<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number 0-18148
DEAN WITTER REALTY YIELD PLUS, L.P.
---------------------------------------------------------------
(Exact name of registrant as specified in governing instrument)
Delaware 13-3426531
- ----------------------- ---------------------------------
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None 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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I.
ITEM 1. BUSINESS
The Registrant, Dean Witter Realty Yield Plus, L.P. (the "Partnership"), is a
limited partnership organized in January 1987 under the Uniform Limited
Partnership Act of the State of Delaware for the purpose of investing in
income-producing properties.
The Managing General Partner of the Partnership is Dean Witter Realty Yield Plus
Inc. (the "Managing General Partner"), a Delaware corporation which is
wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General
Partner is Dean Witter Realty Yield Plus Associates, L.P. (the "Associate
General Partner"), a Delaware limited partnership, the general partner of which
is the Managing General Partner. The Managing General Partner manages and
controls all aspects of the business of the Partnership. The terms of
transactions between the Partnership and its affiliates are set forth in the
consolidated financial statements in Item 8 and in Item 13 below.
The Partnership issued 8,909,969 units of limited partnership interest (the
"Units") for $178,199,380. The offering has been terminated and no additional
Units will be sold.
The proceeds from the offering were used to make investments in six
participating mortgage loans and land leases secured by interests in real
property. Additionally, proceeds were used to make an investment in a short-term
loan secured by eleven partnership interests. The Partnership subsequently
acquired equity interests in the real estate securing all of the loans through
foreclosure or through transfers of ownership in lieu of foreclosure. All
property interests but three were sold to unaffiliated purchasers or lost
through foreclosure prior to December 31, 1998. The Partnership's remaining
property interests are described in Item 2 below.
The Partnership's remaining property interests currently are being marketed for
sale, with the objective of completing sales of such interests during 1999.
There can be no assurance that these interests will be sold.
<PAGE>
The Partnership considers its business to include one industry segment,
investment in real property. Financial information regarding the Partnership is
in the Partnership's financial statements in Item 8 below. The Partnership's
real property investments are subject to competition from similar types of
properties in the vicinities in which they are located. Further information
regarding competition and market conditions where the Partnership's properties
are located is set forth in Item 7 below.
The Partnership has no employees.
All of the Partnership's business is conducted in the United States.
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade Center, New
York, New York 10048. The Partnership has no other offices.
As of December 31, 1998, the Partnership owned the following interests in real
estate. Generally, the leases pertaining to the properties provide for
pass-throughs to the tenants of their pro-rata share of certain operating
expenses. In the opinion of the Managing General Partner, all of the properties
are adequately covered by insurance.
<PAGE>
<TABLE>
<CAPTION>
Date of Initial Net Rentable Type of
Property, Completion/ Investment2 Area Ownership of
Location and Type Acquisition1 ($000) (000 sq. ft.) Land & improvements
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deptford Crossing 1991/1992 $18,291 200 100% through interests
Deptford, NJ in general partnerships
shopping center and corporations.
One Congress Street3 1990,91/1997 $19,500 office-246 58% general partner-
Boston, MA retail-37 ship interest.4
office building and
garage
Military Crossing N/A/1994 $300 .6 acres 100% through interests
Norfolk, VA in general partnerships
unimproved land and corporations.
</TABLE>
- ------
1. Acquisition date is date of foreclosure or in-substance foreclosure.
2. The lower of estimated fair value of property or net carrying value of
loan at acquisition date.
3. Property is subject to a mortgage loan. In 1997, the Partnership acquired
an equity interest in the property. See Note 6 to the consolidated
financial statements.
4. Dean Witter Realty Yield Plus II, L.P., an affiliate, owns the remaining
42% general partnership interest. The total net carrying value of the
general partnership interest at the acquisition date was approximately
$33.4 million.
In 1998, the Partnership sold the 401 East Ontario Street residential building,
located in Chicago, Illinois, and the unimproved land (known as Pine Ridge) in
Flint, Michigan. Also, in 1998, the Michelson joint venture (which is owned
50.81% by the Partnership and 49.19% by Dean Witter Realty Yield Plus II, L.P.,
an affiliate) sold its three office buildings, located in Irvine, California.
Each property, except the unimproved land, was built with on-site parking
facilities.
An affiliate of Realty was the property manager for the Michelson and Deptford
Crossing properties in 1998.
Further information relating to the Partnership's properties is included in Item
7 and Notes 4, 5, 6, 7 and 8 to the consolidated financial statements in Item 8
below.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On December 27, 1995, a purported class action lawsuit (the "Grigsby Action")
naming various public real estate partnerships sponsored by Realty (including
the Partnership and its Managing General Partner and Associate General Partner),
Realty, Dean Witter Reynolds Inc. ("DWR") and others as defendants was filed in
Superior Court in California. The complaint alleged fraud, negligent
misrepresentation, intentional and negligent breach of fiduciary duty, unjust
enrichment and related claims and sought compensatory and punitive damages in
unspecified amounts and injunctive and other equitable relief. The defendants
removed the case to the United States District Court for the Southern District
of California. Pursuant to an order of the U.S. District Court for the Southern
District of California entered May 24, 1996, the Grigsby Action was transferred
to the U.S. District Court for the Southern District of New York.
On February 14, 1996, a purported class action lawsuit (the "Schectman Action")
naming various public real estate partnerships sponsored by Realty (including
the Partnership and its Managing General Partner), Realty, Dean Witter, Discover
& Co. (now known as Morgan Stanley Dean Witter & Co., "MWD") and DWR as
defendants was filed in the Chancery Court of Delaware for New Castle County
(the "Delaware Chancery Court"). On February 23, 1996, a purported class action
lawsuit (the "Dosky Action") naming various public real estate partnerships
sponsored by Realty (including the Partnership and its Managing General
Partner), Realty, MWD, DWR and others as defendants was filed in the Delaware
Chancery Court. On February 29, 1996, a purported class action lawsuit (the
"Segal Action") naming various public real estate partnerships sponsored by
Realty (including the Partnership and its Managing General Partner), Realty,
DWR, MWD and others as defendants was filed in the Delaware Chancery Court. On
March 13, 1996, a purported class action lawsuit (the "Young Action") naming the
Partnership, other unidentified limited partnerships, MWD, DWR and others as
defendants was filed in the Circuit Court for Baltimore City in Baltimore,
Maryland. The defendants removed the Young Action to the United States District
Court for the District of Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal Action were
consolidated in a single action (the "Consolidated Action") in the Delaware
Chancery Court. The Young Action was dismissed without prejudice. The plaintiffs
in the Young Action and the Grigsby Action
<PAGE>
joined the Consolidated Action. The Grigsby Action remains stayed indefinitely
subject to being reopened for good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a First
Consolidated and Amended Class Action Complaint naming various public real
estate partnerships sponsored by Realty (including the Partnership and its
Managing General Partner), Realty, MWD, DWR and others as defendants. This
complaint alleges breach of fiduciary duty and seeks an accounting of profits,
compensatory damages in an unspecified amount, possible liquidation of the
Partnership under a receiver's supervision and other equitable relief. The
defendants filed a motion to dismiss this complaint on December 10, 1996.
On July 17, 1998, the Delaware Chancery Court granted the defendants' motion to
dismiss the complaint in the Consolidated Action. The plaintiffs filed a notice
of appeal from the Chancery Court's order on August 14, 1998. Oral argument on
the appeal was heard by the Delaware Supreme Court on January 5, 1999. The
Delaware Supreme Court affirmed the Chancery Court's dismissal of the
Consolidated Action on January 6,1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote
of Unit holders.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
An established public trading market for the Units does not exist, and it is not
anticipated that such a market will develop in the future. Accordingly,
information as to the market value of a Unit at any given date is not available.
However, the Partnership does allow its limited partners (the "Limited
Partners") to transfer their Units, if a suitable buyer can be located.
As of February 28, 1999, there were 14,971 holders of limited partnership
interests.
<PAGE>
The Partnership is a limited partnership and, accordingly, does not pay
dividends. It does, however, make distributions of cash to its partners.
Pursuant to the Partnership Agreement, distributable cash, as defined, is paid
90% to the Limited Partners and 10% to the general partners (the "General
Partners"). Pursuant to the Partnership Agreement, $1,239,345 of the General
Partner's share of such net cash flow distributable to them through December 31,
1990, was deferred subject to receipt by the Limited Partners of an 8% annual
return on their invested capital through that date.
During the year ended December 31, 1998, the Partnership paid cash distributions
aggregating $10.97 per Unit (including approximately $10.58 per Unit from
proceeds from the sales of the Michelson and 401 East Ontario properties, which
were paid 100% to the Limited Partners). The total distributions amounted to
$98,173,009, with $97,777,999 distributed to the Limited Partners and $395,010
distributed to the General Partners. During the year ended December 31, 1997,
the Partnership paid cash distributions aggregating $1.71 per Unit (including a
distribution of approximately $1.19 from proceeds from the sale of the Greenway
Pointe property, which was paid 100% to the Limited Partners.). Total
distributions were $15,750,550, with $15,235,751 distributed to the Limited
Partners and $514,799 to the General Partners.
The Partnership has not made a regular distribution of distributable cash since
the 1998 first quarter distribution (paid in April) and does not anticipate
making regular distributions to its partners in the future. Generally, future
cash distributions will be paid from proceeds received from the sales of the One
Congress Street and Deptford Crossing properties and cash reserves.
Sale or financing proceeds will be distributed, to the extent available: first,
97% to the Limited Partners and 3% to the General Partners until the Limited
Partners receive a return of their invested capital plus an amount sufficient to
provide a 10% cumulative annual return thereon; second, 100% to the General
Partners until they have received the amount of any net cash flow previously
deferred and not distributed; and third, 85% to the Limited Partners and 15% to
the General Partners.
Taxable income generally will be allocated to the partners in proportion to the
distribution of distributable cash or sale or financing proceeds, as the case
may be (or 90% to the Limited Partners and 10% to the General
<PAGE>
Partners if there is no distributable cash or sale or financing proceeds). At a
minimum, the General Partners must be allocated at least 1% of the taxable
income from a sale or financing. Tax losses, if any, will be allocated 90% to
the Limited Partners and 10% to the General Partners.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the
Partnership:
DEAN WITTER REALTY YIELD PLUS, L.P.
