,028 139,855
- --------------------------------------------------------------------------------
Financing activities
Partners' distributions (230,303) (6,898,583) (795,453)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 6,738 (78,180) (41,742)
Cash, at beginning of year 292,557 370,737 412,479
- --------------------------------------------------------------------------------
Cash, at end of year $299,295 $ 292,557 $ 370,737
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-5
<PAGE>
Clover Income Properties, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
=================================================================================================
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities
Net (loss) income $ (255,099) $ 2,707,691 $ 342,883
- -------------------------------------------------------------------------------------------------
Adjustments
Impairment loss, investment in
The Willowbrook Joint Venture 289,764 -- --
Depreciation and amortization 24,231 141,597 257,572
Share of income from The Willowbrook Joint
Venture (126,666) (133,322) (107,751)
Distributions received from The Willowbrook
Joint Venture 126,666 133,322 107,751
Gain on sale of Holly Tree Park Apts -- (2,503,522) --
Decrease in rents receivable -- 659 10,598
Decrease (increase) in prepaid expenses -- 40,293 (2,451)
Decrease (increase) in state tax refund receivable 16,733 (16,733) --
(Decrease) increase in accounts payable -- (11,382) 490
(Decrease) increase in accrued expenses (30,750) 22,841 7,790
(Decrease) in tenants' security deposits -- (42,980) (10,665)
(Decrease) increase in prepaid rents -- (4,297) 321
(Decrease) increase in expenses due to affiliates (3,000) (73,792) 7,318
- -------------------------------------------------------------------------------------------------
Total adjustments 296,978 (2,447,316) 270,973
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 41,879 $ 260,375 $ 613,856
=================================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-6
<PAGE>
Clover Income Properties, L.P.
Summary of Significant Accounting Policies
================================================================================
Rental Revenue Rental revenue is recognized when earned, net of
concessions and vacancies.
Capitalization and At December 31, 1995, deferred acquisition fees
Amortization of paid to an affiliate have been written off (see
Certain Costs Note 2). For the years ended December 31, 1994 and
prior, these costs were included in investment in
The Willowbrook Joint Venture and were amortized
over a two hundred and forty month period (life of
the Partnership) using the straight-line method.
Income Taxes The Partnership has not provided for federal
income taxes, since all income and losses are to
be allocated to the partners for inclusion in
their respective tax returns. The Partnership
files a state composite tax return on behalf of
its non-resident partners and remits any taxes
due. The tax returns, the status of the
Partnership as such for tax purposes and the
amount of allocable Partnership income or loss are
subject to examination by the Internal Revenue
Service. If such examinations result in changes
with respect to the Partnership status or in
changes to allocable Partnership income or loss,
the tax liability of the partners could be changed
accordingly.
Net Income (Loss) Net income (loss) and distributions per limited
and Distributions partnership unit are computed from the date of the
Per Partnership Unit closing of the Minimum Offering (March 31, 1987)
based upon net income and distributions allocated
to the limited partners and the weighted average
number of limited partnership units outstanding.
Per unit information has been computed based on
15,000 weighted average limited partnership units.
Investment The investment property was recorded at cost.
Property and
Depreciation Depreciation on the property was provided on a
straight-line basis over the estimated useful
lives of the various assets as follows:
Apartment buildings 25 years
Land improvements 10 years
Furniture and fixtures 5-8 years
Maintenance and repair expenses were charged to
expense as incurred. Significant betterments and
improvements were capitalized and depreciated over
their respective lives.
F-7
<PAGE>
Clover Income Properties, L.P.
Summary of Significant Accounting Policies
================================================================================
Impairment of A writedown for impairment will be recorded when
Long-Lived Assets the facts and circumstances indicate that the cost
of the investment in the Willowbrook Joint Venture
including the related deferred acquisition fees
may be impaired, the estimated undiscounted cash
flows associated with the assets are compared to
the investment's carrying amount.
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 amounts
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.
F-8
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
1. Organization Clover Income Properties, L.P. ("CIP") is a
and Basis of limited partnership which was formed on July 14,
Accounting 1986, in the State of Delaware for the purpose of
acquiring, operating and holding residential real
estate for investment purposes. Leases primarily
had a term of one year or less. The general
partner of the Partnership is C.I.P. Management
Corp., a wholly-owned subsidiary of Clover
Financial Corporation.
CIP's records are maintained on the accrual basis
of accounting as adjusted for federal income tax
reporting purposes. The accompanying financial
statements have been prepared from such records
after making appropriate adjustments, where
applicable, to reflect the Partnership's accounts
on the accrual basis of accounting according to
generally accepted accounting principles (GAAP).
Depreciation for financial reporting purposes is
provided using the straight-line method over the
estimated useful lives of the assets, while
alternative methods are used for federal income
tax purposes. Transfer taxes have been capitalized
for financial reporting purposes and expensed for
tax purposes. The net effect of these items is
summarized as follows:
December 31, 1995 1994
--------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
--------------------------------------------------------------------------
Total assets $4,296,559 $5,126,194 $4,815,711 $5,288,084
==========================================================================
Partners' capital $4,277,059 $5,106,694 $4,762,461 $5,234,834
==========================================================================
F-9
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
Reconciliation of income per financial statement
to income per Federal income tax return is as
follows:
Year ended December 31, 1995 1994 1993
---------------------------------------------------------------------------
Net (loss) income per
financial statement $ (255,099) $ 2,707,691 $ 342,883
Reconciling items
Depreciation -- (15,720) (31,521)
Impairment loss, investment in
The Willowbrook Joint Venture
(currently not deductible for
tax purposes) 289,764 -- --
Additional income from
The Willowbrook Joint
Venture resulting from
different depreciation
methods 67,259 67,082 67,082
Increase in the gain on the sale
of The Holly Tree Park Apts
resulting from different
depreciation methods -- 281,358 --
---------------------------------------------------------------------------
Net income per federal income
tax return $ 101,924 $ 3,040,411 $ 378,444
===========================================================================
2. Investment On December 17, 1987, CIP acquired a 50% interest in
in The The Willowbrook Joint Venture for $6,450,000. The
Willowbrook Willowbrook Joint Venture owns the Willowbrook
Joint Venture Apartments, a 299-unit mid-rise apartment complex
located in Baltimore, Maryland.
On April 8, 1992, CIP and Clover Income Properties II,
L.P., an affiliated partnership, consummated an
agreement which was effective April 1, 1992 with Clover
Income Properties III, L.P. (CIP III), an affiliated
partnership, pursuant to which CIP III acquired an
interest in The Willowbrook Joint Venture for
$2,200,000 in cash. The Partnership reduced its
interest from 50% to 42.91% and received a distribution
of $1,100,000 from the Joint Venture, based on an
independently appraised value of the Willowbrook
F-10
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
Apartments of $15,650,000 as of February 11, 1992. The
excess of the amount paid over the net book value of
the 14.18% interest in the Joint Venture purchased by
CIP III amounted to $325,788. The $325,788 was credited
to the partners' capital accounts as of that date.
On February 7, 1996, the Willowbrook Joint Venture
entered into an agreement of sale with Berwind
Properties Group, Inc. and First Montgomery Properties,
Ltd. Under the terms of the agreement, the Joint
Venture will sell the Willowbrook Apartments (including
land), all related improvements and tangible and
intangible property for $10,500,000 less a $315,000
credit for capital improvements. See note 7 for
additional information.
The sale is contingent upon, among other things, the
approval by a majority of the limited partners of CIP,
CIP II and CIP III. If the sale is approved by a
majority of the limited partners and all other
conditions to the sale are met, the sale will be
completed.
Concurrent with the sale of The Willowbrook Apartments,
all assets of the Joint Venture will be liquidated. The
net proceeds will be distributed to its owners (CIP,
CIP I and CIP II) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture,
the limited partnership will then liquidate the net
assets, distribute the proceeds and be dissolved.
Due to the proposed sale of the Willowbrook Apartments
and subsequent liquidation of the Partnership, CIP has
reflected its investment in the Joint Venture at the
lower of cost or market. Market value is based on the
estimated cash proceeds (net of settlement costs) from
the sale of the Willowbrook Apartments after allocation
of proceeds to CIP, CIP II and CIP III. In May 1996,
the Partnership reevaluated its investment in
Willowbrook Apartments, including an impairment loss
amounting to $289,764, which has been charged to
operations in the 1995 year.
F-11
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
A summary of the Joint Venture's financial statements
is as follows:
December 31, 1995 1994
--------------------------------------------------------------
Other assets $ 322,078 $ 331,731
Investment property held for sale,
net of accumulated depreciation 9,396,753 9,858,484
--------------------------------------------------------------
$ 9,718,831 $10,190,215
==============================================================
Liabilities (including
$326,293 in 1995 and $326,240
in 1994 to affiliates) $ 403,359 $ 419,934
Capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
--------------------------------------------------------------
$ 9,718,831 $10,190,215
==============================================================
Year ended December 31, 1995 1994 1993
--------------------------------------------------------------
Revenues $2,049,103 $2,064,966 $1,967,909
Expenses 1,753,912 1,754,265 1,716,800
--------------------------------------------------------------
Net income $ 295,191 $ 310,701 $ 251,109
==============================================================
Depreciation on the Willowbrook Property has been
provided on a straight-line basis over the estimated
useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
The Joint Venture made distributions to the Partnership
totaling $321,828, $321,828 and $308,405 during 1995,
1994 and 1993, respectively. These distributions
represent 42.91% of the total distributions made during
1995, 1994 and 1993.
F-12
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
For the year ended December 31, 1994, deferred
acquisition fees amounted to $313,995, net of
accumulation of $205,134.
3. Sale of On July 1, 1994, CIP sold the Holly Tree Park
Investment Apartments, a 144 unit garden-style residential
Property apartment complex located in Waldorf, Maryland,
together with all related improvements and intangible
and tangible property to United Dominion Realty Trust,
Inc. (the "Purchaser") for a cash purchase price of
$6,500,000. The purchaser is not affiliated with the
Partnership. The gain of $2,503,522 ($2,784,880 for tax
purposes) has been recorded in income for the year
ended December 31, 1994.
4. Partnership Pursuant to the terms of the Partnership Agreement, the
Agreement net profits or losses until admission of the limited
partners on March 31, 1987 were allocated 1% to the
initial limited partner and 99% to the general partner.
After the sale of the Minimum Offering and the
admission of additional limited partners to the
Partnership, all items of income, gain and loss and
distributions of cash are allocated as follows:
Net income of the Partnership from operations will be
allocated as follows:
(a) first, if the Partnership made net cash receipts
distributions with respect to such period, an
amount of net income up to the amount of such net
cash receipts distributions shall be allocated
among the partners in the same proportions as such
net cash receipts distributions were distributed
provided, however, that if the total amount of net
income is less than the amount of net cash
receipts distributions, an amount of net income
equal to the amount of net cash receipts
distributions to the general partner shall be
allocated to the general partner and the balance
shall be allocated to the limited partners,
(b) second, to those partners having deficit balances
in their capital accounts in proportion to and to
the extent of such deficits,
(c) third, to those partners, if any, who have
received cumulative net cash receipts
distributions in the current and prior periods in
an amount in excess of the cumulative amount of
net income allocated to such partners in
proportion to and to the extent of any such excess
and, then,
F-13
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
(d) fourth, the balance, if any, shall be allocated 1%
to the general partner and 99% to the limited
partners in proportion to their relative ownership
of units.
