<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A-2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
DECEMBER 31, 1995 0-16859
For the fiscal year Commission file number
ended
</TABLE>
------------------------
NYLIFE REALTY INCOME PARTNERS I, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3410538
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
51 MADISON AVENUE, SUITE 1710, NEW YORK, N.Y. 10010
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (212) 576-7300
------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in any amendment to this Form 10-K. Yes
_X_ No ___
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial information regarding
the Partnership's financial position and operating results for the five years
ended December 31, 1995. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements and Supplementary Data, which are
included in Items 7 and 8 of this report, respectively.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total assets at December 31............... $ 14,565,801 $ 19,114,353 $ 18,529,965 $ 18,480,937 $ 23,235,833
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Equity in income (loss) from Joint
Ventures (3)............................. $ 248,687 $ 765,893 $ 311,734 $ (4,686,456) $ 626,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income (loss) -- GAAP basis (2)....... $ 157,197 $ 615,369 $ 158,466 $ (4,856,242) $ 470,825
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income (loss) -- Tax basis (2)........ $ 486,336 $ (1,155,825) $ 420,471 $ 412,579 $ 477,655
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income (loss) allocated to partners:
To Limited Partners....................... $ 155,625 $ 609,215 $ 156,881 $ (4,807,680) $ 466,117
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
To General Partners....................... $ 1,572 $ 6,154 $ 1,585 $ (48,562) $ 4,708
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income (loss) per Unit................ $ .05 $ .21 $ .06 $ (1.70) $ .16
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Cash generated from (used in)
operations............................... $ 71,646 $ 700,795 $ 58,242 $ (78,052) $ 533,578
Cash distributions to Limited Partners
(5)...................................... 4,581,098 141,697 -- -- 779,333
Cash distributions to General Partners.... 13,769 1,431 -- -- 7,872
------------- ------------- ------------- ------------- -------------
Total cash distributions (1).............. 4,594,867 143,128 -- -- 787,205
------------- ------------- ------------- ------------- -------------
Cash generated from (used in) operations
after distributions to Limited Partners
(4)...................................... $ (4,523,221) $ 557,667 $ 58,242 $ (78,052) $ (253,627)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Limited Partner cash distributions per
Unit..................................... $ 1.62 $ .05 $ .00 $ .00 $ .28
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Number of Units outstanding at December
31....................................... 2,833,925.5 2,833,925.5 2,833,925.5 2,833,925.5 2,833,925.5
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
- --------------------------
(1) In 1991 the General Partners decided to suspend distributions throughout
1992 and 1993 as part of a long-term strategy to preserve the assets and
maximize performance of the portfolio. See Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
(2) The differences between GAAP and Tax basis net income (loss) are primarily
the result of different methods of depreciation and rental income
recognition for financial reporting and tax reporting purposes.
(3) The 1992 Equity in loss from Joint Ventures resulted from a write-down of
the carrying values of Parklane and NewMarket to their then current
appraised values. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(4) Cash generated from (used in) operations after distributions to Limited
Partners does not include cash distributions from Joint Ventures in excess
of earnings (return of capital) of $3,849,522, $802,507, $12,779, $373,732
and $302,816 for each of the five years in the period ended December 31,
1995.
(5) Cash distributions to Limited Partners representing a return of capital were
$1.62, $.05, $.00, $.00 and $.11, on a per Unit basis, for each of the five
years in the period ended December 31, 1995 and $.00 and $1.45 per Unit for
each of the three months ended March 31, 1996 and March 31, 1995,
respectively.
2
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Notes to Financial Statements on pages F-8 through F-15 and Notes to
Combined Financial Statements of Joint Ventures on pages F-23 through F-28.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
All financial statements required by Item 8 of Form 10-K are contained in
Appendix A as indicated in Item 8.
2. FINANCIAL STATEMENT SCHEDULES:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted since
either (1) the information required is disclosed in the financial statements and
the notes thereto; (2) the schedules are not required under the related
instructions; or (3) the schedules are inapplicable.
3. EXHIBITS:
NUMBER AND DESCRIPTION UNDER REGULATION S-K
The following reflects all applicable Exhibits required under Item 601 of
Regulation S-K:
(3) ARTICLES OF INCORPORATION AND BY-LAWS
<TABLE>
<S> <C>
3.1 Amended and Restated Agreement of Limited Partnership ("Partnership
Agreement") of the Registrant, incorporated by reference to Exhibit A to the
Prospectus of Registrant dated March 2, 1987 included in Registrant's
Registration Statement on Form S-11 (Reg. No. 33-10725).*
</TABLE>
(10) MATERIAL CONTRACTS
<TABLE>
<S> <C>
10.1 Form of Partnership Agreement of NYLIFE Realty Partners I -- General
Partnership A (also referred to as Joint Venture Agreement) between
Registrant and the Co-Venturer incorporated by reference to Exhibit 10C to
Registrant's Registration Statement on Form S-11 (Reg. No. 33-10725).*
10.2 Partnership Formation Agreement dated June 10, 1987 between Registrant, the
NYLIFE General Partner and the Co-Venturer, incorporated by reference to
Exhibit 10D to Registrant's annual report on Form 10-K for the year ended
December 31, 1988.*
10.3 Agreement for Sale and Purchase of Real Property, Improvements to Realty and
Personal Property dated January 19, 1988 by and between Cornell Plaza
Partners and NYLIFE Realty Partners I -- General Partnership A, as amended,
incorporated by reference to Exhibit 10E to Registrant's Registration
Statement on Form S-11 (Reg. No. 33-10725).*
10.4 Agreement for Sale and Purchase of Real Property, Improvements to Realty and
Personal Property dated April 18, 1988 by and between John Hancock Mutual
Life Insurance Co. and NYLIFE Realty Partners I -- General Partnership B, as
amended, incorporated by reference to Exhibit 10F to Registrant's
Registration Statement on Form S-11 (Reg. No. 33-10725).*
10.5 Agreement for Sale and Purchase of Real Property, Improvements to Realty and
Personal Property dated June 22, 1988 by and between The Oak Associates and
NYLIFE Realty Partners I -- General Partnership C, as amended, incorporated
by reference to Exhibit 10G to Registrant's Registration Statement on Form
S-11 (Reg. No. 33-10725).*
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
10.6 Agreement for Sale and Purchase of Real Property, Improvements to Realty and
Personal Property dated September 13, 1988 by and between NewMarket Columbus
Venture and NYLIFE Realty Partners I -- General Partnership D, as amended,
incorporated by reference to Exhibit 10I to Registrant's Registration
Statement on Form S-11 (Reg. No. 33-10725).*
10.7 Letter Agreement dated March 25, 1992 by and between NYLIFE Realty Partners
I -- General Partnership A and Greystone Realty Corporation, incorporated by
reference to Exhibit 10.10 to Registrant's annual report on Form 10-K for
the years ended December 31, 1989, December 31, 1990 and December 31, 1991.*
10.8 Letter Agreement dated March 25, 1992 by and between NYLIFE Realty Partners
I -- General Partnership B and Greystone Realty Corporation, incorporated by
reference to Exhibit 10.11 to Registrant's annual report on Form 10-K for
the years ended December 31, 1990 and December 31, 1991.*
10.9 Letter Agreement dated March 25, 1992 by and between NYLIFE Realty Partners
I -- General Partnership C and Greystone Realty Corporation, incorporated by
reference to Exhibit 10.12 to Registrant's annual report on Form 10-K for
the years ended December 31, 1990 and December 31, 1991.*
10.10 Letter Agreement dated March 25, 1992 by and between NYLIFE Realty Partners
I -- General Partnership D and Greystone Realty Corporation, incorporated by
reference to Exhibit 10.13 to Registrant's annual report on Form 10-K for
the years ended December 31, 1990 and December 31, 1991.*
10.11 Letter Agreement dated December 18, 1992 by and between NYLIFE Realty
Partners I -- General Partnership A and Greystone Realty Corporation,
incorporated by reference to Exhibit 10.11 to Registrant's annual report on
Form 10-K for the year ended December 31, 1992.*
10.12 Letter Agreement dated December 18,1992 by and between NYLIFE Realty
Partners I -- General Partnership B and Greystone Realty Corporation,
incorporated by reference to Exhibit 10.12 to Registrant's annual report on
Form 10-K for the year ended December 31, 1992.*
10.13 Letter Agreement dated December 18, 1992 by and between NYLIFE Realty
Partners I -- General Partnership C and Greystone Realty Corporation,
incorporated by reference to Exhibit 10.13 to Registrant's annual report on
Form 10-K for the year ended December 31, 1992.*
10.14 Letter Agreement dated December 18, 1992 by and between NYLIFE Realty
Partners I -- General Partnership D and Greystone Realty Corporation,
incorporated by reference to Exhibit 10.14 to Registrant's annual report on
Form 10-K for the year ended December 31, 1992.*
10.15 Agreement for Purchase and Sale of Property (All Cash) dated October 7, 1994
by and between NYLIFE Realty Partners I -- General Partnership B by and
through Greystone Realty Corporation, Principal Mutual Life Insurance
Company and Chicago Title Insurance Company, incorporated by reference to
Exhibit 2.1 to Registrant's current report on Form 8-K dated December 20,
1994.*
27 Financial Data Schedule.*
</TABLE>
- ------------------------
* Previously filed.
