<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
COMMISSION FILE NUMBER 33-13375
OF
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3309
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in part III of this form 10-K or any amendment to this
form 10-K: Not applicable
Aggregate market value of the voting stock held by non-affiliates:
Not applicable
Documents incorporated by reference: Certain pages of the
Prospectus of Registrant included in Form S-1 (as amended), file
number 33-13375, filed March 31, 1995 are incorporated by reference
in Parts I and II of this Annual Report on Form 10-K.
<PAGE>
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PART I
Item 1. BUSINESS
General
IDS Life Account RE (the Account) was established by a resolution
of the Board of Directors of IDS Life Insurance Company (IDS Life)
as a separate asset account, pursuant to Minnesota law. The
Account was formed to make real estate related investments in
connection with the sale of individual deferred variable annuity
contracts (Contracts) offered by IDS Life. The Account commenced
operations on August 7, 1987 when the annuity contracts were first
offered for sale to the public. The Account holds assets that are
segregated from all of IDS Life's other assets and are not
chargeable with liabilities arising out of any other business of
IDS Life.
The Account is not registered as an investment management company
under the Investment Company Act of 1940. The Account is under the
control and management of the Board of Directors of IDS Life and
its officers. The owners of the Contracts have no voting rights
with respect to the Account.
IDS Life does not guarantee the investment performance of the
Account and is not responsible for the liabilities of the Account.
However, IDS Life is responsible for the fulfillment of the terms
of each Contract, including payment of death benefits and the
guarantees of the minimum annuity purchase rates contained in the
Contracts.
Investment Objective
The investment objectives of the Account are to provide for payment
of retirement income under the Contracts by seeking to: (i)
preserve and protect the Account's assets in real (i.e., inflation-
adjusted) terms; (ii) provide for compounding of income through
reinvestment of cash flow from investments; and (iii) provide for
increases in income through capital appreciation of real property
investments and, to the extent available, through participation in
the capital appreciation, gross revenues or income of the real
properties subject to mortgage loans or land sale-leasebacks.
There is no guarantee that the investment objectives of the Account
will be attained. The assets of the Account will be invested
primarily in real estate related investments in accordance with the
diversification requirements regarding variable annuities contained
in Section 817(h) of the Internal Revenue Code (the "Code").
Previously, the Account had been seeking an asset mix of
approximately 65 to 70 percent in real property investments and 15
to 25 percent in mortgage loans and land sale-leaseback
investments. The Account is currently seeking to have
approximately 50 to 70 percent of the Account's assets invested in
income-producing real property investments such as office
buildings, shopping centers, apartment complexes and other real
properties, and that approximately 15 to 40 percent of the
Account's assets will be invested in mortgage loans and land
sale-leaseback investments, which may include participation in the<PAGE>
PAGE 3
appreciation or the gross revenues or income of the real properties
that are subject to the mortgage loans or land sale-leaseback
investments. The remaining portion of the Account's assets
generally will be invested in short-term debt instruments and
intermediate term bonds with maturities of up to five years.
However, IDS Life will have the discretion to alter such
percentages in accordance with changing market conditions or under
certain other circumstances if it deems it advisable given the
Account's investment objectives and portfolio or the liquidity
considerations of the Account. IDS Life expects to diversify the
Account's investments consistent with the U.S. Treasury regulations
regarding diversification for variable annuities. Other than
meeting the diversification requirements of Section 817(h) of the
Code, there are no limits on the percentage of Account assets that
may be invested in one property.
Competition
As of December 31, 1994, IDS Life was aware of 3 other real estate
variable annuity products that have been registered with the
Securities and Exchange Commission and that are being offered for
sale by competitors. These products differ from IDS Life Account
RE in various features although their structure and investment
objectives are similar. In addition, the Account competes against
other real estate investment funds and registered investment
companies including limited partnerships, real estate investment
trusts, unit investment trusts, pension and profit sharing trusts,
corporations, etc., all of which may or may not be offered for sale
by commercial and investment banks, realty corporations, insurance
companies, savings and loan associations, diversified financial
service companies, and other financial service intermediaries.
The Account will be competing for real property investments,
mortgage loans and land sale-leasebacks with numerous other
entities, as well as with individuals, corporations, real estate
investment trusts, real estate partnerships and other entities
engaged in real estate investment activities, including certain
affiliates of the JMB Annuity Advisers (the Investment Adviser) and
IDS Life. The real properties that are the subject of the
Account's real estate related investments are in competition with
other real properties (including those in which the Investment
Adviser, IDS Life or their affiliates may have an interest) in the
areas in which they are located, particularly with respect to
obtaining new tenants and the retention of existing tenants. Such
competition is based upon, among other things, effective rents
charged, services to tenants and the facilities available.
Employees
IDS Life Account RE does not directly employ any persons. The
business of the Account is under the control and management of IDS
Life's Board of Directors, its principal officers, and its
investment committee to the Account. The Investment Adviser, an
affiliate of JMB Realty Corporation, provides investment selection,
management, disposition, and consulting services with respect to
the real estate related investments of the Account pursuant to an
investment advisory agreement. <PAGE>
PAGE 4
Item 2. PROPERTIES
Description of the Account's real estate related investments is
hereby incorporated herein by reference to pages 20 to 44 of the
Registrant's prospectus included in Form S-1 (as amended), File
number 33-13375 filed March 31, 1995, which pages are filed
herewith as Exhibit 99.2 to this report.
Item 3. LEGAL PROCEEDINGS
There are no material current or pending legal proceedings to which
the Registrant is a party, or to which the Registrant's assets are
subject.
Item 4. SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDERS MATTERS
The Contracts are offered for sale through the registered
representatives of IDS Life. There is no established public
trading market for the Contracts. In addition, the Contracts are
not bid for, but are sold at the Account's current accumulation
unit value. A contract owner may elect to surrender all or part of
the Contract while the Contract is in force prior to the earlier of
the retirement date or the death of the first to die of the
annuitant or owner. A description of surrenders, withdrawals and
transfers is hereby incorporated herein by reference to pages 62 to
64 under the heading "Contract Surrender" and 67 to 68 under the
headings "Suspension and Delay of Payments" and "Transfer of
Ownership" in the Registrant's prospectus included in Form S-1 (as
amended), File Number 33-13375, filed March 31, 1995, which pages
are filed herewith as Exhibit 99.1 to this report. For the year
ended December 31, 1994, the high and low accumulation unit values
were $1.10 and $1.05 per unit, respectively. The number of
contract owners at December 31, 1994 was 3,039.
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Contract Purchase Payments
(Terminations), Net $(5,184,527) $(6,873,380) $(6,257,432) $ (575,134) $ 4,470,257
Net Income (Loss) $ (946,390) $ 1,816,417 $(5,761,830) $ 628,297 $ 1,835,465
Total Contract Owners'
Equity $35,993,731 $42,124,648 $47,181,611 $59,200,873 $59,147,710
Accumulation Units
Outstanding 34,238,180 39,000,431 45,475,432 51,202,112 51,693,083
Accumulation Unit
Value $ 1.05 $ 1.08 $ 1.04 $ 1.16 $ 1.14
/TABLE
<PAGE>
PAGE 6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Results of Operations
For the Year Ended December 31, 1994 Compared to the Year Ended
December 31, 1993 -
Net assets decreased from $42,124,648 at December 31, 1993 to
$35,993,731 at December 31, 1994. During this same time period,
the accumulation unit value decreased from $1.08 to $1.05. The
Account experienced net terminations amounting to $5,184,527 for
the year ended December 31, 1994 compared to $6,873,380 for the
year ended December 31, 1993.
Net income (loss) for the year ended December 31, 1994 was
$(946,390) compared to $1,816,417 for the year ended
December 31, 1993. The difference was primarily due to the
Account's recognition of a greater amount of unrealized
depreciation on its investments in unconsolidated joint ventures
during 1994 than during 1993, as well as the recognition during
1993 of approximately $481,000 of unrealized appreciation on its
participation in the mortgage loan and wholly-owned real estate
investment.
Interest income represents income earned on the Account's
investment in short-term securities and the participation in a
mortgage loan. Interest generated from short-term investments
decreased to $20,847 from $161,348 for the years ended December 31,
1994 and 1993, respectively. This decrease is due primarily to a
lower average amount invested in short-term securities. Income
generated from participation in the mortgage loan for 1994 remained
relatively unchanged compared to that for 1993.
For the year ended December 31, 1994, the Account's equity in
earnings of its unconsolidated joint ventures (N/S Associates,
Monmouth Associates and 1225 Connecticut) was $2,094,682, which was
a decrease from $2,097,089 for the year ended
December 31, 1993. The decrease is due to declining tenant
occupancy at Northridge Mall partially offset by lease termination
fees received during 1994. The operations of the other investment
properties of the unconsolidated joint ventures were relatively
unchanged.
In addition, the Account generated rental income of $2,235,867 for
the year ended December 31, 1994 from its wholly-owned real estate
investment, West Springfield Terrace Apartments, compared to
$2,251,285 for the year ended December 31, 1993. Expenses related
to the wholly-owned real estate investment totaled $1,792,255 for
the year ended December 31, 1994 compared to $1,770,999 for 1993.
The increase in expenses was primarily due to higher utility
expenses resulting from severe weather in the first quarter of
1994. Capital expenditures for the property in 1994 were
approximately $111,000. These costs related primarily to plumbing,
tile and carpet replacement associated with weather-related damage
incurred in the first quarter of 1994.
<PAGE>
PAGE 7
For the year ended December 31, 1993, the Account recognized net
unrealized depreciation of investments in unconsolidated joint
ventures of approximately $188,000. This net unrealized
depreciation was primarily due to the recognition in the first
quarter of 1993 of unrealized appreciation of $327,000 related to a
slight adjustment of the capitalization rate used in valuing the
1225 Connecticut office building, offset by the recognition of
unrealized depreciation of the investment in N/S Associates during
the second quarter of 1993 in the amount of approximately $320,000,
which was related to a write down in the estimated value of
Northridge Mall, and by the recognition of unrealized depreciation
in the amount of approximately $173,000 relating to the 1225
Connecticut office building. This latter adjustment to 1225
Connecticut's estimated value was consistent with a valuation
performed by an independent appraiser.
For the year ended December 31, 1994, the Account recognized net
unrealized depreciation of investments in unconsolidated joint
ventures of approximately $2,362,000. Approximately $217,000,
$751,000 and $1,428,000 of unrealized depreciation recognized by
the Account were attributable to the Account's investments in the
1225 Connecticut office building, Monmouth Mall and Northridge
Mall, respectively, partially offset by a slight amount of
unrealized appreciation of approximately $34,000 in the Account's
investment in Southridge Mall for the year.
The decrease in the estimated value of the 1225 Connecticut office
building was primarily attributable to a reduction in the assumed
long-term rental rate growth that could be achieved for the
property in future years. The estimated value is consistent with a
recent independent appraisal obtained for the office building.
In December 1994, Federated Department Stores, which owns Abraham &
Straus, completed its merger with R. H. Macy and Company, which
owns Macy's. In January 1995, Federated Department Stores
indicated that it intends to convert the Abraham & Straus store at
Monmouth Mall to a Stern's store in the spring of 1995. Monmouth
Associates may provide additional financing to the borrower/lessee
to pay future costs necessary for a long-term solution to replace
Abraham & Straus as a department store tenant at Monmouth Mall.
The recognition of unrealized depreciation in 1994 for the
Account's investment in Monmouth Mall primarily reflects the
Account's estimated share of the financing expected to be needed in
the future to pay these costs. In 1992, Monmouth Associates
discontinued the accrual of contingent interest on the leasehold
mortgage loan and contingent rent under the ground lease due to the
uncertainty surrounding the collectibility of such amounts in light
of the previous decrease in the estimated value of Monmouth Mall.
The decrease in the estimated value for Northridge Mall was
primarily attributable to a reduction in anticipated leasing
activity and the expected rents that can be achieved for the
property. In general, it is expected that the vacancy at
Northridge Mall will lease up more slowly and the rents obtained
will be lower than previously anticipated. Due to these reduced
expectations, the current estimated value of Northridge Mall is
approximately 8 percent less than its estimated value in a recent
independent appraisal.<PAGE>
PAGE 8
Northridge Mall continues to be adversely affected by the
perception that it is an unsafe place to shop. This perception has
resulted in declining sales and occupancy over the past three
years. Compounding the problem of declining sales are the high
operating costs for tenants at the mall due to high real estate
taxes. Occupancy has also been affected by tenant bankruptcies
during 1993 and 1994. As of December 31, 1994, occupancy of the
mall shops was approximately 84%, including temporary tenants under
short term leases. Same store sales per square foot for mall
tenants decreased approximately 4.7 percent for 1994 as compared to
1993. The recognition of unrealized depreciation for the property
also reflects generally higher interest rates at the end of 1994.
To counter the negative perception of Northridge Mall, N/S
Associates has implemented certain capital improvements and
operational programs to improve the shopping center's safety and
appearance, as well as instituted certain marketing efforts to
enhance its image. However, elimination of the negative perception
is expected to take some time. In addition, N/S Associates is
seeking to increase occupancy at the shopping center by
aggressively marketing space for new and renewal tenants through
leasing incentives, as well as continuing to cooperate with
existing tenants who need short-term rent reductions in order to
retain occupancy of their space.