Net income or gain realized by the Partnership on a
sale shall be allocated in the following order of
priority:
(a) first, to the partners with negative capital
account balances, proportionately based on the
respective negative balances in their capital
accounts until each such partner has a zero
capital account balance,
(b) second, to the limited partners until the capital
account balance of each limited partner shall
equal his adjusted capital contribution,
(c) third, an amount equal to the priority returns
(10%) distributed or to be distributed to the
limited partners pursuant to the transaction
giving rise to such allocation, in proportion to
each limited partner's relative share of such
priority return,
(d) fourth, an amount equal to the additional returns
(up to 2%) distributed or to be distributed to the
limited partners whose subscriptions for units
were received by the Partnership prior to June 1,
1987, in proportion to each such limited partner's
relative share of such additional return and,
then,
(e) any remaining amounts of net income or gain shall
be allocated 15% to the general partner and 85% to
the limited partners in proportion to their
relative ownership of units.
Net losses of the Partnership shall be allocated 1% to
the general partner and 99% to the limited partners.
Net cash receipts shall, to the extent determined by
the general partner, be distributed 1% to the general
partner and 99% to the limited partners until the
limited partners receive a 7% annual noncompounded
cumulative return on contributed capital. Thereafter,
net cash receipts will be distributed 10% to the
general partner and 90% to the limited partners. Sale,
refinancing or financing proceeds shall be distributed
first to the limited partners in an aggregate amount
equal to their capital contributions plus a specified
return
F-14
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
thereon and thereafter 15% to the general partner and
85% to the limited partners.
5. Transactions Holly Tree, which was sold July 1, 1994, was managed by
With Affiliates an affiliate of the general partner pursuant to a
management agreement which provided for an annual fee
not to exceed 5% of the gross revenues from the
Property.
The general partner and its affiliates are entitled to
reimbursement for administrative services rendered to
the Partnership, direct expenses of Partnership
operations, and goods and services used by and for the
Partnership.
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
---------------------------------------------------------------
Amount payable (prepaid) at
January 1, 1993 $ (4,051) $ 69,474 $ 65,423
Incurred during 1993 55,296 33,679 88,975
Payments during 1993 (50,387) (27,219) (77,606)
--------------------------------------------------------------
Amount payable at
December 31, 1993 858 75,934 76,792
Incurred during 1994 27,567 21,736 49,303
Payments during 1994 (28,425) (94,670) (123,095)
--------------------------------------------------------------
F-15
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
Management Reimbursable
Fees Costs Total
---------------------------------------------------------------
Amount payable (prepaid) at
December 31, 1994 $ -- $ 3,000 $ 3,000
Incurred during 1995 -- 6,586 6,586
Payments during 1995 -- (9,586) (9,586)
---------------------------------------------------------------
Amount payable at
December 31, 1995 $ -- $ -- $ --
---------------------------------------------------------------
6. Subsequent In January 1996, the Partnership made cash
Distributions distributions of $54,750 to the limited partners and
$548 to the general partner.
7. Subsequent On May 16, 1996, the agreement to sell the Willowbrook
Event Apartments was amended. The amendment, among other
things, reduced the sales price from $10,500,000 less a
$315,000 credit for capital contributions to
$9,850,000.
F-16
<PAGE>
Report of Independent Certified Public Accountants
The Willowbrook Joint Venture
Merchantville, New Jersey
We have audited the accompanying balance sheets of The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the related statements of income,
partners' capital, and cash flows for each of the three years in the period
ended December 31, 1995. 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 The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Note 2, which is
February 7, 1996
and Note 5 which
is May 16, 1996.
F-17
<PAGE>
The Willowbrook Joint Venture
Balance Sheets
================================================================================
December 31, 1995 1994
- --------------------------------------------------------------------------------
Assets
Cash $ 141,494 $ 146,687
Cash held for security deposits - restricted 34,868 46,394
Rents receivable 7,602 868
Prepaid expenses 137,014 136,682
Utility deposit 1,100 1,100
Investment property held for sale, net of
accumulated depreciation 9,396,753 9,858,484
- --------------------------------------------------------------------------------
$ 9,718,831 $10,190,215
================================================================================
Liabilities and Partners' Capital
Liabilities
Accounts payable $ -- $ 17,447
Accrued expenses 36,956 26,563
Tenants' security deposits 32,222 40,748
Prepaid rents 7,888 8,936
Due to affiliates 326,293 326,240
- --------------------------------------------------------------------------------
Total liabilities 403,359 419,934
- --------------------------------------------------------------------------------
Commitment
Partners' capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
- --------------------------------------------------------------------------------
Total partners' capital 9,315,472 9,770,281
- --------------------------------------------------------------------------------
$ 9,718,831 $10,190,215
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-18
<PAGE>
The Willowbrook Joint Venture
Statements of Income
================================================================================
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Revenues
Rental income $2,013,638 $2,013,518 $1,928,002
Other income 34,414 48,416 34,772
Interest income 1,051 3,032 5,135
- --------------------------------------------------------------------------------
Total revenues 2,049,103 2,064,966 1,967,909
- --------------------------------------------------------------------------------
Expenses
Depreciation and amortization 514,843 512,242 508,510
Operating expenses (including affiliate
transactions of $17,905 in 1995,
$112,445 in 1994 and $115,451 in 1993) 1,225,052 1,219,161 1,186,441
Professional services 14,017 11,173 12,068
General and administrative, affiliates -- 11,689 9,781
- --------------------------------------------------------------------------------
Total expenses 1,753,912 1,754,265 1,716,800
- --------------------------------------------------------------------------------
Net income $ 295,191 $ 310,701 $ 251,109
- --------------------------------------------------------------------------------
See accompanying summary of significant accounting policies
and notes to financial statements.
F-19
<PAGE>
The Willowbrook Joint Venture
Statements of Partners' Capital
<TABLE>
<CAPTION>
=====================================================================================
Clover Clover Clover
Income Income Income
Properties, Properties Properties
L.P. II, L.P. III, L.P. Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $ 4,220,846 $ 4,220,846 $ 2,154,052 $ 10,595,744
Capital contributions 30,836 30,836 10,197 71,869
Net income 107,751 107,751 35,607 251,109
Partners' distributions (308,405) (308,405) (101,924) (718,734)
- -------------------------------------------------------------------------------------
Balance, December 31, 1993 4,051,028 4,051,028 2,097,932 10,199,988
Capital contributions 4,116 4,116 1,360 9,592
Net income 133,322 133,322 44,057 310,701
Partners' distributions (321,828) (321,828) (106,344) (750,000)
- -------------------------------------------------------------------------------------
Balance, December 31, 1994 3,866,638 3,866,638 2,037,005 $ 9,770,281
Capital contributions -- -- -- --
Net income 126,666 126,666 41,859 295,191
Partners' distributions (321,828) (321,828) (106,344) (750,000)
- -------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 3,671,476 $ 3,671,476 $ 1,972,520 $ 9,315,472
- -------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-20
<PAGE>
The Willowbrook Joint Venture
Statements of Cash Flows
================================================================================
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Operating activities
Cash received from rentals $2,005,856 $2,020,702 $1,926,352
Interest income received 1,051 3,032 5,135
Other income received 34,414 48,416 34,772
Security deposits paid 11,526 4,051 15,521
Cash paid for operating expenses (1,254,928) (1,255,209) (1,266,247)
- -------------------------------------------------------------------------------
Net cash provided by operating activities 797,919 820,992 715,533
- -------------------------------------------------------------------------------
Investing activities
Cash paid for investment property (53,112) (62,265) (94,426)
- -------------------------------------------------------------------------------
Financing activities
Partners' distributions (750,000) (750,000) (718,734)
Partners' contributions -- 9,592 71,869
- -------------------------------------------------------------------------------
Net cash (used) in financing activities (750,000) (740,408) (646,865)
- -------------------------------------------------------------------------------
Net (decrease) increase in cash (5,193) 18,319 (25,758)
Cash, at beginning of year 146,687 128,368 154,126
- -------------------------------------------------------------------------------
Cash, at end of year $ 141,494 $ 146,687 $ 128,368
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-21
<PAGE>
The Willowbrook Joint Venture
Statements of Cash Flows
================================================================================
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Reconciliation of net income to net cash
provided by operating activities
Net income $ 295,191 $ 310,701 $ 251,109
- -------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 514,843 512,242 508,510
(Increase) decrease in cash held
for security deposits 11,526 4,051 15,521
(Increase) decrease in rents receivable (6,734) 2,428 (1,929)
(Increase) decrease in prepaid expenses (332) 15,508 320
(Decrease) increase in accounts payable (17,447) (11,091) 9,308
Increase (decrease) in accrued expenses 10,393 526 (2,146)
(Decrease) in tenants' security deposits (8,526) (5,816) (15,874)
(Decrease) increase in prepaid rents (1,048) 4,756 279
Increase (decrease) in due to affiliates 53 (12,313) (49,565)
- -------------------------------------------------------------------------------
Total adjustments 502,728 510,291 464,424
- -------------------------------------------------------------------------------
Net cash provided by operating activities $ 797,919 $ 820,992 $ 715,533
================================================================================
See accompanying summary of significant accounting policies
and notes to financial statements.
F-22
<PAGE>
The Willowbrook Joint Venture
Summary of Significant Accounting Policies
================================================================================
Impairment of In the event that facts and circumstances indicate that
Long-Lived Assets the cost of the investment property may be impaired, an
evaluation of recoverability would be performed. If an
evaluation is required, the estimated undiscounted cash
flows associated with the assets would be compared to
the asset's carrying amount.
Income Taxes The Joint Venture has not provided for income taxes,
since all income and losses are to be allocated to the
partners for inclusion in their respective tax returns.
The tax returns, the status of the Joint Venture as
such for tax purposes and the amount of allocable Joint
Venture income or loss are subject to examination by
the Internal Revenue Service. If such examinations
result in changes with respect to the joint venture
status or in changes to allocable Joint Venture income
or loss, the tax liability of the partners could be
changed accordingly.
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 amounts 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.
F-23
<PAGE>
The Willowbrook Joint Venture
Notes to Financial Statements
================================================================================
1. Organization The Willowbrook Joint Venture ("Joint Venture") was
and Basis of formed on December 17, 1987, by Clover Income
Accounting Properties, L.P. (CIP) and Clover Income Properties II,
L.P. (CIP II) for the purpose of acquiring, operating
and holding the Willowbrook Apartments. Leases
primarily have a term of one year or less. The life of
the joint venture was initially set at 20 years.
On April 8, 1992, Clover Income Properties III, L.P.
("CIP III") acquired a 14.18% interest in the Joint
Venture for $2,200,000 in cash, effective April 1,
1992, from CIP and CIP II, which reduced their
respective ownership interest in the Joint Venture from
50% to 42.91% each. The life of the Joint Venture was
extended for an additional 8 years, at that time.