(B) REPORTS ON FORM 8-K:
None.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
NYLIFE Realty Income Partners I, L.P.
By: NYLIFE Realty Inc.
General Partner
May 28, 1996 By: /s/ KEVIN M. MICUCCI
-----------------------------------
Kevin M. Micucci
President and
Controller
By: CNP Realty Investments Inc.
General Partner
May 28, 1996 By: /s/ KEVIN M. MICUCCI
-----------------------------------
Kevin M. Micucci
President and
Controller
5
<PAGE>
APPENDIX A
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (A)(1) AND (2)
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995 AND 1994
NYLIFE REALTY INCOME PARTNERS I, L.P.
F-1
<PAGE>
PRELIMINARY COPY
NYLIFE REALTY INCOME PARTNERS I, L.P.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Report of Independent Public Accountants........................................................... F-3
Balance Sheets as of December 31, 1995 and 1994.................................................... F-4
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993...................... F-5
Statements of Changes in Partners' Capital for the Years Ended December 31, 1995, 1994 and 1993.... F-6
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993...................... F-7
Notes to Financial Statements...................................................................... F-8 to F-15
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of NYLIFE Realty Income Partners I, L.P.:
We have audited the accompanying balance sheets of NYLIFE Realty Income Partners
I, L.P. (a Delaware limited partnership) (the "Partnership") as of December 31,
1995 and 1994 and the related statements of operations, changes in 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 general
partner. 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 the
general partner, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As further discussed in Note 11, in connection with the proposed settlement of
litigation involving NYLIFE Realty Inc., a co-general partner of the
Partnership, the general partners will solicit consents of the limited partners
for the dissolution of the Partnership. The financial statements do not include
any adjustments that might result should the limited partners consent to
liquidate the Partnership.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership 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.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
March 22, 1996
F-3
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash and cash equivalents........................................ $ 688,977 $ 1,362,676
Restricted cash.................................................. 283,392 283,392
Investments in real estate Joint Ventures........................ 13,590,960 17,440,482
Other assets -- net.............................................. 2,472 27,803
----------- -----------
Total assets............................................... $14,565,801 $19,114,353
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Due to affiliates................................................ $ -- $ 100,000
Accrued liabilities.............................................. 94,058 104,940
----------- -----------
Total liabilities.......................................... 94,058 204,940
----------- -----------
Partners' capital
General Partners:
Capital contributions........................................ 2,000 2,000
Accumulated deficit.......................................... (9,103) (10,675)
Cumulative distributions..................................... (66,470) (52,701)
----------- -----------
(73,573) (61,376)
----------- -----------
Limited Partners:
Capital contributions net of public offering expenses........ 25,032,724 25,032,724
Accumulated deficit.......................................... (901,371) (1,056,996)
Cumulative distributions..................................... (9,586,037) (5,004,939)
----------- -----------
14,545,316 18,970,789
----------- -----------
Total partners' capital.................................... 14,471,743 18,909,413
----------- -----------
Total liabilities and partners' capital.................... $14,565,801 $19,114,353
----------- -----------
----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-4
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
Equity in income from Joint Venture operations..................... $ 248,687 $ 765,893 $ 311,734
Interest........................................................... 64,280 16,444 20,332
------------- ------------- -------------
Total income................................................... 312,967 782,337 332,066
------------- ------------- -------------
EXPENSES
General and administrative......................................... 55,770 66,968 73,600
General and administrative -- related party........................ 100,000 100,000 100,000
------------- ------------- -------------
Total expenses................................................. 155,770 166,968 173,600
------------- ------------- -------------
Net income................................................... $ 157,197 $ 615,369 $ 158,466
------------- ------------- -------------
------------- ------------- -------------
NET INCOME ALLOCATED
General Partners................................................... $ 1,572 $ 6,154 $ 1,585
Limited Partners................................................... 155,625 609,215 156,881
------------- ------------- -------------
$ 157,197 $ 615,369 $ 158,466
------------- ------------- -------------
------------- ------------- -------------
Net income per Unit................................................ $ .05 $ .21 $ .06
------------- ------------- -------------
------------- ------------- -------------
Number of Units.................................................... 2,833,925.5 2,833,925.5 2,833,925.5
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-5
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
TOTAL
LIMITED GENERAL PARTNERS'
PARTNERS PARTNERS CAPITAL
-------------- ---------- --------------
<S> <C> <C> <C>
Capital (deficit) at January 1, 1993................................ $ 18,346,390 $ (67,684) $ 18,278,706
Net income.......................................................... 156,881 1,585 158,466
-------------- ---------- --------------
Capital (deficit) at December 31, 1993.............................. 18,503,271 (66,099) 18,437,172
Net income.......................................................... 609,215 6,154 615,369
Distributions to partners........................................... (141,697) (1,431) (143,128)
-------------- ---------- --------------
Capital (deficit) at December 31, 1994.............................. 18,970,789 (61,376) 18,909,413
Net income.......................................................... 155,625 1,572 157,197
Distributions to partners........................................... (4,581,098) (13,769) (4,594,867)
-------------- ---------- --------------
Capital (deficit) at December 31, 1995.............................. $ 14,545,316 $ (73,573) $ 14,471,743
-------------- ---------- --------------
-------------- ---------- --------------
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-6
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 157,197 $ 615,369 $ 158,466
-------------- ------------- ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in income from joint venture operations..................... (248,687) (765,893) (311,734)
Cash distributions from joint venture operations................... 248,687 765,893 311,734
Changes in assets and liabilities:
(Increase) decrease in restricted cash............................. -- (250,000) 250,000
Decrease (increase) in other assets................................ 25,331 (26,721) 9,214
(Decrease) increase in due to affiliates........................... (100,000) 100,000 --
(Decrease) increase in accrued liabilities......................... (10,882) 12,147 (109,438)
-------------- ------------- ------------
Total adjustments................................................ (85,551) (164,574) 149,770
-------------- ------------- ------------
Net cash provided by operating activities........................ 71,646 450,795 308,242
-------------- ------------- ------------
Cash flows from investing activities:
Cash distributions from Joint Venturers in excess of earnings
(return of capital)............................................... 3,849,522 802,507 12,779
Investments in real estate Joint Ventures.......................... -- -- (459,375)
-------------- ------------- ------------
Net cash provided by (used in) investing activities.............. 3,849,522 802,507 (446,596)
-------------- ------------- ------------
Cash flows from financing activities:
Distributions to partners.......................................... (4,594,867) (143,128) --
-------------- ------------- ------------
Net (decrease) increase in cash and cash equivalents................. (673,699) 1,110,174 (138,354)
Cash and cash equivalents at beginning of year....................... 1,362,676 252,507 390,856
-------------- ------------- ------------
Cash and cash equivalents at end of year............................. $ 688,977 $ 1,362,676 $ 252,507
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-7
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 -- ORGANIZATION
NYLIFE Realty Income Partners I, L.P. (the "Partnership") is a Delaware
limited partnership formed on November 14, 1986. Its co-general partners are
NYLIFE Realty Inc. ("Realty") and CNP Realty Investments, Inc. ("CNP"),
(collectively, the "General Partners"). The Partnership was formed to enter into
a series of joint ventures (individually, a "Joint Venture", collectively, the
"Joint Ventures") with New York Life Insurance Company (the "Co-Venturer"), an
affiliate of Realty. Each Joint Venture acquired (on an unleveraged basis),
operates, holds for investment, and will ultimately sell, existing, income
producing, commercial properties (individually, a "Property", collectively, the
"Properties").