Same store sales per square foot for mall tenants at Southridge
Mall increased approximately 3.4 percent for 1994 as compared to
1993. However, same store sales toward the end of 1994 were
relatively unchanged from those at the end of 1993. High operating
costs for tenants attributable to high real estate taxes for the
shopping center somewhat limits the ability of N/S Associates to
increase rents at Southridge Mall. The Account's investment in
Southridge Mall showed approximately $34,000 of unrealized
appreciation over all of 1994. Most of the unrealized appreciation
recognized in the second quarter of 1994 for the Account's
investment in Southridge Mall was offset by unrealized depreciation
recognized at the end of 1994. The year-end unrealized
depreciation was due to the increase in interest rates, which
resulted in an increase in the capitalization rate used in
estimating the value of the property, as well as the reduced rate
of sales increases achieved by mall tenants at the property.
The Account paid asset management and mortality expense risk fees
for the year ended December 31, 1994 of $1,268,164 compared to
$1,323,099 for 1993. The decrease in fees reflects a decrease in
the assets of the Account which is partially offset by an increase
in performance fees paid in 1994.
For the Year Ended December 31, 1993 Compared to the Year Ended
December 31, 1992 -
Net assets decreased from $47,181,611 at December 31, 1992 to
$42,124,648 at December 31, 1993. During this same time period,
the accumulation unit value increased from $1.04 to $1.08. The
Account experienced net terminations amounting to $6,873,380 for
the year ended December 31, 1993 compared to $6,257,432 for the
year ended December 31, 1992.<PAGE>
PAGE 9
Net income (loss) for the year ended December 31, 1993 was
$1,816,417 compared to $(5,761,830) for the year ended
December 31, 1992. The difference was primarily due to the
Account's recognition of unrealized depreciation on its
participation in mortgage loan, investments in unconsolidated joint
ventures and wholly-owned real estate property in the aggregate
amount during 1992 of approximately $7,206,000. During 1992, the
Account recognized unrealized depreciation with respect to its
investments in unconsolidated joint ventures in an aggregate amount
of approximately $5,560,000, of which $3,272,000, $1,230,000 and
$1,058,000 were attributable to its investments in N/S Associates,
Monmouth Associates and 1225 Connecticut, respectively. These
devaluations were primarily due to increases in the capitalization
rates used to determine the estimated current values of Northridge,
Southridge and Monmouth Malls and the 1225 Connecticut office
building. The devaluations also reflected, in the case of Monmouth
Mall, the competition in the market area for that property and, in
the case of Northridge Mall, a greater than five percent decrease
in comparable 1992 sales per square foot versus the year earlier,
which resulted in decreased demand for space at that property.
During 1992, the Account also recognized unrealized depreciation of
approximately $1,570,000 related to its wholly owned real estate
investment, West Springfield Terrace Apartments, and $76,000
related to its participation in the Riverpoint Center mortgage
loan. The devaluation relating to West Springfield Terrace
Apartments reflected an increase in the capitalization rate used in
deriving its estimated current value.
Interest income represents income earned on the Account's
investment in short-term securities and the participation in a
mortgage loan. Interest generated from short-term investments
decreased to 161,348 from 470,565 for the year ended December 31,
1993 and 1992, respectively. This decrease is due primarily to a
lower average amount invested in short-term securities. Income
generated from participation in the mortgage loan remained
relatively unchanged compared to the corresponding period in 1992.
For the year ended December 31, 1993, the Account's equity in
earnings of its unconsolidated joint ventures (N/S Associates,
Monmouth Associates, and 1225 Connecticut) was $2,097,089, which
represented a slight increase from the prior year's amount of
$2,072,715.
In addition, the Account generated rental income of $2,251,285 for
the year ended December 31, 1993 from its wholly-owned real estate
investment, West Springfield Terrace Apartments, compared to
$2,202,548 for the year ended December 31, 1992, with the increase
primarily attributable to increased average rents and an increase
in occupancy at the property. Expenses related to the wholly-owned
real estate investment totaled $1,770,999 for the year ended
December 31, 1993 compared to $1,730,533 for the corresponding
period in 1992.
The Account paid total asset management and mortality expense risk
fees for the year ended December 31, 1993 of $1,323,099 compared to
$1,637,871 for the corresponding period in 1992. The decrease in
fees reflects a decrease in the assets of the Account.
<PAGE>
PAGE 10
Liquidity and Capital Resources
For the Year Ended December 31, 1994 Compared to the Year Ended
December 31, 1993 -
At December 31, 1994, the Account had cash and investments in
short-term securities of approximately $205,000 as compared to
approximately $2,665,000 at December 31, 1993. The decrease is
primarily attributable to net contract terminations of
approximately $5,185,000 during the year ended December 31, 1994.
The Account financed a portion of the net contract terminations
during 1994 through borrowings under its line of credit from IDS
Life, discussed below. The Account has experienced net contract
terminations in each of the last 13 quarters.
The liquidity requirements of the Account are generally met by
funds provided from the Account's short-term investments, cash
distributions from unconsolidated joint ventures, operating cash
flow, interest income, proceeds from sales of contracts, and
borrowings under the line of credit from IDS Life discussed below.
The primary uses of funds currently are expected to be for property
operating expenses, asset management and mortality and expense risk
fees, payments for contract terminations and contributions to pay
the Account's share of the financing of the Monmouth Mall
renovation discussed below.
In March 1994, the Account obtained a revolving line of credit for
up to $10 million from IDS Life to pay for contract surrenders and
other obligations under the contracts. The line of credit is for a
one-year term and is automatically renewed at each anniversary for
an additional one-year term subject to termination by one party
giving 30 days' prior written notice of termination to the other
party. Borrowings under the line of credit must be made in
increments (or multiples) of $100,000. Outstanding borrowings
under the line of credit bear interest at a floating rate equal to
the 30-day London Interbank Offered Rate (LIBOR), adjusted on a
monthly basis. The line of credit requires monthly payments of
interest only until the earlier of maturity or termination of the
line of credit, when the entire outstanding principal plus any
accrued and unpaid interest on the line of credit will be due and
payable. Outstanding principal may be repaid in whole or in part
in increments (or multiples) of $100,000, together with any accrued
and unpaid interest thereon, at any time without premium or
penalty. Borrowings under the line of credit are generally
unsecured, although IDS Life will have a right to set off against
any deposits or credits of the Account held by IDS Life for
outstanding borrowings. As of March 30, 1995, $3,600,000 was
outstanding under the line of credit. The proceeds of these
borrowings were used to pay contract terminations.
If borrowings under the line of credit do not provide sufficient
liquidity, the Account expects to consider additional options,
which could include among other things, the purchase by IDS Life of
accumulation units in the Account or the sale of real estate
related investment(s). In the event that IDS Life purchases
accumulation units, it would participate in the increase or
decrease in the value of the Account's investments in the same
manner as any other holder of accumulation units. However, IDS<PAGE>
PAGE 11
Life would not purchase a Contract and would not be subject to a
surrender charge at any time in connection with any redemption of
its accumulation units. A sale or sales of real estate related
assets could be made under circumstances that result in a
realization of more or less than the book value of the asset or
assets sold. The Account does not currently expect to acquire
additional real estate related investments unless and until its
liquidity situation is significantly improved, including the build
up of its liquid assets.
Distributions received from joint ventures decreased by $288,150
for the year ended December 31, 1994 as compared to 1993. The
decrease was primarily due to the reduction in distributions from
Monmouth Associates, which has used its cash reserves and cash flow
to provide funds for the initial draw downs under its renovation
loan, as discussed below. It is expected that Monmouth Associates
will continue to use its cash flow, to the extent available, to
fund amounts which are drawn down under the renovation loan, which
closed in May 1994. Distributions from 1225 Connecticut in 1994
included amounts previously held in reserves for capital
improvements and working capital. 1225 Connecticut is using
proceeds from the refinancing of its mortgage loan to pay tenant
improvement and other capital costs.
The renovation loan for Monmouth Mall is in the maximum principal
amount of $29.1 million and bears interest on the outstanding
principal amount at a rate of 10.5% per annum. Prior to completion
of the renovation (and subject to funding of the maximum amount of
the renovation loan), monthly interest on the loan may be accrued
and added to principal, and after completion of the renovation, the
loan requires monthly payments of interest only until maturity of
the loan when the entire principal balance and any accrued and
unpaid interest will be due. As additional consideration for
making the renovation loan, Monmouth Associates' participation in
certain levels of proceeds from a joint sale or refinancing of the
fee and leasehold interests in the property will be increased until
Monmouth Associates has received aggregate payments equal to an
internal rate of return of 11 percent per annum on its investments
in the first leasehold mortgage loan and the land subject to the
ground lease. The renovation loan will mature contemporaneously
with the first leasehold mortgage loan in October 2003, subject to
(i) acceleration in the event of default or certain other events,
including a joint sale of the entire fee and leasehold interests in
Monmouth Mall, or (ii) extension of the loan maturity by Monmouth
Associates under certain circumstances for up to 20 years on the
same loan terms prior to the extension (other than the maturity
date). The renovation loan is secured by a leasehold mortgage
subordinated to the leasehold mortgages securing the first
leasehold mortgage loan and certain other loans previously made for
tenant improvements or other ordinary capital expenditures, and is
cross-defaulted with those loans as well as the ground lease. The
renovation loan is generally non-recourse to the borrower/lessee.
Payment of principal and accrued interest of the renovation loan
out of proceeds from a joint sale or refinancing of the fee and
leasehold interests in the property is subordinated to the payment
of certain other amounts payable to Monmouth Associates in
connection with the ground lease and the first leasehold mortgage
loan.<PAGE>
PAGE 12
The estimated cost of the renovation is $28,500,000 including any
accrued interest on the loan added to principal. Through
December 31, 1994, Monmouth Associates had funded approximately
$7.8 million, and these fundings were made from cash reserves held
by Monmouth Associates and its cash flow from interest and ground
rent payments received from the borrower/lessee. Some of the
additional draw downs under the renovation loan are to be funded by
capital contributions. Based upon Monmouth Associates' current
estimated cash flow and its anticipated fundings of other loans
discussed below, the aggregate amount of these capital
contributions is expected to be up to approximately $10,430,000,
made to Monmouth Associates by its joint venture partners pro rata
based upon their respective interests, including approximately
$3,350,000 made in January 1995. Based upon its 6.97% interest in
Monmouth Associates, the Account's share of the additional capital
contributions is expected to be approximately $727,000. Monmouth
Associates may also be required to make certain additional loans to
pay a portion of the costs of certain tenant improvements or other
ordinary capital expenditures.
In addition, it is expected that Monmouth Associates will provide
additional financing to the borrower/lessee in order to pay costs
expected to be incurred in connection with the substitution of a
Stern's store and/or another department store tenant at Monmouth
Mall for the Abraham & Straus store, which will be closed in the
near future. The timing and amount of the financing that may be
needed are dependent upon negotiation and agreement with the
borrower/lessee and Federated Department Stores, which is the owner
of Abraham & Straus, as well as possibly another potential
department store tenant, and have not been determined. The
recognition of approximately $700,000 of the Account's unrealized
depreciation at the end of 1994 represents the current estimate of
the Account's share of such financing.
Until the Monmouth renovation is finished, currently anticipated to
be in the fourth quarter of 1995, it is expected that there will be
lower than normal occupancy at the shopping center. The occupancy
of mall shops and outparcel space at the shopping center as of
December 31, 1994 was approximately 64 percent, which represents a
decrease from 82 percent from the previous year due to the
continuing renovation. However, the mall shops and outparcel space
are approximately 82 percent leased, including leases whose terms
will commence after renovation of the tenant space permits
occupancy.
The Account has a loan outstanding in the principal amount of
approximately $7,852,000 as of December 31, 1994, secured by its
wholly-owned real estate investment, West Springfield Terrace
Apartments. The loan has an original term of seven years and bears
interest at a rate of 9.5 percent per annum. The loan requires
monthly payments of principal and interest aggregating $824,000 per
annum until November of 1996 when the remaining principal balance
of approximately $7,704,000 and any accrued and unpaid interest
will be due and payable. For 1995, approximately $119,000 has been
budgeted for painting, carpet replacement and other capital costs.
In 1993, Ernst & Young agreed to extend the original term of a
majority of its existing leased space at the 1225 Connecticut
office building to June 2007 and to increase the rent to $34 per<PAGE>
PAGE 13
square foot. In 1994, Ernst & Young agreed to lease an additional
approximately 26,300 square feet of space at $34 per square foot
and approximately 1,700 square feet of first floor space at $17.50
per square foot through June 2007. As a result, Ernst & Young now
leases approximately 159,600 square feet or 87 percent of the
office space in the 1225 Connecticut office building. In
connection with the extension and expansion of its leases, Ernst &
Young received certain leasing incentives, including a tenant
improvement allowance and a rent credit for its fourth floor space
for a portion of the lease term commencing in 1995.
In January 1994, 1225 Connecticut refinanced its mortgage loan,
which had an outstanding principal balance of approximately
$1,665,000, with a new first mortgage loan in the principal amount
of $7,000,000 that bears interest at 6.98 percent per annum. The
new loan requires monthly payments of interest only aggregating
approximately $489,000 per annum until maturity in February 2001
when the entire principal amount together with accrued and unpaid
interest will be due and payable. 1225 Connecticut is using the
approximately $5,250,000 of excess proceeds from the refinancing to
pay for lobby and other common area renovation costs, a sprinkler
system and certain tenant improvement costs related to the Ernst &
Young lease extension. To date, approximately $4.3 million has
been spent for the renovation and other capital costs and leasing
commissions. It is currently anticipated that capital expenditures
for 1995 will be approximately $1,200,000. These amounts will be
primarily used to complete improvements to the sidewalks and
elevators and to pay for remaining tenant improvement costs. The
building is 100% occupied at December 31, 1994, and no significant
additional leasing costs are anticipated for 1995.