<TABLE>
<CAPTION>
For the years ended December 31, 1998, 1997, 1996, 1995 and 1994
19981 19972 19963 19954 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 74,796,181 $ 24,706,819 $ 20,071,013 $ 34,399,506 $ 29,051,935
Income (loss)
before extra-
ordinary item $ 57,364,812 $ 6,322,426 $ (1,785,073) $ 1,343,582 $ 4,024,6465
Extraordinary item $ -- $ 548,3956 $ -- $ -- $ 626,3757
Net income (loss) $ 57,364,812 $ 6,870,821 $ (1,785,073) $ 1,343,582 $ 4,651,0215
Per Unit of
limited
partnership
interest:
Income (loss)
before extra-
ordinary item $ 6.39 $ .69 $ (.18) $ .17 $ .41
Extraordinary
item $ -- $ .06 $ -- $ -- $ .06
Net income
(loss) $ 6.39 $ .75 $ (.18) $ .17 $ .47
Cash distribution
paid per Unit
of limited
partnership
interest8 $ 10.979 $ 1.7110 $ 1.2611 $ .60 $ .60
Total assets at
December 31 $ 35,082,602 $ 107,962,275 $ 126,752,827 $ 141,753,976 $ 195,810,917
Long-term debt due
after one year $ -- $ 10,566,268 $ -- $ 19,823,736 $ 66,887,850
</TABLE>
1. Total revenues include gains on the sales of the Michelson property ($25.2
million), the 401 East Ontario property ($39.8 million) and the Pine Ridge
land ($0.4 million). Net income includes these gains, reduced by the
minority interest share of the gain on Michelson ($12.7 million).
<PAGE>
2. Total revenues, income before extraordinary item and net income include
reserves of $1.6 million of accrued but unpaid interest on the One
Congress Street participating mortgage loan, and $5.2 million gain on sale
of the Greenway Pointe property.
3. Total revenues and net loss include reserves of $0.7 million of accrued
but unpaid interest on the One Congress Street participating mortgage
loan, and net loss also includes a $1.0 million impairment loss on
principal of the One Congress Street participating mortgage loan.
4. Total revenues and net income include a $3.3 million gain on sale of three
shopping centers and net income is net of a $6.9 million loss on
impairment of real estate.
5. Income before extraordinary item and net income are net of a $1.7 million
impairment loss on the principal of the One Congress Street participating
mortgage loan.
6. Represents gain on extinguishment of debt through foreclosure.
7. Represents gain on refinancing of debt.
8. Distributions paid to Limited Partners for the year ended December 31,
1998 included a return of capital of $7.14 per Unit, calculated as the
excess of cash distributed per Unit over accumulated earnings per Unit not
previously distributed. All distributions paid to Limited Partners in 1994
- 1997 represent returns of capital.
9. Includes approximately $10.58 per Unit of proceeds from the sales of the
Michelson and 401 East Ontario properties.
10. Includes approximately $1.19 per Unit of proceeds from sale of the
Greenway Pointe property.
11. Includes approximately $0.72 per Unit of proceeds from the December 1995
sale of three shopping centers.
The above financial data should be read in conjunction with the consolidated
financial statements and the related notes in Item 8.
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Partnership completed a $178,199,380 public offering in 1987. The
Partnership has no plans to raise additional capital.
The Partnership originally invested in seven loans or land leases. Due to the
past weakness in real estate markets, the properties securing the loans did not
generate sufficient cash flow to fully service their debt. As a result, the
Partnership acquired equity interests in all of the properties in which it
originally invested, through foreclosure or transfers of ownership in lieu of
foreclosure. No additional investments are planned.
In November 1997, the Partnership sold the Greenway Pointe property, and, in
August 1997, the Partnerhsip lost the Genessee Crossing property through
foreclosure by the lender of the first mortgage loan secured by the property.
The Michelson, 401 East Ontario Street and Pine Ridge properties were sold in
April 1998, July 1998 and November 1998, respectively. See Note 5 to the
consolidated financial statements.
As a result of the sales and loss of properties in 1997 and 1998, Partnership
cash flow from operations decreased during the year ended December 31, 1998
compared to 1997.
The Managing General Partner is currently marketing for sale the Deptford
Crossing property and the unimproved land. The partnership which owns the One
Congress Street property ("GCGA") began to market its property for sale during
the fourth quarter of 1998. There can be no assurance that these properties will
be sold.
The Partnership will not dissolve until the litigation with respect to the 401
East Ontario property, described in Note 4 to the consolidated financial
statements, is resolved.
The retail market in Deptford, New Jersey, the location of Deptford Crossing,
currently has a vacancy rate of 5%. During 1998, average
<PAGE>
occupancy at the property was 79%, and, at December 31, 1998, occupancy was 81%
as compared to 77% at the prior year-end. Tenants occupying 10% or more of the
property's space include T.J. Maxx (16%), Marshalls (14%), Office Max (13%) and
Petsmart (10%); their leases expire in 2001, 2002, 2002 and 2003, respectively.
The property is leased to eleven other tenants. No significant amount of leases
expire before 2001.
Currently, the vacancy rate in the downtown Boston office market, the location
of One Congress Street, is approximately 7% and rental rates in this market are
stable. There is no significant new construction in this market. In 1998, GCGA
and the Government Services Administration ("GSA") amended their lease to
increase office space at the property from 70% to 82% starting October 1998. The
GSA lease, as amended, is scheduled to expire no earlier than August 1, 2003.
Also, in 1998, the remaining vacant office space at the property was leased to
the Commonwealth of Massachusetts for a five year period beginning in January
1999. The lease for 100% of the parking lot space at the property with Kinney
Systems, Inc. expires in 2003. GSA also leased a small portion of retail space
in 1998. However, the retail space, which is not a significant portion of the
overall space, remained substantially vacant.
As part of the amended lease between GCGA and GSA, GCGA will fund tenant
improvements of up to $2,580,000; $1,300,000 of this amount (plus interest at
8%) will be repaid by GSA in monthly installments over five years. In addition,
GCGA is required to fund leasing commissions of up to $1,409,000. The maximum
amount of the Partnership's share of the above-mentioned tenant-related
expenditures (58%) is approximately $2,315,000 (of which $754,000 would be
repaid by GSA, as described above). The Partnership has paid approximately
$1,306,000 of the expenditures through December 31, 1998.
As of December 31, 1998, the Partnership is also required to fund approximately
$300,000, its share of the remaining costs of tenant improvements and leasing
commissions per the new lease between the Commonwealth of Massachusetts and
GCGA.
During the year ended December 31, 1998, all of the Partnership's remaining
property interests generated positive cash flow from operations, and it is
anticipated that the Deptford Crossing and One Congress Street properties will
continue to do so in 1999.
<PAGE>
During the year ended December 31, 1998, the Partnership incurred capital costs
of approximately $657,000, primarily for tenant-related capital expenditures at
the Michelson (net of contributions by the minority interest) and Deptford
Crossing properties.
In July 1998, the Partnership used approximately $10.6 million of the proceeds
it received from the sale of the 401 East Ontario Street property to repay its
mortgage note payable (see Note 7 to the consolidated financial statements).
During the year ended December 31, 1998, the Partnership made cash distributions
of cash flow from operations and proceeds from sales of properties. See Item 5.
During the year ended December 31, 1998, distributions to investors (excluding
the distribution of sale proceeds), capital expenditures, contributions to GCGA
and distributions to the minority interest (excluding the distribution of sale
proceeds) exceeded cash flow from operations of real estate (net of minority
interest share), distributions from GCGA and contributions from the minority
interest. This deficiency was funded with Partnership cash reserves.
In addition to its commitment to contribute funds to GCGA in 1999, the
Partnership had a commitment to fund $125,000 of capital expenditures at the
Deptford Crossing property as of December 31, 1998.
The Managing General Partner believed that the Partnership did not have
sufficient cash reserves to fully fund its potential liability for its share of
capital expenditures and leasing commissions at the One Congress Street property
and other Partnership cash requirements. Therefore, in order to increase cash
reserves, the Partnership stopped paying its quarterly cash distributions after
the 1998 first quarter distribution was paid in April 1998, and withheld
approximately $900,000 from the distribution of proceeds from the sale of the
401 East Ontario Street property to Limited Partners. Also, the Partnership did
not distribute any of the net sales proceeds (approximately $515,000) from the
sale of the Pine Ridge land parcel. Generally, future cash distributions will be
paid from proceeds received from the sales of the Deptford Crossing and One
Congress Street properties and cash reserves.
<PAGE>
Net deferred expenses, other assets and accounts payable and other liabilities
decreased in 1998 primarily as a result of the sales of the Michelson and 401
East Ontario Street properties.
Except as discussed above and in the consolidated financial statements, the
Managing General Partner is not aware of any trends or events, commitments or
uncertainties that may have a material impact on liquidity.
Operations
Fluctuations in the Partnership's operating results for the year ended December
31, 1998 compared to 1997 and 1997 compared to 1996 are primarily attributable
to the following:
Rental revenues, property operating expenses, depreciation and amortization
expenses, and general and administrative expenses decreased in 1998 compared to
1997 as a result of the sales of the Greenway Pointe, Michelson and 401 East
Ontario Street properties and the loss through foreclosure of the Genesee
Crossing property.
The 1998 decrease in rental revenue was partially offset by an increase in
rental revenue at the 401 East Ontario Street property in the months preceding
its sale. This increase resulted from higher occupancy and rental rates at the
property in 1998 and the discontinuance of rental concessions and free rent. In
1997, rental revenue at the 401 East Ontario Street property increased as
compared to 1996 by approximately $932,000 because of the discontinuance of
rental concessions and free rent granted to tenants while repairs were being
performed at the property, and because rental rates for certain apartment types
at the property were raised during the year. The increased rental revenue at 401
East Ontario Street was partially offset by the loss of approximately $599,000
of rental income from the Genessee Crossing Shopping Center after it was
foreclosed upon in August 1997.
In 1998, the gains on sales of real estate resulted from the sales of the
Michelson, 401 East Ontario Street and Pine Ridge properties in April, July and
November, respectively. In 1997, the gain on sale of real estate resulted from
the sale of the Greenway Pointe property in November.
