SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
September 30, 1997 Commission file #0-17708
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(Exact name of registrant as specified in its charter)
Illinois 36-3467497
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . 13
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 17
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 5,987,103 4,841,921
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 66,678 101,050
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,556 182,529
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 6,323,337 5,125,500
----------- -----------
Investment properties held for sale or disposition. . . . . . . . . . . . 8,613,315 20,565,034
----------- -----------
Investment in unconsolidated venture, at equity . . . . . . . . . . . . . 252,462 278,653
Note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 75,764
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,247 421,992
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . 229,264 333,557
----------- -----------
$15,547,625 26,800,500
=========== ===========
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 9,702,478 9,985,385
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,168 97,709
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,726 278,965
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . 69,952 351,841
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 302,500 --
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 10,199,824 10,713,900
------------ -----------
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 302,500
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . -- 63,395
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6,916,941
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 10,199,824 17,996,736
Venture partner's subordinated equity in venture. . . . . . . . . . . . . 42,300 81,293
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (238,785) (235,934)
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (278,580) (322,607)
------------ -----------
(497,365) (538,541)
------------ -----------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . . . 29,696,495 29,696,495
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (20,142,970) (12,889,180)
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (3,750,659) (7,546,303)
------------ -----------
5,802,866 9,261,012
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . . 5,305,501 8,722,471
------------ -----------
$ 15,547,625 26,800,500
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 335,580 835,857 1,527,637 2,788,257
Interest income . . . . . . . . . . . . . . . . . 95,278 52,879 238,991 178,157
----------- ---------- ---------- ----------
430,858 888,736 1,766,628 2,966,414
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . . 206,615 371,694 627,498 1,103,586
Depreciation. . . . . . . . . . . . . . . . . . . -- 178,484 -- 535,169
Property operating expenses . . . . . . . . . . . 105,966 332,410 593,582 1,037,324
Professional services . . . . . . . . . . . . . . 2,699 10,102 18,562 63,722
Amortization of deferred expenses . . . . . . . . 25,629 47,675 105,222 133,159
Management fees to corporate general partner. . . -- -- 4,752 19,010
General and administrative. . . . . . . . . . . . 67,651 59,741 201,386 192,899
Provision for value impairment. . . . . . . . . . -- 1,103,533 -- 1,103,533
----------- ---------- ---------- ----------
408,560 2,103,639 1,551,002 4,188,402
----------- ---------- ---------- ----------
Operating earnings (loss). . . . . . . . . . 22,298 (1,214,903) 215,626 (1,221,988)
Partnership's share of operations
of unconsolidated ventures. . . . . . . . . . . . 34,520 (19,427) (26,191) (107,553)
Venture partner's share of
venture's operations. . . . . . . . . . . . . . . (51) (36) (1,757) (3,125)
----------- ---------- ---------- ----------
Net operating earnings (loss) . . . . . . . 56,767 (1,234,366) 187,678 (1,332,666)
Gain on sale of investment property,
net of venture partner's
share of gain of $37,708. . . . . . . . . . . . . -- -- 3,733,116 --
----------- ---------- ---------- ----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
Net earnings (loss) before
Partnership's share of
extraordinary item. . . . . . . . . . . . 56,767 (1,234,366) 3,920,794 (1,332,666)
Extraordinary item, net of venture
partner's share of $820 . . . . . . . . . . . . . -- -- (81,123) --
----------- ---------- ---------- ----------
Net earnings (loss) . . . . . . . . . . . . $ 56,767 (1,234,366) 3,839,671 (1,332,666)
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest:
Net operating earnings. . . . . . . . . . $ 1.60 (34.63) 5.27 (37.39)
Net gain on sale of investment property . -- -- 108.01 --
Net extraordinary item. . . . . . . . . . -- -- (2.35) --
----------- ----------- ---------- ----------
$ 1.60 (34.63) 110.93 (37.39)
=========== =========== ========== ==========
Cash distributions per
limited partnership
interest. . . . . . . . . . . . . . . . . $ -- -- 212.00 8.00
=========== =========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,839,671 (1,332,666)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 535,169