N/S Associates undertakes asbestos removal from time to time at
portions of the Northridge and Southridge Malls as tenant spaces
are vacated and prior to occupancy by new tenants. The cost of
such asbestos removal generally will be provided out of cash flows
from the properties.
Amounts expended by N/S Associates for capital items in 1994 were
approximately $1,900,000, including amounts for replacement of an
escalator at Southridge Mall and improvement of interior lighting
and partial roof replacement at Northridge Mall. The amounts
expended during 1994 represented an approximate decrease of
$700,000 from the budgeted amount primarily due to lower than
anticipated leasing during the year at Northridge and Southridge
Malls, which resulted in lower than expected tenant improvement and
asbestos abatement costs. It is currently anticipated that capital
expenditures for 1995, including tenant improvements, asbestos
abatement and completion of the partial roof replacement at
Northridge Mall will be approximately $3,900,000. The anticipated
increase over the amount for 1994 is attributable primarily to
anticipated leasing related costs at Northridge Mall.
In February 1995, N/S Associates obtained a loan from an
institutional lender in the principal amount of $35 million to
refinance the previous mortgage loan secured by Southridge Mall.
Proceeds from the new loan were also used to repay the two mortgage
loans secured by Northridge Mall. The remaining net refinancing
proceeds are expected to be used to pay approximately $2.9 million<PAGE>
PAGE 14
of the tenant improvement and other capital costs currently
expected to be incurred for Northridge and Southridge Malls during
1995. The new loan has a term of seven years, bears interest at
8.35 percent per annum and requires monthly payments of interest
only prior to maturity. The new loan is expected to result in a
cash flow savings since the current constants on the previous
mortgage loans averaged approximately 12 percent.
Carson Pirie Scott & Co., which owns a Boston Store at each of
Northridge and Southridge Malls, has made a bid to acquire
Younkers, which also has department stores at those shopping
centers. If it were to acquire Younkers, Carson Pirie Scott & Co.
would have two department stores at both Northridge and Southridge
Malls and could seek to sell or otherwise cease to operate some of
those stores. However, Younkers is subject to operating covenants
at each of the shopping centers that, with certain exceptions (such
as in the case of a sale of a store), requires a Younkers store to
be operated through 1999. N/S Associates expects to review the
possible alternatives in the event that Younkers is acquired.
Certain affiliates of the Investment Adviser have sold their assets
to an unaffiliated third party that acts as adviser to
institutional investors with respect to real estate investments.
In addition, certain management personnel of these affiliates also
became management personnel of the purchaser or its affiliates in
connection with the sale. These affiliates of the Investment
Adviser included JMB Properties Company, which acted as property
manager for the 1225 Connecticut office building and West
Springfield Terrace Apartments properties, and certain other
entities that acted as advisers to the institutional investors who
constitute all or some of the other partners or shareholders of N/S
Associates, Monmouth Associates, and 1225 Investment Corporation,
which owns the 1225 Connecticut office building. As a result of
the sale, the successor to JMB Properties Company's assets now acts
as property manager of the 1225 Connecticut office building and
West Springfield Terrace Apartments on the same terms that existed
prior to the sale. Under the terms of the partnership agreements
for N/S Associates and Monmouth Associates, and under the terms of
a shareholders' agreement for 1225 Investment Corporation, major
decisions concerning the joint venture partnerships and their real
estate investments are to be made by the vote or approval of the
partner or partners holding a majority of the percent interests,
and certain major decisions concerning 1225 Investment Corporation
and its real estate investment are to made by shareholders owning
at least 96 percent of the corporation's outstanding stock. As a
result of the sale, the other partners in N/S Associates and
Monmouth Associates and certain of the other shareholders of 1225
Investment Corporation are no longer advised or managed by entities
affiliated with the Investment Adviser. This could result in such
other partners or shareholders having different investment policies
or objectives in the future. In addition, the officers and
directors of 1225 Investment Corporation are not currently
affiliated or associated with the Investment Adviser.
At December 31, 1994, real property investments (through two
unconsolidated joint ventures, N/S Associates and 1225 Connecticut
and a wholly-owned property, West Springfield Terrace Apartments),
mortgage loan and land sale-leaseback investments (through an<PAGE>
PAGE 15
unconsolidated joint venture, Monmouth Associates, and a
participation in the loan for Riverpoint Center) and short-term
investments represented 72 percent, 27.3 percent and .7 percent of
total assets, respectively. The Account seeks to maintain an asset
mix of 50 percent to 70 percent in real property investments, 15
percent to 40 percent in mortgage loans or sale-leaseback
investments, and the remaining portion in short-term or
intermediate-term liquid debt securities.
For the Year Ended December 31, 1993 Compared to the Year Ended
December 31, 1992 -
At December 31, 1993, the Account had cash and investments in
short-term securities of approximately $2,665,000 as compared to
$8,369,000 at December 31, 1992. The decrease was primarily
attributable to net contract terminations during the year ended
December 31, 1993. Both a decrease in contract sales and an
increase in contract terminations contributed to an increase of
$616,000 in net contract terminations for the year ended December
31, 1993 over the prior year. The Account had experienced net
contract terminations in each of the last nine quarters through
December 31, 1993.
The liquidity requirements of the Account are generally met by
funds provided from the Account's short-term investments, cash
distributions from unconsolidated joint ventures, operating cash
flow, interest income and proceeds from sales of contracts. The
primary use of funds currently are expected to be for property
operating expenses, asset management and mortality expense risk
fees, payments for contract terminations and contributions to pay
the Account's share of the financing of the Monmouth Mall
renovation.
During the year ended December 31, 1993, the Account incurred
capital improvement costs of approximately $25,000 in relation to
its wholly-owned real estate property. These capital improvements
included the cost of upgrading kitchens, bathrooms and certain
other areas in West Springfield Terrace Apartments.
The account had a loan outstanding in the principal amount of
approximately $7,927,000 as of December 31, 1993, secured by its
wholly-owned real estate investment.
At December 31, 1993, real property investments, mortgage loan and
land sale-leaseback investments and short-term investments
represented 69 percent, 26 percent and 5 percent of total assets,
respectively. At December 31, 1992, real property investments,
mortgage loan and land sale-leaseback investments and short-term
investments represented 62 percent, 23 percent and 15 percent of
total assets, respectively.
<PAGE>
PAGE 16
Item 8. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
Index
Independent Auditors' Report
Balance Sheets, December 31, 1994 and 1993
Statements of Operations, years ended December 31, 1994, 1993
and 1992
Statements of Changes in Contract Owners' Equity, years ended
December 31, 1994, 1993 and 1992
Statements of Cash Flows, years ended December 31, 1994, 1993
and 1992
Notes to Financial Statements
Participation in Mortgage Loan on Real Estate and Interest Earned
on Participation in Mortgage - Schedule III
Real Estate Owned and Rental Income - Schedule IV
Schedules not Filed:
All schedules other than those indicated in the index have been
omitted as the required information is inapplicable or the
information is presented in financial statements or the related
notes.
N/S ASSOCIATES, MONMOUTH ASSOCIATES & 1225 INVESTMENT CORPORATION
UNCONSOLIDATED JOINT VENTURES
of
IDS LIFE ACCOUNT RE
Index
Independent Auditors' Report
Combined Balance Sheets, December 31, 1994 and 1993
Combined Statements of Operations, years ended December 31, 1994,
1993 and 1992
Combined Statements of Partner's Capital Accounts, years ended
December 31, 1994, 1993 and 1992
Combined Statements of Cash Flows, years ended December 31, 1994,
1993 and 1992
Notes to Financial Statements
Participation in Mortgage Loan on Real Estate and Interest Earned
on Participation in Mortgage - Schedule III
Real Estate Owned and Rental Income - Schedule IV
Schedules not Filed:
All schedules other than those indicated in the index have been
omitted as the required information is inapplicable or the
information is presented in financial statements or the related
notes. <PAGE>
PAGE 17
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
IDS Life Insurance Company and
Contract Owners of IDS Life Account RE:
We have audited the financial statements of IDS Life Account RE as
listed in the accompanying index. In connection with our audits of
the financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These
financial statements and financial statement schedules are the
responsibility of the management of IDS Life Insurance Company.
Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
Life Account RE at December 31, 1994 and 1993 and the results of
its operations and its cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
As discussed in note 2, the financial statements include real
estate related investments which represent 99% and 94% of total
assets at December 31, 1994 and 1993, respectively, that are stated
at fair value as estimated by the investment adviser. Such fair
value estimates involve subjective judgments and the actual market
price of real estate can only be determined by negotiation between
independent third parties in a sales transaction.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 17, 1995
<PAGE>
PAGE 18
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
<S> <C> <C>
Assets:
Cash $ 204,859 $ 171,242
Investments in short-term securities,
at amortized cost -- 2,493,649
Receivable from IDS Life for contracts sold 5,225 600
Investments in unconsolidated joint ventures,
at fair value (cost of $34,753,104 and
$34,115,612 at Dec. 31, 1994 and
December 31, 1993, respectively) (Note 4) 27,044,876 28,769,085
Participation in mortgage loan, at fair
value (cost of $3,047,188 at Dec. 31, 1994
and December 31, 1993) (Note 4) 2,994,023 2,995,600
Investment in wholly-owned real estate
property (Note 5):
Building, at fair value (cost of $14,010,548
and $13,899,674 at Dec. 31, 1994 and
December 31, 1993, respectively) 12,077,794 11,966,920
Land, at fair value (cost of $3,915,263
at Dec. 31, 1994 and December 31, 1993) 3,915,263 3,915,263
Deferred borrowing costs, net of accumulated
amortization of $131,726 and $105,874 at
Dec. 31, 1994 and December 31, 1993, respectively 49,730 75,582
Other assets 34,507 36,012
Total assets $46,326,277 $50,423,953
Liabilities:
Payable to IDS Life for:
Operating expenses $ 58,400 $ 62,289
Contract terminations 10,139 47,077
Revolving loan-principal 2,100,000 --
Revolving loan-interest 9,224 --
Accrued mortality and expense risk fee 40,136 44,667
Accrued asset management fee 50,171 55,834
Liabilities related to wholly-owned
real estate property (Note 5):
Accounts payable and other liabilities 212,197 162,617
Mortgage payable 7,852,279 7,926,821
Total liabilities 10,332,546 8,299,305
Contract Owners' Equity:
Net assets applicable to Variable Annuity
contracts in accumulation period $35,993,731 $42,124,648
Accumulation units outstanding 34,238,180 39,000,431
Net asset value per accumulation unit $ 1.05 $ 1.08
See accompanying notes to financial statements.
<PAGE>
PAGE 19
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
For the years ended
December 31, December 31, December 31,
1994 1993 1992
<C>
Income:
Interest income $ 286,386 $ 428,480 $ 727,411
Account's equity in earnings of
unconsolidated joint ventures 2,094,682 2,097,089 2,072,715
Rental income 2,235,867 2,251,285 2,202,548
Unrealized (depreciation) appreciation of
participation in mortgage loan (1,577) 172,373 (75,735)
Unrealized (depreciation) of investments
in unconsolidated joint ventures (2,361,701) (188,079) (5,560,069)
Unrealized appreciation (depreciation) of
investment in wholly-owned real estate
property -- 308,240 (1,569,754)
Total income (loss) 2,253,657 5,069,388 (2,202,884)
Expenses:
Asset management fee 765,557 773,849 988,698
Mortality and expense risk fee 502,607 549,250 649,173
Professional services 36,384 49,829 64,748
Amortization of deferred organizational
and borrowing costs 25,852 25,922 60,504
Salaries 34,091 37,980 43,929
Revolving loan interest 26,169 -- --
Other operating expenses 17,132 45,142 21,361
Operating expenses related to wholly-owned
real estate property:
Interest 749,268 756,051 759,957
Utilities 194,543 139,974 141,924
Repairs and maintenance 144,472 177,047 147,667
Property and other taxes 200,243 197,478 197,847
Salaries 216,137 243,220 217,948
Management fees 112,234 112,765 108,762
Other 175,358 144,464 156,428
Total expenses 3,200,047 3,252,971 3,558,946
Net income (loss) $ (946,390) $1,816,417 $(5,761,830)
See accompanying notes to financial statements.
<PAGE>
PAGE 20
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
For the years ended
December 31, December 31, December 31,
1994 1993 1992
Net income (loss) $ (946,390) $ 1,816,417 $ (5,761,830)
Contract purchase proceeds 1,452,798 1,766,368 1,865,041
Contract termination payments (6,637,325) (8,639,748) (8,122,473)
Decrease in net assets (6,130,917) (5,056,963) (12,019,262)
Contract owners' equity at
beginning of year 42,124,648 47,181,611 59,200,873
Contract owners' equity at end of year $ 35,993,731 $ 42,124,648 $ 47,181,611
Accumulation Unit Activity
Units purchased with proceeds from sale
of contracts 1,334,632 1,661,478 1,622,774
Units redeemed for contract terminations (6,096,883) (8,136,479) (7,349,454)
Net decrease in units (4,762,251) (6,475,001) (5,726,680)
Units outstanding at beginning of year 39,000,431 45,475,432 51,202,112
Units outstanding at end of year 34,238,180 39,000,431 45,475,432
See accompanying notes to financial statements.