The Joint Venture's records are maintained on the
accrual basis of accounting as adjusted for Federal
income tax reporting purposes. The accompanying
financial statements have been prepared from such
records after making appropriate adjustments, where
applicable, to reflect the Joint Venture's accounts on
the accrual basis of accounting according to generally
accepted accounting principles (GAAP). Depreciation for
financial reporting purposes is provided using the
straight-line method over the estimated useful lives of
the assets, while alternative methods are used for
Federal income tax purposes. The net effect of this
difference is summarized as follows:
December 31, 1995 1994
---------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
---------------------------------------------------------------------
Total assets $ 9,718,831 $11,481,249 $10,190,215 $11,809,659
=====================================================================
Partners' capital $ 9,315,472 $11,077,891 $ 9,770,281 $11,389,717
=====================================================================
F-24
<PAGE>
The Willowbrook Joint Venture
Notes to Financial Statements
================================================================================
Reconciliation of income per financial statement to
income per Federal income tax return is as follows:
Year ended December 31, 1995 1994 1993
------------------------------------------------------
Net income per financial
statements $295,191 $310,701 $251,109
Reconciling item
Depreciation 142,983 142,571 142,571
------------------------------------------------------
Tax basis income $438,174 $453,272 $393,680
======================================================
2. Investment On December 17, 1987, the Joint Venture acquired the
Property Held Willowbrook Apartments (the Property), a mid-rise
for Sale apartment complex comprising 299 apartment units
contained in eight five-story buildings. The complex is
located in Baltimore, Maryland.
On February 7, 1996, the Joint Venture entered into an
agreement of sale with Berwind Properties Group, Inc.
and First Montgomery Properties, Ltd. Under the terms
of the agreement, the Joint Venture will sell The
Willowbrook Apartments (including land), all related
improvements and tangible and intangible property for
$10,500,000 less a $315,000 credit for capital
improvements (see Note 5 for additional information).
The sale is contingent upon, among other things, the
sale of all of the properties owned by affiliates of
Clover Financial Corporation which are also under
agreement of sale with Berwind and First Montgomery.
Clover Financial Corporation is the parent company of
the general partner of CIP, CIP II and CIP III. The
sale must be approved by a majority of the limited
partners of CIP, CIP II and CIP III. Upon sale of The
Willowbrook Apartments, all assets of the Joint Venture
will be liquidated. The net proceeds will then be
distributed to its owners (CIP, CIP II and CIP III) and
the Joint Venture dissolved.
Due to the proposed sale of the Willowbrook Apartments
and subsequent liquidation of the Partnership, the
Joint Venture has reflected the investment property
held for sale at the lower of cost or market. Market
value is based on the estimated cash proceeds (net of
settlement costs) from the sale of the
F-25
<PAGE>
Clover Income Properties, L.P.
Notes to Financial Statements
================================================================================
Willowbrook Apartments. At December 31, 1995, the
investment property held for sale was not impaired.
The following is a summary of investment property held
for sale which is carried at the lower of cost or
market:
December 31, 1995 1994
----------------------------------------------------------
Land $ 1,421,205 $ 1,421,205
Apartment buildings 11,006,247 10,980,891
Furniture and fixtures 1,004,545 976,789
-----------------------------------------------------------
13,431,997 13,378,885
Less accumulated depreciation (4,035,244) (3,520,401)
-----------------------------------------------------------
$ 9,396,753 $ 9,858,484
===========================================================
Depreciation on the property has been provided on a
straight-line basis over the estimated useful lives of
the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
Maintenance and repair expenses are charged to expense
as incurred. Significant betterments and improvements
are capitalized and depreciated over their useful
lives.
3. Transactions Effective February 21, 1995, NPI-CL Management, L.P.
with ("NPI") which is unaffiliated with the Partners,
Affiliates replaced an affiliate of the Partners as Property
Manager. Until that time, the property was managed by
the affiliate pursuant to a management agreement which
provided for an annual fee not to exceed 5% of the
gross revenues from the Property.
The general partner of CIP, CIP II, and CIP III and
their affiliates are entitled to reimbursement for
administrative services rendered to the Joint Venture,
direct expenses of operations and goods and services
used by and for the Joint Venture.
F-26
<PAGE>
The Willowbrook Joint Venture
Notes to Financial Statements
================================================================================
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
-----------------------------------------------------------
Amount payable at
January 1, 1993 $ 334,953 $ 53,165 $ 388,118
Incurred during 1993 98,313 26,919 125,232
Payments during 1993 (114,616) (60,181) (174,797)
-----------------------------------------------------------
Amount payable at
December 31, 1993 318,650 19,903 338,553
Incurred during 1994 102,734 21,400 124,134
Payments during 1994 (102,252) (34,195) (136,447)
-----------------------------------------------------------
Amount payable at
December 31, 1994 319,132 7,108 326,240
Incurred during 1995 12,750 5,155 17,905
Payments during 1995 (12,750) (5,102) (17,852)
-----------------------------------------------------------
Amount payable at
December 31, 1995 $ 319,132 $ 7,161 $ 326,293
===========================================================
4. Subsequent In January 1996, the Joint Venture made cash
Distributions distributions of $26,819, $26,819 and $8,862 to Clover
Income Properties, L.P., Clover Income Properties II,
L.P. and Clover Income Properties III, L.P.,
respectively.
5. Subsequent On May 16, 1996, the agreement to sell the Willowbrook
Event Apartments was amended. The amendment, among other
things, reduced the sales price from $10,500,000 less a
$315,000 credit for capital contributions to
$9,850,000.
F-27
<PAGE>
================================================================================
Years Ended December 31, 1995, 1994 and 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
----------------------- -------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144-unit garden apartment complex
located in Waldorf, Maryland None $474,225 $4,594,906 $45,276 $553,785
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount at
which the real estate is carried for financial reporting purposes, less
$44,738 of transfer taxes which were capitalized for financial reporting
purposes and expensed for federal income tax purposes.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $ -- $ 5,615,822 $ 5,585,858
Additions during year:
Acquisitions -- 52,370 29,964
Dispositions during year:
Cost of real estate sold -- (5,668,192) --
- ----------------------------------------------------------------------------------
Balance, at end of year $ -- $ -- $ 5,615,822
==================================================================================
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ -- $ 1,626,340 $ 1,392,999
Depreciation expense -- 117,366 233,341
Accumulated depreciation - disposal of assets -- (1,743,706) --
- ----------------------------------------------------------------------------------
Balance, at end of year $ -- $ -- $ 1,626,340
==================================================================================
</TABLE>
<PAGE>
SCHEDULE III
Clover Income Properties, L.P.
Schedules of Real Estate and Accumulated Depreciation
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at December 31, 1995 (A) Life on Which
- -------------------------------------------------------------------------------------------- Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1995
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$- $- $- $- 1973 12/15/86 5-25 years
</TABLE>
F-28
<PAGE>
================================================================================
Years Ended December 31, 1995, 1994 and 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
----------------------- -------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
299-unit mid-rise apartment complex
located in Baltimore, Maryland None $1,421,205 $11,289,276 $- $721,516
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes, plus
the additional stepped up basis due to a Section 754 election in the
amount of $556,439.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $13,378,885 $13,316,620 $13,222,194
Additions during year:
Improvements, etc 53,112 62,265 94,426
- --------------------------------------------------------------------------------------
Balance, at end of year $13,431,997 $13,378,885 $13,316,620
======================================================================================
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ 3,520,401 $ 3,008,159 $ 2,499,649
Depreciation expense 514,843 512,242 508,510
- --------------------------------------------------------------------------------------
Balance, at end of year $ 4,035,244 $ 3,520,401 $ 3,008,159
======================================================================================
</TABLE>
<PAGE>
SCHEDULE III
The Willowbrook Joint Venture
Schedule of Real Estate and Accumulated Depreciation
================================================================================
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at December 31, 1995 (A) Life on Which
- ----------------------------------------------------------------------------- Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$1,421,205 $12,010,792 $13,431,997 $4,035,244 1966 12/17/87 12-25 years
</TABLE>
F-29
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On February 7, 1996, The Willowbrook Joint Venture, in which Clover Income
Properties, L.P. has a 42.91% interest, entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd. Under the
terms of the agreement, as amended on May 16, 1996, the Joint Venture will sell
the Willowbrook Apartments (including land), all related improvements and
tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of Clover Income Properties, L.P. (CIP), Clover
Income Properties II, L.P. (CIP II) and Clover Income Properties III, L.P. (CIP
III). If the sale is approved by a majority in interest of the limited partners
and all the other conditions to the sale are met, the sale will be completed.
Concurrent with the sale of the Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP II and CIP III) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, CIP, CIP II and CIP III
will then liquidate their net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the audited financial statements of Clover Income Properties, L.P. (the
"Partnership") as of December 31, 1995 and for the year then ended contained
herein, giving effect to the adjustments in the notes accompanying these pro
forma financial statements. The pro forma condensed balance sheet as of December
31, 1995 gives effect to the sale of the Willowbrook Apartments and the
resulting distribution of net cash proceeds as a result of the Partnership's
termination and dissolution as if they had occurred on December 31, 1995; the
pro forma condensed statement of operations for the year ended December 31, 1995
gives effect to the sale of the Willowbrook Apartments as if the transaction had
occurred on January 1, 1995. These pro forma financial statements are not
necessarily indicative of the results that actually would have occurred if the
sale of the Willowbrook Apartments had been consummated on the date indicated or
which may be attained in the future, and should be read in conjunction with the
Partnership's financial statements and notes thereto.
F-30
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
December 31, 1995
- --------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
-------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Balance
Reported Willowbrook Partnership Sheet
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $299,295 $4,052,729 (2) $(4,352,024) (3) $-
Investment in The Willowbrook
Joint Venture, at market 3,997,264 55,460 (1) - -
- (3,726,936) (2) (325,788) (4) -
- --------------------------------------------------------------------------------------------------------
Total assets $4,296,559 $381,253 $(4,677,812) $-
- --------------------------------------------------------------------------------------------------------
Accrued expenses $19,500 $ - $ (19,500) (3) $-
- --------------------------------------------------------------------------------------------------------
General partner (4,854) 4,854 (1) - -
Limited partners 4,281,913 325,793 (2) (325,788) (4) -
50,606 (1) (4,332,524) (3)
- --------------------------------------------------------------------------------------------------------
Total partners' capital 4,277,059 381,253 (4,658,312) -
- --------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $4,296,559 $381,253 $(4,677,812) $-
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-31
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995
- --------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
------------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Statement
Reported Willowbrook Partnership of Operations
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Interest income $ 5,809 $ - $ (5,809) (4) $--
- -------------------------------------------------------------------------------------------------------------------
Expenses
Impairment loss, investment in
The Willowbrook Joint Venture 289,764 (289,764) -- (4) --
General, administrative and operating expenses 9,061 -- (9,061) (4) --
Professional fees 64,518 -- (64,518) (4) --
Amortization 24,231 (24,231) -- (4) --
- -------------------------------------------------------------------------------------------------------------------
Total expenses 387,574 (313,995) (73,579) --
- -------------------------------------------------------------------------------------------------------------------
Share of income from
The Willowbrook Joint Venture 126,666 (126,666) -- (4) --
===================================================================================================================
Net (loss) income $(255,099) $187,329 $ 67,770 $--
===================================================================================================================
Net (loss) per limited
partnership unit $ (16.84) $ -- $ -- $--
===================================================================================================================
Distribution per limited
partnership unit $ -- $ -- $(288.83) $--
===================================================================================================================
Weighted average of limited
partnership units 15,000 -- 15,000 --
===================================================================================================================
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-32
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. Gain for accounting purposes of $129,247 will be
recognized on the sale after deduction of $324,000 in
expenses related to the sale.
Proceeds from sale of the Willowbrook
Apartments $9,850,000
Less: Net book value in Willowbrook
Apartments (9,396,753)
Expenses related to sale (324,000)
-------------------------------------------------------
Gain on sale of the Willowbrook Apartments $ 129,247
=======================================================
Clover Income Properties, L.P. share(42.91%)$ 55,460
=======================================================
Allocated to: General Partner $ 4,854
Limited Partners $ 50,606
-------------------------------------------------------
$ 55,460
=======================================================
The allocation reflects an allocation of gain of $4,854
to the general partner and $50,606 to the limited
partners in accordance with the partnership agreement.