Because the Partnership began recognizing its share of income from the GCGA
property using the equity method of accounting as of October 27, 1997
<PAGE>
(see Note 6 to the consolidated financial statements), equity in earnings of
unconsolidated partnership increased in 1998 compared to 1997, and no interest
was recorded on the participating mortgage loan to GCGA in 1998. Interest on
this loan decreased in 1997 compared to 1996 because $1,560,000 of reserves of
uncollected interest was recognized from January 1, 1997 to October 27, 1997
(when the Partnership obtained control of the property) compared to $660,000 in
1996.
In 1998, interest on cash and cash equivalents increased because interest earned
on the proceeds from the 1998 property sales (before such proceeds were
distributed to Limited Partners) exceeded interest earned on sales proceeds in
1997. Interest income on cash and cash equivalents decreased in 1997 compared to
1996 because the Partnership funded a significant portion of capital
expenditures and the repairs at the 401 East Ontario Street property from cash
reserves and, accordingly, had less cash available for investment in 1997.
Property operating expenses also decreased in 1998 at the 401 East Ontario
Street property due to the absence of expenditures for repairs (such costs
totaled $2,750,000 in 1997) and due to the 1998 receipt of a $1.2 million
settlement for litigation concerning repairs made at the property during 1995
through 1997 (see Note 4 to the consolidated financial statements). Property
operating expenses decreased in 1997 compared to 1996 primarily because
expenditures for the above-described repairs at 401 East Ontario Street were
approximately $2,750,000 in 1997, compared to $4,850,000 in 1996. This decrease
was partially offset by an increase in real estate taxes at the Michelson
property in 1997 caused by the absence of real estate tax refunds (the
Partnership received $508,000 of such refunds in 1996).
Interest expense decreased in 1998 compared to 1997 due to the extinguishment
through foreclosure of the debt secured by the Genesee Crossing property in 1997
and the repayment of the debt secured by the 401 East Ontario property in 1998.
Interest expense decreased by $314,000 in 1997 compared to 1996 because of the
foreclosure on the Genessee Crossing shopping center in August 1997. This
decrease was partially offset by an increase in the interest rate on the
Deptford Crossing mortgage loan between the September 15, 1997 maturity date of
the note and the December 30, 1997 repayment of the note.
<PAGE>
General and administrative expenses decreased in 1997 compared to 1996 primarily
due to additional costs incurred during the first quarter of 1996 related to the
December 1995 sale of three shopping centers.
The extraordinary gain in 1997 resulted from the extinguishment of the mortgage
note payable secured by the Genesee Crossing property.
There were no other individually significant factors which caused changes
to revenues or expenses.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect on the
operations of the Partnership or its properties.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
DEAN WITTER REALTY YIELD PLUS, L.P.
INDEX
(a) Financial statements
Page
----
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1998 and 1997 Consolidated
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Partners' Capital for the years
ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(b) Financial statement schedule
Real Estate and Accumulated Depreciation III
- ----------
All schedules other than those indicated above have been omitted because either
the required information is not applicable or the information is shown in the
consolidated financial statements or notes thereto.
<PAGE>
Independent Auditors' Report
The Partners
Dean Witter Realty Yield Plus, L.P.:
We have audited the accompanying consolidated balance sheets of Dean Witter
Realty Yield Plus, L.P. and consolidated partnerships (the "Partnership") as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, partners' capital and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included financial statement
schedule III. These financial statements and the financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dean Witter Realty Yield Plus, L.P.
as of December 31, 1998 and 1997, and the results of its operations and cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. Also, in our opinion,
financial statement schedule III, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
Deloitte & Touche LLP
/s/Deloitte & Touche LLP
New York, New York
March 18, 1999
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate:
Land $ 2,070,000 $ 6,267,858
Buildings and improvements 10,580,047 44,072,371
- ------------------------------------------------------------------------------------
12,650,047 50,340,229
Accumulated depreciation 1,954,876 5,847,422
- ------------------------------------------------------------------------------------
10,695,171 44,492,807
Real estate held for sale -- 36,896,371
Investment in unconsolidated partnership 19,471,311 19,721,195
Cash and cash equivalents 4,555,260 4,584,786
Deferred expenses, net 157,127 882,731
Other assets 203,733 1,384,385
- ------------------------------------------------------------------------------------
$ 35,082,602 $ 107,962,275
====================================================================================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 382,432 $ 3,343,047
Mortgage notes payable -- 10,566,268
Minority interest -- 18,544,593
- ------------------------------------------------------------------------------------
382,432 32,453,908
- ------------------------------------------------------------------------------------
Partners' capital (deficiency):
General partners (7,405,208) (7,472,965)
Limited partners ($20 per Unit, 8,909,969 issued
and outstanding) 42,105,378 82,981,332
- ------------------------------------------------------------------------------------
Total partners' capital 34,700,170 75,508,367
- ------------------------------------------------------------------------------------
$ 35,082,602 $ 107,962,275
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years and December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Rental $ 8,003,462 $ 17,559,416 $ 17,014,283
Gains on sales of real estate 65,403,728 5,242,166 --
Equity in earnings of unconsolidated partnership 462,869 264,862 --
Interest on participating mortgage loan -- 697,153 2,098,555
Interest on cash and cash equivalents 449,572 178,585 476,051
Other 476,550 764,637 482,124
- ------------------------------------------------------------------------------------------------------------
74,796,181 24,706,819 20,071,013
- ------------------------------------------------------------------------------------------------------------
Expenses:
Property operating 2,492,122 11,241,228 13,009,606
Depreciation 748,020 3,673,145 3,918,119
Amortization 99,006 385,386 411,090
Interest 404,509 1,476,954 1,594,580
General and administrative 468,674 673,852 996,930
Losses on impairment of participating mortgage loan -- -- 979,000
- ------------------------------------------------------------------------------------------------------------
4,212,331 17,450,565 20,909,325
- ------------------------------------------------------------------------------------------------------------
Income (loss) before minority interests
and extraordinary item 70,583,850 7,256,254 (838,312)
Minority interests 13,219,038 933,828 946,761
- ------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 57,364,812 6,322,426 (1,785,073)
Extraordinary item:
Gain on extinguishment of debt through foreclosure -- 548,395 --
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 57,364,812 $ 6,870,821 $ (1,785,073)
============================================================================================================
Net income (loss) allocated to:
Limited partners $ 56,902,045 $ 6,707,955 $ (1,606,566)
General partners 462,767 162,866 (178,507)
- ------------------------------------------------------------------------------------------------------------
$ 57,364,812 $ 6,870,821 $ (1,785,073)
============================================================================================================
Per Unit of limited partnership interest:
Income (loss) before extraordinary item $ 6.39 $ .69 $ (.18)
Extraordinary item -- .06 --
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 6.39 $ .75 $ (.18)
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Partners' Capital
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1996 $ 104,341,939 $ (6,407,938) $ 97,934,001
Net loss (1,606,566) (178,507) (1,785,073)
Cash distributions (11,226,245) (534,587) (11,760,832)
- --------------------------------------------------------------------------------
Partners' capital (deficiency)
at December 31, 1996 91,509,128 (7,121,032) 84,388,096
Net income 6,707,955 162,866 6,870,821
Cash distributions (15,235,751) (514,799) (15,750,550)
- --------------------------------------------------------------------------------
Partners' capital (deficiency)
at December 31, 1997 82,981,332 (7,472,965) 75,508,367
Net income 56,902,045 462,767 57,364,812
Cash distribution (97,777,999) (395,010) (98,173,009)
- --------------------------------------------------------------------------------
Partners' capital (deficiency)
at December 31, 1998 $ 42,105,378 $ (7,405,208) $ 34,700,170
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 57,364,812 $ 6,870,821 $ (1,785,073)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gains on sales of real estate (65,403,728) (5,242,166) --
Depreciation and amortization 847,026 4,058,531 4,329,209
Minority interests in earnings of consolidated
partnership 13,219,038 933,828 946,761
Gain on extinguishment of debt -- (548,395) --
Equity in earnings of unconsolidated partnership (462,869) (264,862) --
Losses on impairment of participating mortgage loan -- -- 979,000
Increase in deferred expenses (329,546) (379,406) (204,560)
Decrease in other assets 704,121 695,735 454,446
Decrease in accounts payable and other liabilities (2,960,615) (90,608) (777,135)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,978,239 6,033,478 3,942,648
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of real estate, net of closing
costs 137,280,794 10,600,353 --
Additions to real estate (498,404) (856,266) (2,696,891)
Distributions from unconsolidated partnership 2,252,968 -- --
Contributions to unconsolidated partnership (1,540,215) (116,000) --
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 137,495,143 9,628,087 (2,696,891)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Cash distributions (98,173,009) (15,750,550) (11,760,832)
Repayments of mortgage notes payable (10,566,268) (11,136,496) (277,240)
Borrowings under mortgage note payable -- 10,566,268 --
Minority interest in distributions from
consolidated partnerships (31,934,845) (1,884,766) (2,297,113)
Contributions by minority interest to
consolidated partnerships 171,214 329,445 949,483
- -----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (140,502,908) (17,876,099) (13,385,702)
- -----------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (29,526) (2,214,534) (12,139,945)
Cash and cash equivalents at beginning of year 4,584,786 6,799,320 18,939,265
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,555,260 $ 4,584,786 $ 6,799,320
=================================================================================================================
</TABLE>
(continued)
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(continued)
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 404,509 $ 1,476,954 $ 1,594,580
========================================================================================================
Supplemental disclosure of non-cash investing
activities:
Reclassification of real estate held for sale:
Land $ -- $ 4,080,416 $ --
Building and improvements -- 45,012,801 --
Accumulated depreciation -- (12,196,846) --
- --------------------------------------------------------------------------------------------------------
Real estate held for sale $ -- $ 36,896,371 $ --
========================================================================================================
Acquisition of investment in unconsolidated
partnership resulting from restructuring
of participating mortgage loan:
Investment in participating mortgage loan, net $ -- $ 18,995,382 $ --
Deferred costs, net -- 344,951 --
- --------------------------------------------------------------------------------------------------------
Investment in unconsolidated partnership $ -- $ 19,340,333 $ --
========================================================================================================
Supplemental disclosures of non-cash
financing activities:
Extinguishment of debt and loss of real
estate through foreclosure:
Balance due on mortgage note payable $ -- $ 8,590,000 $ --
- --------------------------------------------------------------------------------------------------------
Write-off of real estate:
Land -- (1,709,535) --
Building -- (6,830,465) --
Accumulated depreciation -- 565,640 --
- --------------------------------------------------------------------------------------------------------
-- (7,974,360) --
Decrease in other assets -- (67,245) --
- --------------------------------------------------------------------------------------------------------
Gain on extinguishment of debt due to foreclosure $ -- $ 548,395 $ --
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1. The Partnership
Dean Witter Realty Yield Plus, L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of Delaware in 1987 to invest in
participating mortgage loans collateralized by income-producing properties. The
Managing General Partner of the Partnership is Dean Witter Realty Yield Plus
Inc., which is wholly-owned by Dean Witter Realty Inc. ("Realty").