<PAGE>
PAGE 21
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
For the years ended
December 31, December 31, December 31,
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ (946,390) $ 1,816,417 $ (5,761,830)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Account's equity in earnings of
unconsolidated joint ventures (2,094,682) (2,097,089) (2,072,715)
Change in accrued interest on
participation in mortgage loan -- 21,977 (21,977)
Amortization of organizational & borrowing costs 25,852 25,922 60,504
Change in cumulative discount amortization
on short-term investments 12,590 94,160 (43,632)
Change in unrealized depreciation of investments
in unconsolidated joint ventures 2,361,701 188,079 5,560,069
Change in unrealized depreciation (appreciation)
of participation in mortgage loan 1,577 (172,373) 75,735
Change in unrealized (appreciation)
depreciation of investment in wholly-owned
real estate property -- (308,240) 1,569,754
Change in other assets 1,505 67,708 39,064
Change in payable to IDS Life-operating expenses (3,889) (5,746) (8,052)
Change in accrued mortality expense risk fees (4,531) (5,803) (67,688)
Change in accrued asset management fee (5,663) (7,253) (84,612)
Change in payables and other liabilities related
to wholly-owned real estate property 49,580 (3,795) 7,724
Change in payable to IDS Life for revolving
loan interest 9,224 -- --
Total adjustments to net income (loss) 353,264 (2,202,453) 5,014,174
Net cash used in operating activities (593,126) (386,036) (747,656)
Cash flows from investing activities:
Net sales (purchases) of short-term securities 2,481,059 5,459,869 5,900,549
Capital improvements to wholly-owned real estate (110,874) (24,825) (448,422)
Distributions received from joint ventures 1,457,190 1,745,340 1,685,350
Net cash provided by investing activities 3,827,375 7,180,384 7,137,477
Cash flows from financing activities:
Proceeds from sales of contracts 1,448,173 1,777,709 1,862,285
Payments for contract terminations (6,674,263) (8,654,423) (8,060,721)
Decrease in mortgage payable (74,542) (67,812) (5,367)
Change in payable to IDS Life for revolving loan 2,100,000 -- --
Net cash used in financing activities (3,200,632) (6,944,526) (6,203,803)
Net increase (decrease) in cash 33,617 (150,178) 186,018
Balance of cash at beginning of year 171,242 321,420 135,402
Balance of cash at end of year $ 204,859 $ 171,242 $ 321,420
Supplemental cash flow disclosure:
Cash paid for mortgage and revolving
loan interest $ 775,437 $ 756,051 $ 759,957
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 22
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
December 31, 1994
NOTES TO FINANCIAL STATEMENTS
1. Organization
IDS Life Account RE (the Account) is a segregated asset account
of IDS Life Insurance Company (IDS Life) under Minnesota law.
A registration statement under the Securities Act of 1933
relative to the deferred variable annuity contracts (the
Contracts) issued by the Account became effective on August 6,
1987. The assets of the Account are held for the exclusive
benefit of contract owners and are not chargeable with
liabilities arising out of any other business conducted by
IDS Life.
2. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the
accrual basis of accounting. Significant accounting policies
followed by the Account are summarized below.
Investments in Securities
Investments in short-term securities maturing more than 60 days
from the valuation date are valued at the market price or
approximate fair value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost. The
Account also may invest in intermediate-term bonds with
maturities of up to five years which are valued at fair value
as determined by reference to market quotations, market
indices, matrices and data from independent brokers.
Security transactions are accounted for on the date securities
are purchased or sold. Interest income, including amortization
of premium and discount, is accrued daily.
Consolidation and Unconsolidated Joint Ventures
The Account's policy is to consolidate the underlying assets,
liabilities and operations of property investments where 50
percent or greater ownership position is maintained.
Investments in unconsolidated joint ventures with less than 50
percent ownership interest are accounted for on the equity
method of accounting.
Investments in Real Property, Mortgage Loans and
Land/Sale-Leasebacks
The Account initially values real estate related investments
at their cost (including acquisition or mortgage placement fees
and other acquisition or placement expenses) unless
circumstances otherwise indicate that a different value should
be used. Subsequently, the value of these investments will be
periodically determined by JMB Annuity Advisers (the Investment<PAGE>
PAGE 23
Adviser). Procedures utilized to determine the estimated value
include the following: (i) at the time of purchase and once
every two years thereafter, each real property investment and
each real property underlying a participating mortgage loan or
land sale-leaseback investment will be appraised by an
independent appraiser or an existing appraisal will be updated,
(ii) various assumptions including, but not limited to,
occupancy and rental rates, expense levels, net operating
income, average capital costs and capitalization rates upon sale
will be used in determining the discounted present value of an
investment's estimated cash flow and its estimated sale proceeds
or its asset value under a direct capitalization methodology,
and (iii) for fixed interest rate mortgage loans and fixed
rental rate land sale-leaseback investments, estimated values
will be determined by comparison to current interest rates on
U.S. Treasury debt as adjusted for a risk differential of the
Account's investments. The relative weight to be given to a
particular methodology or other relevant factors in determining
the estimated asset value of a particular real property will
depend upon an assessment of the existing and anticipated market
conditions and property specific factors relevant to such real
property. There is no assurance that the assumptions, estimates
and methodologies used in valuing the Account's real estate
related investments will in fact prove accurate or that such
values would in fact be realized. In addition, any expenses
that may be borne by the Account in connection with the
disposition of a real estate related investment are not deducted
in determining its estimated value.
Because the Account values its real property investments at
estimated fair values, no provision for depreciation expense is
recorded.
Each day the Account will record estimated income and expenses
attributable to real estate related assets. Periodically,
adjustments to reflect the difference between estimates and
actual income and expenses will be made.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Account is
treated as part of IDS Life for federal income tax purposes.
Under existing federal income tax law, no income taxes are
payable with respect to any income of the Account.
3. Fees and Expenses
The Account pays a mortality and expense risk fee to IDS Life
which is accrued daily and is equal, on an annual basis, to 1.00
percent of the average daily asset value, as defined, of the
Account. The mortality risk is IDS Life's guarantee to make
retirement payments according to the terms of the Contract, no
matter how long annuitants live. The expense risk portion of
the fee is paid to IDS Life for its guarantee that the various
fees paid by the Account to IDS Life will not be increased in
the future. For the years ended December 31, 1994, 1993 and
1992, the Account paid IDS Life a mortality and expense risk fee
of $502,607, $549,250 and $649,173, respectively.<PAGE>
PAGE 24
The Account also pays IDS Life an asset management fee equal, on
an annual basis, to 1.25 percent of the average daily asset
value, as defined, of the Account. A portion of this fee, equal
to 0.95 percent of the average daily asset value, is paid by IDS
Life to the Investment Adviser. The total fee may be adjusted
upward to a maximum of 1.50 percent depending upon the
performance of the Account's real property investments as
measured against the FRC Property Index. The
performance-related portion of the fee is calculated and
recorded on an annual basis when the FRC Property Index is
released each year for the preceding calendar year. The
performance fee paid by the Account in 1994 for 1993 was
$137,299. The performance fee paid by the Account in 1993 for
1992 was $87,287. The performance fee paid by the Account in
1992 for 1991 was $177,202. Any performance fee adjustment will
be paid to the Investment Adviser. For the years ended
December 31, 1994, 1993 and 1992, the Account paid total asset
management fees of $765,557, $773,849 and $988,698,
respectively.
IDS Life will receive from the Account an acquisition and
mortgage placement fee equal to 3.75 percent of the total cash
to be paid or advanced by the Account (net of any borrowings in
the case of real property investments) in connection with each
real property investment, mortgage loan or land sale-leaseback
investment made by the Account. A portion of this fee, equal to
3.50 percent, will be paid to the Investment Adviser in
consideration for its services in connection with the
acquisition or placement of real estate related investments of
the Account. No acquisition and mortgage placement fees were
paid in 1994, 1993 and 1992.
The Account will pay for all operational expenses incurred on
behalf of the Account. For the years ended December 31, 1994,
1993 and 1992, IDS Life was reimbursed $51,223, $83,122 and
$65,290, respectively, for personnel related expenses incurred
in the administration of the Account.
4. Investments in Unconsolidated Joint Venture Partnerships and
Participation in Mortgage Loan
Joint Venture Partnership - N/S Associates
IDS Life, on behalf of the Account, entered into a joint venture
partnership called N/S Associates, which on April 4, 1988
acquired interests in two enclosed super regional shopping malls
that are described below.
The terms of N/S Associates partnership agreement provide that
its annual net cash flows and net sales or refinancing proceeds
generally will be distributed among all of the partners in
accordance with their respective percentage ownership interests
in N/S Associates.
The Account contributed approximately $12,008,000 to N/S
Associates as its capital contribution. The percentage interest
of the Account in N/S Associates is 5.92 percent. In connection<PAGE>
PAGE 25
with the purchase of the shopping malls, the Account paid to IDS
Life and the Investment Adviser their respective portions of the
acquisition fee amounting to approximately $450,000.
Summary of Real Estate Investments Made Through N/S Associates
Milwaukee, Wisconsin - Northridge Mall
The Account, through N/S Associates, owns an interest in an
existing enclosed super regional shopping center in Milwaukee,
Wisconsin, known as Northridge Mall. The mall shops and four
adjacent department stores comprising the shopping center
contain approximately 1,053,000 square feet of gross leasable
area, of which N/S Associates owns approximately 399,000 square
feet of mall shops (approximately 388,000 square feet ) and
storage space (approximately 11,000 square feet). The remaining
654,000 square feet of gross leasable area are occupied by four
department stores, three of which own their own stores and a
portion of the parking area. The fourth department store leases
its space from an unaffiliated third party.
N/S Associates acquired its interest in the shopping center in
April 1988 for a purchase price of approximately $108,107,000,
of which $89,653,000 was paid in cash at closing, subject to the
existing mortgage loans with a then outstanding aggregate
balance of approximately $18,454,000. The property was
encumbered by two mortgage loans with outstanding principal
balances at December 31,1994 of approximately $15,058,000 and
$365,000, respectively. In addition to the purchase price, a
reserve of $8,900,000 was established, all of which has been
used to pay for certain capital improvements made at the
shopping center. In February 1995, the two mortgage loans
secured by the property were repaid with a portion of the
proceeds from the refinancing of the Southridge Mall mortgage
loan.
The shopping center is being managed by an affiliate of the
Investment Adviser under a management agreement. The affiliate
of the Investment Adviser receives an annual fee equal to 3.75
percent of the gross receipts of the property plus reimbursement
of certain direct expenses in connection with the property
management.
Greendale, Wisconsin - Southridge Mall
The Account, through N/S Associates, owns an interest in an
existing enclosed super regional shopping center in Greendale,
Wisconsin, known as Southridge Mall. The mall shops and five
adjacent department stores comprising the shopping center
contain approximately 1,297,000 square feet of gross leasable
area, of which N/S Associates owns approximately 437,000 square
feet, including the space leased to one of the department
stores. The remaining 860,000 square feet of gross leasable
area are occupied by four other department stores, three of
which own their own stores and a portion of the parking area.
The fourth department store leases its space from an
unaffiliated third party.<PAGE>
PAGE 26
N/S Associates acquired its interest in the shopping center for
a purchase price of approximately $115,401,000, of which
$96,865,000 was paid in cash at closing. The property was
encumbered by a first mortgage loan with an outstanding
principal balance at December 31, 1994 of approximately
$15,506,000. In addition to the purchase price, a reserve of
approximately $7,250,000 was established for capital
improvements, all of which has been spent as of December 31,
1994. In February 1995, the mortgage loan secured by the
property was repaid with a portion of the proceeds from a new
mortgage loan in the principal amount of $35,000,000. The new
mortgage loan has a term of seven years, bears interest at 8.35
percent per annum and requires monthly payments of interest only
prior to maturity. Proceeds from the new mortgage loan were
also used to repay the two mortgage loans secured by Northridge
Mall. The remaining net proceeds from the new loan are expected
to be used to pay approximately $2,900,000 of tenant improvement
and other capital costs expected to be incurred for Northridge
and Southridge Malls.
The shopping center is being managed by an affiliate of the
Investment Adviser under a management agreement. The affiliate
of the Investment Adviser will receive an annual fee equal to
3.75 percent of the gross receipts of the property plus
reimbursement of certain direct expenses in connection with the
property management.
Joint Venture Partnership - Monmouth Associates
IDS Life, on behalf of the Account, entered into a joint venture
partnership called Monmouth Associates, which on October 27,
1988 (i) acquired certain land underlying a super regional
shopping center in Eatontown, New Jersey known as Monmouth Mall,
(ii) leased the land to the owner of the shopping center
pursuant to a long-term ground lease, and (iii) executed a first
leasehold mortgage loan to the owner of the shopping center
secured by the leasehold real estate and the improvements
thereon as more fully described below. The owner of the
shopping center (the Borrower/Lessee) is a partnership whose
partners are not affiliated with Monmouth Associates.
The terms of Monmouth Associates' partnership agreement provide
that its annual net cash flows and net sales or refinancing
proceeds generally will be distributed among all of the partners
in accordance with their respective percentage interests in
Monmouth Associates. The Account contributed approximately
$10,000,000 to Monmouth Associates as its initial capital
contribution. The Account expects to make additional capital
contributions of approximately $685,000. The percentage
interest of the Account in Monmouth Associates is 6.97 percent.