All adjustments related to gain on the sale are of a
non-recurring nature and are not part of the continuing
operations of the Partnership. Therefore, such
adjustments are not included in the pro forma condensed
statement of operations.
Per unit information for pro forma purposes has been
computed on 15,000 limited partnership units.
The expenses related to the sale are as follows:
Closing costs $154,000
Professional fees 115,000
Proxy statement costs 55,000
-------------------------------------------------------
$324,000
=======================================================
F-33
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
2. The following pro forma adjustments to the
Partnership's investment accounts have been made upon
the sale of the Willowbrook Apartments and the
dissolution of the Joint Venture:
CIP CIP II CIP III Total
-------------------------------------------------------------------------
Cash
distribution $(4,052,729) $(4,052,729) $(1,339,261) $(9,444,719)
Dissolution
adjustment 325,793 325,793 (651,586) --
-------------------------------------------------------------------------
$(3,726,936) $(3,726,936) $(1,990,847) $(9,444,719)
=========================================================================
3. The following pro forma adjustments to cash have been
made to estimate the distribution to the partners upon
dissolution of the Partnership:
Distribution from Willowbrook Joint Venture $4,052,729
Payment of liabilities upon dissolution
of the Partnership (19,500)
-------------------------------------------------------
Net change in cash 4,033,229
Cash on hand 299,295
-------------------------------------------------------
Distribution to limited partners 4,332,524
=======================================================
Distribution per limited partnership unit $ 288.83
=======================================================
4. The pro forma adjustment represents the write-off of
the remaining basis of the investment in the Joint
Venture.
5. The pro forma adjustment to the statement of operations
gives effect to the transaction as of January 1, 1995.
F-34
<PAGE>
THE WILLOWBROOK JOINT VENTURE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On February 7, 1996, The Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement, as amended on May 16, 1996, the Joint Venture
will sell the Willowbrook Apartments (including land), all related improvements
and tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of Clover Income Properties, L.P. (CIP), Clover
Income Properties II, L.P. (CIP II) and Clover Income Properties III, L.P. (CIP
III). If the sale is approved by a majority in interest of the limited partners
and all the other conditions to the sale are met, the sale will be completed.
Concurrent with the sale of the Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP II and CIP III) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, CIP, CIP II and CIP III
will then liquidate their net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the audited financial statements of The Willowbrook Joint Venture (the
"Partnership") as of December 31, 1995 and for the year then ended contained
herein, giving effect to the adjustments in the notes accompanying these pro
forma financial statements. The pro forma condensed balance sheet as of December
31, 1995 gives effect to the sale of the Willowbrook Apartments and the
resulting distribution of net cash proceeds as a result of the Partnership's
termination and dissolution as if they had occurred on December 31, 1995; the
pro forma condensed statement of operations for the year ended December 31, 1995
gives effect to the sale of the Willowbrook Apartments as if the transaction had
occurred on January 1, 1995. These pro forma financial statements are not
necessarily indicative of the results that actually would have occurred if the
sale of the Willowbrook Apartments had been consummated on the date indicated or
which may be attained in the future, and should be read in conjunction with the
Partnership's financial statements and notes thereto.
F-35
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995
- ------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
-------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Joint Balance
Reported Willowbrook Venture Sheet
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 141,494 $9,631,606 (2) $(9,807,968) (2) $-
34,868 (2)
Cash held for security deposits, restricted 34,868 (34,868) (2) - -
Rents receivable 7,602 (7,602) (2) - -
Prepaid expenses 137,014 (137,014) (2) - -
Utility deposits 1,100 (1,100) (2) - -
Investment property held for sale,
net of accumulated depreciation 9,396,753 (9,396,753) (1) - -
- ------------------------------------------------------------------------------------------------------------------
Total assets $9,718,831 $ 89,137 $(9,807,968) $-
==================================================================================================================
Accounts payable and
accrued expenses $ 36,956 $ - $ (36,956) (2) $-
Prepaid rent 7,888 (7,888) (2) - -
Tenant security deposits 32,222 (32,222) (2) - -
Due to affiliates 326,293 - (326,293) (2) -
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 403,359 (40,110) (363,249) -
- ------------------------------------------------------------------------------------------------------------------
Clover Income Properties, L.P. 3,671,476 55,460 (1) (3,726,936) (3) -
Clover Income Properties II, L.P. 3,671,476 55,460 (1) (3,726,936) (3) -
Clover Income Properties III, L.P. 1,972,520 18,327 (1) (1,990,847) (3) -
- ------------------------------------------------------------------------------------------------------------------
Total partners' capital 9,315,472 129,247 (9,444,719) -
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and capital $9,718,831 $ 89,137 $(9,807,968) $-
==================================================================================================================
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-36
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995
- --------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
----------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Joint Statement
Reported Willowbrook Venture of Operations
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Rental income $2,013,638 $(2,013,638) (4) $ - $ -
Other income 34,414 (34,414) (4) - -
Interest income 1,051 (1,051) (4) - -
- -------------------------------------------------------------------------------------------------------------------
Total revenues 2,049,103 (2,049,103) - -
- -------------------------------------------------------------------------------------------------------------------
Expenses
Depreciation 514,843 (514,843) (4) - -
Professional fees 14,017 (14,017) (4) - -
Operating expenses 1,225,052 (1,225,052) (4) - -
- -------------------------------------------------------------------------------------------------------------------
Total expenses 1,753,912 (1,753,912) - -
- -------------------------------------------------------------------------------------------------------------------
Net income $295,191 $(295,191) $ - $ -
===================================================================================================================
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-37
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. Gain for accounting purposes of $129,247 will be
recognized on the sale after deduction of $324,000 in
expenses related to the sale.
Proceeds from sale of the Willowbrook
Apartments $9,850,000
Less: Net book value in Willowbrook
Apartments (9,396,753)
Expenses related to sale (324,000)
-------------------------------------------------------
Gain on sale of Willowbrook $129,247
=======================================================
Allocated to: Clover Income Properties, L.P. $ 55,460
Clover Income Properties II, L.P. 55,460
Clover Income Properties III, L.P. 18,327
-------------------------------------------------------
$129,247
=======================================================
The expenses related to the sale are as follows:
Closing costs $154,000
Professional fees 115,000
Proxy statement costs 55,000
-------------------------------------------------------
$324,000
=======================================================
All adjustments related to gain on the sale are of a
non-recurring nature and are not part of the continuing
operations of the Partnership, therefore, such
adjustments are not included in the pro forma condensed
statement of operations.
F-38
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
2. The following pro forma adjustments to cash have been
made to determine the cash available for distribution:
Sale of The Willowbrook Apartments
Sales price $9,850,000
Settlement costs (324,000)
-------------------------------------------------------
Net cash proceeds from sale of
The Willowbrook Apartments 9,526,000
Reimbursement of operating assets
at settlement 145,716
Transfer of security deposits and prepaid
rents at settlement (40,110)
-------------------------------------------------------
Net cash proceeds from sale of
The Willowbrook Apartments $9,631,606
Cash held for security deposits,
unrestricted upon sale 34,868
Cash on hand $141,494
Payment of remaining liabilities upon
dissolution of the Partnership (363,249)
-------------------------------------------------------
Cash available for distribution upon dissolution of the
Joint Venture $9,444,719
=======================================================
F-39
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
3. The following pro forma adjustments to the partner's
equity accounts have been made upon dissolution of the
Joint Venture:
CIP CIP II CIP III Total
- -------------------------------------------------------------------------------
Cash
distribution $(4,052,729) $(4,052,729) $(1,339,261) $(9,444,719)
Dissolution
adjustment 325,793 325,793 (651,586) --
- -------------------------------------------------------------------------------
$(3,726,936) $(3,726,936) $(1,990,847) $(9,444,719)
================================================================================
4. The pro forma adjustment to the statement of operations
gives effect to the transaction as of January 1, 1995.
F-40
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements reflect the authorization of the Joint
Venture to borrow up to $7,000,000 in the form of a first priority mortgage loan
which will be collateralized by the Willowbrook Apartments (including land). As
of this date, no lender has been identified. The interest rate, amortization
period, and closing costs for the loan are based upon assumptions of prevailing
rates and terms and estimates of costs made by the general partner. The Joint
Venture will distribute the net loan proceeds to Clover Income Properties, L.P.,
Clover Income Properties II, L.P. and Clover Income Properties III, L.P. The
General Partner will then disburse in the form of a return of capital the loan
proceeds to the limited partners. The following unaudited pro forma financial
statements have been prepared based on the audited financial statements of
Clover Income Properties, L.P. (the "Partnership") as of December 31, 1995 and
for the year then ended contained herein, giving effect to the adjustments in
the notes accompanying these pro forma financial statements. The pro forma
condensed balance sheet as of December 31, 1995 gives effect to the borrowing
and the resulting distribution of net cash proceeds as if they had occurred on
December 31, 1995. The pro forma condensed statement of operations for the year
ended December 31, 1995 gives effect as if they had occurred on January 1, 1995.
These pro forma financial statements are not necessarily indicative of the
results that actually would have occurred if the loan had been obtained on the
date indicated, or which may be attained in the future, and should be read in
conjunction with Partnership's financial statements and notes thereto.
F-41
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
December 31, 1995
- --------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Balance
Reported Adjustments Sheet
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash $299,295 $ - $299,295
Investment in The Willowbrook
Joint Venture, at market 3,997,264 (2,574,600) (1) 1,422,664
- --------------------------------------------------------------------------------------
Total assets $4,296,559 $(2,574,600) $1,721,959
======================================================================================
Accrued expenses $19,500 $ - $19,500
- --------------------------------------------------------------------------------------
General partner (4,854) - (4,854)
Limited partners 4,281,913 (2,574,600) (1) 1,707,313
- --------------------------------------------------------------------------------------
Total partners' capital 4,277,059 (2,574,600) 1,702,459
- --------------------------------------------------------------------------------------
Total liabilities and capital $4,296,559 $(2,574,600) $1,721,959
======================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-42
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995
- ------------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Statement
Reported Adjustments of Operations
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Interest income $5,809 $ - $5,809
- ------------------------------------------------------------------------------------------------
Expenses
Impairment loss, investment in
The Willowbrook Joint Venture 289,764 - 289,764
Amortization 24,231 - 24,231
Professional services 64,518 - 64,518
General, administrative and
operating expenses 9,061 - 9,061
- ------------------------------------------------------------------------------------------------
Total expenses 387,574 - 387,574
- ------------------------------------------------------------------------------------------------
Share of income (loss) from
The Willowbrook Joint Venture 126,666 (287,222) (2) (160,556)
- ------------------------------------------------------------------------------------------------
Net (loss) $(255,099) $(287,222) $(542,321)
================================================================================================
Net (loss) per limited
partnership unit $(16.84) $(18.96) $(35.80)
================================================================================================
Weighted average of limited
partnership units 15,000 15,000 15,000
================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-43
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. The following pro forma adjustments have been made to
determine the cash available for distribution:
Total loan amount $7,000,000
Less payment to affiliates (326,293)
Less closing deferred financing costs (329,000)
Expenses related to loan (44,707)
Reserves (300,000)
-------------------------------------------------------
Net proceeds from the loan $6,000,000
=======================================================
Clover Income Properties, L.P. (42.91%) $2,574,600
=======================================================
Allocated to: General Partner $-
Limited Partners 2,574,600
-------------------------------------------------------
$2,574,600
=======================================================
Distributions per limited partnership unit $171.64
=======================================================
Per unit information for pro forma purposes has been
computed on 15,000 limited partnership units.