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . . 105,222 133,159
Partnership's share of operations of unconsolidated ventures. . . . . . . 26,191 107,553
Venture partner's share of venture's operations, gain on sale or
disposition of investment property and extraordinary item . . . . . . . 38,645 3,125
Total gain on sale of investment property . . . . . . . . . . . . . . . . (3,770,824) --
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,943 --
Net asset decrease due to the sale of investment property . . . . . . . . 67,999 --
Provision for value impairment. . . . . . . . . . . . . . . . . . . . . . -- 1,103,533
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . . . (18,541) 160,220
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (20,584)
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,892) (582)
Note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,152 39,365
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 12,117 554
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,658) 89,540
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,333) 2,314
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . (281,889) (74,163)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . . (62,381) --
------------ -----------
Net cash provided by (used in) operating activities . . . . . . . . . (83,578) 746,537
------------ -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . . . (125,720) (44,410)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . (28,593) (119,343)
Cash proceeds from sale of investment property,
net of selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 8,922,472 --
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . . . 8,768,159 (163,753)
------------ -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . . . (205,120) (234,910)
Distributions to venture partner. . . . . . . . . . . . . . . . . . . . . . . (77,638) --
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . . . (7,253,790) (273,734)
Distributions to general partners . . . . . . . . . . . . . . . . . . . . . . (2,851) (11,406)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . . (7,539,399) (520,050)
----------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . 1,145,182 62,734
Cash and cash equivalents, beginning of year. . . . . . . . . . . . . 4,841,921 4,856,276
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . $ 5,987,103 4,919,010
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . . . $ 633,831 1,101,272
============ ===========
Non-cash investing and financing activities:
Total sales proceeds from sale of investment property:
Total sales proceeds, net of selling expenses . . . . . . . . . . . . . . $ 16,053,577 --
Prepayment penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . (81,943) --
Payoff of mortgage loans and accrued interest . . . . . . . . . . . . . . (7,049,162) --
------------ -----------
Cash proceeds from sale of investment properties. . . . . . . . . . . $ 8,922,472 --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1996 which are
included in the Partnership's 1996 Annual Report on Form 10-K (File No. 0-
17708) dated on March 21, 1997, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial
statements have been omitted from this report. Capitalized terms used but
not defined in this quarterly report have the same meaning as in the
Partnership's 1996 Annual Report on Form 10-K.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell or dispose of such property and active marketing activity has
commenced or is expected to commence in the near term or the Partnership
has concluded that it may dispose of the property by no longer funding
operating deficits or debt service requirements of the property thus
allowing the lender to realize upon its security. In accordance with SFAS
121, any properties identified as "held for sale or disposition" are no
longer depreciated.
As of September 30, 1997, the Partnership and its consolidated venture
have or have previously committed to plans to sell or dispose of all their
remaining investment properties. Accordingly, all consolidated properties
have been classified as held for sale or disposition in the accompanying
consolidated financial statements as of the respective date of such plan's
adoption. The results of operations, net of venture partners' share, for
these properties and for properties sold or disposed of in the past two
years were $340,953 and ($1,033,206), respectively, for the nine months
ended September 30, 1997 and 1996.
In addition, the accompanying consolidated financial statements
include ($26,191) and ($107,553), respectively, of the Partnership's share
of total property operations of ($251,415) and ($1,032,430) for
unconsolidated properties for the nine months ended September 30, 1997 and
1996, respectively, which are held for sale or disposition or have been
sold or disposed of during the past two years.
During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. As the Partnership's
capital structure only has general and limited partnership interests, the
Partnership does not expect any significant impact on its consolidated
financial statements upon adoption of these standards when required at the
end of 1997.