The Partnership is the managing partner of each Joint Venture, responsible
for management of the day-to-day operations and implementing the joint decisions
of the Joint Venture's partners.
The Partnership will continue until December 31, 2036, unless terminated
sooner in accordance with the terms of the partnership agreement (the
"Partnership Agreement") (see Note 11). The Partnership did not commence active
operations until March 1987. The offering of units was terminated by the General
Partners on June 30, 1989.
Capitalized terms used in these Notes to Financial Statements, unless
otherwise defined herein, shall have the meanings set forth in Section 2 of the
Partnership Agreement.
NOTE 2 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF REPORTING
The accompanying financial statements are prepared under generally accepted
accounting principles using the accrual basis of accounting. Accordingly,
revenues are recognized as earned and expenses are recognized as incurred.
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.
CASH AND CASH EQUIVALENTS
Highly liquid debt instruments (primarily consisting of commercial paper)
purchased with a maturity of three months or less are considered cash
equivalents.
RESTRICTED CASH
Restricted cash represents amounts required to be retained in the
Partnership which may be used to fund future operating requirements pursuant to
the Partnership Agreement.
INVESTMENTS IN REAL ESTATE JOINT VENTURES
The Partnership accounts for its investments in real estate joint ventures
using the equity method of accounting. Equity in income (loss) from Joint
Venture operations is recognized as earned and cash distributions received are
accounted for as a reduction of the related investment (see Note 4).
The Partnership's investments in real estate joint ventures are carried at
the lower of equity method carrying amount or estimated net realizable value.
The Partnership periodically reviews its investments for declines in net
realizable values, to amounts below recorded balances based upon its
F-8
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 2 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
present investment strategies. Future changes in such investment strategies and
other circumstances may effect estimates of net realizable values and therefore
the carrying amount of investments (see Note 10).
INCOME TAXES
No provision for income taxes has been made in the financial statements
since these taxes are the responsibility of the individual partners rather than
the Partnership.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
NOTE 3 -- THE PARTNERSHIP AGREEMENT
The Partnership Agreement, dated June 10, 1987, provides that net cash from
operations, as defined, for each fiscal year will be distributed on a quarterly
basis, 99% to the Limited Partners and 1% to the General Partners until each
Limited Partner has received a 6% annual return. Any remaining net cash from
operations will first be distributed to the General Partners until the General
Partners have received an additional 9% of the aggregate net cash from
operations distributed to all partners. Thereafter, net cash from operations
will be distributed 99% to the Limited Partners and 1% to the General Partners.
Net proceeds from sales of Properties shall be distributed first, 100% to
the Limited Partners until each Limited Partner has received an amount equal to
his capital contribution; second, 100% to the Limited Partners until each
Limited Partner has received aggregate distributions from all sources (other
than the proceeds previously referred to) equal to a 6% cumulative return;
third, after payment of the subordinated disposition fee to the General
Partners, if any, 100% to the Limited Partners until each Limited Partner has
received aggregate distributions from all sources (other than the proceeds first
mentioned) equal to a 10% cumulative return; and fourth, any remaining proceeds
will be distributed 85% to the Limited Partners and 15% to the General Partners.
NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES
Since inception, the Partnership and Co-Venturer have acquired four
commercial properties, Cornell Plaza Office Building ("Cornell"), Parklane
Office Building ("Parklane"), Eden Woods Business Center ("Eden Woods") and
NewMarket Shopping Center ("NewMarket") through investments in Joint Ventures
("Joint Ventures A, B, C and D" respectively) as follows:
<TABLE>
<CAPTION>
PARTNERSHIP INTEREST
DATE AT
JOINT RENTABLE ACQUIRED BY --------------------
VENTURE PROPERTY NAME LOCATION SQ. FT. PARTNERSHIP PURCHASE PRICE 12/31/95 12/31/94
- --------- --------------- --------------------- --------- ----------- -------------- --------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
A Cornell Blue Ash, OH 85,625 3/30/88 $ 9,550,000 60% 60%
(1)B Parklane Brentwood, TN 107,523 6/29/88 $ 9,600,000 60% 60%
C Eden Woods Eden Prairie, MN 165,866 8/23/88 $ 10,900,000 47.06% 47.06%
D NewMarket Columbus, OH 172,833 12/22/88 $ 15,500,000 43.82% 43.82%
</TABLE>
- ------------------------
(1) As discussed below, Parklane was sold on December 6, 1994.
F-9
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
MINIMUM RENT PAYMENTS
Future minimum rental income to be received from non-cancelable operating
leases as of December 31, 1995 for the Joint Ventures are as follows:
<TABLE>
<S> <C>
1996.......................................... $ 2,594,600
1997.......................................... 2,380,277
1998.......................................... 2,082,463
1999.......................................... 1,721,142
2000.......................................... 1,159,530
Thereafter.................................... 3,001,737
-----------
$12,939,749
-----------
-----------
</TABLE>
Base rent in 1995, 1994 and 1993 was $2,703,146, $3,875,542 and $3,492,005
excluding escalations, respectively.
Generally, lease terms are for 3 to 5 years and allow for increases in
certain property operating expenses to be passed through to the tenants.
JOINT VENTURE A -- CORNELL
During the years ended December 31, 1995 and 1994, various leasing and
capital improvement costs were incurred as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 21,663 $ 274,378
----------- -----------
----------- -----------
Building improvements............................................... $ 314,554 $ 21,024
----------- -----------
----------- -----------
Leasing commissions................................................. $ 16,882 $ 69,172
----------- -----------
----------- -----------
Rent concessions.................................................... $ 12,655 $ 1,400
----------- -----------
----------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from Cornell of
$280,761 and $179,043, respectively.