2. The following pro forma adjustments are being made to
reflect the loan in the pro forma condensed statement
of operations:
Expenses relating to obtaining the loan $44,707
Amortization expenses of the deferred
financing costs 32,900
Interest expense 591,753
-------------------------------------------------------
$669,360
=======================================================
Clover Income Properties, L.P. (42.91%) $287,222
=======================================================
F-44
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
Allocated to: General Partner $2,872
Limited Partners 284,350
-------------------------------------------------------
$287,222
=======================================================
3. The loan is payable in monthly installments of $56,367,
including interest based on the ten year U.S. treasury
note (effectively 6.5%) plus 2%. The term of the loan
is ten years with a balloon payment at the end of the
term of approximately $5,724,000.
4. Deferred financing costs are being amortized on the
straight line basis over the life of the loan.
F-45
<PAGE>
THE WILLOWBROOK JOINT VENTURE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements reflect the authorization of the Joint
Venture to borrow up to $7,000,000 in the form of a first priority mortgage loan
which will be collateralized by the Willowbrook Apartments (including land). As
of this date, no lender has been identified. The interest rate, amortization
period, and closing costs for the loan are based upon assumptions of prevailing
rates and terms and estimates of costs made by the general partner. The Joint
Venture will distribute the net loan proceeds to Clover Income Properties, L.P.,
Clover Income Properties II, L.P., and Clover Income Properties III, L.P. The
General Partner of each partnership will then disburse in the form of a return
of capital the loan proceeds to the limited partner. The following unaudited pro
forma financial statements have been prepared based on the audited financial
statements of The Willowbrook Joint Venture (the "Partnership") as of December
31, 1995 and for the year then ended contained herein, giving effect to the
adjustments in the notes accompanying these pro forma financial statements. The
pro forma condensed balance sheet as of December 31, 1995 gives effect to the
borrowing and the resulting distribution of net cash proceeds as if they had
occurred on December 31, 1995. The pro forma condensed statement of operations
for the year ended December 31, 1995 gives effect as if they had occurred on
January 1, 1995. These pro forma financial statements are not necessarily
indicative of the results that actually would have occurred if the loan had been
obtained on the date indicated, or which may be attained in the future, and
should be read in conjunction with Partnership's financial statements and notes
thereto.
F-46
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
December 31, 1995
- -------------------------------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Balance
Reported Adjustments Sheet
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $141,494 $300,000 (1) $441,494
Cash held for security deposits, restricted 34,868 - - 34,868
Rents receivable 7,602 - 7,602
Prepaid expenses 137,014 - 137,014
Utility deposits 1,100 - 1,100
Investment property held for sale,
net of accumulated depreciation 9,396,753 - 9,396,753
Deferred financing costs - 329,000 (1) 329,000
- -------------------------------------------------------------------------------------------------------------------
Total assets $9,718,831 $629,000 $10,347,831
===================================================================================================================
Loans payable $ - $7,000,000 (1) $7,000,000
Accounts payable and
accrued expenses 36,956 - 36,956
Prepaid rents 7,888 - 7,888
Tenant security deposits 32,222 - 32,222
Due to affiliates 326,293 (326,293) (1) -
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 403,359 6,673,707 7,077,066
- -------------------------------------------------------------------------------------------------------------------
Clover Income Properties, L.P. 3,671,476 (2,574,600) (1) 1,077,692
(19,184) (1)
Clover Income Properties II, L.P. 3,671,476 (2,574,600) (1) 1,077,692
(19,184) (1)
Clover Income Properties III, L.P. 1,972,520 (850,800) (1) 1,115,381
(6,339) (1)
- -------------------------------------------------------------------------------------------------------------------
Total partners' capital 9,315,472 (6,044,707) 3,270,765
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and capital $9,718,831 $629,000 $10,347,831
===================================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-47
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
Year ended December 31, 1995
- --------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Statement
Reported Adjustment of Operations
- --------------------------------------------------------------------------------
Revenues
Rental income $2,013,638 $ - $2,013,638
Other income 34,414 - 34,414
Interest income 1,051 - 1,051
- -------------------------------------------------------------------------------
Total revenues 2,049,103 - 2,049,103
- -------------------------------------------------------------------------------
Expenses
Depreciation 514,843 - 514,843
Amortization - 32,900 (2) 32,900
Professional fees 14,017 - 14,017
Operating expenses 1,225,052 44,707 (2) 1,269,759
- -------------------------------------------------------------------------------
Total expenses 1,753,912 77,607 1,831,519
- -------------------------------------------------------------------------------
Interest expense - 591,753 (2) 591,753
- -------------------------------------------------------------------------------
Net income (loss) $295,191 $(669,360) $(374,169)
- -------------------------------------------------------------------------------
See notes to unaudited pro forma condensed financial statements.
F-48
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. The following pro forma adjustments have been made to
determine the cash available for distribution:
Total loan amount $7,000,000
Less payment to affiliates (326,293)
Less closing deferred financing costs (329,000)
Expenses related to loan (44,707)
Reserves (300,000)
-------------------------------------------------------
Net proceeds from the loan $6,000,000
=======================================================
Allocated to: Clover Income Properties, L.P.$2,574,600
Clover Income Properties II, L.P. 2,574,600
Clover Income Properties III, L.P. 850,800
-------------------------------------------------------
$6,000,000
=======================================================
2. The following pro forma adjustments are being made to
reflect the loan in the pro forma condensed statement
of operations:
Expenses relating to obtaining the loan $ 44,707
Amortization expenses of the deferred
financing costs 32,900
Interest expenses 591,753
-------------------------------------------------------
$669,360
=======================================================
Allocated to:Clover Income Properties, L.P. $287,222
Clover Income Properties II, L.P. 287,223
Clover Income Properties III, L.P. 94,915
-------------------------------------------------------
$ 669,360
=======================================================
3. The loan is payable in monthly installments of $56,367,
including interest based on the ten year U.S. treasury
note (effectively 6.5%) plus 2%. The term of the loan
is ten years with a balloon payment at the end of the
term of approximately $5,724,000.
4. Deferred financing costs are being amortized on the
straight line basis over the life of the loan.
F-49
<PAGE>
[LOGO] ALLOY, SILVERSTEIN, SHAPIRO,
ADAMS, MULFORD & CO.
a professional corporation
CERTIFIED PUBLIC ACCOUNTANTS
[Letterhead]
To the Stockholder
C.I.P. Management Corporation
23 West Park Avenue
Merchantville, New Jersey 08109
We have audited the accompanying balance sheet of C.I.P. Management
Corporation as of November 30, 1995. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of C.I.P. Management Corporation as of
November 30, 1995 in conformity with generally accepted accounting principles.
/s/ ALLOY, SILVERSTEIN, SHAPIRO, ADAMS, MULFORD & CO.
ALLOY, SILVERSTEIN, SHAPIRO, ADAMS, MULFORD & CO.
January 4, 1996
Cherry Hill, New Jersey
<PAGE>
C.I.P. MANAGEMENT CORPORATION
BALANCE SHEET
NOVEMBER 30, 1995
ASSETS
CURRENT ASSETS
Prepaid Expenses $ 13
OTHER ASSETS
Loans Receivable-Clover Financial Corporation 1,507,180
-----------
TOTAL ASSETS $ 1,507,193
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Share of Accumulated Losses from Partnership
in Excess of Investments and Advances $ 192
Deferred Tax Liability 908
-----------
TOTAL LIABILITIES 1,100
-----------
STOCKHOLDER'S EQUITY
Common Stock, no par value, 1,000 Shares
Authorized, 300 Issued and Outstanding 1,525,500
Accumulated (Deficit) (19,407)
-----------
TOTAL STOCKHOLDER'S EQUITY 1,506,093
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,507,193
===========
The accompanying notes are an integral part of this statement.
Page 2
<PAGE>
C.I.P. MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENT
NOVEMBER 30, 1995
1. Organization
C.I.P. Management Corporation, formerly Pennsville Properties, Inc., a
wholly-owned subsidiary of Clover Financial Corporation, is the general
partner of Clover Income Properties, L.P. (CIP), a real estate limited
partnership. The Company was formed on September 12, 1978.
2. Summary of Significant Accounting Policies
Use of Estimates
Estimates and assumptions are used in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses, as applicable. Actual results
could differ from those estimates.
Investments
The Company accounts for its 1% investment in a real estate limited
partnership under the equity method, because the Company exercises
significant influence over its operating and financial activities.
Accordingly, the investment is carried at cost, adjusted for the
Company's proportionate share of earnings or losses.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
which requires the use of the "liability method" of accounting for
income taxes. Accordingly, deferred tax liabilities and assets are
determined based on the difference between the financial statement and
tax bases of assets and liabilities, using enacted tax rates in effect
for the year in which the differences are expected to reverse.
3. Loans Receivable - Clover Financial Corporation
Loans receivable - Clover Financial Corporation, bear interest at 5.86%
and have no scheduled maturity dates.
4. Investment in Partnership
The Company purchased for $1,000 a 1% general partnership interest in
CIP and has been allocated losses in the amount of $1,192. This amount
exceeds the Company's investment and advances to the partnership by
$192. This amount has been recorded as a liability.
5. Income Taxes
The Company files a consolidated federal income tax return with Clover
Financial Corporation. Temporary differences giving rise to the deferred
tax liability consisted of partnership investment income and deductions
accounted for differently for financial reporting and tax purposes. The
deferred tax liability as of November 30, 1995 was $908.
6. Commitments
The Company, as a general partner in CIP, could be liable for, or
otherwise committed to provide funds to this partnership.
Page 3
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On February 7, 1996, The Willowbrook Joint Venture, in which Clover Income
Properties, L.P. has a 42.91% interest, entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd. Under the
terms of the agreement, as amended on May 16, 1996, the Joint Venture will sell
the Willowbrook Apartments (including land), all related improvements and
tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of Clover Income Properties, L.P. (CIP), Clover
Income Properties II, L.P. (CIP II) and Clover Income Properties III, L.P. (CIP
III). If the sale is approved by a majority in interest of the limited partners
and all the other conditions to the sale are met, the sale will be completed.
Concurrent with the sale of the Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP II and CIP III) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, CIP, CIP II and CIP III
will then liquidate their net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the unaudited financial statements of Clover Income Properties, L.P. (the
"Partnership") as of March 31, 1996 and for the three months then ended
contained herein, giving effect to the adjustments in the notes accompanying
these pro forma financial statements. The pro forma condensed balance sheet as
of March 31, 1996 gives effect to the sale of the Willowbrook Apartments and the
resulting distribution of net cash proceeds as a result of the Partnership's
termination and dissolution as if they had occurred on March 31, 1996; the pro
forma condensed statement of operations for the three months ended March 31,
1996 gives effect to the sale of the Willowbrook Apartments as if the
transaction had occurred on January 1, 1996. These pro forma financial
statements are not necessarily indicative of the results that actually would
have occurred if the sale of the Willowbrook Apartments had been consummated on
the date indicated or which may be attained in the future, and should be read in
conjunction with the Partnership's financial statements and notes thereto.