In connection with the investment, the Account paid to IDS Life
and the Investment Adviser their respective portions of the
acquisition and mortgage placement fee amounting to
approximately $375,000.<PAGE>
PAGE 27
Summary of Real Estate Investment Made Through Monmouth
Associates
Eatontown, New Jersey - Monmouth Mall
The Account, through Monmouth Associates, acquired an interest
in the land underlying a shopping center in Eatontown,
New Jersey known as Monmouth Mall. The mall is located on
approximately 90 acres of land, of which Monmouth Associates
owns approximately 88.5 acres, subject to the rights of one of
the department store tenants to acquire the land underlying its
store and the improvements thereon for nominal consideration.
The remaining acres are owned by 2 department stores. Monmouth
Associates acquired its interest in the land for a purchase
price of approximately $13,500,000.
Monmouth Associates entered into an agreement whereby the land
underlying the mall is leased back to the Borrower/Lessee under
a long-term ground lease. The long-term ground lease, which has
a term of 75 years, provides for monthly base rent aggregating
$780,000 per annum for the first two lease years, $1,040,000 per
annum for the third lease year, and $650,000 per annum for each
lease year thereafter. The long-term ground lease also provides
for contingent rent, payable quarterly out of the excess, if
any, of substantially all of the gross receipts from the
shopping center received by the Borrower/Lessee over certain
base amounts, equal to the sum of (x) a specified annual amount
(commencing in the fourth lease year at $390,000 per annum and
increasing in the sixth lease year to $520,000 per annum),
increased until paid at the "applicable rate" of interest
payable under the first leasehold mortgage loan described below
(such amount as so increased herein called the "rent shortfall
amount"), plus (y) 15 percent of the balance of such excess
gross receipts remaining after deducting the aggregate amount
paid at such time of the rent shortfall amount under the
long-term ground lease and the "interest shortfall amount" under
the first leasehold mortgage loan as described below.
In addition, Monmouth Associates made a first leasehold
participating mortgage loan in the original principal amount of
$128,920,000 to the Borrower/Lessee which is secured by the
leasehold real estate and the improvements thereon. The current
loan amount is $127,670,000. The loan has a term of 15 years,
which may be extended from time to time at the option of
Monmouth Associates for up to an additional 20 years. The loan
provides for monthly payments of base interest at a base rate of
approximately 5.98 percent per annum for the first two loan
years, approximately 7.97 percent per annum for the third loan
year and approximately 5.00 percent per annum for each loan year
thereafter. The first leasehold mortgage also provides for
quarterly payments of contingent interest, payable out of the
excess, if any, of substantially all of the gross receipts from
the shopping center received by the Borrower/Lessee over certain
base amounts, equal to the sum of (x) the difference between the
amount of interest payable on the loan at the "applicable rate"<PAGE>
PAGE 28
and that payable at the base rate described above, increased
until paid at the applicable rate (such amount as so increased
herein called the "interest shortfall amount"), plus (y) 45
percent of the balance of such excess gross receipts remaining
after deducting the aggregate amount paid at such time of the
rent shortfall amount under the ground lease and the interest
shortfall amount under the first leasehold mortgage loan. The
"applicable rate" under the loan is 5.98 percent per annum for
the first two loan years, 7.97 percent per annum for the next
three loan years and 8.97 percent per annum for each loan year
thereafter. In addition, upon a joint sale or refinancing of
the land and improvements or at maturity of the leasehold
mortgage loan, Monmouth Associates is entitled to receive
certain participations in the proceeds from such sale or
refinancing after payment of its investment in the land and/or
repayment of the principal amount of the leasehold mortgage
loan. In April 1992, Monmouth Associates discontinued the
accrual of contingent interest on the leasehold mortgage loan as
a result of uncertainty as to the collectibility of such
contingent interest in light of the previous decrease in the
estimated value of Monmouth Mall. In addition, no contingent
rent was accrued under the ground lease for 1994, 1993 or 1992.
Monmouth Associates is obligated to make certain additional
loans to the Borrower/Lessee under certain circumstances to
finance the cost of 60 percent of tenant improvements or other
ordinary capital expenditures. In addition, in May 1994,
Monmouth Associates made a loan to finance the cost of a
renovation of the shopping center, which commenced during the
third quarter of 1994. The renovation consists of, among other
things, the elimination of certain outparcels, the addition of
a food court and cinema, and the re-merchandising of
approximately 300,000 square feet of gross leasable area. The
renovation loan from Monmouth Associates bears interest at a
fixed interest rate of 10.5 percent per annum. In addition,
Monmouth Associates' participation in certain levels of sale or
refinancing proceeds from the property will be increased until
Monmouth Associates has received aggregate payments equal to an
internal rate of return of 11 percent per annum on its
investments in the land and/or the first leasehold mortgage
loan. The maximum amount of the renovation loan is
$29,100,000, and the cost of the renovation is currently
estimated to be $28,500,000. Monmouth Associates is funding the
renovation loan out of its cash reserves, cash flow and
additional capital contributions made pro rata based upon the
respective interests of the joint venture partners in Monmouth
Associates. The renovation loan requires monthly payments of
interest only until maturity when the entire principal amount
and any accrued and unpaid interest will be due. The renovation
loan will mature contemporaneously with the first leasehold
mortgage loan in October 2003, subject to acceleration or
extension of the loan by Monmouth Associates under certain
circumstances.
<PAGE>
PAGE 29
Joint Venture - 1225 Connecticut Avenue, N.W.
Washington, D.C. - 1225 Connecticut Avenue, N.W.
In May 1990, IDS Life, on behalf of the Account, acquired an
interest in a newly formed Delaware corporation, 1225 Investment
Corporation (the Corporation) owned jointly with certain other
persons described below. The Corporation acquired an office
building located in Washington, D.C. known as 1225 Connecticut
Avenue, N.W. (1225 Connecticut).
The office building, which was completed in 1968, is an
eight-story reinforced concrete frame building containing
184,432 square feet of rentable office space, 18,498 square feet
of rentable retail space, 6,416 square feet of below grade
storage space and 100,024 square feet of subsurface parking
space for over 300 automobiles.
The Corporation has elected to qualify as a real estate
investment trust (REIT) pursuant to sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the Code). For
each taxable year that the Corporation qualifies as a REIT, the
Corporation in general will not be subject to federal corporate
income tax or the District of Columbia corporate franchise tax
on its regular taxable income and will not be taxed on long-term
capital gain income to the extent its income is distributed as
dividends. If the Corporation were to fail to qualify as a
REIT, it would be taxed at rates applicable to a corporation on
its taxable income, whether or not distributed.
The Account owns approximately 16.3 percent of the outstanding
shares of common stock of the Corporation. Certain of the
outstanding shares of common stock of the Corporation not owned
by the Account are owned by an affiliate of the Investment
Adviser.
The Corporation purchased 1225 Connecticut from the seller for a
purchase price of approximately $54,125,000 (net of prorations
and miscellaneous closing costs), consisting of $51,425,000 paid
in cash and assumption of approximately $2,700,000 of mortgage
indebtedness then encumbering the property. The Corporation
paid approximately $2,130,000 for real estate brokerage
commissions to an independent third party and certain closing
costs. The Account contributed $9,000,000 for its interest in
the Corporation. The Account has also paid acquisition fees
amounting to $337,500.
At December 31, 1993, the outstanding balance of the mortgage
loan encumbering the property was approximately $1,695,000. The
mortgage loan bore interest at a rate of 6.50 percent per annum
and required monthly payments of principal and interest
aggregating approximately $426,300 per annum. In January 1994,
the Corporation refinanced its mortgage loan with a first
mortgage loan in the principal amount of $7,000,000 bearing<PAGE>
PAGE 30
interest 6.98 percent per annum. The new loan requires monthly
payments of interest only aggregating $488,600 per annum until
maturity in February 2001 when the principal amount together
with accrued interest will be due and payable. Under certain
circumstances, the principal amount of the loan may be prepaid
in whole (but not in part), subject to a prepayment premium.
Pursuant to the deed of trust securing the mortgage loan, the
Corporation is prohibited from modifying Ernst & Young's primary
lease or from entering into certain other tenant leases without
the lender's consent. Prior to selling the property or
encumbering the property with any additional debt, the
Corporation must obtain the consent of the lender, which may be
arbitrarily withheld. However, subject to certain restrictions,
the Corporation has a one-time right to transfer title to the
property together with an assumption of the mortgage loan.
The property is being managed under an agreement pursuant to
which the manager is obligated to manage 1225 Connecticut,
collect all of the receipts from operations and, to the extent
available from such receipts, pay all of the expenses of 1225
Connecticut. The manager is paid a fee equal to 2.5 percent of
the gross revenues of 1225 Connecticut, plus reimbursement for
certain direct expenses of the manager. The property had
previously been managed by JMB Properties Company, an affiliate
of the Investment Adviser. In December 1994, JMB Properties
Company sold substantially all of its assets to an unaffiliated
third party, and certain management personnel of JMB Properties
Company became management personnel of the third party. As a
result of the sale, the successor to JMB Properties Company's
assets now acts as property manager of the 1225 Connecticut
office building on the same terms that existed prior to the
sale.
Pursuant to a lease currently in effect, an unaffiliated third
party leases and operates the entire parking garage (subject to
certain parking rights provided for tenants of the property)
until November 1997. The lease provides for a fixed rent
payment of $485,000 a year (which reflects an increase at the
end of 1993 from $430,000 a year), provides that the lessee
shall pay the operating expenses of the parking garage and does
not provide such lessee with an option to extend the term of the
lease.<PAGE>
PAGE 31
Unconsolidated Joint Ventures - Summary Information
Summary information for the Account of its investments in
Unconsolidated Joint Ventures for the years ended
December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Year ended Year ended
Dec. 31, 1994 Dec. 31, 1993
<S> <C> <C>
Account's investment in Unconsolidated
Joint Ventures $ 27,044,876 $ 28,769,085
Account's share of net investment income from
Unconsolidated Joint Ventures $ 2,094,682 $ 2,097,089
Net depreciation in Unconsolidated Joint Ventures $ (2,361,701) $ (188,079)
Total net investment income of Unconsolidated
Joint Ventures $ 27,482,000 $ 25,638,000
Total assets of Unconsolidated Joint Ventures $ 393,717,000 $ 414,148,000
Total liabilities of Unconsolidated Joint Ventures $ 48,558,000 $ 44,602,000
</TABLE>
Participation in Mortgage Loan - Riverpoint Associates
Chicago, Illinois - Riverpoint Center
In August 1989, IDS Life, on behalf of the Account, participated
in the initial funding of a non-recourse participation first
mortgage loan in the principal amount of $26,000,000. The
Account's share of the initial funding was $2,666,660 or 10.26
percent of this loan. The remaining portion of the loan is
funded by affiliates of the Investment Adviser (herein, the
Account and said affiliates are collectively called the
Lenders). The Loan is secured by a first mortgage on a shopping
center known as Riverpoint Center in Chicago, Illinois. The
shopping center is owned by a partnership (the Borrower) whose
general partners are not affiliated with any of the Lenders. In
connection with the loan, the Account paid to the Investment
Adviser a mortgage placement fee amounting to approximately
$108,000, less $37,500 in loan origination fees paid to the
Investment Adviser by the Borrower, for a net fee paid of
approximately $70,500 paid by the Account.
Additional amounts aggregating approximately $2,040,000 (of
which the Account's share was approximately $209,000) have been
funded since the Initial Funding. The Borrower did not qualify
for any additional fundings above the $28,040,000 which has been
funded to date, and no additional fundings will be made by the
Lenders.
The ten-year loan requires periodic payments of interest only
and bears basic interest at the rate of 8.84 percent per annum
in the first loan year, 8.75 percent per annum during the second
loan year, increasing 0.50 percent per annum in the fourth and
0.25 percent per annum in the seventh loan year to a maximum<PAGE>
PAGE 32
rate of 9.50 percent per annum, payable monthly in advance. The
loan also provides for additional annual simple accrual of
interest at the rate of 2.00 percent per annum payable upon
prepayment or maturity. For financial reporting purposes,
commencing in August of 1991, the Account suspended recognition
of income related to the simple accrual interest receivable
(deferred until maturity).The loan also provides for additional
interest in an amount equal to a percentage of annual gross
income from the underlying property (exclusive of tenant
reimbursement of expenses) in excess of a base amount and, on
sale or repayment of the loan, an amount equal to a percentage
of the subsequent increase in the value of the underlying
property in excess of a specified amount. Such amounts of
additional interest payments made by the Borrower will be used
to offset, on a dollar-for-dollar basis, the amount of accrued
interest payable. The loan is generally non-recourse to the
borrower and its partners.
The shopping center, completed in 1989, is located on
approximately 17 acres and consists of approximately 200,800
square feet of gross leasable area.
5. Investments in Wholly-owned Real Estate Property
Fairfax County, Virginia - West Springfield Terrace Apartments
In August 1989, IDS Life, on behalf of the Account, acquired a
244-unit garden apartment complex known as West Springfield
Terrace Apartments, which is located in Fairfax County,
Virginia.