JOINT VENTURE B -- PARKLANE
On December 6, 1994 pursuant to a Purchase and Sale Agreement dated October
7, 1994, Joint Venture B sold Parklane, along with the underlying land and
related improvements, to Principal Mutual Life Insurance Company for $5,600,000
which represents approximately 127% of its appraised value of $4,400,000 at
November 30, 1993. It was determined that under current market conditions and
considering the departure of South Central Bell, whose 69,302 sq. ft. occupancy
comprises approximately 64% of Parklane's net rentable space, the sale of
Parklane would provide more value than utilizing the cash reserve to re-tenant
the building. At the time of the sale the cash reserve balance was $1,519,570.
During 1995 and 1994, the Partnership received distributions from Parklane of
$3,301,334 and $915,124, respectively. The Partnership distributed to investors
its share of the net proceeds from the sale, along with its share of the cash
reserve, in accordance with the provisions of the Partnership Agreement on
February 15, 1995.
F-10
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
JOINT VENTURE C -- EDEN WOODS
During the years ended December 31, 1995 and 1994, various leasing costs
were incurred as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 213,655 $ 273,914
----------- -----------
----------- -----------
Leasing commissions................................................. $ 122,270 $ 76,809
----------- -----------
----------- -----------
Rent concessions.................................................... $ 59,060 $ 51,951
----------- -----------
----------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from Eden Woods
of $163,970 and $211,193, respectively.
JOINT VENTURE D -- NEWMARKET
During 1993, substantial structural improvements were made at NewMarket to
accommodate leases with CompUSA to anchor the south end of the center and Media
Play to anchor the north end. Such improvements were funded by cash flow from
operations as well as capital contributions by the Partnership and Co-Venturer
during 1993 and 1994. Since the Partnership was unable to fund a portion of its
required contribution in 1994, the Co-Venturer increased its contribution by the
amount of the Partnership's shortfall in exchange for an increased ownership
interest in the Joint Venture. During 1994, the Co-Venturer contributed $155,059
of additional capital and during 1993, the Partnership and the Co-Venturer
contributed $459,375 and $1,600,163, of additional capital, respectively.
During the years ended December 31, 1995 and 1994 various leasing and
capital improvement costs were incurred as follows:
<TABLE>
<CAPTION>
1995 1994
--------- -----------
<S> <C> <C>
Tenant improvements.................................................... $ 4,500 $ 115,448
--------- -----------
--------- -----------
Building improvements.................................................. $ 2,521 $ 85,632
--------- -----------
--------- -----------
Leasing commissions.................................................... $ -- $ 36,178
--------- -----------
--------- -----------
Rent concessions....................................................... $ 2,454 $ 10,487
--------- -----------
--------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from NewMarket
of $352,144 and $263,040, respectively.
The terms of the Partnership Agreement, dated June 10, 1987, provide that
all Joint Venture income, losses and distributions, generally, will be
apportioned pro-rata among the Partnership and the Co-Venturer in proportion to
their respective contributions (exclusive of the Partnership's contribution for
Acquisition Fees).
F-11
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 4 -- INVESTMENT IN REAL ESTATE JOINT VENTURES (CONTINUED)
A summary of the condensed combined financial information of the Joint
Ventures and the appraised values of the Properties as of December 31, 1995 and
1994 is presented below:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------- ------------
COMBINED COMBINED
CORNELL PARKLANE EDEN WOODS NEWMARKET TOTAL TOTAL
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
APPRAISED VALUES OF
PROPERTIES.................... $ 7,200,000 -- $ 9,200,000 $ 8,000,000 $ 24,400,000 $ 21,800,000
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
BALANCE SHEETS
Land........................... $ 1,128,832 -- $ 1,765,928 $ 1,773,046 $ 4,667,806 $ 4,667,806
Building and improvements...... 9,840,813 -- 10,382,181 9,667,612 29,890,606 29,333,712
Accumulated depreciation....... (3,202,942) -- (2,802,780) (2,903,364) (8,909,086) (7,440,878)
Other assets................... 500,368 -- 750,316 651,961 1,902,645 7,596,351
Accrued liabilities............ (176,651) -- (125,209) (251,255) (553,115) (690,317)
Co-Venturer's equity........... (3,185,096) -- (5,312,239) (5,505,369) (14,002,704) (16,646,395)
----------- ----------- ----------- ----------- ------------ ------------
Partnership's equity in Joint
Ventures...................... $ 4,905,324 -- $ 4,658,197 $ 3,432,631 $ 12,996,152 $ 16,820,279
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
Represented by:
Partnership's equity in Joint
Ventures at January 1......... $ 5,106,600 $ 3,300,349 $ 4,920,342 $ 4,113,191 $ 17,440,482 $ 18,242,989
Joint Venture income......... 79,485 985 47,860 145,754 274,084 765,893
Cash distributions........... (280,761) (3,301,334) (163,970) (352,144) (4,098,209) (1,568,400)
----------- ----------- ----------- ----------- ------------ ------------
Net equity investment.......... 4,905,324 -- 4,804,232 3,906,801 13,616,357 17,440,482
Interest....................... -- -- (72,377) (300,910) (373,287) (373,287)
Acquisition fees............... -- -- (73,656) (173,260) (246,916) (246,916)
Amortization of interest and
acquisition fees.............. -- -- 6,043 19,354 25,397 --
----------- ----------- ----------- ----------- ------------ ------------
Partnership's equity in Joint
Ventures at December 31....... $ 4,905,324 -- $ 4,664,242 $ 3,451,985 $ 13,021,551 $ 16,820,279
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</TABLE>
The following is a summary of the condensed combined operations of the Joint
Ventures for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------- ----------- -----------
EDEN COMBINED COMBINED COMBINED
OPERATIONS CORNELL PARKLANE WOODS NEWMARKET TOTAL TOTAL TOTAL
- -------------------------- --------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating income...... $ 121,882 $ (673) $ 93,754 $ 323,504 $ 538,467 $ 1,051,960 $ 499,690
Interest income........... 10,593 2,314 7,945 9,115 29,967 67,190 39,011
Gain on sale of Property
(1)...................... -- -- -- -- -- 294,687 --
--------- ----------- --------- ----------- ----------- ----------- -----------
Net income................ $ 132,475 $ 1,641 $ 101,699 $ 332,619 $ 568,434 $ 1,413,837 $ 538,701
--------- ----------- --------- ----------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- ----------- -----------
Net income allocated:
To Co-Venturer............ $ 52,990 $ 656 $ 53,839 $ 186,865 $ 294,350 $ 647,944 $ 226,967
To Partnership............ 79,485 985 47,860 145,754 274,084 765,893 311,734
--------- ----------- --------- ----------- ----------- ----------- -----------
$ 132,475 $ 1,641 $ 101,699 $ 332,619 $ 568,434 $ 1,413,837 $ 538,701
--------- ----------- --------- ----------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------------
(1) As discussed above, Parklane was sold on December 6, 1994.
NOTE 5 -- MANAGEMENT OF REAL ESTATE JOINT VENTURES
In order to provide quality asset management consistent with the goals and
objectives of the Partnership, the three remaining Joint Ventures contracted
with Greystone Realty Corporation
F-12
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 5 -- MANAGEMENT OF REAL ESTATE JOINT VENTURES (CONTINUED)
("Greystone"), an affiliate of the Co-Venturer and the General Partners, to
provide property management services for the Joint Ventures. Greystone has been
managing the Joint Ventures since July 1, 1989. Greystone has contracted with
local property managers and leasing agents separately in accordance with the
terms and conditions approved by the management of each Joint Venture.