<PAGE>
Certain amounts in the 1996 consolidated financial statements have
been reclassified to conform with the 1997 presentation.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of their employees and certain of their officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investments. Fees, commissions and
other expenses required to be paid by the Partnership (and its consolidated
venture) to the General Partners and their affiliates as of September 30,
1997 and for the nine months ended September 30, 1997 and 1996 were as
follows:
Unpaid at
September 30,
1997 1996 1997
------- ------ -------------
Property management fees. . . . $47,206 53,788 --
Management fees to
corporate general partner. . . 4,752 19,010 --
Insurance commissions . . . . . 2,892 2,911 --
Reimbursement (at cost) for
out-of-pocket salary and
salary-related expenses
related to the on-site
personnel and for other
costs for the Partnership
and its investment
properties . . . . . . . . . . 23,874 50,263 16,417
------- ------- ------
$78,724 125,972 16,417
======= ======= ======
18 CENTRAL SHOPPING CENTER
Occupancy at the shopping center remained consistent with the previous
quarter at 81%, down from 92% at March 31, 1997, due to the lease
expiration of a tenant occupying approximately 10,000 square feet. Of the
approximately 25,000 square feet (approximately 29% of the portion of the
center owned by the Partnership) originally scheduled to expire in 1997,
the Partnership has renewed one lease of approximately 15,000 square feet.
Such renewal is at a market rent which is significantly lower than the rent
the tenant was previously paying. The Partnership is actively pursuing
replacement tenants for the vacant space. However, rents achieved upon
renewal or releasing of the space are expected to be at market rates that
are significantly lower than the previous rents received for this space.
In March 1993, the Partnership modified and extended to December 1,
1997 the mortgage note secured by the 18 Central Shopping Center to reduce
the accrual rate on the loan which had matured December 1992. In addition,
the modification provides the lender with additional interest equal to 50%
of the "net sales proceeds" or "net appraised proceeds" (each as defined)
of the property, subject to a minimum amount of $250,000 (or, if less, 100%
of the "net sales proceeds" or "net appraised proceeds") and a maximum
amount of $450,000 of additional interest, $250,000 of which has been
reflected as other current liabilities and other liabilities in the
accompanying Consolidated Financial Statements at September 30, 1997 and
December 31, 1996, respectively. The Partnership will also be required to
<PAGE>
pay a loan extension fee of $52,500, payable at maturity or prepayment of
the loan, which has also been reflected as other current liabilities and
other liabilities in the accompanying Consolidated Financial Statements at
September 30, 1997 and December 31, 1996, respectively. The loan extension
fee and additional interest are non-recourse liabilities to the Partnership
and are not required to be paid out of any cash reserves of the Partnership
upon transfer of title to the lender in full satisfaction of the mortgage,
as discussed below. Prepayment of the loan is currently subject to a
prepayment charge generally equal to the greater of 1% of the loan amount
prepaid or the amount that equals the discounted value of the difference
between the yield that would be provided to maturity based upon the
existing interest rate of the mortgage loan, and the yield that would be
provided to maturity based upon the interest rate of U.S. Treasury
obligations (as of the date of prepayment) having the same maturity date as
the mortgage loan. In connection with the loan modification and extension,
commencing in 1994 the Partnership is required to deposit 95% of the "net
cash flow" (as defined) from the property up to $750,000 and 47.5% in
excess of such amount to a collateral account to be used for the payment of
tenant improvement costs, leasing commissions, other capital expenditures
and operating deficits (as of the date of this report, $137,395 has been
deposited and no amounts have been funded from this account). The lender
has a first priority interest in the collateral account. In addition, the
property requires certain capital and major repair projects, including roof
repairs or replacement, to be completed over the next several years.
Certain of these costs are to be paid out of the deposits in the collateral
account noted above.
The first mortgage loan in the principal amount of approximately
$9,702,000 is scheduled to mature in December 1997. The lender has
informed the Partnership that the lender is not willing to modify or extend
the loan. The Partnership believes that the value of the shopping center
is less than the mortgage loan, and the Partnership does not intend to
expend any additional funds of its own on the property. Accordingly, the
Partnership has deferred any capital improvements and major repair projects
for the shopping center. Subsequent to September 30, 1997, the Partnership
reached an agreement in principle with the lender to transfer its ownership
interest to the lender. Upon such transfer, the Partnership would no
longer have an ownership interest in the property and due to the prior
$1,103,533 provision for value impairment recorded in September 1996 for
financial reporting purposes, the Partnership will recognize an
insignificant amount of gain for financial reporting purposes and a loss of
approximately $2,000,000 for Federal income tax purposes with no
distributable proceeds. In addition, upon transfer of the interest in the
property in full satisfaction of the mortgage, the Partnership will
recognize, for financial reporting purposes, approximately $1,500,000 of
extraordinary gain on extinguishment of debt. However, there can be no
assurance that this transaction will be consummated on these or any other
terms.