F-53
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
Dissolution Pro Forma
of the Condensed
As Sale of Limited Balance
Reported Willowbrook Partnership Sheet
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 310,761 $4,070,502 (2) $(4,381,263) (2) $-
Investment in The Willowbrook
Joint Venture, at market 3,963,439 107,056 (1) - -
(3,744,707) (2) (325,788) (4) -
- -------------------------------------------------------------------------------------------------------------------
Total assets $4,274,200 $ 432,851 $(4,707,051) $-
===================================================================================================================
Accrued expenses $ 13,171 $ - $ (13,171) (3) $-
- -------------------------------------------------------------------------------------------------------------------
General partner (4,854) 4,854 (1) - -
Limited partners 4,265,883 102,202 (1) (325,788) (4) -
325,795 (2) (4,368,092) (3)
- -------------------------------------------------------------------------------------------------------------------
Total partners' capital 4,261,029 432,851 (4,693,880) -
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $4,274,200 $ 432,851 $(4,707,051) $-
===================================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-54
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Three months ended March 31, 1996
- --------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
Dissolution Pro Forma
of the Condensed
As Sale of Limited Statement
Reported Willowbrook Partnership of Operations
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Interest income $1,556 $- $(1,556) (4) $-
- -------------------------------------------------------------------------------------------------------------------
Expenses
General and administrative expenses 1,842 - (1,842) (4) -
Professional fees 7,073 - (7,073) (4) -
- -------------------------------------------------------------------------------------------------------------------
Total expenses 8,915 - (8,915) -
- -------------------------------------------------------------------------------------------------------------------
Share of income from
The Willowbrook Joint Venture 46,632 (46,632) - (4) -
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $39,273 $(46,632) $(8,915) $-
===================================================================================================================
Net income per limited
partnership unit $2.59 $- $ - $-
===================================================================================================================
Distribution per limited
partnership unit $- $- $(291.20) $-
===================================================================================================================
Weighted average of limited
partnership units 15,000 - 15,000 -
===================================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-55
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. Gain for accounting purposes of $249,490 will be
recognized on the sale after deduction of $324,000 in
expenses related to the sale.
Proceeds from sale of the
Willowbrook Apartments $9,850,000
Less: Net book value in
Willowbrook Apartments (9,276,510)
Expenses related to sale (324,000)
-------------------------------------------------------
Gain on sale of the
Willowbrook Apartments $249,490
=======================================================
Clover Income Properties, L.P.
share (42.91%) $107,056
-------------------------------------------------------
Allocated to: General Partner $4,854
Limited Partners $102,202
-------------------------------------------------------
$107,056
=======================================================
The allocation reflects an allocation of gain of $4,854
to the general partner and $102,202 to the limited
partners in accordance with the partnership agreement.
All adjustments related to gain on the sale are of a
non-recurring nature and are not part of the continuing
operations of the Partnership. Therefore, such
adjustments are not included in the pro forma condensed
statement of operations.
Per unit information for pro forma purposes has been
computed on 15,000 limited partnership units.
The expenses related to the sale are as follows:
Closing costs $154,000
Professional fees 115,000
Proxy statement costs 55,000
------------------------------------------------------
$324,000
======================================================
F-56
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
2. The following pro forma adjustments to the
Partnership's investment accounts have been made upon
the sale of the Willowbrook Apartments and the
dissolution of the Joint Venture:
CIP CIP II CIP III Total
- --------------------------------------------------------------------------------
Cash
distribution $(4,070,502) $(4,070,502) $(1,345,134) $(9,486,138)
Dissolution
adjustment 325,795 325,795 (651,590) --
- --------------------------------------------------------------------------------
$(3,744,707) $(3,744,707) $(1,996,724) $(9,486,138)
================================================================================
3. The following pro forma adjustments to cash have been
made to estimate the distribution to the partners upon
dissolution of the Partnership:
Distribution from Willowbrook Joint Venture $4,070,502
Payment of liabilities upon dissolution
of the Partnership (13,171)
-------------------------------------------------------
Net change in cash 4,057,331
Cash on hand 310,761
-------------------------------------------------------
Distribution to general and
limited partners $4,368,092
=======================================================
Distribution per limited partnership unit $291.20
=======================================================
4. The pro forma adjustment represents the write-off of
the deferred acquisition fees related to the
acquisition of the Willowbrook Apartments and the
remaining basis of the investment in the Joint Venture.
5. The pro forma adjustment to the statement of operations
gives effect to the transaction as of January 1, 1996.
F-57
<PAGE>
THE WILLOWBROOK JOINT VENTURE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On February 7, 1996, The Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement, as amended on May 16, 1996, the Joint Venture
will sell the Willowbrook Apartments (including land), all related improvements
and tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of Clover Income Properties, L.P. (CIP), Clover
Income Properties II, L.P. (CIP II) and Clover Income Properties III, L.P. (CIP
III). If the sale is approved by a majority in interest of the limited partners
and all the other conditions to the sale are met, the sale will be completed.
Concurrent with the sale of the Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP II and CIP III) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, CIP, CIP II and CIP III
will then liquidate their net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the unaudited financial statements of The Willowbrook Joint Venture (the
"Partnership") as of March 31, 1996 and for the three months then ended
contained herein, giving effect to the adjustments in the notes accompanying
these pro forma financial statements. The pro forma condensed balance sheet as
of March 31, 1996 gives effect to the sale of the Willowbrook Apartments and the
resulting distribution of net cash proceeds as a result of the Partnership's
termination and dissolution as if they had occurred on March 31, 1996; the pro
forma condensed statement of operations for the three months ended March 31,
1996 gives effect to the sale of the Willowbrook Apartments as if the
transaction had occurred on January 1, 1996. These pro forma financial
statements are not necessarily indicative of the results that actually would
have occurred if the sale of the Willowbrook Apartments had been consummated on
the date indicated or which may be attained in the future, and should be read in
conjunction with the Partnership's financial statements and notes thereto.
F-58
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
Three months ended March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
-------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Joint Balance
Reported Willowbrook Venture Sheet
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $271,377 $9,577,737 (2) $(9,883,329) (2) $-
34,215 (2)
Cash held for security deposits, restricted 34,215 (34,215) (2) - -
Rents receivable 2,828 (2,828) (2) - -
Prepaid expenses 88,850 (88,850) (2) - -
Utility deposits 1,100 (1,100) (2) - -
Investment property held for sale,
net of accumulated depreciation 9,276,510 (9,276,510) (1) - -
- -------------------------------------------------------------------------------------------------------------------
Total assets $9,674,880 $208,449 $(9,883,329) $-
===================================================================================================================
Accounts payable and
accrued expenses $70,898 $ - $(70,898) (2) $-
Prepaid rent 6,826 (6,826) (2) - -
Tenant security deposits 34,215 (34,215) (2) - -
Due to affiliates 326,293 - (326,293) (2) -
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 438,232 (41,041) (397,191) -
- -------------------------------------------------------------------------------------------------------------------
Clover Income Properties, L.P. 3,637,651 107,056 (1) (3,744,707) (3) -
Clover Income Properties II, L.P. 3,637,651 107,056 (1) (3,744,707) (3) -
Clover Income Properties III, L.P. 1,961,346 35,378 (1) (1,996,724) (3) -
- -------------------------------------------------------------------------------------------------------------------
Total partners' capital 9,236,648 249,490 (9,486,138) -
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and capital $9,674,880 $208,449 $(9,883,329) $-
===================================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-59
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Three months ended March 31, 1996
- ----------------------------------------------------------------------------------------------
Pro Forma Adjustments
-----------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Joint Statement
Reported Willowbrook Venture of Operations
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Rental income $511,753 $(511,753) (4) $ - $ -
Other income 12,181 (12,181) (4) - -
Interest income 138 (138) (4) - -
- ----------------------------------------------------------------------------------------------
Total revenues 524,072 (524,072) - -
- ----------------------------------------------------------------------------------------------
Expenses
Depreciation 128,711 (128,711) (4) - -
Professional fees 1,938 (1,938) (4) - -
Operating expenses 284,747 (284,747) (4) - -
- ----------------------------------------------------------------------------------------------
Total expenses 415,396 (415,396) - -
- ----------------------------------------------------------------------------------------------
Net income (loss) $108,676 $(108,676) $ - $ -
==============================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-60
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. Gain for accounting purposes of $249,490 will be
recognized on the sale after deduction of $324,000 in
expenses related to the sale.
Proceeds from sale of the
Willowbrook Apartments $9,850,000
Less: Net book value in
Willowbrook Apartments (9,276,510)
Expenses related to sale (324,000)
-------------------------------------------------------
Gain on sale of Willowbrook $249,490
=======================================================
Allocated to:Clover Income Properties, L.P. $107,056
Clover Income Properties II, L.P. 107,056
Clover Income Properties III, L.P. 35,378
-------------------------------------------------------
$249,490
=======================================================
The expenses related to the sale are as follows:
Closing costs $154,000
Professional fees 115,000
Proxy statement costs 55,000
--------------------------------------------------------
$324,000
========================================================
All adjustments related to gain on the sale are of a
non-recurring nature and are not part of the continuing
operations of the Partnership, therefore, such
adjustments are not included in the pro forma condensed
statement of operations.
F-61
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
2. The following pro forma adjustments to cash have been
made to determine the cash available for distribution:
Sale of The Willowbrook Apartments
Sales price $9,850,000
Settlement costs (324,000)
--------------------------------------------------------
Net cash proceeds from sale of
The Willowbrook Apartments 9,526,000
Reimbursement of operating assets
at settlement 92,778
Transfer of security deposits and prepaid
rents at settlement (41,041)
-------------------------------------------------------
Net cash proceeds from sale of
The Willowbrook Apartments $ 9,577,737
Cash held for security deposits,
unrestricted upon sale 34,215
` Cash on hand $271,377
Payment of remaining liabilities upon
dissolution of the Partnership (397,191)
-------------------------------------------------------
Cash available for distribution upon
dissolution of the Joint Venture $9,486,138
=======================================================
F-62
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
3. The following pro forma adjustments to the partner's
equity accounts have been made upon dissolution of the
Joint Venture:
CIP CIP II CIP III Total
-------------------------------------------------------------------------
Cash
distribution $(4,070,502) $(4,070,502) $(1,345,134) $(9,486,138)
Dissolution
adjustment 325,795 325,795 (651,590) --
-------------------------------------------------------------------------
$(3,744,707) $(3,744,707) $(1,996,724) $(9,486,138)
=========================================================================
4. The pro forma adjustment to the statement of operations
gives effect to the transaction as of January 1, 1996.
F-63
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements reflect the authorization of the Joint
Venture to borrow up to $7,000,000 in the form of a first priority mortgage loan
which will be collateralized by the Willowbrook Apartments (including land). As
of this date, no lender has been identified. The interest rate, amortization
period, and closing costs for the loan are based upon assumptions of prevailing
rates and terms and estimates of costs made by the general partner. The Joint
Venture will distribute the net loan proceeds to Clover Income Properties, L.P.,
Clover Income Properties II, L.P. and Clover Income Properties III, L.P. The
General Partner will then disburse in the form of a return of capital the loan
proceeds to the limited partners. The following unaudited pro forma financial
statements have been prepared based on the unaudited financial statements of
Clover Income Properties, L.P. (the "Partnership") as of March 31, 1996 and for
the three months then ended contained herein, giving effect to the adjustments
in the notes accompanying these pro forma financial statements. The pro forma
condensed balance sheet as of March 31, 1996 gives effect to the borrowing and
the resulting distribution of net cash proceeds as if they had occurred on March
31, 1996. The pro forma condensed statement of operations for the three months
ended March 31, 1996 gives effect as if they had occurred on January 1, 1996.