NOTE 6 -- TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The following is a summary of the amounts earned by the General Partners and
their affiliates for the years ended December 31, 1995, 1994 and 1993, as
defined in the Partnership Agreement:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Property management fees (1)........................... $ 138,660 $ 171,972 $ 175,000
Reimbursement of general and administrative expenses
paid by the General Partner........................... 100,000 100,000 100,000
----------- ----------- -----------
$ 238,660 $ 271,972 $ 275,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The above amounts are allocable to the General Partners and their affiliates
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NYLIFE Realty Inc...................................... $ 100,000 $ 100,000 $ 100,000
Greystone Realty Corporation........................... 138,660 171,972 175,000
----------- ----------- -----------
$ 238,660 $ 271,972 $ 275,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------------
(1) Costs associated with property management fees are borne by the Joint
Ventures.
NOTE 7 -- CAPITAL CONTRIBUTIONS AND ALLOCATION OF NET INCOME TO LIMITED PARTNERS
As of December 31, 1995 and 1994, the Partnership had issued 2,833,925.5
Units in exchange for an aggregate of $28,339,255 in Limited Partner capital
contributions. Net income or loss and cash distributions from operations for any
fiscal year shall be allocated 99% to the Limited Partners and 1% to the General
Partners.
NOTE 8 -- RECONCILIATION OF NET INCOME TO TAXABLE INCOME
The following table reconciles net income for financial reporting purposes
to taxable income (loss) for Federal income tax reporting purposes for the years
ended 1995, 1994 and 1993. The differences are due primarily to i) differences
between the tax and financial statement basis of buildings and improvements,
(creating a loss on the sale of Parklane for tax reporting purposes and a gain
for financial reporting purposes in 1994), ii) depreciating real estate on a
straight-line basis for financial
F-13
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 8 -- RECONCILIATION OF NET INCOME TO TAXABLE INCOME (CONTINUED)
reporting purposes while using accelerated methods for tax reporting purposes
and iii) recognition of rental income on a straight-line basis for financial
reporting purposes and based upon the contractual minimum rental payments for
tax reporting purposes.
<TABLE>
<CAPTION>
1995 1994 1993
----------- -------------- -----------
<S> <C> <C> <C>
Net income for financial reporting purposes.............. $ 157,197 $ 615,369 $ 158,466
Difference between tax and financial statement
depreciation............................................ 264,490 189,828 180,537
Adjustment for straight-line rent........................ 39,252 14,382 79,292
Adjustment for bad debt reserve.......................... -- (18,150) 2,176
Difference between tax loss and financial statement gain
on the sale of Parklane................................. -- (1,957,254) --
Difference between tax and financial statement
amortization............................................ 25,397 -- --
----------- -------------- -----------
Net income (loss) for income tax reporting purposes...... $ 486,336 $ (1,155,825) $ 420,471
----------- -------------- -----------
----------- -------------- -----------
</TABLE>
NOTE 9 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
of financial instruments, whether or not recognized on the accompanying balance
sheets, for which it is practical to estimate that value. Management believes
that, due to the short term nature of cash equivalents, the carrying amounts
reported on the balance sheets approximate their fair value.
NOTE 10 -- ADOPTION OF NEWLY ISSUED PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement requires that long-lived assets to be
held and used by an entity be recognized as impaired whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable, and when impaired to record an impairment loss to state the asset
at its fair value. In addition, the statement requires that long-lived assets to
be disposed of be reported at the lower of carrying amount or fair value less
cost to sell. This pronouncement is effective for fiscal years beginning after
December 15, 1995. In management's opinion, except for the proposed dissolution
of the Partnership as more fully discussed in Note 11, when adopted on January
1, 1996, Statement No. 121 will not have a material adverse effect on the
Partnership's financial position or results of operations.
In the event of dissolution, the Partnership would record an adjustment to
state its investments in real estate Joint Ventures at their then fair market
value. Subsequent increases and decreases in fair market value would be recorded
currently in earnings under the liquidation method of accounting.
NOTE 11 -- SUBSEQUENT EVENT
Two class action lawsuits were filed against the Co-Venturer and certain
other affiliates of the General Partners in the District Court of Harris County,
Texas on January 11, 1996, styled GRIMSHAWE V. NEW YORK LIFE INSURANCE CO., ET
AL. (No. 96-001188) and SHEA V. NEW YORK LIFE INSURANCE CO., ET AL. (No.
96-001189) alleging misconduct in connection with the original sale of
investment units in
F-14
<PAGE>
NYLIFE REALTY INCOME PARTNERS I, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 11 -- SUBSEQUENT EVENT (CONTINUED)
various partnerships (the "Proprietary Partnerships"), including violation of
various laws and regulations and claims of continuing fraudulent conduct. The
plaintiffs have asked for compensatory damages for their lost original
investment, plus interest, costs (including attorneys fees), punitive damages,
disgorgement of any earnings, compensation and benefits received by the
defendants as a result of the alleged actions and other unspecified relief to
which plaintiffs may be entitled. These suits were amended and refiled in a
consolidated action in the United States District Court for the Southern
District of Florida (the "Court") on March 18, 1996. In the federal action, the
plaintiffs added Realty and CNP as defendants and included allegations
concerning the Partnership. The Partnership is not a defendant in the
litigation.
The defendants expressly deny any wrongdoing alleged in the complaint and
concede no liability or wrongdoing in connection with the sale of the Units or
the structure of the Proprietary Partnerships. Nevertheless, to reduce the
burden of protracted litigation, the defendants have entered into a Stipulation
of Settlement ("Settlement Agreement") with the plaintiffs because in their
opinion such Settlement would (i) provide substantial benefits to the limited
partners in a manner consistent with New York Life's position that it had
previously determined to wind up most of the Proprietary Partnerships, including
the Partnership, through orderly liquidation as the continuation of the business
no longer serves the intended objectives of either the limited partners or the
defendants and to offer the limited partners an enhancement to the liquidating
distribution they would otherwise receive and (ii) provide an opportunity to
wind up such partnerships on a schedule favorable to the limited partners and
resolve the issues raised by the lawsuit.
In connection with the proposed settlement (the "Settlement"), the General
Partners will solicit consents of the Limited Partners for the dissolution of
the Partnership.
Under the terms of the Settlement Agreement, any settling Limited Partners
will receive at least a complete return of their original investment, less
distributions received prior to the final settlement date, in exchange for a
release of any and all claims a Limited Partner may have against the defendants
in connection with the Proprietary Partnership, including the Partnership, and
all activities related to the dissolution and liquidation of such partnerships.
Payments under the Settlement Agreement will be made by NYLIFE Realty, as paying
agent for NYLIFE Inc., directly to each Settling Limited Partner, who will grant
NYLIFE Realty a security interest in such Settling Limited Partner's Units and
liquidating distributions received from the Partnership to secure repayment of a
portion of such settlement payments.
Preliminary approval of the Settlement Agreement was given by the Court on
March 19, 1996. The Settlement Agreement is further conditioned upon final
approval by the Court as well as certain other conditions and is subject to
certain rights of termination detailed in the consent solicitation material
being mailed to the Limited Partners.