The Partnership issued 8,909,969 units of limited partnership interests (the
"Units") for $178,199,380. No additional Units will be sold.
The Partnership expects to sell its remaining real estate investments in 1999.
Pursuant to the Partnership Agreement, the sale of the Partnership's last such
investment will cause the dissolution of the Partnership. Thereafter, the
Partnership will wind up its affairs, make a final cash distribution, and
terminate. However, the Partnership will not dissolve until the litigation with
respect to the 401 East Ontario property described in Note 4 is resolved.
2. Summary of Significant Accounting Policies
The financial statements include the accounts of the Partnership, DW Columbia
Gateway Associates, DW Michelson Associates ("DMA"), DW Lakeshore Associates,
Deptford Crossing Associates, DW Community Centers Limited Partnership, DW
Maplewood Inc. and Hampton Crossing Associates (inactive in 1998 and 1997) on a
consolidated basis.
Effective October 27, 1997, the Partnership acquired a 58% general partnership
interest in GCGA Limited Partnership ("GCGA"), the owner/borrower of the One
Congress Street property, and began accounting for this investment using the
equity method. See Note 6.
The Partnership's records are maintained on the accrual basis of accounting for
financial reporting and tax purposes. The preparation of
23
<PAGE>
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.
Real estate and the investment in unconsolidated partnership, all of which were
acquired in settlement of loans, were recorded at the lower of the carrying
value of the original loan or the estimated fair value of the real estate
investment acquired at the date of foreclosure or in-substance foreclosure.
Costs of improvements to real estate are capitalized and repairs are expensed.
Depreciation is recorded on the straight-line method.
Cash and cash equivalents consist of cash and highly liquid investments with
maturities, when purchased, of three months or less.
At least annually, and more often if circumstances dictate, the Partnership
evaluates the recoverability of the net carrying value of its real estate and
any related assets, including the real estate and related assets owned by the
unconsolidated partnership. As part of this evaluation, the Partnership
assesses, among other things, whether there has been a significant decrease in
the market value of any of its properties. If events or circumstances indicate
that the net carrying value of a property may not be recoverable, the expected
future net cash flows from the property are estimated for a period of
approximately five years (or a shorter period if the Partnership expects that
the property may be disposed of sooner), along with estimated sales proceeds at
the end of the period. If the total of these future undiscounted cash flows were
less than the carrying amount of the property, the property would be written
down to its fair value as determined (in some cases with the assistance of
outside real estate consultants) based on discounted cash flows, and a loss on
impairment recognized by a charge to earnings.
The Partnership also periodically evaluated the collectibility of both interest
and principal of the investment it held in the participating mortgage loan to
determine whether it was impaired. The mortgage loan was considered to be
impaired when, based on then-current information and events, it was probable
that the Partnership would be unable to collect all amounts due according to the
existing contractual terms of the loan.
24
<PAGE>
When the mortgage loan was considered to be impaired, the Partnership
established a valuation allowance which was equal to the difference between a)
the carrying value of the loan, and b) the present value of the expected cash
flows from the loan at its effective interest rate, or, for practical purposes,
at the estimated fair value of the real estate collateralizing the loan.
Because the determination of fair value is based upon projections of future
economic events such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates which are inherently subjective, the
amounts ultimately realized at disposition may differ materially from the net
carrying value as of December 31, 1998. The cash flows used to evaluate the
recoverability of the assets and to determine fair value are based on good faith
estimates and assumptions developed by the Managing General Partner.
Unanticipated events and circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from the estimates and the
variances may be material. The Partnership may provide additional write-downs,
which could be material, in subsequent years if real estate markets or local
economic conditions change.
Deferred expenses consist of leasing commissions and, prior to October 27, 1997,
origination fees in connection with the participating mortgage loan. Leasing
commissions are amortized over the applicable lease terms. Origination fees were
amortized over the loan term, which approximated the effective yield method.
Rental income is accrued on a straight-line basis over the terms of the leases.
Accruals in excess of amounts payable by tenants pursuant to their leases
(resulting from rent concessions or rents which periodically increase over the
term of a lease) are recorded as receivables and included in other assets.
Net income (loss) per Unit amounts are calculated by dividing net income (loss)
allocated to Limited Partners, in accordance with the Partnership Agreement, by
the weighted average number of Units outstanding.
No provision for income taxes has been made in the financial statements, since
the liability for such taxes is that of the partners rather than the
Partnership.
25
<PAGE>
The accounting policies used for tax reporting purposes differ from those used
for financial reporting purposes. For tax purposes, the Partnership's
subsidiaries are not consolidated, and properties acquired by the subsidiaries
are not treated as real estate owned by the Partnership. The Partnership
recognizes its share of the subsidiaries' taxable income (which is net of
interest expense on the participating mortgage loans which are still
outstanding). For tax purposes, the Partnership also continues to recognize
taxable interest income on its loans. The policies used by the subsidiaries to
account for property operations for tax reporting purposes differ from those
used by the Partnership for financial reporting purposes as follows: (a)
depreciation is calculated using accelerated methods, (b) rental income is
recognized based on the payment terms in the applicable leases, and (c)
write-downs for impairments of real estate and the participating mortgage loan
are not deductible. In addition, the Partnership's offering costs are treated
differently for tax and financial reporting purposes. The tax basis of the
Partnership's assets and liabilities is approximately $44.5 million higher than
the amounts reported for financial statement purposes at December 31, 1998.
The implementation in 1998 of the Financial Accounting Standards Board Statement
No. 130, "Reporting Comprehensive Income," and Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information," effective for the
Partnership's 1998 year-end financial statements, did not have any impact on the
Partnership's financial statements.
3. Partnership Agreement
The Partnership Agreement provides that net cash flow, as defined, will be paid
90% to the Limited Partners and 10% to the General Partners. Pursuant to the
Agreement, $1,239,345 of the General Partners' share of such net cash flow
distributable to them through December 31, 1990 was deferred, subject to receipt
by the Limited Partners of an 8% annual return on their invested capital.
Sale or financing proceeds will be distributed, to the extent available: first,
97% to the Limited Partners and 3% to the General Partners until the Limited
Partners receive a return of their invested capital plus an amount sufficient to
provide a 10% cumulative annual return thereon; second, 100% to the General
Partners until they have received the amount
26
<PAGE>
of any net cash flow previously deferred and not distributed; and third, 85% to
the Limited Partners and 15% to the General Partners.
Taxable income generally will be allocated to the partners in proportion to the
distribution of distributable cash or sale or financing proceeds, as the case
may be (or 90% to the Limited Partners and 10% to the General Partners if there
is no distributable cash or sale or financing proceeds). At a minimum, the
General Partners must be allocated at least 1% of the taxable income from a sale
or financing. Tax losses, if any, are allocated 90% to the Limited Partners and
10% to the General Partners.
Distributions paid to Limited Partners in 1998 included a return of capital of
$7.14 per Unit, calculated as the excess of cash distributed per Unit over
accumulated earnings per Unit not previously distributed. All distributions paid
to Limited Partners in 1997 and 1996 represent returns of capital.
4. Real Estate
The locations, years of acquisition through foreclosure or in-substance
foreclosure and net carrying values of the Partnership's properties are as
follows:
Year of December 31,
Property Acquisition 1998 1997
- -------------------------------------------------------------------------------
Deptford Crossing, Deptford, NJ 1992 $10,395,171 $10,406,611
Military Crossing (land), Norfolk, VA 1994 300,000 300,000
401 East Ontario Street, Chicago, IL 1992 -- 33,651,449
Pine Ridge (land), Flint, MI 1994 -- 134,747
- -------------------------------------------------------------------------------
$10,695,171 $44,492,807
===============================================================================
The Deptford Crossing property was subject to a first mortgage loan, which was
repaid in December 1997 with funds obtained through a revolving credit facility
secured by the 401 East Ontario Street property. All amounts due under the
revolving credit facility were repaid in July 1998 with a portion of the
proceeds from the sale of the 401 East Ontario Street property (see Note 7).
27
<PAGE>
In February 1995, the Partnership discovered cracks and spalling on certain
portions of the concrete exterior of the 401 East Ontario Street building.
Reports by three independent engineering firms in 1995 confirmed that cracking
and spalling of this nature were highly unusual for a building of this age, and
attributed the problems to both defective design and construction of the
building. Permanent repair work began in 1995 and was completed in 1996. In
1996, the Partnership's costs for this repair work approximated $4.0 million;
total repair costs were approximately $5.7 million. The building's primary
insurance carrier, which denied that these repairs were covered by the
Partnership's policy, paid $125,000 to the Partnership during 1996 in settlement
of this matter.
In 1996, the Partnership discovered that certain of the interior walls of the
building did not meet the City of Chicago's fire code requirements. The
Partnership retained the services of nationally recognized consultants to review
the building's fire and life safety systems and determine how to fix the
problems they identified with those systems. The City of Chicago agreed with the
proposed corrections and the Partnership commenced repair work in 1996. The
Partnership completed such repairs in 1997. The cost of these measures was
approximately $3.6 million, of which approximately $2.75 million and $0.85
million were incurred in 1997 and 1996, respectively. In addition, free rent and
rent concessions were offered to the residents in order to maintain occupancy
during the period in 1997 when repairs were being performed. The building's
insurance carriers were notified of the repairs to the fire and life safety
systems.
The Partnership initiated litigation against all parties it deemed responsible
for defects in the design and construction of the 401 East Ontario Street
building. In March 1998, the Partnership received $1.2 million pursuant to a
settlement with the architect and the engineer of the property. In March 1999,
the Partnership negotiated a $740,000 settlement with the property's testing
agency. The Partnership incurred legal fees of approximately $222,000, $425,000
and $425,000 in 1998, 1997 and 1996, respectively, in connection with the
litigation. The Partnership is continuing its litigation against the general
contractor and others.