PALM DESERT TOWN CENTER
The Partnership received (through a joint venture with an
affiliate) its specified cash return relating to Palm Desert Town Center,
which was being funded in part by the unaffiliated venture partner through
December 31, 1994 pursuant to the terms of the applicable joint venture
agreement. Since the unaffiliated venture partner's funding obligation
expired at the end of 1994, the Partnership's share of cash has been
dependent upon the operations of the property. Occupancy at the portion of
the shopping center in which the Partnership owns an interest increased to
87% at September 30, 1997 up from 86% at June 30, 1997. Sales at the
center have been negatively impacted during the last several quarters by
new competition in the center's trade area. The increased competition has
resulted in lower effective rents upon re-leasing of space. The center
will continue to be subject to increased competition from new developments
<PAGE>
that are expected to be opening in the vicinity in the near future. In
addition, the property's operations have been affected by tenant
bankruptcies during the past year. The property is operating at an
approximately break-even level. The Partnership is discussing the
possibility of the sale of its interest in the joint venture to the
unaffiliated venture partner. However, there can be no assurance that a
sale transaction on acceptable terms can be arranged. The property has
been classified as held for sale or disposition as of July 1, 1997, and
therefore, is no longer subject to continued depreciation.
The land underlying the shopping center is owned by the lender under
the first mortgage loan. Palm Desert leases the land by assignment of an
existing ground lease which provides for minimum annual rental payments of
$900,000, as well as for additional rental payments for each calendar year
equal to 50% of the amount by which certain of the ground lessee's gross
receipts from the shopping center exceed $6,738,256. Total ground rent
expense for the nine months ended September 30, 1997 and 1996 was $914,664
and $990,245, respectively.
The joint venture continues to consider a possible expansion of the
mall and restructuring of the ground lease and mortgage loan. In the event
that the joint venture decides to proceed, the Partnership may utilize a
portion of its available funds to pay for its share of costs. However, as
discussed above, the Partnership is also discussing with the unaffiliated
venture partner the possibility of a sale of the Partnership's interest in
the joint venture. In the event of such sale, the Partnership would not be
required to pay a share of the restructuring and mall expansion costs.
HOUSTON INDUSTRIAL PROPERTIES
On March 28, 1997, the joint venture sold the Houston Industrial
Properties to an unaffiliated third party for $16,350,000 (before selling
expenses of approximately $296,000). Approximately $7,131,000 of sales
proceeds were utilized to retire the mortgage debt including a prepayment
penalty of approximately $81,900 (of which the Partnership's share of
approximately $81,000 is included as an extraordinary item in the
Partnership's 1997 consolidated financial statements). The sale resulted
in approximately $3,771,000 of gain for financial reporting purposes in
1997 (of which approximately $3,733,000 was allocated to the Partnership).
The joint venture expects to recognize a gain of approximately $3,678,000
for Federal income tax purposes in 1997 (of which approximately $3,641,000
will be allocated to the Partnership).
In connection with the sale of these properties, as is customary in
such transactions, the joint venture agreed to certain representations and
warranties, with a stipulated survival period to December 15, 1997.
Although it is not expected, the joint venture may ultimately have some
liability under such representations and warranties. In this regard, the
joint venture will not be liquidated until after the expiration of the
above-mentioned survival period and after the distribution of any remaining
funds to the venture partners.
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary financial information for Palm Desert for the nine months
ended September 30, 1997 and 1996 is as follows:
1997 1996
---------- ----------
Total income . . . . . . . $7,889,968 8,043,469
Expenses applicable to
operating income . . . . 8,141,383 9,075,899
---------- ----------
Net loss . . . . . . . . . $ 251,415 1,032,430
========== ==========
Partnership's share
of loss. . . . . . . . . $ 26,191 107,553
========== ==========
<PAGE>
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1997 and for the three and nine months ended September 30, 1997 and 1996.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investments.