If the necessary consents of Limited Partners for dissolution are obtained,
the Partnership will be dissolved even if all necessary approvals for the
Settlement Agreement are not obtained or the Settlement Agreement is otherwise
terminated. In general, upon the dissolution of the Partnership, negative tax
consequences may accrue to the partners. Recent appraisals (Note 4) indicate
that the fair market value of the Properties is less than their carrying
amounts. If the Properties are sold, proceeds from such sales may be less than
these carrying amounts or the recent appraisal amounts.
The financial statements do not include any adjustments that might result
should the Limited Partners vote to liquidate the Partnership.
F-15
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
F-16
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
INDEX OF COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------------
<S> <C>
Report of Independent Public Accountants.......................................................... F-18
Combined Balance Sheets as of December 31, 1995 and 1994.......................................... F-19
Combined Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993............ F-20
Combined Statements of Changes in Partners' Capital for the Years Ended December 31, 1995, 1994
and 1993......................................................................................... F-21
Combined Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993............ F-22
Notes to Combined Financial Statements............................................................ F-23 to F-28
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of NYLIFE Realty Income Partners I, L.P.
We have audited the accompanying combined balance sheets of Cornell Plaza
Office Building, Parklane Office Building, Eden Woods Business Center and
NewMarket Shopping Center (all Delaware joint ventures) as of December 31, 1995
and 1994 and the related combined statements of operations, changes in 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 general
partner of NYLIFE Realty Income Partners I, L.P. (the "Partnership"). 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 the
general partner, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As further discussed in Note 7, in connection with the proposed settlement
of litigation involving NYLIFE Realty Inc., a co-general partner of the
Partnership, the general partners will solicit consents of the limited partners
for the dissolution of the Partnership. The combined financial statements do not
include any adjustments that might result should the limited partners consent to
liquidate the Partnership.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Cornell Plaza
Office Building, Parklane Office Building, Eden Woods Business Center and
NewMarket Shopping Center as of December 31, 1995 and 1994, and the combined
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 22, 1996
F-18
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Investment property:
Buildings and improvements..................................................... $ 29,890,606 $ 29,333,712
Land........................................................................... 4,667,806 4,667,806
-------------- --------------
34,558,412 34,001,518
Less: accumulated depreciation................................................... (8,909,086) (7,440,878)
-------------- --------------
25,649,326 26,560,640
Cash and cash equivalents........................................................ 789,631 6,187,495
Deferred leasing costs -- net.................................................... 786,511 828,469
Other assets..................................................................... 326,503 580,387
-------------- --------------
Total assets................................................................. $ 27,551,971 $ 34,156,991
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
Accrued real estate taxes........................................................ $ 298,602 $ 332,312
Accrued liabilities.............................................................. 254,513 358,005
Partners' capital................................................................ 26,998,856 33,466,674
-------------- --------------
Total liabilities and partners' capital...................................... 27,551,971 34,156,991
-------------- --------------
-------------- --------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these balance sheets.
F-19
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
Rental income........................................................ $ 4,286,900 $ 5,817,251 $ 4,880,084
Interest............................................................. 29,967 67,190 39,011
------------- ------------- -------------
Total income....................................................... 4,316,867 5,884,441 4,919,095
------------- ------------- -------------
EXPENSES
Operating............................................................ 1,356,365 2,022,574 1,824,199
Operating -- related party........................................... 139,000 172,000 155,000
Real estate taxes.................................................... 616,120 786,738 819,946
Depreciation and amortization........................................ 1,636,948 1,783,979 1,581,249
------------- ------------- -------------
Total expenses..................................................... 3,748,433 4,765,291 4,380,394
------------- ------------- -------------
Income before gain on sale of property............................. 568,434 1,119,150 538,701
Gain on sale of property............................................. -- 294,687 --
------------- ------------- -------------
Net income....................................................... $ 568,434 $ 1,413,837 $ 538,701
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these statements.
F-20
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
NYLIFE REALTY
NEW YORK LIFE INCOME TOTAL
INSURANCE PARTNERS I, PARTNERS'
COMPANY L.P. CAPITAL
-------------- -------------- --------------
<S> <C> <C> <C>
Capital at January 1, 1993....................................... 15,603,799 17,176,190 32,779,989
Capital contributions............................................ 1,600,163 459,375 2,059,538
Net income....................................................... 226,967 311,734 538,701
Distributions to partners........................................ (283,577) (324,513) (608,090)
-------------- -------------- --------------
Capital at December 31, 1993..................................... 17,147,352 17,622,786 34,770,138
Capital contributions............................................ 155,059 -- 155,059
Net income....................................................... 647,944 765,893 1,413,837
Distributions to partners........................................ (1,303,960) (1,568,400) (2,872,360)
-------------- -------------- --------------
Capital at December 31, 1994..................................... 16,646,395 16,820,279 33,466,674
Net income....................................................... 294,351 274,083 568,434
Distributions to partners........................................ (2,938,043) (4,098,209) (7,036,252)
-------------- -------------- --------------
Capital at December 31, 1995..................................... $ 14,002,703 $ 12,996,153 $ 26,998,856
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these statements.
F-21
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 568,434 $ 1,413,837 $ 538,701
-------------- -------------- --------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of property........................................ -- (294,687) --
Depreciation and amortization................................... 1,636,948 1,783,979 1,581,247
Changes in assets and liabilities:
Increase in deferred leasing costs.............................. (126,782) (223,724) (404,813)
Decrease (increase) in other assets............................. 253,884 (290,047) 34,030
Decrease in accrued real estate taxes........................... (33,710) (80,993) --
(Decrease) increase in accrued liabilities...................... (103,492) 159,588 7,758
-------------- -------------- --------------
Total adjustments............................................. 1,626,848 1,054,116 1,218,222
-------------- -------------- --------------
Net cash provided by operating activities..................... 2,195,282 2,467,953 1,756,923
-------------- -------------- --------------
Cash flows from investing activities:
Investments in property......................................... (556,894) (898,396) (2,680,207)
Proceeds from sale of property -- net........................... -- 5,358,797 --
-------------- -------------- --------------
Net cash (used in) provided by investing activities........... (556,894) 4,460,401 (2,680,207)
-------------- -------------- --------------
Cash flows from financing activities:
Partners' capital contributions................................. -- 155,059 2,059,538
Distributions to partners....................................... (7,036,252) (2,872,360) (608,090)
-------------- -------------- --------------
Net cash (used in) provided by investing activities........... (7,036,252) (2,717,301) 1,451,448
-------------- -------------- --------------
Net (decrease) increase in cash and cash equivalents.............. (5,397,864) 4,211,053 528,164
Cash and cash equivalents at beginning of period.................. 6,187,495 1,976,442 1,448,278
-------------- -------------- --------------
Cash and cash equivalents at end of period........................ $ 789,631 $ 6,187,495 $ 1,976,442
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying Notes to Combined Financial Statements are
an integral part of these statements.
F-22
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 -- BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF REPORTING
The accompanying combined financial statements are prepared under generally
accepted accounting principles using the accrual basis of accounting.
Accordingly, revenues are recognized as earned and expenses are recognized as
incurred.
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.