5. Disposition of Real Estate
28
<PAGE>
Genessee Crossing
The Partnership's mortgage note payable secured by the Genessee Crossing
shopping center matured in May 1997. The Partnership determined not to refinance
the loan without making an additional equity investment in the property, and
determined that in light of its estimate of the property's market value such an
additional investment would not be in the Partnership's best interest. As a
result, the property was foreclosed upon in August 1997, and in March 1998, the
lender took final possession of the property. Since the amount of the mortgage
note payable ($8,590,000) exceeded the net book value of the property
(approximately $8,040,000), the Partnership recognized an extraordinary gain on
the extinguishment of debt of approximately $550,000 in 1997.
Greenway Pointe, Columbia, Maryland
In November 1997, the Partnership sold the Greenway Pointe property to an
unaffiliated party for a negotiated sale price of $11,050,000. The proceeds from
the sale, net of closing costs, were approximately $10.6 million, and were
distributed 100% to the Limited Partners in December 1997. The Partnership
recognized a gain on this sale of approximately $5.2 million, which was
allocated 100% to Limited Partners in accordance with the Partnership Agreement.
Michelson, Irvine, California
The Michelson property, which consists of three office buildings, is owned by
Michelson Company Limited Partnership (the "Company"). The 90% general partner
of the Company was DMA, a general partnership which is owned 50.81% by the
Partnership and 49.19% by Dean Witter Realty Yield Plus II, L.P. ("Yield Plus
II"), an affiliated partnership. The 10% limited partner of the Company is SC
Enterprises ("SCE"), an affiliate of the property's developer.
In April 1998, DMA sold its 90% general partnership interest in the Company to
SCE along with two promissory notes due from SCE (totaling approximately $1.2
million) for a negotiated aggregate sale price of $64 million. SCE assigned its
right to purchase the interest in the Company to Spieker Properties, L.P., which
is not affiliated with the Partnership, its affiliated partnerships or SCE.
29
<PAGE>
The sale price was received in cash at closing on April 3, 1998. On April 28,
1998, the Partnership distributed approximately $32.4 million ($3.635 per Unit),
its share of the proceeds from the sale (net of closing costs), 100% to the
Limited Partners. DMA recognized a gain on sale of this property of $25.2
million. The Partnership's share of this gain was approximately $12.6 million;
such gain was allocated 100% to the Limited Partners in accordance with the
Partnership Agreement.
On December 31, 1997, the Partnership reclassified the net carrying value of the
Michelson property to real estate held for sale.
401 East Ontario Street
In July 1998, the Partnership sold the 401 East Ontario Street property to
Streeterville Development Associates, LLC ("SDA") for a negotiated sale price of
$74.5 million. The Partnership used a portion of the sale proceeds to repay the
mortgage note payable to which the property was subject (see Note 7). SDA is an
unaffiliated party; however, Draper and Kramer Inc., which owns 37.5% of SDA,
was the manager of the property while it was owned by the Partnership.
The Partnership received sale proceeds, net of the mortgage note repayment,
closing costs and other deductions, of approximately $62.7 million. On July 31,
1998, the Partnership distributed approximately $61.8 million of such proceeds
100% to Limited Partners ($6.94 per Unit) and added the remaining proceeds to
the Partnership's cash reserves. The Partnership recognized a gain on this sale
of approximately $39.8 million, which was allocated 100% to the Limited Partners
in accordance with the Partnership Agreement.
Pine Ridge
In November 1998, the Partnership sold the Pine Ridge unimproved land parcel to
an unaffiliated purchaser for a negotiated sale price of $550,000. The proceeds
from the sale, net of closing costs, of approximately $515,000 were added to
cash reserves. The Partnership recognized a gain on this sale of approximately
$372,000, which was allocated 100% to the Limited Partners in accordance with
the Partnership Agreement.
6. Investment in Unconsolidated Partnership and Participating Mortgage
30
<PAGE>
Loan
One Congress Street, Boston, Massachusetts
The Partnership and Yield Plus II (collectively the "Lender") made a $59.2
million participating second mortgage loan on the One Congress Street building
(the "Loan") to GCGA. The Loan is due in 2001. Base interest was originally
payable at 8% and the first $250,000 of net revenues in any calendar year from
the property was payable as additional interest. The Lender also owned a 58%
interest in adjusted net revenue and capital proceeds generated by the property.
The property is subject to a first mortgage loan.
In October 1996, GCGA defaulted on the Loan by failing to pay timely its debt
service. Thereafter, the Lender accelerated the Loan and attempted to take
possession of the property. On October 15, 1996, GCGA filed a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code. On October 27, 1997, the Lender
entered into a settlement agreement with GCGA (the "Agreement"). As part of the
Agreement, a new corporation, which is jointly owned by the Partnership (58%)
and Yield Plus II (42%) became the sole general partner of GCGA (the "New
General Partner"), with an aggregate 19.81% ownership interest in the property.
The Partnership and Yield Plus II have agreed to make all decisions concerning
the property jointly. The Lender has retained an affiliate of GCGA`s original
general partner as property manager.
The Agreement also provides the following:
(a) as a result of their interests in the New General Partner, the Partnership
and Yield Plus II are required to make additional loans, if needed, to
fund future tenant improvements and leasing commissions at the property
(the "New Loans") in proportion to their ownership of the New General
Partner. Any New Loans will bear interest at 12%, payable monthly from
available cash flow generated by the property after payment of debt
service on the first mortgage loan and certain operating escrows;
(b) the interest rate on the principal of the Loan and past due interest
thereon (aggregating approximately $12.3 million at the date of the
agreement) has been increased to 10%, payable monthly
31
<PAGE>
from available cash flow generated by the property after payment of debt
service on the New Loans;
(c) any future unpaid debt service will accrue interest at 10%; and
(d) the Partnership's and Yield Plus II's interest in adjusted net revenue and
capital proceeds generated by the property was increased to 80%.
The Agreement effectively changed the Lender from a participating lender to GCGA
into the general partner in a partnership which owns the One Congress Street
property. The Partnership, through the New General Partner, owns an 11.5%
partnership interest in GCGA and, accordingly, at October 27, 1997, the
Partnership recorded its investment at an amount equal to the net carrying value
of its investment in the participating mortgage loan and related assets (which
carrying value was less than the estimated fair value of the property at that
date). The Partnership began, effective October 27, 1997, to account for its
investment on the equity method (and stopped recognizing interest income from
its participating mortgage loan). Because the Partnership and Yield Plus II
control GCGA and are entitled to receive substantially all the cash flow and
other economic benefits from the property, the Partnership and Yield Plus II
recognize all of GCGA's profit and losses in proportion to their ownership of
the New General Partner.
The Partnership believed that during the period of the bankruptcy it would be
unable to collect its interest on the Loan in full and that the bankruptcy could
adversely impact future leasing at the property. Accordingly, in 1996, the
Partnership determined that the Loan was impaired and recorded an additional
valuation allowance of $979,000 to reduce the carrying value of the Loan to its
estimated fair value. The Partnership had previously recognized impairment
allowances of $1.7 million in 1994 and $12.9 million in 1993.
In 1997 (prior to the Agreement) and 1996, the Partnership reserved accrued but
unpaid interest on the Loan of $1,560,000 and $660,000, respectively. At October
27, 1997, the Partnership's total reserves against accrued but unpaid interest
approximated $2,220,000.
32
<PAGE>
Summarized financial information of GCGA is as follows:
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------------------------------
1998 1997
<S> <C> <C>
ASSETS
Land and building, net $ 60,698,880 $ 59,921,306
Other 6,394,881 8,333,385
- ----------------------------------------------------------------------------------------------------------
Total assets $ 67,093,761 $ 68,254,691
==========================================================================================================
LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY
First mortgage loan $ 37,750,000 $ 37,750,000
Second mortgage loan and accrued interest 79,023,308 72,148,266
Other liabilities 3,190,814 3,036,017
Partners' capital deficiency (52,870,361) (44,679,592)
- ----------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital deficiency $ 67,093,761 $ 68,254,691
==========================================================================================================
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Rental $11,513,818 $ 11,498,722 $ 13,380,683
Other 79,390 238,937 63,455
- ----------------------------------------------------------------------------------------------------------
11,593,208 11,737,659 13,444,138
- ----------------------------------------------------------------------------------------------------------
Expenses:
Interest on second mortgage loan 8,078,420 8,036,377 9,357,983
Other interest 3,798,362 3,768,876 3,816,304
Property operating and other 5,946,569 5,075,676 4,874,545
Depreciation and amortization 1,960,626 1,940,143 2,226,861
- ----------------------------------------------------------------------------------------------------------
19,783,977 18,821,072 20,275,693
- ----------------------------------------------------------------------------------------------------------
Net loss $(8,190,769) $ (7,083,413) $ (6,831,555)
==========================================================================================================
</TABLE>
GCGA's second mortgage loan consists of the Loan. The accounting policies of
GCGA are consistent with those of the Partnership.
33
<PAGE>
7. Mortgage Notes Payable
The Partnership's properties were subject to first mortgage notes as follows:
1998 1997
- --------------------------------------------------------------------------------
$11,500,000 Revolving Credit Facility due
December 31, 1999; secured by the 401 East Ontario
property: Interest-only payable monthly at
Partnership's election of Prime Rate or LIBOR plus
1.15% per annum. $ -- $10,566,268
================================================================================
The fair value of the mortgage note payable at December 31, 1997 was
approximately equal to its carrying value. The fair value was estimated by
discounting future principal and interest payments using current lending rates
and market conditions for instruments with similar maturities and credit
quality.
A mortgage note securing the Deptford Crossing property was scheduled to mature
in September 1997. Interest on this mortgage note (bearing a rate at the
Partnership's election of LIBOR plus 0.375%, the bank's quoted variable rate
plus 1.375% or the bank's fixed rate) and principal payments of $15,000 were
payable monthly, and additional principal payments equal to excess cash (as
defined) were payable quarterly.
When the Deptford mortgage note matured in September 1997, the lender agreed to
temporarily forebear all rights and remedies provided in the loan agreement if
the Partnership would avoid further default provisions in the loan agreement,
pay monthly debt service equal to net cash flow from operations of the related
property and reimburse the lender for all of its expenses caused by the
forbearance. In December 1997, the Partnership borrowed $10,566,268 under the
revolving credit facility to repay the Deptford mortgage note.
In July 1998, the Partnership paid in full all amounts due under the revolving
credit facility using a portion of the sale proceeds from the sale of the 401
East Ontario Street property (see Note 5).