These pro forma financial statements are not necessarily indicative of the
results that actually would have occurred if the loan had been obtained on the
date indicated, or which may be attained in the future, and should be read in
conjunction with Partnership's financial statements and notes thereto.
F-64
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
March 31, 1996
- ---------------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Balance
Reported Adjustments Sheet
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash $310,761 $ - $310,761
Investment in The Willowbrook
Joint Venture, at market 3,963,439 (2,574,600) (1) 1,388,839
- ---------------------------------------------------------------------------------------------------
Total assets $4,274,200 $(2,574,600) $1,699,600
===================================================================================================
Accrued expenses $13,171 $ - $13,171
- ---------------------------------------------------------------------------------------------------
General partner (4,854) - (4,854)
Limited partners 4,265,883 (2,574,600) (1) 1,691,283
- ---------------------------------------------------------------------------------------------------
Total partners' capital 4,261,029 (2,574,600) 1,686,429
- ---------------------------------------------------------------------------------------------------
Total liabilities and capital $4,274,200 $(2,574,600) $1,699,600
===================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-65
<PAGE>
Clover Income Properties, L.P.
Unaudited Pro Forma Condensed Statement of Operations
<TABLE>
<CAPTION>
Three months ended March 31, 1996
- --------------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Statement
Reported Adjustments of Operations
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Interest income $1,556 $ - $1,556
- --------------------------------------------------------------------------------------------------
Expenses
Professional services 7,073 - 7,073
General and administrative 1,842 - 1,842
- --------------------------------------------------------------------------------------------------
Total expenses 8,915 - 8,915
- --------------------------------------------------------------------------------------------------
Share of income (loss) from
The Willowbrook Joint Venture 46,632 (86,480) (2) (39,848)
- --------------------------------------------------------------------------------------------------
Net income (loss) $39,273 $(86,480) $(47,207)
==================================================================================================
Net income (loss) per limited
partnership unit $ 2.59 $ (5.71) $(3.12)
==================================================================================================
Weighted average of limited
partnership units 15,000 15,000 15,000
==================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-66
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1.
The following pro forma adjustments have been made to
determine the cash available for distribution:
Total loan amount $7,000,000
Less payment to affiliates (326,293)
Less closing deferred financing costs (329,000)
Expenses related to loan (44,707)
Reserves (300,000)
-------------------------------------------------------
Net proceeds from the loan $6,000,000
=======================================================
Clover Income Properties, L.P. (42.91%) $2,574,600
=======================================================
Allocated to: General Partner $ -
Limited Partners 2,574,600
-------------------------------------------------------
$2,574,600
=======================================================
Distributions per limited partnership unit $171.64
=======================================================
Per unit information for pro forma purposes has been
computed on 15,000 limited partnership units.
2. The following pro forma adjustments are being made to
reflect the loan in the pro forma condensed statement
of operations:
Expenses relating to obtaining the loan $44,707
Amortization expenses of the deferred
financing costs 8,225
Interest expense 148,605
-------------------------------------------------------
$ 201,537
=======================================================
Clover Income Properties, L.P. (42.91%) $86,480
=======================================================
F-67
<PAGE>
Clover Income Properties, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
Allocated to: General Partner $865
Limited Partners 85,615
-------------------------------------------------------
$ 86,480
=======================================================
3. The loan is payable in monthly installments of $56,367,
including interest based on the ten year U.S. treasury
note (effectively 6.5%) plus 2%. The term of the loan
is ten years with a balloon payment at the end of the
term of approximately $5,724,000.
4. Deferred financing costs are being amortized on the
straight line basis over the life of the loan.
F-68
<PAGE>
THE WILLOWBROOK JOINT VENTURE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The pro forma financial statements reflect the authorization of the Joint
Venture to borrow up to $7,000,000 in the form of a first priority mortgage loan
which will be collateralized by the Willowbrook Apartments (including land). As
of this date, no lender has been identified. The interest rate, amortization
period, and closing costs for the loan are based upon assumptions of prevailing
rates and terms and estimates of costs made by the general partner. The Joint
Venture will distribute the net loan proceeds to Clover Income Properties, L.P.,
Clover Income Properties II, L.P., and Clover Income Properties III, L.P. The
General Partner of each partnership will then disburse in the form of a return
of capital the loan proceeds to the limited partner. The following unaudited pro
forma financial statements have been prepared based on the unaudited financial
statements of The Willowbrook Joint Venture (the "Partnership") as of March 31,
1996 and for the three months then ended contained herein, giving effect to the
adjustments in the notes accompanying these pro forma financial statements. The
pro forma condensed balance sheet as of March 31, 1996 gives effect to the
borrowing and the resulting distribution of net cash proceeds as if they had
occurred on March 31, 1996. The pro forma condensed statement of operations for
the three months ended March 31, 1996 gives effect as if they had occurred on
January 1, 1996. These pro forma financial statements are not necessarily
indicative of the results that actually would have occurred if the loan had been
obtained on the date indicated, or which may be attained in the future, and
should be read in conjunction with Partnership's financial statements and notes
thereto.
F-69
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Balance Sheet
================================================================================
<TABLE>
<CAPTION>
March 31, 1996
- --------------------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Balance
Reported Adjustments Sheet
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $305,592 $300,000 (1) $605,592
Rents receivable 2,828 - 2,828
Prepaid expenses 88,850 - 88,850
Utility deposits 1,100 - 1,100
Investment property held for sale,
net of accumulated depreciation 9,276,510 - 9,276,510
Deferred financing costs - 329,000 (1) 329,000
- --------------------------------------------------------------------------------------------------------
Total assets $9,674,880 $629,000 $10,303,880
========================================================================================================
Loans payable $ - $7,000,000 (1) $7,000,000
Accounts payable and
accrued expenses 70,898 - 70,898
Prepaid rents 6,826 - 6,826
Tenant security deposits 34,215 - 34,215
Due to affiliates 326,293 (326,293) (1) -
- --------------------------------------------------------------------------------------------------------
Total liabilities 438,232 6,673,707 7,111,939
- --------------------------------------------------------------------------------------------------------
Clover Income Properties, L.P. 3,637,651 (2,574,600) (1) 1,043,867
(19,184) (1)
Clover Income Properties II, L.P. 3,637,651 (2,574,600) (1) 1,043,867
(19,184) (1)
Clover Income Properties III, L.P. 1,961,346 (850,800) (1) 1,104,207
(6,339) (1)
- --------------------------------------------------------------------------------------------------------
Total partners' capital 9,236,648 (6,044,707) 3,191,941
- --------------------------------------------------------------------------------------------------------
Total liabilities and capital $9,674,880 $629,000 $10,303,880
========================================================================================================
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-70
<PAGE>
The Willowbrook Joint Venture
Unaudited Pro Forma Condensed Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Three months ended March 31, 1996
- ----------------------------------------------------------------------------------------------
Pro Forma
Condensed
As Pro Forma Statement
Reported Adjustment of Operations
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $511,753 $ - $511,753
Other income 12,181 - 12,181
Interest income 138 - 138
- ----------------------------------------------------------------------------------------------
Total revenues 524,072 - 524,072
- ----------------------------------------------------------------------------------------------
Expenses
Depreciation 128,711 - 128,711
Amortization - 8,225 (2) 8,225
Professional fees 1,938 - 1,938
Operating expenses 284,747 44,707 (2) 329,454
- ----------------------------------------------------------------------------------------------
Total expenses 415,396 52,932 468,328
- ----------------------------------------------------------------------------------------------
Interest expense - 148,605 (2) 148,605
- ----------------------------------------------------------------------------------------------
Net income (loss) $108,676 $(201,537) $(92,861)
- ----------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited pro forma condensed financial statements.
F-71
<PAGE>
The Willowbrook Joint Venture
Notes to Unaudited Pro Forma Condensed Financial Statements
================================================================================
1. The following pro forma adjustments have been made to
determine the cash available for distribution:
Total loan amount $7,000,000
Less payment to affiliates (326,293)
Less closing deferred financing costs (329,000)
Expenses related to loan (44,707)
Reserves (300,000)
-------------------------------------------------------
Net proceeds from the loan $6,000,000
=======================================================
Allocated to:
Clover Income Properties, L.P. $2,574,600
Clover Income Properties II, L.P. 2,574,600
Clover Income Properties III, L.P. 850,800
-------------------------------------------------------
$6,000,000
=======================================================
2. The following pro forma adjustments are being made to
reflect the loan in the pro forma condensed statement
of operations:
Expenses relating to obtaining the loan $ 44,707
Amortization expenses of the deferred
financing costs 8,225
Interest expenses 148,605
-------------------------------------------------------
$ 201,537
=======================================================
Allocated to:
Clover Income Properties, L.P. $ 86,480
Clover Income Properties II, L.P. 86,480
Clover Income Properties III, L.P. 28,577
-------------------------------------------------------
$ 201,537
=======================================================
3. The loan is payable in monthly installments of $56,367,
including interest based on the ten year U.S. treasury
note (effectively 6.5%) plus 2%. The term of the loan
is ten years with a balloon payment at the end of the
term of approximately $5,724,000.
4. Deferred financing costs are being amortized on the
straight line basis over the life of the loan.
F-72
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
BALANCE SHEET
(Unaudited)
ASSETS
March 31,
1996
---------
CASH $310,761
INVESTMENT IN THE WILLOWBROOK JOINT
VENTURE, at market 3,963,439
---------
TOTAL ASSETS $4,274,200
==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued expenses $13,171
---------
PARTNERS' CAPITAL
General partner (4,854)
Limited partners 4,265,883
---------
Total partners' capital 4,261,029
---------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $4,274,200
==========
The accompanying notes are an integral part of these financial statements.
F-74
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
------ -----
REVENUES
Interest income $ 1,556 $ 992
------- -------
Total revenues 1,556 992
------- -------
EXPENSES
Amortization -- 6,058
Professional services 7,073 8,396
General and administrative 1,842 6,019
------- -------
Total expenses 8,915 20,473
------- -------
SHARE OF INCOME FROM THE WILLOWBROOK JOINT
VENTURE 46,632 45,527
------- -------
NET INCOME $39,273 $26,046
======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 2.59 $ 1.69
======= =======
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
General Limited
Partner Partners Total
----------- ----------- -----------
Balance at January 1, 1996 $ (4,854) $ 4,281,913 $ 4,277,059
Partners' distributions, $3.65
per limited partnership unit (553) (54,750) (55,303)
Net income 553 38,720 39,273
----------- ----------- -----------
Balance at March 31, 1996 $ (4,854) $ 4,265,883 $ 4,261,029
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
--------- ---------
OPERATING ACTIVITIES
Interest received $ 1,556 $ 992
Distributions received from The Willowbrook
Joint Venture 46,632 45,527
Cash paid for operating expenses (15,244) (7,412)
--------- ---------
Net cash provided by operating activities 32,944 39,107
--------- ---------
INVESTING ACTIVITIES
Distributions received from the Willowbrook
Joint Venture 33,825 34,930
--------- ---------
FINANCING ACTIVITIES
Partners' distributions (55,303) (64,388)
--------- ---------
NET INCREASE IN CASH 11,466 9,649
CASH, beginning of period 299,295 292,557
--------- ---------
CASH, end of period $ 310,761 $ 302,206
========= =========
The accompanying notes are an integral part of these financial statements.