PRINCIPLES OF COMBINATION
Cornell Plaza Office Building ("Cornell"), Parklane Office Building
("Parklane"), Eden Woods Business Center ("Eden Woods") and NewMarket Shopping
Center ("NewMarket") (individually, a "Property", collectively, the
"Properties") are commercial real estate properties acquired by four separate
joint ventures (the "Joint Ventures") which are owned 60%, 60%, 47.06% and
43.82%, respectively, by NYLIFE Realty Income Partners I, L.P. (the
"Partnership") as of December 31, 1995. The remaining equity interests are held
by New York Life Insurance Company (the "Co-Venturer") an affiliate of NYLIFE
Realty Inc. (the "NYLIFE General Partner"), a co-general partner of the
Partnership. The Properties were acquired on March 30, June 29, August 23, and
December 22, 1988, respectively. Parklane was sold on December 6, 1994. See Note
4 "The Properties" for a further discussion of the sale. The accompanying
combined financial statements include the individual accounts of the Properties,
as all four entities are affiliated under common ownership.
CASH AND CASH EQUIVALENTS
Highly liquid debt instruments (primarily consisting of commercial paper)
purchased with a maturity of three months or less are considered cash
equivalents.
RENTAL INCOME
Rental income is recognized on a straight-line basis over the related lease
terms. Escalation rents and other charges which, pursuant to the terms of the
related leases, have been billed or are billable to tenants, are included in
rental income and are recorded on the accrual basis of accounting.
DEFERRED LEASING COSTS
As an inducement to execute a lease, the Properties may offer incentives
such as rent abatements. These costs and other direct lease costs, such as
leasing commissions, are classified as deferred leasing costs and are amortized
on a straight-line basis over the terms of the related leases. Accumulated
amortization at December 31, 1995 and 1994 was $478,673 and $309,935,
respectively.
INVESTMENT PROPERTY
The buildings are carried at their original cost, including acquisition fees
and expenses plus capital expenditures and improvements since acquisition, less
property value write-downs, and are depreciated over an estimated useful life of
31.5 years on a straight-line basis. Building improvements are recorded at cost
and are depreciated on a straight-line basis over the remaining life of the
building. Tenant improvements are recorded at cost and are amortized over the
terms of the related leases. Expenditures for maintenance and repairs which do
not extend the useful life of the building are expensed.
F-23
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 -- BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cornell, Eden Woods and NewMarket were approximately 97%, 100% and 93%
occupied, respectively, as of December 31, 1995, and 98%, 98% and 96% occupied,
respectively as of December 31, 1994. Parklane was sold on December 6, 1994. See
Note 4 "The Properties" for a further discussion of the sale.
The Joint Venture's investments in the Properties are carried at the lower
of depreciated historical cost or estimated net realizable value. The Joint
Ventures periodically review their investments for declines in net realizable
values, to amounts below recorded balances based upon their present investment
strategies. Future changes and other circumstances may affect estimates of net
realizable values and therefore the carrying amount of investments (see Note 6).
INCOME TAXES
No provision for income taxes is made in the accompanying combined financial
statements since these taxes are the responsibility of the individual partners
rather than the Joint Ventures.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
NOTE 2 -- MINIMUM RENT PAYMENTS
Future minimum rental income to be received from non-cancellable operating
leases as of December 31, 1995 for the Joint Ventures is as follows:
<TABLE>
<S> <C>
1996.......................................... 2,594,600
1997.......................................... 2,380,277
1998.......................................... 2,082,463
1999.......................................... 1,721,142
2000.......................................... 1,159,530
Thereafter.................................... 3,001,737
-----------
$12,939,749
-----------
-----------
</TABLE>
Base rent in 1995, 1994 and 1993 was $2,703,146, $3,875,542 and $3,492,005
excluding escalations, respectively.
Generally, lease terms are for 3 to 5 years and allow for increases in
certain property operating expenses to be passed through to the tenants.
NOTE 3 -- RELATED PARTY TRANSACTIONS
Property management fees of $138,660, $171,972 and $175,000 were paid by the
Properties to Greystone Realty Corporation ("Greystone") during 1995, 1994 and
1993, respectively. Greystone is an affiliate of the Co-Venturer and provides
property management services to the Joint Ventures.
NOTE 4 -- THE PROPERTIES
The terms of the Partnership Formation Agreement, dated June 10, 1987,
provide that all Joint Venture income, losses and distributions generally will
be apportioned pro-rata among the Partnership and the Co-Venturer in proportion
to their respective contributions (exclusive of the Partnership's contribution
for Acquisition Fees). At December 31, 1995 and 1994, the Partners' equity
F-24
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 -- THE PROPERTIES (CONTINUED)
and ownership interests in each of the Joint Ventures are as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------ ------------------------------------------------
THE CO-VENTURER THE PARTNERSHIP THE CO-VENTURER THE PARTNERSHIP
JOINT PROPERTY ----------------------- ----------------------- ----------------------- -----------------------
VENTURE NAME EQUITY INTEREST EQUITY INTEREST EQUITY INTEREST EQUITY INTEREST
- --------- ------------ ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
A Cornell $3,185,096 40% $4,905,324 60% $3,319,279 40% $5,106,600 60%
(1) B Parklane $ -- 40% $ -- 60% $2,114,011 40% $3,300,349 60%
C Eden Woods $5,312,239 52.94% $4,664,242 47.06% $5,442,857 52.94% $4,774,309 47.06%
D NewMarket $5,505,369 56.18% $3,451,985 43.82% $5,770,248 56.18% $3,639,021 43.82%
</TABLE>
At December 31, 1995 and 1994, the aggregate carrying values and the
appraised values of the Properties are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------------- ---------------------------------------------------
INVESTMENT ACCUMULATED CARRYING APPRAISED INVESTMENT ACCUMULATED CARRYING APPRAISED
PROPERTY PROPERTY DEPRECIATION VALUE VALUE PROPERTY DEPRECIATION VALUE VALUE
- --------------- ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cornell........ $10,969,645 $(3,202,942) $ 7,766,703 $ 7,200,000 $10,633,427 $(2,679,966) $ 7,953,461 $ 6,500,000
Eden Woods..... 12,148,109 (2,802,780) 9,345,329 9,200,000 11,934,454 (2,306,443) 9,628,011 8,100,000
NewMarket...... 11,440,658 (2,903,364) 8,537,294 8,000,000 11,433,637 (2,454,469) 8,979,168 7,200,000
----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
$34,558,412 $(8,909,086) $25,649,326 $24,400,000 $34,001,518 $(7,440,878) $26,560,640 $21,800,000
----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
</TABLE>
- ------------------------
(1) As discussed below, Parklane was sold on December 6, 1994.
CORNELL
Occupancy at Cornell decreased from 98% to 97% during 1995.
During 1995 and 1994, various leasing and capital improvement costs were
incurred as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 21,663 $ 274,378
----------- -----------
----------- -----------
Building improvements............................................... $ 314,554 $ 21,024
----------- -----------
----------- -----------
Leasing commissions................................................. $ 16,882 $ 69,172
----------- -----------
----------- -----------
Rent concessions.................................................... $ 12,655 $ 1,400
----------- -----------
----------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from Cornell of
$280,761 and $179,043, respectively.
PARKLANE
On December 6, 1994, pursuant to a Purchase and Sale Agreement dated October
7, 1994, Joint Venture B sold Parklane, along with the underlying land and
related improvements, to Principal Mutual Life Insurance Company for $5,600,000
(net of selling costs of $241,203) which represents approximately 127% of its
appraised value of $4,400,000 at November 30, 1993. The carrying amount of
Parklane was $5,064,110 and accordingly Joint Venture B recognized a gain of
$294,687 on the transaction. It was determined that under current market
conditions and considering the departure of South Central Bell, whose 69,302 sq.
ft. occupancy comprises approximately 64% of Parklane's net rentable space, the
sale of Parklane would provide more value than utilizing the cash reserve to re-
tenant the building. At the time of the sale the cash reserve balance was
$1,519,570. During 1995 and 1994, the Partnership received distributions from
Parklane of $3,301,334 and $915,124, respectively.