A mortgage note secured by the Genesee Crossing property, bearing interest at
9.375% per annum, matured in May 1997. The Partnership
34
<PAGE>
determined not to refinance the note and therefore lost the Genesee Crossing
property through foreclosure in August 1997 (see Note 5).
8. Leases
Minimum future rentals under noncancellable operating leases at the Deptford
Crossing shopping center as of December 31, 1998 are as follows:
Year ending December 31,
1999 $1,474,321
2000 1,458,677
2001 1,410,445
2002 404,651
2003 225,855
Thereafter 94,070
----------
Total $5,068,019
==========
The Partnership has determined that all leases relating to the shopping center
are operating leases. These leases range in term from one to ten years, and
generally provide for fixed minimum rent with expense reimbursement clauses.
9. Related Party Transactions
An affiliate of Realty provided property management services for the Deptford
Crossing, Michelson, Genessee Crossing and Greenway Pointe properties. The
Partnership paid the affiliate property management fees (included in property
operating expenses) of approximately $79,000, $220,000 and 235,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
Realty performs administrative functions, and processes certain investor and tax
information on behalf of the Partnership. For the years ended December 31, 1998,
1997 and 1996, Realty was reimbursed approximately $275,000, $391,000 and
$387,000, respectively, for these services (included in general and
administrative expenses).
As of December 31, 1998, Realty and its affiliate were owed $22,000 for these
services, which is included in accounts payable and other liabilities.
35
<PAGE>
10. Litigation
Various public partnerships sponsored by Realty (including the Partnership and
its Managing General Partner) were defendants in a class action lawsuit. On July
17, 1998, the Delaware Chancery Court granted the defendants' motion to dismiss
the complaint in the lawsuit. On August 14, 1998, the Plaintiffs filed a notice
of appeal from the Court's order. On January 6, 1999, the Delaware Supreme Court
affirmed the Chancery Court's dismissal of the complaint.
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and has no directors or officers.
The directors and executive officers of the Managing General Partner are as
follows:
Position with the
Name Managing General Partner
- ----------------------- -----------------------------------
William B. Smith Chairman of the Board of Directors
E. Davisson Hardman, Jr. President and Director
Lawrence Volpe Director
Ronald T. Carman Secretary and Director
All of the directors have been elected to serve until the next annual meeting of
the Shareholders of the Managing General Partner or until their successors are
elected and qualify. Each of the executive officers has been elected to serve
until his successor is elected and qualifies.
William B. Smith, age 55, has been a Managing Director of Morgan Stanley and
co-head of Morgan Stanley Realty Incorporated since July 1997, and a Managing
Director of Dean Witter Realty Inc., which he joined in 1982. He is an Executive
Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 49, has been a Managing Director of Morgan Stanley
Asia, Ltd. since July 1997, and a Managing Director of Dean Witter Realty Inc.,
which he joined in 1982.
Lawrence Volpe, age 51, is a Senior Vice President of Dean Witter Reynolds Inc.,
which he joined in 1983. Since June 1998, he has served in an advisory capacity
in connection with Dean Witter Realty Inc. and related entities. Prior to June
1998, he was the Controller of Dean Witter Reynolds Inc. and the Managing
General Partner, and the Controller and a Director of Dean Witter Realty Inc.
37
<PAGE>
Ronald T. Carman, age 47, is a Director and the Secretary of Dean Witter Realty
Inc. He has been an Assistant Secretary of MWD and a Managing Director of Morgan
Stanley & Co. Inc., since July 1998. Previously, he was a Senior Vice President
and Associate General Counsel of Dean Witter Reynolds Inc., which he joined in
1984.
There is no family relationship among any of the foregoing persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash distributions, when and as
cash distributions are made to the Limited Partners, and a share of taxable
income or tax loss. Descriptions of such distributions and allocations are in
Item 5 above. The General Partners received cash distributions totaling
$395,010, $514,799 and $534,587 during the years ended December 31, 1998, 1997
and 1996, respectively. The General Partners have deferred distribution of their
share of all proceeds from property sales to date.
The General Partners and their affiliates were paid certain fees and reimbursed
for certain expenses. Information concerning such fees and reimbursements is
contained in Note 9 to the consolidated financial statements in Item 8 above.
The directors and executive officers of the Partnership's Managing General
Partner received no renumeration from the Partnership.
40
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of
more than five percent of the Units.
(b) The executive officers and directors of the Managing General Partner
own the following Units as of February 28, 1999:
(3)
Amount
and Nature of
(1) (2) of Beneficial
Title of Class Ownership Name of Beneficial Owner Ownership
- --------------------------------------------------------------------------------
Limited Partnership All directors and executive *
Interests officers of the Managing
General Partner, as a group
- ----------
* Own, by virtue of ownership of limited partnership interests in the
Associate General Partner, less than 1% of the Units of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their being partners of a limited partnership which is the
limited partner of the Associate General Partner, certain current and former
officers and directors of the Managing General Partner also own indirect general
partnership interests in the Partnership. The Partnership Agreement of the
Partnership provides that cash distributions and allocations of income and loss
to the General Partners shall be distributed or allocated 50% to the Managing
General Partner and 50% to the Associate General Partner. The General Partners'
share of cash distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing General Partner
are owned by Realty, a Delaware corporation which is a wholly-owned subsidiary
of Morgan Stanley Dean Witter & Co. The general partner of the Associate General
Partner is the Managing General Partner. The limited partner of the Associate
General Partner is LSYP 87, L.P., a Delaware limited partnership. Realty and
certain current and former
41
<PAGE>
officers and directors of the Managing General Partner are partners of LSYP 87,
L.P. Additional information with respect to the directors and executive officers
and compensation of the Managing General Partner and affiliates is contained in
Items 10 and 11 above.
The 401 East Ontario Street property was developed by a joint venture between a
third party developer and an entity comprised of former and current Realty
executives, several of whom are former or current executive officers of the
Managing General Partner. In January 1994, the Partnership obtained ownership of
the property by deed-in-lieu of foreclosure.
The One Congress Street property was developed by a partnership between a
Maryland-based developer and an entity comprised of former Realty executives,
some of whom were formerly executive officers of the Managing General Partner.
This entity withdrew as a partner of the borrower in September 1993, so the
borrower partnership was controlled solely by the Maryland-based developer until
control of the borrower was transferred to the Partnership and Yield Plus II in
1997.
The General Partners and their affiliates were paid certain fees and reimbursed
for certain expenses. Information concerning such fees and reimbursements is
contained in Note 9 to the Consolidated Financial Statements in Item 8 above.
The Partnership believes that the payment of fees and the reimbursement of
expenses to the General Partners and their affiliates are on terms as favorable
as would be obtained from unrelated third parties.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as part of
Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements filed as
part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April
29, 1987 set forth in Exhibit A to the Prospectus included in
Registration Statement Number 33-11648 is incorporated herein by
reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987
incorporated by reference in Registration Statement Number 33-11648 is
incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April
29, 1987 set forth in Exhibit A to the Prospectus included in
Registration Statement Number 33-11648 is incorporated herein by
reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987
incorporated by reference in Registration Statement Number 33-11648 is
incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988.
Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
41
<PAGE>
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the
Government Center Garage Realty Trust (Maker) and Dean Witter Realty
Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to
Current Report on Form 8-K on April 26, 1989 and is incorporated herein
by reference.
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government
Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield
Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was
filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on
April 26, 1989 and is incorporated herein by reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean
Witter Realty Yield Plus II, L.P., and Realty Management Services Inc.
dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to
Current Report on Form 8-K on April 26, 1989 and is incorporated herein
by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989
between Government Center Garage Realty Trust, as Borrower and Dean
Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II,
L.P., as Lender. Incorporated by reference to Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated
October 12, 1989 between Government Center Garage Realty Trust (Maker)
and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by
reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990
between Government Center Garage Realty Trust, as Borrower and Dean
Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II,
L.P., as Lender. Incorporated by reference to Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.
42
<PAGE>
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan
Promissory Note dated June 22, 1990 between Government Center Garage
Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder).
Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government
Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield
Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender.
Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government
Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated
by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
(10)(k) Supplement and Amendment to Construction Loan Agreement dated October
27, 1997 between Government Center Garage Realty Trust (Borrower) and
Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus
II, L.P. (Lenders) was filed as an Exhibit to Form 8-K on October 27,
1997 and is incorporated herein by reference.
(10)(l) Third Amendment to Notes dated October 27, 1997 between Government
Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P. (Holder) was filed as an
Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by
reference.
(10)(m) Purchase and Sale Agreement dated as of December 26, 1997 among DW
Michelson Associates as Seller, Michelson Company Limited Partnership as
Acquired Partnership and SC Enterprises as Purchaser, First Amendment to
Purchase and Sale Agreement dated as of February 3, 1998 and Assignment
and Assumption Agreement dated as of April 3, 1998 were
43
<PAGE>
collectively filed as an Exhibit to Form 8-k on April 3, 1998 and is
incorporated herein by reference.
(10)(n) Purchase and Sale Agreement among DW
Lakeshore Associates, L.P., a Delaware Limited Partnership, as Seller
and Streeterville Development Associates, LLC, an Illinois Limited
Liability Company, as Purchaser dated July 17, 1997 was filed as an
Exhibit to Form 8-k on July 17, 1998 and is incorporated herein by
reference.
(21) Subsidiaries:
Deptford Crossing Associates, a New Jersey limited partnership.
Hampton Crossing Associates, a Michigan limited partnership.
DW Lakeshore Associates, an Illinois limited partnership.
DW Columbia Gateway Associates, a Maryland limited partnership.
DW Michelson Associates, a California limited partnership.
DW Community Centers Limited Partnership, a Delaware limited
partnership.
DW Maplewood Inc.
(27) Financial Data Schedule
(d) Financial Statement Schedules
1. Financial Statements of GCGA Limited Partnership, owner of an office
building/parking garage located in Boston, Massachusetts.
44
<PAGE>
SCHEDULE III
DEAN WITTER REALTY YIELD PLUS, L.P.