F-77
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
-------- --------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 39,273 $ 26,046
ADJUSTMENTS
Amortization -- 6,058
Income from investment in the Willowbrook Joint
Venture (46,632) (45,527)
Distributions received from the Willowbrook
Joint Venture 46,632 45,527
Decrease in other receivables -- 16,733
Decrease in accrued expenses (6,329) (6,730)
Decrease in due to affiliates -- (3,000)
-------- --------
Total adjustments (6,329) 13,061
-------- --------
Net cash provided by operating activities $ 32,944 $ 39,107
======== ========
The accompanying notes are an integral part of these
financial statements.
F-78
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
Readers of this quarterly report should refer to the Partnership's audited
financial statements as of December 31, 1995, as certain footnote disclosures
which would substantially duplicate those contained in such audited financial
statements have been omitted from this report.
1. INVESTMENT IN THE WILLOWBROOK JOINT VENTURE:
On December 17, 1987, the Partnership acquired a 50% interest in The Willowbrook
Joint Venture (the "Joint Venture") for $6,450,000. The Joint Venture owns the
Willowbrook Apartments, a 299-unit mid-rise apartment complex located in
Baltimore, Maryland.
On April 8, 1992, the Partnership and Clover Income Properties II, L.P. ("CIP
II"), an affiliated partnership, consummated an agreement which was effective
April 1, 1992 with Clover Income Properties III L.P. ("CIP III"), an affiliated
partnership, pursuant to which CIP III acquired an interest in The Willowbrook
Joint Venture. The Partnership reduced its interest from 50% to 42.91% and
received a distribution of $1,100,000 from the Joint Venture, of which
$1,000,000 was distributed to the limited partners in April 1992. The excess of
the amount paid over the net book value of the 14.18% interest in the Joint
Venture purchased by CIP III amounted to $325,788. The $325,788 was credited to
the partners' capital accounts as of that date.
On February 7, 1996, the Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement as amended on May 16, 1996, the Joint Venture
will sell the Willowbrook Apartments (including land), all related improvements
and tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the approval by a majority of
the limited partners of CIP, CIP II and CIP III. If the sale is approved by a
majority of the limited partners and all other conditions to the sale are met,
the sale will be completed.
Concurrent with the sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP II and CIP III) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, the limited partnership
will then liquidate the net assets, distribute the proceeds and be dissolved.
Due to the proposed sale of the Willowbrook apartments and subsequent
liquidation of the Partnership, CIP has reflected its investment in the Joint
Venture at the lower of cost or market. Market value is based on the estimated
cash proceeds (net of settlement costs) from the sale of the Willowbrook
Apartments after allocation of these proceeds to CIP, CIP II and CIP III. At
March 31, 1996, CIP's investment in The Willowbrook Joint Venture was not
impaired.
F-79
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
1. INVESTMENT IN THE WILLOWBROOK JOINT VENTURE (continued):
A summary of the Joint Venture's financial statements is as follows:
Three Months
Ended March 31,
1996
----------
Current assets $397,270
Investment property, net of accumulated depreciation 9,276,510
Other noncurrent assets 1,100
----------
Total assets $9,674,880
==========
Current liabilities $438,232
Capital -
Clover Income Properties, L.P. 3,637,651
Clover Income Properties II, L.P. 3,637,651
Clover Income Properties III, L.P. 1,961,346
----------
Total liabilities and capital $9,674,880
==========
Revenues $524,072
Expenses 415,396
----------
Net income $108,676
==========
The Joint Venture made distributions from operations to the Partnership in the
amount of $80,457 during the first three months of 1996. (Also, see Note 2).
F-80
<PAGE>
CLOVER INCOME PROPERTIES, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
2. SUBSEQUENT DISTRIBUTION:
In April 1996, the Partnership received a $26,819 distribution from the
Willowbrook Joint Venture. It is anticipated that the Partnership will make a
cash distribution in May 1996 of $54,750 to the limited partners and $553 to the
General Partner.
3. GENERAL:
The financial statements reflect all adjustments which are, in the opinion of
the General Partner, necessary for a fair statement of the results for the
interim period presented. Such adjustments are of a normal recurring nature.
F-81
<PAGE>
THE WILLOWBROOK JOINT VENTURE
BALANCE SHEET
(Unaudited)
ASSETS
March 31,
1996
----------
CURRENT ASSETS
Cash $271,377
Cash held for security deposits-restricted 34,215
Prepaid expenses 88,850
Rents receivable 2,828
----------
Total current assets 397,270
----------
INVESTMENT PROPERTY HELD FOR SALE 13,440,465
Less - accumulated depreciation (4,163,955)
----------
Net investment property 9,276,510
----------
OTHER ASSETS
Utility deposit 1,100
----------
TOTAL ASSETS $9,674,880
- ------------ ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable $17,500
Accrued expenses 53,398
Tenants' security deposits 34,215
Prepaid rents 6,826
Due to affiliates 326,293
----------
Total current liabilities 438,232
----------
PARTNERS' CAPITAL
Clover Income Properties, L.P. 3,637,651
Clover Income Properties II, L.P. 3,637,651
Clover Income Properties III, L.P. 1,961,346
----------
Total partners' capital 9,236,648
----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $9,674,880
==========
The accompanying notes are an integral part of these statements.
F-82
<PAGE>
THE WILLOWBROOK JOINT VENTURE
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
---------- ----------
REVENUES:
Rental income $511,753 $494,733
Other income 12,181 5,584
Interest income 138 484
---------- ----------
Total revenues 524,072 500,801
---------- ----------
EXPENSES:
Depreciation 128,711 128,253
Operating expenses (including affiliate
transactions of $16,089 for the
three months ended March 31, 1995) 284,747 261,502
Professional services 1,938 4,948
---------- ----------
Total expenses 415,396 394,703
---------- ----------
NET INCOME $108,676 $106,098
========== ==========
The accompanying notes are an integral part of these statements.
F-83
<PAGE>
THE WILLOWBROOK JOINT VENTURE
STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
Clover Clover Clover
Income Income Income
Properties Properties Properties
L.P. II, L.P. III, L.P. Total
Balance - January 1, 1996 $ 3,671,476 $ 3,671,476 $ 1,972,520 $ 9,315,472
Net income 46,632 46,632 15,412 108,676
Partners' distributions (80,457) (80,457) (26,586) (187,500)
----------- ----------- ----------- -----------
Balance at March 31, 1996 $ 3,637,651 $ 3,637,651 $ 1,961,346 $ 9,236,648
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
F-84
<PAGE>
THE WILLOWBROOK JOINT VENTURE
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
--------- ---------
OPERATING ACTIVITIES:
Cash received from rentals $ 515,473 $ 490,830
Other income received 12,181 5,584
Interest income received 138 484
Security deposits paid (received) 653 (202)
Cash paid for operating expenses (202,594) (224,314)
--------- ---------
Net cash provided by operating
activities 325,851 272,382
--------- ---------
INVESTING ACTIVITIES
Cash paid for investment property (8,468) --
--------- ---------
FINANCING ACTIVITIES
Partners' distributions (187,500) (187,500)
--------- ---------
NET INCREASE IN CASH 129,883 84,882
Cash, beginning of period 141,494 146,687
--------- ---------
Cash, end of period $ 271,377 $ 231,569
========= =========
The accompanying notes are an integral part of these statements.
F-85
<PAGE>
THE WILLOWBROOK JOINT VENTURE
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
--------- ---------
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
NET INCOME $ 108,676 $ 106,098
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 128,711 128,253
Decrease (increase) in cash held for
security deposits 653 (202)
Decrease in prepaid expenses 48,164 58,063
Decrease (increase) in rents receivable 4,774 (4,129)
Increase (decrease) in accounts payable 17,500 (1,849)
Increase (decrease) in accrued expenses 16,442 (12,923)
Increase (decrease) in security deposits 1,993 (1,194)
(Decrease) increase prepaid rents (1,062) 226
Increase in due to affiliates -- 39
--------- ---------
Total adjustments 217,175 166,284
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 325,851 $ 272,382
========= =========
The accompanying notes are an integral part of these statements.
F-86
<PAGE>
THE WILLOWBROOK JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Readers of this quarterly report should refer to the Joint Venture's audited
financial statements as of December 31, 1995, as certain footnote disclosures
which would substantially duplicate those contained in such audited financial
statements have been omitted from this report.
1. INVESTMENT PROPERTY HELD FOR SALE:
On December 17, 1987, the Joint Venture acquired the Willowbrook Apartments, a
mid-rise apartment complex comprising 299 apartment units contained in eight
five-story buildings. The complex is located in Baltimore, Maryland.
On February 7, 1996, the Joint Venture entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd Under the
terms of the agreement, as amended on May 16, 1996, the Joint Venture will sell
The Willowbrook Apartments (including land), all related improvements and
tangible and intangible property for $9,850,000.
The sale is contingent upon, among other things, the sale of all of the
properties owned by affiliates of Clover Financial Corporation which are also
under agreement of sale with Berwind and First Montgomery. Clover Financial
Corporation is the parent company of the general partner of CIP, CIP II, and CIP
III. The sale must be approved by a majority of the limited partners of CIP, CIP
II, and CIP III. Upon sale of The Willowbrook Apartments, all assets of the
Joint Venture will be liquidated. The net proceeds will then be distributed to
its owners (CIP, CIP II, and CIP III) and the Joint Venture dissolved.
Due to the proposed sale of The Willowbrook Apartments and subsequent
liquidation of the Partnership, the Joint Venture has reflected the investment
property held for sale at the lower of cost or market. Market value is based on
the estimated cash proceeds (net of settlement costs) from the sale of the
Willowbrook Apartments. At March 31, 1996, the investment property held for sale
was not impaired.
The following is a summary of investment property as of March 31, 1996.
Land $ 1,421,205
Building 11,006,247
Furniture and fixtures 1,013,013
-----------
13,440,465
Less: Accumulated depreciation (4,163,955)
-----------
$ 9,276,510
===========
F-87
<PAGE>
THE WILLOWBROOK JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1996
(UNAUDITED)
2. TRANSACTIONS WITH AFFILIATES:
Effective February 21, 1995, NPI-CL Management, L.P. ("NPI") which is
unaffiliated with the general partner, replaced an affiliate of the general
partner as Property Manager. Until this time, as compensation for property
management services performed by an affiliate of the Partners with respect to
the Property, the affiliate was entitled to a management fee in an amount not to
exceed 5% of gross revenues. On January 19, 1996, the stockholders of National
Property Investors, Inc. sold all of its issued and outstanding stock to IFGP
Corporation, an affiliate of Insignia Financial Group, Inc.
The general partners of CIP, CIP II, and CIP III and their affiliates were
entitled to reimbursement for administrative services rendered to the Joint
Venture and direct expenses of operations and goods and services used by and for
the Joint Venture. For the three months ended March 31, 1995, $3,339 of such
costs were incurred by the Joint Venture. Property management fees of $12,750
were incurred and paid for the three months ended March 31, 1995, to an
affiliate of the general partner. During the three months ended March 31, 1996,
there were no transactions with affiliates.
As of March 31, 1996, The Willowbrook Joint Venture owed a total of $326,293 to
Clover and its affiliates, including $7,161 for reimbursable costs and $319,132
for accrued property management fees. The payment of such amounts will be made
from the Willowbrook Joint Venture's cash flow when available and from the
proceeds of any sale or refinancing of the assets of the Willowbrook Joint
Venture.
3. SUBSEQUENT DISTRIBUTIONS:
In April 1996, the Joint Venture paid total distributions of $62,500 to its
partners.
4. GENERAL:
The financial statements reflect all adjustments which are, in the opinion of
the joint venture partners, necessary for a fair statement of results for the
interim periods presented. Such adjustments are of a normal recurring nature.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
F-88