F-25
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 -- THE PROPERTIES (CONTINUED)
EDEN WOODS
Occupancy at Eden Woods increased from 98% to 100% during 1995.
During 1995 and 1994 various leasing and capital improvement costs were
incurred as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 213,655 $ 273,914
----------- -----------
----------- -----------
Leasing commissions................................................. $ 122,270 $ 76,809
----------- -----------
----------- -----------
Rent concessions.................................................... $ 59,060 $ 51,951
----------- -----------
----------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from Eden Woods
of $163,970 and $211,193, respectively.
NEWMARKET
During 1993, substantial structural improvements were made at NewMarket to
accommodate leases with CompUSA to anchor the south end of the center and Media
Play to anchor the north end. Such improvements were funded by cash flow from
operations as well as capital contributions by the Partnership and the
Co-Venturer during 1993 and 1994. Since the Partnership was unable to fund a
portion of its required contribution in 1994, the Co-Venturer increased its
contribution by the amount of the Partnership's shortfall in exchange for an
increased ownership interest in the Joint Venture. During 1994, the Co-Venturer
contributed $155,059 of additional capital and during 1993, the Partnership and
Co-Venturer contributed $459,375 and $1,600,163 of additional capital,
respectively.
Occupancy at NewMarket decreased from 96% to 93% during 1995.
During 1995 and 1994 various leasing and capital improvement costs were
incurred as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Tenant improvements................................................. $ 4,500 $ 115,448
----------- -----------
----------- -----------
Building improvements............................................... $ 2,521 $ 85,632
----------- -----------
----------- -----------
Leasing commissions................................................. $ 0 $ 36,178
----------- -----------
----------- -----------
Rent concessions.................................................... $ 2,454 $ 10,487
----------- -----------
----------- -----------
</TABLE>
During 1995 and 1994, the Partnership received distributions from New Market
of $352,144 and $263,040, respectively.
NOTE 5 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
of financial instruments, whether or not recognized on the accompanying combined
balance sheets, for which it is practical to estimate that value. Management
believes that, due to the short term nature of cash equivalents, the carrying
amounts reported on the combined balance sheets approximate their fair market
value.
NOTE 6 -- ADOPTION OF NEWLY ISSUED PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This
F-26
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6 -- ADOPTION OF NEWLY ISSUED PRONOUNCEMENTS (CONTINUED)
statement requires that long-lived assets to be held and used by an entity be
recognized as impaired whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable, and when impaired to
record an impairment loss to state the asset as its fair value. In addition, the
statement requires that long-lived assets to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. This pronouncement is
effective for fiscal years beginning after December 15, 1995. In management's
opinion, except for the proposed dissolution of the Partnership as more fully
discussed in Note 7, when adopted on January 1, 1996, Statement No. 121 will not
have a material adverse effect on the financial position or results of
operations of the Partnership or the Joint Ventures.
In the event of dissolution, the Joint Ventures would record an adjustment
to state the Properties at their then fair market value. Subsequent increases
and decreases in fair market value would be recorded currently in earnings under
the liquidation method of accounting.
NOTE 7 -- SUBSEQUENT EVENT
Two class action lawsuits were filed against the Co-Venturer and certain
other affiliates of the General Partners in the District Court of Harris County,
Texas on January 11, 1996, styled GRIMSHAWE V. NEW YORK LIFE INSURANCE CO., ET
AL. (No. 96-001188) and SHEA V. NEW YORK LIFE INSURANCE CO., ET AL. (No.
96-001189) alleging misconduct in connection with the original sale of
investment units in various partnerships, including violation of various laws
and regulations and claims of continuing fraudulent conduct. The plaintiffs have
asked for compensatory damages for their lost original investment, plus
interest, costs (including attorneys fees), punitive damages, disgorgement of
any earnings, compensation and benefits received by the defendants as a result
of the alleged actions and other unspecified relief to which plaintiffs may be
entitled. These suits were amended and refiled in a consolidation action in the
United States District Court for the Southern District of Florida (the "Court")
on March 18, 1996. In the federal action, the plaintiffs added Realty and CNP as
defendants and included allegations concerning the Partnership. The plaintiffs
purport to represent a class of all persons (the "Class") who purchased or
otherwise assumed rights and title to interests in certain limited partnerships,
including the Partnership, and other programs created, sponsored, marketed,
sold, operated or managed by the defendants (the "Proprietary Partnerships").
The Partnership is not a defendant in the litigation.
The defendants expressly deny any wrongdoing alleged in the complaint and
concede no liability or wrongdoing in connection with the sale of the Units or
the structure of the Proprietary Partnerships. Nevertheless, to reduce the
burden of protracted litigation, the defendants have entered into a Stipulation
of Settlement ("Settlement Agreement") with the plaintiffs because in their
opinion such Settlement would (i) provide substantial benefits to the Class in a
manner consistent with New York Life's position that it had previously
determined to wind up most of the Proprietary Partnerships, including the
Partnership, through orderly liquidation as the continuation of the business no
longer serves the intended objectives of either the owners of interests in such
Proprietary Partnerships or the defendants and to offer the investors an
enhancement to the liquidating distribution they would otherwise receive and
(ii) provide an opportunity to wind up such partnerships on a schedule favorable
to the Class and resolve the issues raised by the lawsuit.
In coordination with the proposed settlement (the "Settlement"), the General
Partners will solicit consents of the Limited Partners for the dissolution of
the Partnership.
F-27
<PAGE>
CORNELL PLAZA OFFICE BUILDING, PARKLANE OFFICE BUILDING,
EDEN WOODS BUSINESS CENTER AND NEWMARKET SHOPPING CENTER
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 7 -- SUBSEQUENT EVENT (CONTINUED)
Under the terms of the Settlement Agreement, any settling Limited Partners
will receive at least a complete return of their original investment, less
distributions received prior to the final settlement date, in exchange for a
release of any and all claims a Limited Partner may have against the defendants
in connection with the Proprietary Partnerships, including the Partnership, and
all activities related to the dissolution and liquidation of such partnerships.
Payments under the Settlement Agreement will be made by NYLIFE Realty, as paying
agent for NYLIFE Inc., directly to each Settling Limited Partner, who will grant
NYLIFE Realty a security interest in such Settling Limited Partner's Units and
liquidating distributions received from the Partnership to secure repayment of a
portion of such settlement payments.
Preliminary approval of the Settlement Agreement was given by the Court on
March 19, 1996. The Settlement Agreement is further conditioned upon final
approval by the Court as well as certain other conditions and is subject to
certain rights of termination detailed in the consent solicitation material
being mailed to the Limited Partners.
If the necessary consents of Limited Partners for dissolution are obtained,
the Partnership will be dissolved even if all necessary approvals for the
Settlement Agreement are not obtained or the Settlement Agreement is otherwise
terminated. In general, upon the dissolution of the Partnership, negative tax
consequences may accrue to the partners. Recent appraisals (Note 4) indicate
that the fair market value of the Properties is less than their carrying
amounts. If the Properties are sold, proceeds from such sales may be less than
these carrying amounts or the recent appraisal amounts.
The combined financial statements do not include any adjustments that might
result should the Limited Partners vote to liquidate the Partnership.
F-28