Real Estate and Accmulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Initial Cost to Partnership (A)
-------------------------------
Building and
Description Encumbrances Land Improvements Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center, Deptford, NJ -- 6,250,094 12,041,180 18,291,274
Land, Military Crossing,
Norfolk, VA -- 300,000 -- 300,000
- ------------------------------------------------------------------------------------------
-- $ 6,550,094 $12,041,180 $18,591,274
==========================================================================================
<CAPTION>
Cost Loss on
Capitalized Impairment
Subsequent to of Land and
Description Acquisition Real Estate Land
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shopping Center, Deptford, NJ 990,232 (6,931,459) 1,770,000
Land, Military Crossing, Norfolk, VA -- -- 300,000
- --------------------------------------------------------------------------------------
$ 990,232 $(6,931,459) $ 2,070,000
======================================================================================
</TABLE>
45
<PAGE>
SCHEDULE III (continued)
<TABLE>
<CAPTION>
Gross Amount
at which Carried at End of Period (B)
------------------------------------
Buildings and Depreciation Date of
Description Improvements Total (C) Construction
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shopping Center, Deptford, NJ 10,580,047 12,350,047 1,954,876 1991
Land, Military Crossing,
Norfolk, VA -- 300,000 -- N/A
- ----------------------------------------------------------------------------------------
$10,580,047 $12,650,047 $1,954,876
========================================================================================
</TABLE>
Life on which Depreciation
in Latest Income
Description Date Acquired Statements is Computed
- --------------------------------------------------------------------------------
Shopping Center, Deptford, NJ December 1992 40 years
Military Crossing, Norfolk, VA April 1994 -
Notes:
(A) The basis in the properties at acquisition for financial reporting
purposes is the lower of net carrying value of the original loan or
estimated fair market value of the property. Losses on foreclosure of real
estate and real estate impairment losses do not reduce the basis for
federal income tax purposes.
46
<PAGE>
SCHEDULE III (continued)
(B) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 50,340,229 $ 115,682,356 $ 112,985,465
Additions during period:
Additions 498,404 856,266 2,696,891
Foreclosure of real estate -- (8,540,000) --
Sale of real estate (38,188,586) (8,565,176) --
Reclassificaiton to real estate
held for sale -- (49,093,217) --
- -------------------------------------------------------------------------------------------
Balance at end of period $ 12,650,047 $ 50,340,229 $ 115,682,356
===========================================================================================
<CAPTION>
(C) Reconciliation of accumulated depreciation:
1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 5,847,422 $ 18,386,846 $ 14,468,727
Depreciation expense 748,020 3,673,145 3,918,119
Foreclosure of real estate -- (565,640) --
Sale of real estate (4,640,566) (3,450,083) --
Reclassification of real estate
held for sale -- (12,196,846) --
- ------------------------------------------------------------------------------------------
Balance at end of period $ 1,954,876 $ 5,847,422 $ 18,386,846
==========================================================================================
</TABLE>
47
<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 report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS, L.P.
By: Dean Witter Realty Yield Plus Inc.
Managing General Partner
By: /s/ E. Davisson Hardman, Jr. Date: March 24, 1999
----------------------------------
E. Davisson Hardman, Jr.
President
By: /s/ Charles M. Charrow Date: March 24, 1999
----------------------------------
Charles M. Charrow
Controller
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
DEAN WITTER REALTY YIELD PLUS INC.
Managing General Partner
/s/ William B. Smith Date: March 24, 1999
- ---------------------------------
William B. Smith
Chairman of the Board of Directors
/s/ E. Davisson Hardman, Jr. Date: March 24, 1999
- ----------------------------------
E. Davisson Hardman, Jr.
Director
/s/ Lawrence Volpe Date: March 24, 1999
- ----------------------------------
Lawrence Volpe
Director
/s/ Ronald T. Carman Date: March 24, 1999
- ----------------------------------
Ronald T. Carman
Director
48
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Year Ended December 31, 1998
Exhibit Index
Exhibit
No. Description
- --------------------------------------------------------------------------------
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April
29, 1987 set forth in Exhibit A to the Prospectus included in
Registration Statement Number 33-11648 is incorporated herein by
reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987
incorporated by reference in Registration Statement Number 33-11648 is
incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April
29, 1987 set forth in Exhibit A to the Prospectus included in
Registration Statement Number 33-11648 is incorporated herein by
reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987
incorporated by reference in Registration Statement Number 33-11648 is
incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988.
Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the
Government Center Garage Realty Trust (Maker) and Dean Witter Realty
Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to
Current Report on Form 8-K on April 26, 1989 and is incorporated herein
by reference.
E-1
<PAGE>
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government
Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield
Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was
filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on
April 26, 1989 and is incorporated herein by reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean
Witter Realty Yield Plus II, L.P., and Realty Management Services Inc.
dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to
Current Report on Form 8-K on April 26, 1989 and is incorporated herein
by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989
between Government Center Garage Realty Trust, as Borrower and Dean
Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II,
L.P., as Lender. Incorporated by reference to Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated
October 12, 1989 between Government Center Garage Realty Trust (Maker)
and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by
reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990
between Government Center Garage Realty Trust, as Borrower and Dean
Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II,
L.P., as Lender. Incorporated by reference to Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan
Promissory Note dated June 22, 1990 between Government Center Garage
Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder).
Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
E-2
<PAGE>
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government
Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield
Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender.
Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government
Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated
by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
(10)(k) Supplement and Amendment to Construction Loan Agreement dated October
27, 1997 between Government Center Garage Realty Trust (Borrower) and
Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus
II, L.P. (Lenders) was filed as an Exhibit to Form 8-K on October 27,
1997 and is incorporated herein by reference.
(10)(l) Third Amendment to Notes dated October 27, 1997 between Government
Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P. (Holder) was filed as an
Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by
reference.
(10)(m) Purchase and Sale Agreement dated as of December 26, 1997 among DW
Michelson Associates as Seller, Michelson Company Limited Partnership as
Acquired Partnership and SC Enterprises as Purchaser, First Amendment to
Purchase and Sale Agreement dated as of February 13, 1998 and Assignment
and Assumption Agreement dated as of April 3, 1998 were collectively
filed as an Exhibit to Form 8-K on April 3, 1998 and is incorporated
herein by reference.
(10)(n) Purchase and Sale Agreement among DW Lakeshore Associates, L.P., a
Deleware Limited Partnership, as Seller and Streeterville Development
Associates, LLC, an Illinois Limited Liability Company, as Purchaser
dated July 17, 1997 was filed as an Exhibit to Form 8-K on July 17, 1998
and is incorporated herein by reference.
(27) Financial Data Schedule
(99) Financial Statements of GCGA Limited Partnership, owner of an office
building/parking garage located in Boston, Massachusetts.
E-3
<PAGE>
GCGA LIMITED PARTNERSHIP
Financial Statements
For the years ended December 31, 1998 and 1997
Independent Auditors' Report
<PAGE>
Independent Auditors' Report
To the Partners of
GCGA Limited Partnership
We have audited the accompanying balance sheets of GCGA Limited Partnership (the
"Partnership") as of December 31, 1998 and 1997 and the related statements of
operations, partners' capital deficiency, and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of GCGA Limited Partnership as of December 31,
1998 and 1997 and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Deloitte & Touche, LLP
/s/ Deloitte & Touche, LLP
New York, New York
March 18, 1999
<PAGE>
GCGA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1998 and 1997
1998 1997
- --------------------------------------------------------------------------------
Assets
Real estate, at cost:
Land $ 4,892,336 $ 4,892,336
Building and improvements 73,624,779 70,951,977
- --------------------------------------------------------------------------------
78,517,115 75,844,313
Accumulated depreciation (17,818,235) (15,923,007)
- --------------------------------------------------------------------------------
60,698,880 59,921,306
Cash 385,172 2,117,296
Escrow deposits 808,617 772,378
Accounts receivable 4,761,502 4,975,179
Deferred expenses, net 325,806 258,342
Other assets 113,784 210,190
- --------------------------------------------------------------------------------
$ 67,093,761 $ 68,254,691
===============================================================================
Liabilities and Partners' Capital Deficiency
Liabilities:
First mortgage loan $ 37,750,000 $ 37,750,000
Second mortgage loan and accrued interest 79,023,308 72,148,266
Note payable 2,446,428 2,514,255
Accounts payable and other liabilities 744,386 521,762
- --------------------------------------------------------------------------------
119,964,122 112,934,283
Partners' capital deficiency (52,870,361) (44,679,592)
- --------------------------------------------------------------------------------
$ 67,093,761 $ 68,254,691
===============================================================================
See accompanying notes to financial statements.
2
<PAGE>
GCGA LIMITED PARTNERSHIP
Statements of Operations
Years ended December 31, 1998 and 1997
1998 1997
- --------------------------------------------------------------------------------
Revenue:
Rental $ 11,513,818 $ 11,498,722
Interest and other 79,390 238,937
- --------------------------------------------------------------------------------
11,593,208 11,737,659
- --------------------------------------------------------------------------------
Expenses:
Interest 11,876,782 11,805,253
Property operating 4,996,224 4,393,023
Depreciation 1,895,228 1,774,048
Amortization 65,398 166,095
General and administrative 950,345 682,653
- --------------------------------------------------------------------------------
19,783,977 18,821,072
- --------------------------------------------------------------------------------
Net loss $ (8,190,769) $ (7,083,413)
================================================================================
See accompanying notes to financial statements.
3
<PAGE>
GCGA LIMITED PARTNERSHIP
Statements of Changes in Partners' Capital Deficiency
Years ended December 31, 1998 and 1997
Total
- --------------------------------------------------------------------------------
Partners' capital deficiency at
January 1, 1997 $(37,719,179)
Contributions 200,000
Distributions (77,000)
Net loss (7,083,413)
- --------------------------------------------------------------------------------
Partners' capital deficiency
at December 31, 1997 (44,679,592)
Net loss (8,190,769)
- --------------------------------------------------------------------------------
Partners' capital deficiency at December 31, 1998 $(52,870,361)
================================================================================
See accompanying notes to financial statements.