On March 28, 1997, the joint venture through which the Partnership
owned an interest in the Houston Industrial Properties sold the properties
to an unaffiliated third party for $16,350,000. The Partnership made a
distribution to the Holders of Interests of $210 per Interest from the net
proceeds of this sale in May 1997. Since the subordination requirements of
the Partnership Agreement are not expected to be attained, no portion of
these sales proceeds were distributed to the General Partners.
During the second quarter of 1996 some of the Holders of Interests in
the Partnership received from an unaffiliated third party an unsolicited
offer to purchase up to 4.61% of the Interest in the Partnership at $160
per Interest. The Partnership recommended against acceptance of this offer
on the basis that, among other things, the offer price was inadequate. In
June, such offer expired. The board of directors of JMB Realty Corporation
("JMB"), the corporate general partner of the Partnership, has established
a special committee (the "Special Committee") consisting of certain
directors of JMB to deal with all matters relating to tender offers for
Interests in the Partnership, including any and all responses to such
tender offers. The Special Committee has retained independent counsel to
advise it in connection with any potential tender offers for Interests and
has retained Lehman Brothers Inc. as financial advisor to assist the
Special Committee in evaluating and responding to any additional potential
tender offers for Interests.
During the third quarter of 1997, some of the Holders of Interests in
the Partnership received from an unaffiliated third party an unsolicited
offer to purchase up to 4.9% of the outstanding Interests in the
Partnership at $100 per Interest. Such offer has been extended and is
currently scheduled to expire in mid-November 1997. The Special Committee
recommended against acceptance of this offer on the basis that, among other
things, the offer price was inadequate. As of the date of this report, the
Partnership is aware that 3.08% of the Interests have been purchased by all
such unaffiliated third parties either pursuant to such tender offers or
through negotiated purchases. It is possible that other offers for
Interests may be made in the future, although there is no assurance that
any such offer will be made, the terms of any such offer or whether any
such offer will be consummated, amended or withdrawn.
As of September 30, 1997, the Partnership and its consolidated venture
had cash and cash equivalents of approximately $5,987,000. Such cash and
cash equivalents are available to pay a portion of the costs of a possible
expansion of the mall and restructuring of the ground lease and mortgage
loan for Palm Desert Town Center and other working capital requirements.
<PAGE>
In May 1997, the Partnership made a distribution to the Holders of
Interests of cash generated from operations of $2.00 per Interest. The
primary source of the Partnership's cash flow from operations in recent
years has been from the Houston Industrial Properties. As a result of the
sale of the Houston Industrial Properties as noted above, the Partnership
does not anticipate making any further distributions of cash generated from
operations on a current basis. As discussed above, the Partnership
currently plans to retain the balance of cash and investments it holds for
the working capital requirements of the Partnership. The joint venture
which owns the Palm Desert Town Center is currently not distributing cash
flow to the Partnership or other venture partners as the joint venture is
reviewing redevelopment scenarios which could require substantial capital
investments. Future distributions from sales or property operations will
depend upon a combination of operating cash flow from the Palm Desert Town
Center and the longer term capital requirements of the Partnership as well
as the terms of any sale of the Palm Desert Town Center (or the
Partnership's interest therein). Any funds so retained by the Partnership
which are not ultimately used for working capital purposes would be
available for future distributions.
After reviewing the remaining properties and the marketplaces in which
they operate, the General Partners of the Partnership expect to be able to
conduct an orderly liquidation of its remaining investment portfolio as
quickly as practicable. Therefore, the affairs of the Partnership are
expected to be wound up no later than December 31, 1999 (sooner if the
properties are sold or disposed of in the near term), barring unforeseen
economic developments. Although the Partnership does not expect to realize
any proceeds from a disposition of the 18 Central Shopping Center, it
expects to realize net proceeds from the sale of the Palm Desert Town
Center (or the Partnership's interest therein), its other remaining real
estate investment. However, aggregate sale distributions received by
Holders of Interests over the entire term of the Partnership will be
significantly less than their original investment of $1,000 per Interest.
RESULTS OF OPERATIONS
Significant fluctuations in the accompanying consolidated financial
statements are primarily due to the sale of the Houston Industrial
Properties in March 1997.