The apartment complex, which was completed in 1978, consists of
17 separate three and four-story buildings of wood frame with
brick veneer construction containing 52 one-bedroom units, 22
one-bedroom and den units, 118 two-bedroom units, 22 two-bedroom
and den units, and 30 three-bedroom units. The complex contains
a swimming pool, tennis court, clubhouse and approximately 380
parking spaces.
The Account paid $15,222,278 for the apartment complex in cash
at closing, excluding closing costs and prorations. In
connection with the acquisition of the property, the Account
paid a prepayment charge at closing of $92,221 to the lender
that held the mortgage loan on the property. The Account also
paid to IDS Life and the Investment Adviser their respective
portions of the acquisition fee amounting to $274,834. At the
time of the acquisition it was anticipated that an additional
amount of approximately $1,450,000 would be used by the Account
to pay the cost of upgrading kitchens and bathrooms and certain
other upgrades and capital improvements at the complex. The
renovation project was subsequently increased to include
replacing certain carpets in units as they were renovated and to
increase the number of units that received certain upgrades. The
renovation project was completed during 1992 at an aggregate
cost of approximately $1,900,000. To date the Account has paid
IDS Life and the Investment Adviser their respective portions of
the acquisition fee amounting to $18,000 in connection with the
renovation project. <PAGE>
PAGE 33
In November 1989, the Account obtained a loan from an
institutional lender in the principal amount of $8,000,000
secured by a first mortgage on the property. At December 31,
1994, the current balance of the mortgage loan encumbering the
property was approximately $7,852,000. The loan has a term of
seven years and bears interest at a rate of 9.50 percent per
annum. The loan required monthly payments of interest only
during the first three loan years and thereafter is amortizable
over a 27-year schedule through monthly payments of principal
and interest aggregating $824,400 per annum until November 1996,
when the remaining principal balance and any accrued and unpaid
interest of approximately $7,704,000 is due and payable.
The apartment complex is being managed for a fee equal to 5.00
percent of the gross revenues from the property, plus
reimbursement of certain direct expenses of the manager. The
property had previously been managed by JMB Properties Company,
an affiliate of the Investment Adviser, but since December 1994
has been managed on the same terms by an unaffiliated third
party that purchased substantially all of JMB Properties
Company's assets, as discussed in Note 4 in connection with the
1225 Connecticut office building.
6. Line of Credit with IDS Life
In March 1994, the Account obtained a short-term revolving line
of credit for up to $10 million from IDS Life to pay for
contract surrenders and other obligations under the Contracts.
The line of credit is for a one-year term and is automatically
renewed at each anniversary for an additional one-year term
subject to termination by one party giving 30 days' prior
written notice of termination to the other party. Borrowings
under the line of credit must be made in increments (or
multiples) of $100,000. Outstanding borrowings under the line
of credit bear interest at a floating rate equal to the 30-day
London Interbank Offered Rate (LIBOR), adjusted on a monthly
basis. The line of credit requires monthly payments of interest
only until the earlier of maturity or termination of the line of
credit, when the entire outstanding principal plus any accrued
and unpaid interest on the line of credit will be due and
payable. Outstanding principal may be repaid in whole or in
part in increments (or multiples) of $100,000, together with any
accrued and unpaid interest thereon, at any time without premium
or penalty. Borrowings under the line of credit are generally
unsecured, although IDS Life has a right of set off for
outstanding borrowings against any deposits or credits of the
Account held by IDS Life. At December 31, 1994, $2,100,000 was
outstanding on the line of credit at a rate of 6.125% per annum.
<PAGE>
PAGE 34
Schedule III
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
Participation in Mortgage Loan on Real Estate and
Interest Earned on Participation in Mortgage
December 31, 1994
<TABLE>
<CAPTION>
Part 1 - Participation in Mortgage Part 2 - Interest Earned on
Loan on Real Estate at Close of Year on Participation in Mortgage
Liens on Shopping Center:
Principal unpaid Amount of Interest due
Riverpoint Center Carrying at close mortgage being & accrued at Interest
Chicago, Illinois Amount (A) of period foreclosed end of period Income Earned
<S> <C> <C> <C> <C> <C>
1994 $ 2,994,023 $ 2,875,853 $ -- $ -- $ 265,288
1993 $ 2,995,600 $ 2,875,853 $ -- $ -- $ 266,600
1992 $ 2,823,227 $ 2,875,853 $ -- $ 21,977 $ 256,846
(A) - Reconciliation of the carrying value of the participation in the mortgage loan:
1994 1993 1992
Balance at the beginning of year........... $ 2,995,600 $ 2,823,227 $ 2,898,962
Changes during year:
Unrealized appreciation (depreciation)... (1,577) 172,373 (75,735)
Balance at end of year..................... $ 2,994,023 $ 2,995,600 $ 2,823,227
<PAGE>
PAGE 35
Schedule IV
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
Real Estate Owned and Rental Income
December 31, 1994
Part 1 - Real Estate Owned at End of Year (B)
Apartment Complex:
West Springfield Amount at Amount at
Terrace Apartments which carried Cost of Unrealized which carried
Fairfax County, Amount of at beginning improvements, Appreciation at close of
Virginia encumbrance of period (A) etc. (Depreciation) period (B)
1994 $ 7,852,279 $15,882,183 $ 110,874 $ -- $15,993,057
1993 $ 7,926,821 $15,549,118 $ 24,825 $ 308,240 $15,882,183
1992 $ 7,994,633 $16,670,450 $ 448,422 $(1,569,754) $15,549,118
Part 2 - Rental Income
Rents due Total rental Expended for
and accrued income interest taxes, Net income
at end of applicable repairs, and applicable
period to period expenses to period
1994 $ (1,895) $ 2,235,867 $ 1,792,255 $ 443,612
1993 $ 3,929 $ 2,251,285 $ 1,770,999 $ 480,286
1992 $ 3,185 $ 2,202,548 $ 1,730,533 $ 472,015
(A) - Reconciliation of real estate owned:
1994 1993 1992
Balance at the beginning of year............ $ 15,882,183 $ 15,549,118 $ 16,670,450
Additions (deductions) during year:
Improvements, etc......................... 110,874 24,825 448,422
Unrealized appreciation(depreciation)..... -- 308,240 (1,569,754)
Balance at end of year...................... $ 15,993,057 $ 15,882,183 $ 15,549,118
(B) - Reserve for depreciation is not applicable as real estate owned is stated at estimated fair
market value.
</TABLE>
<PAGE>
PAGE 36
Independent Auditors' Report
The Board of Directors of IDS Life
Insurance Company and Contract
Owners of IDS Life Account RE:
We have audited the combined financial statements of N/S
Associates, Monmouth Associates and 1225 Investment Corporation,
unconsolidated joint ventures of IDS Life Account RE (Note 1), as
listed in the accompanying index. In connection with our audits of
the combined financial statements, we also have audited the
combined financial statement schedules as listed in the
accompanying index. These combined financial statements and
combined financial statement schedules are the responsibility of
the Investment Adviser. Our responsibility is to express an
opinion on these combined financial statements and combined
financial statement schedules 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
combined financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by the Investment Adviser, as well as
evaluating the overall combined financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial
position of N/S Associates, Monmouth Associates and 1225 Investment
Corporation, at December 31, 1994 and 1993 and the results of their
combined operations and combined cash flows for each of the years
in the three year period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our
opinion, the related combined financial statement schedules, when
considered in relation to the basic combined financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note 1, the combined financial statements include
assets and liabilities stated at market values which have been
estimated by the Investment Adviser. Such market value estimates
involve subjective judgments and the actual market values can only
be determined by negotiation between independent third parties.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 15, 1995<PAGE>
PAGE 37
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Combined Balance Sheets
December 31, 1994 and 1993
Assets
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
Investments in real estate $373,654,000 392,310,000
Cash and cash equivalents (note 1) 5,727,000 5,211,000
Short-term investments 7,589,000 9,309,000
Rents, interest, and other receivables 6,465,000 5,867,000
Other assets 282,000 1,451,000
$393,717,000 414,148,000
Combined Liabilities and Partners' Capital Accounts
Mortgage notes payable (note 3) $ 37,929,000 33,772,000
Accounts payable and other accrued expenses 10,629,000 10,830,000
-- --
Total liabilities 48,558,000 44,602,000
Commitments and contingencies (notes 2 and 4)
Partners' capital accounts (notes 1 and 2):
IDS Life Account RE:
Capital contributions 32,171,000 32,171,000
Cumulative net investment income 11,858,000 9,764,000
Cumulative share of net unrealized depreciation (7,708,000) (5,347,000)
Cumulative cash distributions (9,276,000) (7,819,000)
27,045,000 28,769,000
Venture partners:
Capital contributions 370,809,000 370,809,000
Cumulative net investment income 147,887,000 122,499,000
Cumulative share of net unrealized depreciation (86,200,000) (54,124,000)
Cumulative cash distributions (114,382,000) (98,407,000)
318,114,000 340,777,000
Total partners' capital accounts 345,159,000 369,546,000
$393,717,000 414,148,000
See accompanying notes to combined financial statements.
<PAGE>
PAGE 38
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Combined Statements of Operations
Years Ended December 31, 1994, 1993 and 1992
<C>
1994 1993 1992
Investment income:
Rental income $41,706,000 40,150,000 40,750,000
Interest 8,083,000 7,434,000 8,521,000
49,789,000 47,584,000 49,271,000
Investment expenses:
Mortgage and other interest 3,224,000 2,979,000 3,089,000
Real estate taxes 8,106,000 8,967,000 8,723,000
Property operating expenses 10,657,000 9,752,000 9,248,000
General and administrative 320,000 248,000 112,000
22,307,000 21,946,000 21,172,000
Net investment income $ 27,482,000 25,638,000 28,099,000
Unrealized depreciation on investments
in real estate (note 1) $(34,437,000) (9,455,000) (35,864,000)
See accompanying notes to combined financial statements.
<PAGE>
PAGE 39
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Combined Statements of Partners' Capital Accounts
Years Ended December 31, 1994, 1993 and 1992
Combined IDS Life Venture
Total Account RE Partners
Balance at December 31, 1991 $405,205,000 33,777,000 371,428,000
Net investment income 28,099,000 2,073,000 26,026,000
Net unrealized depreciation on investments
in real estate (35,864,000) (5,560,000) (30,304,000)
Cash distributions and dividends (22,301,000) (1,685,000) (20,616,000)
Balance at December 31, 1992 375,139,000 28,605,000 346,534,000
Net investment income 25,638,000 2,097,000 23,541,000
Net unrealized depreciation on investments
in real estate (9,455,000) (188,000) (9,267,000)
Cash distributions and dividends (21,776,000) (1,745,000) (20,031,000)
Balance at December 31, 1993 369,546,000 28,769,000 340,777,000
Net investment income 27,482,000 2,094,000 25,388,000
Net unrealized depreciation on investments
in real estate (34,437,000) (2,361,000) (32,076,000)
Cash distributions and dividends (17,432,000) (1,457,000) (15,975,000)
Balance at December 31, 1994 $345,159,000 27,045,000 318,114,000
See accompanying notes to combined financial statements.
<PAGE>
PAGE 40
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Combined Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
Cash flows from operating activities:
Net investment income $ 27,482,000 25,638,000 28,099,000
Adjustments to reconcile net investment
income to net cash provided by operating
activities represented by changes in:
Rents and other receivables (598,000) 378,000 (2,084,000)
Other assets 222,000 (1,292,000) 1,197,000
Accounts payable and accrued expenses (201,000) (1,309,000) (1,318,000)
Net cash provided by operations 26,905,000 23,415,000 25,894,000
Cash flows from investing activities:
Net (purchases) sales of short-term investments 1,720,000 (9,309,000) --
Additions to investments in real estate (14,834,000) (2,389,000) (3,250,000)
Net cash provided by (used in)
investing activities (13,114,000) (11,698,000) (3,250,000)
Cash flows from financing activities:
Principal payments on mortgages payable (2,843,000) (1,358,000) (1,250,000)
Cash distributions to partners (13,500,000) (18,000,000) (19,500,000)
Proceeds from mortgage note payable 7,000,000 -- --
Cash dividends paid to shareholders (3,932,000) (3,776,000) (2,801,000)
Net cash used in financing activities (13,275,000) (23,134,000) (23,551,000)
Net increase in cash and cash
equivalents $ 516,000 (11,417,000) (907,000)
Cash and cash equivalents beginning
of year 5,211,000 16,628,000 17,535,000
Cash and cash equivalents end
of year $ 5,727,000 5,211,000 16,628,000
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest $ 3,201,000 2,989,000 3,097,000
Non-cash investing and financing activities:
Unrealized depreciation on
investments in real estate $(34,437,000) (9,455,000) (35,864,000)
See accompanying notes to combined financial statements.
</TABLE>
<PAGE>
PAGE 41
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Notes to Combined Financial Statements
Years ended December 31, 1994, 1993, and 1992
(1) Organization and Basis of Accounting
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the
Securities and Exchange Commission. The combined financial
statements include the accounts of the unconsolidated joint ventures
in which IDS Life Account RE of IDS Life Insurance Company owns an
equity interest. The unconsolidated joint ventures are N/S
Associates, Monmouth Associates and 1225 Investment Corporation.
The accompanying combined financial statements have been prepared
on the accrual basis of accounting.
The ventures have implemented Statement of Accounting Standards
No. 95 "Statement of Cash Flows" which classifies receipts and
payments according to whether they stem from operating, investing or
financing activities. The ventures record amounts held in U.S.