4
<PAGE>
GCGA LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities: $(8,190,769) $(7,083,413)
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Interest accrual on second mortgage loan in excess
of payments 4,154,099 6,856,266
Depreciation and amortization 1,960,626 1,940,143
(Increase) decrease in operating assets:
Escrow deposits (36,239) (188,802)
Accounts receivable 213,677 (36,403)
Deferred expenses (132,862) (29,417)
Other assets 96,406 (98,627)
Increase (decrease) in accounts payable and
other liabilities 222,624 (92,377)
- -------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (1,712,438) 1,267,370
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to building and improvements (2,672,802) --
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings under second mortgage loan 2,720,943 --
Repayment of note payable (67,827) (80,571)
Partner contributions -- 200,000
Partner distributions -- (77,000)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing
activities 2,653,116 42,429
- -------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash (1,732,124) 1,309,799
Cash at beginning of year 2,117,296 807,497
- -------------------------------------------------------------------------------------------------------------
Cash at end of year $ 385,172 $ 2,117,296
=============================================================================================================
Supplemental disclosure of cash paid during the year
for interest $ 7,752,794 $ 4,948,987
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1998 and 1997
1. Organization
GCGA Limited Partnership (the "Partnership") is a limited partnership organized
under the laws of the Commonwealth of Massachusetts. The Partnership is the sole
beneficiary of the Government Center Garage Realty Trust (the "Trust") which
owns One Congress Street (the "Property"), an 11-story structure containing
approximately 283,000 square feet of office and retail space and a 2,200-space
parking garage, located in Boston, Massachusetts.
Prior to October 27, 1997, the partners of the Partnership were Government
Center Garage Associates Limited Partnership ("GCA"), which owned a 1% general
partnership interest and a 98% limited partnership interest, and an individual
affiliated with the developer of the property who owned a 1% limited partnership
interest (the "Affiliate").
In October 1996, the Partnership defaulted on its second mortgage loan by
failing to timely pay its debt service. Thereafter, the second mortgage lenders
(Dean Witter Yield Plus, L.P. ("Yield Plus") and Dean Witter Yield Plus II, L.P.
("Yield Plus II"), collectively, (the "Lender")) accelerated the loan and
attempted to take possession of the property. On October 15, 1996, the
Partnership and the Trust filed a voluntary petition for relief under Chapter 11
of Title 11 of the United States Code in the United States Bankruptcy Court for
the District of Maryland (the "Bankruptcy Court"). While in bankruptcy, the
Partnership operated as a debtor-in-possession, whereby the Partnership could
not engage in transactions outside of the ordinary course of business without
approval of the Bankruptcy Court, after notice and hearing.
On October 27, 1997, the Partnership entered into a settlement agreement with
the Lender (the "Agreement"). As part of the Agreement, two new corporations
each of which are jointly owned by Yield Plus (58%) and Yield Plus II (42%),
became the sole general partners (the "New General Partners") of the Partnership
(with an aggregate 19% ownership interest) and GCA (with an aggregate 1%
ownership interest). Yield Plus and Yield Plus II have agreed to make all
decisions concerning the Partnership and its property jointly, and retained an
affiliate of the Partnership's
6
<PAGE>
CGA LIMITED PARTNERSHIP
Notes to Financial Statements
1. Organization (continued)
original general partner as property manager. As part of the Agreement, the
second mortgage loan was also restructured (see Note 4).
Pursuant to the Agreement, GCA's limited partnership interest in the Partnership
was reduced to 81% and the Affiliate's 1% interest in the Partnership was
eliminated.
2. Summary of Significant Accounting Policies
The Partnership's records are maintained on the accrual basis of accounting for
financial reporting and tax purposes. 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.
Real estate is recorded at cost less accumulated depreciation. Cost includes
land, improvements, direct construction costs, indirect project costs, and
carrying costs, including real estate taxes, interest and loan costs incurred
during the construction period. Depreciation is recorded on the straight-line
method. Repairs are expensed.
Cash and cash equivalents consist of cash and highly liquid investments with
maturities, when purchased, of three months or less.
At least annually, and more often if circumstances dictate, the Partnership
evaluates the recoverability of the net carrying value of the Property and any
related assets. As part of this evaluation, the Partnership assesses, among
other things, whether there has been a significant decrease in the market value
of the Property. If events or circumstances indicate that the net carrying value
of the Property may not be recoverable, the expected future net cash flows from
the Property are estimated for a period of approximately five years (or a
shorter period if the Partnership expects that the Property may be disposed of
7
<PAGE>
sooner), along with estimated sales proceeds at the end of the period.
8
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
If the total of these future undiscounted cash flows were less than the carrying
amount of the Property, the Property would be written down to its fair value as
determined (in some cases with the assistance of outside real estate
consultants) based on discounted cash flows, and a loss on impairment recognized
by a charge to earnings.
Because the determination of fair value is based upon projections of future
economic events such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates which are inherently subjective, the
amounts ultimately realized at disposition may differ materially from the net
carrying value as of December 31, 1998. The cash flows used to evaluate the
recoverability of the assets and to determine fair value are based on good faith
estimates and assumptions developed by the New General Partners. Unanticipated
events and circumstances may occur and some assumptions may not materialize;
therefore actual results may vary from the estimates and the variances may be
material. The Partnership may provide additional write-downs, which could be
material, in subsequent years if real estate markets or local economic
conditions change.
Deferred expenses consist of origination fees in connection with the mortgage
loans and leasing commissions. Origination fees are amortized over the
applicable loan terms. Leasing Commissions are amortized over the applicable
lease terms. In 1997, fully amortized deferred expenses (with an original cost
of $2,300,762) were written off.
Rental income is accrued on a straight-line basis over the terms of the leases.
Accruals in excess of amounts payable by tenants pursuant to their leases
(resulting from rent concessions or rents which periodically increase over the
term of a lease) are recorded as receivables and included in other assets.
No provision for income taxes has been made in the financial statements, since
the liability for such taxes is that of the partners rather than the
Partnership.
9
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
The accounting policies used for tax reporting purposes differ from those used
for financial reporting as follows: (a) depreciation is calculated using
accelerated methods and (b) rental income is recognized based on the payment
terms in the applicable leases. The tax basis of the Partnership's assets and
liabilities is approximately $11.7 million lower than the amounts reported for
financial statement purposes at December 31, 1998.
The implementation in 1998 of the Financial Accounting Standards Board Statement
No. 130, "Reporting Comprehensive Income" and Statement NO. 131, "Disclosures
about Segments of an Enterprise and Related Information" effective for the
Partnership's 1998 year-end financial statements did not have any impact on the
Partnership's financial statements.
3. Partnership Agreement
The Partnership Agreement and subsequent amendments (the "Agreement") provide
that net cash flow, as defined in the Agreement, generally will be paid to the
partners pro rata, in accordance with their partnership interests.
Net capital proceeds arising from a transaction involving the disposition of all
or substantially all the beneficial interest in the Trust or the Property or
involving the liquidation of the Partnership shall be distributed in accordance
with the partners capital accounts, as adjusted, pursuant to the Agreement.
10
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
4. Mortgage Loans Payable
The Trust has a $37,750,000 first mortgage loan payable to a major insurance
company. The loan requires monthly payments of interest only, payable at 9.39%
and matures November 1, 2001. For each of the years ended December 31, 1998 and
1997, the Partnership incurred interest expense of $3,544,725 on this loan.
The Trust also has a participating second mortgage loan payable to the Lender
which is due in 2001. Prior to October 27, 1997, principal of the loan was
$59,200,000, base interest was payable monthly at 8% and the first $250,000 of
net revenues in any calendar year from the property was payable as additional
interest. The Lender also owned a 58% interest in adjusted net revenues and
capital proceeds generated by the property.
The second mortgage loan was restructured as follows:
(a) any New Loans (the "New Loans") made by the New General Partners will bear
interest at 12%, payable monthly from available cash flow generated by the
property after payment of debt service on the first mortgage loan and
certain operating escrows;
(b) the interest rate on the principal and past due interest on the second
mortgage loan (aggregating approximately $12.3 million at October 27,
1997) has been increased to 10%, payable monthly from available cash flow
generated by the property after payment of debt service on the New Loans;
(c) any future unpaid debt service will accrue interest at 10%; and
11
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
4. Mortgage Loans Payable (continued)
(d) Yield Plus' and Yield Plus II's interest in adjusted net revenue and
capital proceeds generated by the property was increased to 80%.
In 1998, the Partnership borrowed $2,720,943 as a New Loan.
The Partnership incurred interest expense on the second mortgage loan of
$8,078,420 and $8,036,377 in 1998 and 1997, respectively.
5. Note Payable
At the inception of the parking garage lease with Kinney System of Sudbury St.,
Inc., a wholly owned subsidiary of Kinney System, Inc., the lessee granted a
$3,000,000 loan to the Partnership, which is payable in monthly payments of
$26,350, which include interest at 10 percent per annum. The lease provides for
supplemental rental payments to the Partnership of $26,350 per month to cover
loan principal and interest payments. These amounts are included in rental
income. The lease also provides that the unpaid principal of the loan may be
forgiven if certain conditions described in the note agreement are met. Interest
expense incurred on this loan in 1998 and 1997 were approximately $248,000 and
$224,000, respectively.
12
<PAGE>
GCGA LIMITED PARTNERSHIP
Notes to Financial Statements
6. Leases
Minimum future rental income under noncancelable operating leases as of December
31, 1998 is as follows:
Year ended December 31 Future minimum rentals
- --------------------------------------------------------------------------------
1999 $10,647,316
2000 10,911,285
2001 11,130,690
2002 11,413,015
2003 8,570,642
-----------
$52,672,948
===========
The Partnership has determined that all leases relating to its properties are
operating leases. Lease terms range from six to twenty one years.
7. Related-Party Transactions
The Property is managed by an affiliate of the Partnership. For the years ended
December 31, 1998 and 1997, the affiliate earned management fees of
approximately $105,000 and $124,000, respectively. These amounts are included in
property operating expenses.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information refer to the accompanying
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,555,260
<SECURITIES> 0
<RECEIVABLES> 178,712
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,082,602<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,700,170<F2>
<TOTAL-LIABILITY-AND-EQUITY> 35,082,602<F3>
<SALES> 0
<TOTAL-REVENUES> 74,796,181<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,026,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 404,509
<INCOME-PRETAX> 57,364,812
<INCOME-TAX> 0
<INCOME-CONTINUING> 57,364,812
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,364,812
<EPS-PRIMARY> 6.39<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $10,695,171, investment in unconsolidated partnership of
$19,471,311, net deferred expenses of $157,127 and other assets of $25,021.
<F2>Represents partners' capital
<F3>Liabilities include accounts payable and other liabilities of $382,432.
<F4>Total revenue includes rent of $8,003,462, gain on sale of real estate
of $65,403,728, equity in earnings of unconsolidated partnership of $462,869
and interest on cash equivalents and other revenue of $926,122.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