The increase in cash and cash equivalents at September 30, 1997 as
compared to December 31, 1996 is primarily due to the retention of a
portion of the sales proceeds received from the 1997 sale of the Houston
Industrial Properties pending the expiration of the period for
representations and warranties made in connection with the sale, as
discussed in the Notes to Consolidated Financial Statements.
The increase in escrow deposits and accrued real estate taxes at
September 30, 1997 as compared to December 31, 1996 is primarily due to the
timing of payment of real estate taxes at the 18 Central Shopping Center.
The decrease in accounts payable at September 30, 1997 as compared to
December 31, 1996 is primarily due to the payment of certain tenant
reimbursable expenses previously accrued at the 18 Central Shopping Center
property.
The increase in other current liabilities, and the corresponding
decrease in other liabilities, at September 30, 1997 as compared to
December 31, 1996 is due to the reclassification of the lender's additional
interest and loan extension fee on the property secured by the 18 Central
Shopping Center.
The increase in interest income for the three and nine months ended
September 30, 1997 as compared to the three and nine months ended September
30, 1996 is primarily due to a higher average cash balance invested by the
Partnership in 1997.
<PAGE>
The decrease in depreciation expense for the three and nine months
ended September 30, 1997 as compared to the three and nine months ended
September 30, 1996 is due to the fact that the Partnership classified both
the 18 Central Shopping Center and the Houston Industrial Properties as
held for sale or disposition and therefore suspended depreciation of these
assets as of December 31, 1996 and October 1, 1996, respectively.
The decrease in management fees to corporate general partner for the
three and nine months ended September 30, 1997 as compared to the three and
nine months ended September 30, 1996 is due to a decrease in operating
distributions paid by the Partnership.
The provision for value impairment in 1996 is due to recording a
provision to reduce the carrying value of the 18 Central Shopping Center.
The increase in the Partnership's share of operations of
unconsolidated ventures for the three and nine months ended September 30,
1997 as compared to the same periods in 1996 is primarily due to the Palm
Desert property being classified as held for sale or disposition as of July
1, 1997, and therefore no longer subject to continued depreciation.
The gain on sale of investment property, net of venture partner's
share, for the nine months ended September 30, 1997 is due to the sale of
the Houston Industrial Properties in March 1997.
The extraordinary item reported for the nine months ended September
30, 1997 represents the Partnership's share of pre-payment penalties
resulting from the extinguishment of debt related to the March 1997 sale of
the Houston Industrial Properties.
<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties owned during 1997:
<CAPTION>
1996 1997
-------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Palm Desert Town Center
Palm Desert, California. . . . 91% 92% 88% 89% 88% 86% 87%
2. 18 Central Shopping Center
East Brunswick, New Jersey . . 92% 92% 92% 92% 92% 81% 81%
3. Minimax #2,
Houston, Texas . . . . . . . . 100% 100% 100% 100% N/A N/A N/A
4. Minimax #3,
Houston, Texas . . . . . . . . 100% 100% 100% 100% N/A N/A N/A
5. 1801 West Belt
Houston, Texas . . . . . . . . 100% 100% 100% 100% N/A N/A N/A
6. Pine Forest #17
Houston, Texas . . . . . . . . 100% 100% 100% 100% N/A N/A N/A
7. Silber #1
Houston, Texas . . . . . . . . 93% 93% 100% 100% N/A N/A N/A
<FN>
- ----------
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3-A. The Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus and the Assignment
Agreement set forth as Exhibit B to the Prospectus, copies of which are
hereby incorporated by reference to Exhibit 3 and Exhibit 4-A to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-17708)
dated March 19, 1993.
3-B. Acknowledgement of rights and duties of the General
Partners of the Partnership between ABPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 are hereby incorporated by reference to Exhibit 3-B
to the Partnership's Report for September 30, 1996 on Form 10-Q as amended
(File No. 0-17708) dated November 8, 1996.
4-A. The Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus and the Assignment
Agreement set forth as Exhibit B to the Prospectus, copies of which are
hereby incorporated by reference to Exhibit 3 and Exhibit 4-A to the
Partnership's report for December 31, 1992 on Form 10-K (File No. 0-17708)
dated March 19, 1993.