Government obligations at cost, which approximates market. For the
purposes of these statements, the ventures' policy is to consider all
such amounts held with original maturities of three months or less
($5,989,000 and $3,774,000 at December 31, 1994 and 1993,
respectively) as cash equivalents with any remaining amounts
reflected as short-term investments. Short-term investments
(generally with original maturities of one year or less) are being
held to maturity and are held at amortized cost which approximates
market.
Investments in real estate are stated at estimated fair value.
A description of the valuation process is contained in Note 2 of
Notes to Financial Statements of the Account. Such note is
incorporated herein by reference.
No provision for State or Federal income taxes has been made for
N/S Associates or Monmouth Associates as the liability for such
taxes, if any, is expected to be that of the venture partners rather
than the venture. 1225 Investment Corporation has elected and
qualifies to be treated as a real estate investment trust for Federal
income tax purposes. The Corporation had no Federal income tax
liabilities for taxable years ended December 31, 1994, 1993 and 1992.
Maintenance and repair expenses are charged to operations as
incurred. Significant costs of physical improvements are capitalized
as part of investments in real estate.
Fixed rental income is recorded when the obligation for the
payment of rent is incurred according to the terms of the lease
agreements.<PAGE>
PAGE 42
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Notes to Combined Financial Statements - (Continued)
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires
entities with total assets exceeding $150 million at December 31,
1994 to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is
defined in the Statement as the amount at which the instrument could
be exchanged in a current transaction between willing parties, other
than in a forced or liquidation sale. The ventures believe the
carrying amount of its current assets and liabilities (excluding
current portion of long-term debt) approximates SFAS 107 value due to
the relatively short maturity of these instruments. There is no
quoted market value available for any of the ventures' other
instruments. Based upon estimates of current market rates for debt
with similar terms, the ventures discounted the scheduled loan
payments to maturity. Based upon this calculation, the ventures
believe that the carrying value of the mortgage notes payable
approximate market value.
Certain reclassifications have been made to the 1993 and 1992
financial statements to conform with the 1994 presentation.
(2) Venture Agreements
A description of the venture agreements are contained in Note 4
of Notes to Financial Statements of the Account for the year ended
December 31, 1994. Such note is incorporated herein by reference.
(3) Mortgage Notes Payable
Mortgage notes payable consist of the following at December 31,
1994 and 1993:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
9.125% mortgage note due January 1, 2008 secured by Northridge
Mall; payable in monthly installments of principal and
interest of $165,000, reference is made to Note 6 (a) $15,058,000 15,631,000
10% mortgage note due October 1, 2012, secured by Northridge
Mall; payable in monthly installments of principal and interest of
$4,000, reference is made to Note 6 (a) 365,000 371,000
8.42% mortgage note due October 1, 2001, secured by Southridge
Mall; payable in monthly installments of principal and interest of
$158,000, reference is made to Note 6 (a) 15,506,000 16,075,000
6.5% mortgage note, due March 1, 1998, secured by 1225
Connecticut Avenue; payable in monthly installments of
$35,000 (including interest); in January 1994 the principal
balance was refinanced -- 1,695,000
6.98% mortgage note, due February 1, 2001, secured by 1225
Connecticut Avenue; interest only, payable monthly 7,000,000 --
Total mortgage notes payable $37,929,000 33,772,000
/TABLE
<PAGE>
PAGE 43
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Notes to Combined Financial Statements - (Continued)
Five year maturities of mortgage notes payable are as follows:
1995 $1,254,000
1996 1,369,000
1997 1,494,000
1998 1,631,000
1999 1,780,000
(4) Leases - As Property Lessor
The venture has determined that all leases relating to the two
retail properties and the office building are properly classified as
operating leases; therefore, rental income is reported when earned.
Leases with tenants range in term from one to thirty-two years and
provide for fixed minimum rent and partial to full reimbursement of
operating costs. In addition, substantially all retail leases
provide for additional rent based upon percentage of tenants' sale
volumes over certain specified amounts.
Minimum lease payments to be received in the future under the
above operating lease agreements, are as follows:
1995 $20,046,882
1996 19,281,728
1997 17,960,772
1998 16,005,720
1999 14,154,051
Thereafter 61,845,875
149,295,028
Contingent rent (based on sales by property tenants) from the
retail investments included in rental income is $1,010,000,
$1,000,000 and $2,224,000 in 1994, 1993 and 1992, respectively.
Monmouth Associates entered into an agreement whereby the land
underlying the Monmouth shopping center is leased under a long-term
ground lease. The long-term ground lease, which has a term of 75
years, provides for monthly base rent aggregating $780,000 per annum
for the first two lease years, $1,040,000 per annum for the third
lease year, and $650,000 per annum for each lease year thereafter.
(5) Related Party Transactions
NS Associates has entered into a management agreement with JMB
Retail Properties Company, (the "Retail Manager"). The Retail
Manager is entitled to receive a fee of 3.75% of gross receipts from
the operations of the Malls. Management fees earned by the Retail<PAGE>
PAGE 44
IDS LIFE ACCOUNT RE
OF IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Notes to Combined Financial Statements - (Continued)
Manager are included in property operating expenses and aggregated
approximately $1,266,000 and $1,186,000 for the periods ended
December 31, 1994 and 1993, respectively.
1225 Investment Corporation had entered into a management
agreement with JMB Properties Company. During December 1994, JMB
Properties Company assigned the management agreement to Heitman
Washington D.C. Properties, Ltd. ("Office Manager"). The Office
Manager is entitled to receive a fee of 2.5% of gross receipts from
the operations of the Property. Management fees earned by the Office
Manager are included in property operating expenses and aggregated
approximately $196,000 and $176,000 for the years ended December 31,
1994 and 1993, respectively.
(6) Subsequent Events
(a) NS Associates
On February 1, 1995, NS Associates refinanced the existing
mortgage note on Southridge Mall. The new mortgage note is
in the amount of $35,000,000 and was used to retire the
existing mortgage notes at Southridge and Northridge Malls.
The new mortgage note secured by Southridge Mall bears
interest at 8.35% per annum and provides for interest only
payments until maturity in 2002.
On February 28, 1995, the Trustees authorized and paid a cash
distribution to the partners aggregating $4,000,000. Each
partner received its proportionate share based on its
respective ownership percentage.
(b) 1225 Investment Corporation
In February 1995, 1225 Investment Corporation paid a dividend
of $1,125,000 ($20 per share) to the shareholders of record
as of December 31, 1994.<PAGE>
PAGE 45
Schedule III
IDS LIFE ACCOUNT RE of
IDS LIFE INSURANCE COMPANY
Monmouth Associates
Unconsolidated Joint Venture of IDS Life Account RE
Participation in Mortgage Loan on Real Estate and
Interest Earned on Participation in Mortgage
December 31, 1994
<TABLE>
<CAPTION>
Part 1 - Participation in Mortgage Part 2 - Interest Earned on
Loan on Real Estate at Close of Year on Participation in Mortgage
Liens on Shopping Center:
Principal unpaid Amount of Interest due
Monmouth Mall Carrying at close mortgage being & accrued at Interest
Eatontown, New Jersey Amount (A) of period foreclosed end of period Income Earned
<S> <C> <C> <C> <C> <C>
1994 $ 119,154,000 $ 141,056,000 $ -- $ 3,960,000 $ 7,641,000
1993 $ 119,650,000 $ 132,338,000 $ -- $ 3,437,000 $ 7,166,000
1992 $ 119,650,000 $ 130,688,000 $ -- $ 3,028,000 $ 7,964,000
(A) - Reconciliation of the carrying value of the participation in the mortgage loan:
1994 1993 1992
Balance at the beginning of year........... $ 119,650,000 $ 119,650,000 $ 118,000,000
Changes during year:
Additional fundings...................... 9,318,000 -- 1,650,000
Unrealized depreciation.................. (9,814,000) -- --
Balance at end of year..................... $ 119,154,000 $ 119,650,000 $ 119,650,000
<PAGE>
PAGE 46
Schedule IV
IDS LIFE ACCOUNT RE of
IDS LIFE INSURANCE COMPANY
N/S Associates, Monmouth Associates and 1225 Investment Corporation
Unconsolidated Joint Ventures of IDS Life Account RE
Combined Real Estate Owned and Rental Income
December 31, 1994
Part 1 - Real Estate Owned at End of Year (C)
Amount at
Cost of Unrealized which carried
Amount of improvements, Appreciation at close of
encumbrances Initial Cost etc. (Depreciation) period (A)(B)
Retail properties:
Northridge Mall,
Milwaukee, WI $ 15,423,000 $108,107,000 $ 13,618,000 $(56,725,000) $ 65,000,000
Southridge Mall,
Greendale, WI $ 15,506,000 $115,401,000 $ 14,351,000 $ (6,252,000) $123,500,000
Office Building:
1225 Connecticut Ave.,
Washington, D.C. $ 7,000,000 $ 54,775,000 $ 6,298,000 $ (8,073,000) $ 53,000,000
Ground Lease:
Monmouth Mall,
Eatontown, NJ $ -- $ 13,000,000 $ -- $ -- $ 13,000,000
$ 37,929,000 $291,283,000 $ 34,267,000 $(71,050,000) $254,500,000
Part 2 - Rental Income
Rents due
and accrued
at end of
period
Retail Properties:
Northridge Mall,
Milwaukee, WI $ 403,000
Southridge Mall,
Greendale, WI $ 1,682,000
Office Building:
1225 Connecticut Ave.,
Washington, D.C. $ 51,000
Ground Lease:
Monmouth Mall,
Eatontown, NJ $ --
$ 2,136,000
(A) The aggregate cost of real estate owned at December 31, 1994 for Federal Income tax purposes was
approximately $325,380,000.
(B) Reconciliation of real estate owned:
1994 1993 1992
Balance at the beginning of period.......... $272,660,000 $279,726,000 $313,990,000
Additions (deductions), including
unrealized depreciation................... (18,160,000) (7,066,000) (34,264,000)
Balance at end of year...................... $254,500,000 $272,660,000 $279,726,000
(C) - Reconciliation for depreciation is not applicable as real estate owned is stated at estimated
market value.
/TABLE
<PAGE>
PAGE 47
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Account has no directors or officers. The directors and
principal executive officers of IDS Life Insurance Company are
listed below.
Louis C. Fornetti, 45: Director, IDS Life, since March 1994;
Senior Vice President and Director, American Express Financial
Corporation (AEFC), since February 1985.
David R. Hubers, 52: Director, IDS Life, since September 1989;
President and Chief Executive Officer, AEFC, since August 1993,
and Director since January 1984. Senior Vice President, Finance
and Chief Financial Officer, AEFC, from January 1984 to August
1993.
Richard W. Kling, 54: Director, IDS Life, since February 1984;
President, IDS Life, since March 1994; Executive Vice President,
Marketing and Products, from January 1988 to March 1994. Senior
Vice President, AEFC, since May 1994. Director of IDS Life
Series Fund, Inc. and manager of IDS Life Variable Annuity Funds
A & B.
Paul F. Kolkman, 48: Director, IDS Life, since May 1984;
Executive Vice President, IDS Life, since March 1994; Vice
President, Finance, IDS Life from May 1984 to March 1994; Vice
President, AEFC, since January 1987.
Peter A. Lefferts, 53: Director and Executive Vice President,
Marketing since March 1994; Senior Vice President and Director,
AEFC, since February 1986.
Janis E. Miller, 43: Director and Executive Vice President,
Variable Assets since March 1994; Vice President, AEFC, since
June 1990; Director, Mutual Funds Product Development and
Marketing, AEFC, from May 1987 to May 1990. Director of IDS Life
Series Fund, Inc. and manager of IDS Life Variable Annuity Funds
A and B.
James A. Mitchell, 53: Chairman of the Board since March 1994;
Chief Executive Officer since November 1986; President from July
1984 to March 1994; Executive Vice President, AEFC, since March
1994; Director, AEFC, since July 1984; Senior Vice President,
AEFC, from July 1984 to March 1994.
Barry J. Murphy, 44: Director and Executive Vice President,
Client Service since March 1994; Senior Vice President,
Operations, Travel Related Services (TRS) a subsidiary of
American Express Company, since July 1992; Vice President, TRS,
from November 1989 to July 1992; Chief Operating Officer, TRS,
from March 1988 to November 1989.<PAGE>
PAGE 48
Stuart A. Sedlacek, 37: Director and Executive Vice President,
Assured Assets since March 1994; Vice President, AEFC, since
September 1988.
Melinda S. Urion, 41: Director and Controller, IDS Life, since
September 1991; Executive Vice President since March 1994; Vice
President and Treasurer from September 1991 to March 1994;
Corporate Controller, AEFC, since April 1994; Vice President,
AEFC, since September 1991; Chief Accounting Officer, AEFC, from
July 1988 to September 1991.
Morris Goodwin Jr., 43: Vice President and Treasurer since March
1994; Vice President and Corporate Treasurer, AEFC, since July
1989; Chief Financial Officer and Treasurer, American Express
Trust Company, from January 1988 to July 1989.
William A. Stoltzmann, 46: Vice President, General Counsel and
Secretary since 1985.
The directors, executive officers and certain other offices of JMB
Realty Corporation (JMB), the managing partner of the Investment
Adviser, are listed below. Many of such persons are also officers
and/or directors of numerous affiliated companies of JMB and/or
partners of certain partnerships (herein collectively referred to
as the Associate Partnerships) which are partners, directly or
indirectly, in publicly offered real estate limited partnerships
sponsored by JMB.