4-B.
through
4-D. Copies of documents relating to certain purchase money
notes secured by Minimax 2, Minimax 3 and 1801 West Belt are hereby
incorporated by reference to Exhibits 4-B through 4-D to the Partnership's
report for December 31, 1992 on Form 10-K (File No. 0-17708) dated March
19, 1993.
4-E. Copy of documents relating to the mortgage loan
secured by Pine Forest #17 are hereby incorporated by reference to Exhibit
4-E to the Partnership's report for December 31, 1992 on Form 10-K (File
No. 0-17708) dated March 19, 1993.
4-F. Copy of document relating to the conditional consent
letter agreement secured by the 18 Central Shopping Center are hereby
incorporated by reference to Exhibit 4-F to the Partnership's report for
December 31, 1992 on Form 10-K (File No. 0-17708) dated March 19, 1993.
4-G. Copy of documents relating to mortgage loan secured by
Silber #1 is hereby incorporated by reference to Exhibit 4-G to the
Partnership's report for December 31, 1993 on Form 10-K (File No. 0-17708)
dated March 25, 1994.
4-H. Copy of document relating to the modification of the
mortgage loan secured by 18 Central Shopping Center is hereby incorporated
by reference to Exhibit 4-H to the Partnership's report for December 31,
1993 on Form 10-K (File No. 0-17708) dated March 25, 1994.
10-A. Copy of Agreement together with certain documents
relating to purchase of an interest in Palm Desert Town Center, Palm
Desert, California is hereby incorporated herein by reference to Post-
Effective Amendment No. 4 to the Partnership's Registration Statement on
Form S-11 (File No. 33-9607) dated February 28, 1989.
<PAGE>
10-B. Copy of Agreement together with certain documents
relating to the purchase of the 18 Central Shopping Center, East Brunswick,
New Jersey is hereby incorporated herein by reference to Post-Effective
Amendment No. 7 to the Partnership's Registration Statement on Form S-11
(File No. 33-9607) dated July 31, 1989.
10-C. Copy of Purchase and Sale Agreement together with the
Lease Guarantee Agreement for Minimax 2, Minimax 3 and 1801 West Belt are
hereby incorporated by reference to Exhibit 10-C to the Partnership's
report for December 31, 1992 on Form 10-K (File No. 0-17708) dated March
19, 1993.
10-D. Copy of Purchase and Sale Agreement for the
acquisition of Pine Forest #17 is hereby incorporated by reference to
Exhibit 10-D to the Partnership's report for December 31, 1992 on Form 10-K
(File No. 0-17708) dated March 19, 1993.
10-E. Copies of Limited Partnership Agreement and Formation
of Partnership Agreement relating to JMB/Warehouse Associates are hereby
incorporated by reference to Exhibit 10-E to the Partnership's report for
December 31, 1992 on Form 10-K (File No. 0-17708) dated March 19, 1993.
10-F. Copy of Purchase and Sale Agreement for the
acquisition of Silber #1 is hereby incorporated by reference to Exhibit 10-
G to the Partnership's report for December 31, 1993 on Form 10-K (File No.
0-17708) dated March 25, 1994.
10-G. Sale documents relating to the contract for sale by
the Partnership of its interest in the Houston Industrial Properties are
hereby incorporated by reference to the Partnership's report for March 28,
1997 on Form 8-K (File No. 0-17708) dated April 11, 1997.
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: November 7, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
By: GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000804214
<NAME> CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVII
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,987,103
<SECURITIES> 0
<RECEIVABLES> 336,234
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,323,337
<PP&E> 8,613,315
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,547,625
<CURRENT-LIABILITIES> 10,199,824
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,305,501
<TOTAL-LIABILITY-AND-EQUITY> 15,547,625
<SALES> 1,527,637
<TOTAL-REVENUES> 1,766,628
<CGS> 0
<TOTAL-COSTS> 698,804
<OTHER-EXPENSES> 224,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 627,498
<INCOME-PRETAX> 215,626
<INCOME-TAX> 0
<INCOME-CONTINUING> 187,678
<DISCONTINUED> 3,733,116
<EXTRAORDINARY> (81,123)
<CHANGES> 0
<NET-INCOME> 3,839,671
<EPS-PRIMARY> 110.93
<EPS-DILUTED> 110.93
</TABLE>