Judd D. Malkin, 57, Chairman and Director of JMB, is a director
of Urban Shopping Centers, Inc., an affiliate of JMB engaged in
the business of owning, managing and developing shopping centers,
an officer and/or director of various other JMB affiliates and a
partner of the Associate Partnerships. Until December 1994, he
was also a Trustee of JMB Group Trust I, JMB Group Trust II, JMB
Group Trust III, JMB Group Trust IV and JMB Group Trust V, which
until that time had been advised by an affiliate of the
Investment Adviser. Mr. Malkin has been associated with JMB
since October 1969. Mr. Malkin also is a Director of Catellus
Development Corporation, a major diversified real estate
development company. He is a Certified Public Accountant.
Neil G. Bluhm, 57, President and Director of JMB, is a director
of Urban Shopping Centers, Inc., an affiliate of JMB engaged in
the business of owning, managing and developing shopping centers,
an officer and/or director of various other JMB affiliates and a
partner of the Associate Partnerships. Until December 1994, he
was also a Trustee of JMB Group Trust I, JMB Group Trust II, JMB
Group Trust III, JMB Group Trust IV and JMB Group Trust V, which
until that time has been advised by an affiliate of the
Investment Adviser. Mr. Bluhm has been associated with JMB since
August 1970. He is a member of the Bar of the State of Illinois
and is a Certified Public Accountant.
Burton E. Glazov, 56, Director of JMB, was until December 1990
also Executive Vice President of JMB. Mr. Glazov has been
associated with JMB since June 1971. He is member of the Bar of
the State of Illinois and is a Certified Public Accountant.<PAGE>
PAGE 49
Stuart C. Nathan, 53, Executive Vice President and Director of
JMB, is an officer and/or director of various JMB affiliates and
a partner of the Associate Partnerships. Mr. Nathan has been
associated with JMB since July 1972. He is also a director of
Sportmart Inc., a retailer of sporting goods. He is member of
the Bar of the State of Illinois.
John G. Schreiber, 48, Director of JMB, is also a director of
Urban Shopping Centers, Inc., an affiliate of JMB engaged in the
business of owning, managing and developing shopping centers, and
was, until December 1990, Executive Vice President of JMB.
Mr. Schreiber has been associated with JMB since December 1970.
Mr. Schreiber is President of Schreiber Investments, Inc., a
company which is engaged in the real estate investing business.
He is also a senior advisor and partner of Blackstone Real Estate
Partners, an affiliate of the Blackstone Group, L.P.
Mr. Schreiber also serves as a Trustee of Amli Residential
Property Trust, a publicly-traded real estate investment trust
that invests in multi-family properties. He is also a director
of a number of investment companies advised or managed by T. Rowe
Price Associates and its affiliates. He holds a master's degree
in business administration from the Harvard University
Graduate School of Business.
A. Lee Sacks, 61, Director of JMB, is President and Director of
JMB Insurance Agency, Inc. and a partner of various Associate
Partnerships. Mr. Sacks has been associated with JMB since
December 1972.
H. Rigel Barber, 46, Chief Executive Officer and Executive Vice
President of JMB, is an officer of various JMB affiliates and a
partner of various Associate Partnerships. Mr. Barber has been
associated with JMB since March 1982. He holds a law degree from
the Northwestern University Law School and is a member of the Bar
of the State of Illinois.
Ira J. Schulman, 43, Executive Vice President of JMB, is an
officer of various JMB affiliates and a partner of various
Associate Partnerships. Mr. Schulman has been associated with
JMB since February 1983. He holds a master's degree in business
administration from the University of Pittsburgh.
Gary Nickele, 42, Executive Vice President and General Counsel of
JMB, is an officer and/or director of various JMB affiliates and
a partner of various Associate Partnerships. Mr. Nickele has
been associated with JMB since February 1984. He holds a law
degree from the University of Michigan Law School and is a member
of the Bar of the State of Illinois.
Jeffrey R. Rosenthal, 44, Chief Financial Officer and Managing
Director -- Corporate of JMB, is an officer of various JMB
affiliates and a partner of various Associate Partnerships. Mr.
Rosenthal has been associated with JMB since December 1987. He
is a Certified Public Accountant.
Glenn E. Emig, age 47, Executive Vice President and Chief
Operating Officer of JMB, is an officer of various JMB affiliates
and a partner of various Associate Partnerships. Mr. Emig has<PAGE>
PAGE 50
been associated with JMB since December 1979. He holds a
master's degree in business administration from the Harvard
University Graduate School of Business.
Douglas Cameron, age 45, Executive Vice President of JMB, is an
officer of various JMB affiliates and a partner of various
Associate Partnerships. Mr. Cameron has been associated with JMB
since April 1977. He holds a master's degree in business
administration from the University of Southern California.
Item 11. EXECUTIVE COMPENSATION
Not applicable.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
IDS Life purchased the initial 200,000 units of the Account at
$1.00 per unit. Such units held by IDS Life were redeemed in
April 1990 at the then current accumulation unit value.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Account incurred asset management fees for the year ended
December 31, 1994 of $765,557 of which $614,775 was paid to the
Investment Adviser and the remainder to IDS Life. Asset management
fees incurred for the year ended December 31, 1993 was $773,849, of
which $609,074 was paid to the Investment Adviser and the remainder
to IDS Life.
For the years ended December 31, 1994 and 1993, IDS Life was paid
or reimbursed $502,607 and $549,250, respectively, for mortality
and expense risk fee and $51,225 and $83,122, respectively, for
personnel related expenses incurred in the administration of the
Account.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A.1) See Item 8 for required financial statements.
(A.2) See Item 8 for required financial statements
schedules.
(B) Report on Form 8-K.
No reports on Form 8-K were required by the
Registrant during the year ended December 31, 1994.
No annual report for the fiscal year 1994 or proxy
material for the current year has been distributed to
the contract owners as of March 31, 1995. An annual
report for the period ending December 31, 1994 will
be distributed to contract owners subsequent to this
filing, and copies of such annual report will be
furnished to the Securities and Exchange Commission
at such time.
<PAGE>
PAGE 51
(C) Exhibits.
3.1 Copy of Articles of Incorporation of IDS Life
Insurance Company are hereby incorporated herein by
reference to Exhibit A(6)(b) to Form N-8B-2, File
Number 2-97637, filed April 28, 1986.
3.2 Copy of By-laws of IDS Life Insurance Company are
hereby incorporated herein by reference to Exhibit
A(6)(b) to Form N-8b-2, File Number 2-97637, filed
April 28, 1986.
3.3 Copy of Resolution of the Board of Directors of IDS
Life Insurance Company establishing IDS Life
Account RE is hereby incorporated herein by
reference to Exhibit 3.3 to the Account's Form S-1,
File Number 33-13375, filed April 13, 1987.
4.1 Form of Deferred Variable Annuity Contract is
hereby incorporated herein by reference to Exhibit
4 to the Account's Form S-1 (as amended), File
Number 33-13375, filed July 17, 1987.
4.2 Copy of mortgage loan documents relating to West
Springfield Terrace Apartments is hereby
incorporated herein by reference to Exhibit 4.2 to
the Account's Form S-1 (as amended), File Number
33-13375, filed April 12, 1990.
4.3 Copy of the line of credit agreement, dated
March 30, 1994 between IDS Life and the Account
(including a copy of the executed promissory note,
dated March 30, 1994), filed April 5, 1994.
10.1 Copy of Investment Advisory Agreement between IDS
Life and JMB Annuity Advisors is hereby
incorporated herein by reference to Exhibit 10.1 to
the Account's Form S-1 (as amended), File Number
33-13375, filed April 29, 1988.
10.2 Copy of N/S Associates Joint Venture Agreement
together with certain documents relating to the
purchase of an interest in Northridge Mall is
hereby incorporated herein by reference to Exhibit
10.2 to the Account's Form S-1 (as amended), File
Number 33-13375, filed April 29, 1988.
10.2.1 Copy of Second Amended and Restated Articles of
Partnership of N/S Associates hereby incorporated
herein by reference to Exhibit 10.2.1 to the
Account's Form S-1 (as amended), File Number
33-13375, filed April 20, 1989.
10.3 Copy of N/S Associates Joint Venture Agreement
together with certain documents relating to the
purchase of an interest in Southridge Mall is
hereby incorporated herein by reference to
Exhibit 10.3 to Form S-1 (as amended), File
Number 33-13375, filed April 29, 1988.<PAGE>
PAGE 52
10.4 Copy of Commitment Letter relating to the funding
of a participating mortgage loan secured by
Riverpoint Center is hereby incorporated herein by
reference to Exhibit 10.4 to Form S-1 (as amended),
File Number 33-13375, filed October 11, 1988.
10.5 Copy of Amended and Restated Articles of
Partnership of Monmouth Associates are hereby
incorporated herein by reference to Exhibit 10.5 to
the Account's Form S-1 (as amended), File Number
33-13375, filed April 12, 1990.
10.5.1 Copy of Amended and Restated Articles of
Partnership of Monmouth Associates are hereby
incorporated herein by reference to Exhibit 10.5.2
to the Account's Form S-1 (as amended), File
Number 33-13375, filed April 12, 1990.
10.6 Copy of Agreement together with certain other
documents relating to the purchase of West
Springfield Terrace Apartments is hereby
incorporated herein by reference to Exhibit 10.6 to
Form S-1 (as amended), File Number 33-13375, filed
October 16, 1989.
10.7 Copy of Agreement together with certain documents
relating to the purchase of an interest in 1225
Connecticut Avenue is hereby incorporated herein by
reference to the Account's Form S-1 (as amended),
File Number 33-13375, filed June 29, 1990.
21.1 Copy of list of Subsidiaries of IDS Life Insurance
Company is hereby incorporated herein by reference
to Exhibit 22.1 to the Account's Form S-1, File
Number 33-13375, filed April 13, 1987.
27.1 Financial Data Schedule of the Account for the
period ended December 31, 1994 is filed herewith.
99.1 Copy of description of surrenders, withdrawals and
transfers from pages 62 to 64 and 67 to 68 of the
Account's prospectus included in its Form S-1 (as
amended), File Number 33-13375, filed March 31,
1995 is filed herewith.
99.2 Copy of description of the Account's real estate
related investments from pages 20 to 44 of the
Account's prospectus included in Form S-1 (as
amended), File Number 33-13375 filed March 31, 1995
is filed herewith.
<PAGE>
PAGE 53
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 officers
of IDS Life Insurance Company, thereunto duly authorized.
IDS LIFE ACCOUNT RE of IDS LIFE INSURANCE COMPANY
Registrant
March 30, 1995 By /S/ James A. Mitchell
Date James A. Mitchell, Chairman of the
Board and Chief Executive Officer
March 30, 1995 By /S/ Melinda S. Urion
Date Melinda S. Urion, Executive Vice
President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 30, 1995 By /S/ David R. Hubers
Date David R. Hubers, Director
March 30, 1995 By /S/ Richard W. Kling
Date Richard W. Kling, President
March 30, 1995 By /S/ Paul F. Kolkman
Date Paul F. Kolkman, Executive
Vice President
March 30, 1995 By /S/ Janis E. Miller
Date Janis E. Miller, Executive
Vice President, Variable Assets
March 30, 1995 By /S/ James A. Mitchell
Date James A. Mitchell, Chairman of the
Board and Chief Executive Officer
March 30, 1995 By /S/ Melinda S. Urion
Date Melinda S. Urion, Executive Vice
President and Controller
<PAGE>
<PAGE>
PAGE 1
IDS Life Account RE
File No. 33-13375
EXHIBIT INDEX
Exhibit 27.1: Financial Data Schedule.
Exhibit 99.1: Copies of pages 62-64 & 67-68 of Form S-1.
Exhibit 99.2: Copies of pages 20-44 of Form S-1.
<PAGE>
PAGE 1
[ARTICLE] 5
[LEGEND]
[RESTATED]
[CIK]
[NAME]
[MULTIPLIER]
[CURRENCY]
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-START] JAN-01-1994
[PERIOD-END] DEC-31-1994
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE]
[CASH] 204859
[SECURITIES] 0
[RECEIVABLES] 5225
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 210084
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 46326277
[CURRENT-LIABILITIES] 371043
[BONDS] 9961503
[COMMON] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 35993731
[TOTAL-LIABILITY-AND-EQUITY] 46326277
[SALES] 2235867
[TOTAL-REVENUES] 2253657
[CGS] 0
[TOTAL-COSTS] 1922003
[OTHER-EXPENSES] 502607
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 775437
[INCOME-PRETAX] (946390)
[INCOME-TAX] (946390)
[INCOME-CONTINUING] (946390)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (946390)
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
<PAGE>
<PAGE>
PAGE 1
Contract Surrender
An election to surrender a Contract may be made in writing to the home office
of IDS Life in Minneapolis, MN. If required by IDS Life, the request for
surrender must be accompanied by the Contract if a request for the full
surrender value is being made. An election to surrender a Contract can be made
only while the Contract is in force prior to the earlier of the retirement date
or the death of the first to die of the annuitant or owner. The surrender
value is determined on the basis of the accumulation unit value in effect on
the date on which a request for surrender is received by IDS Life in proper
order.
A partial surrender request not exceeding $50,000 may be made by contacting IDS
Life by telephone. IDS Life has the authority to honor any telephone partial
surrender request it believes to be authentic and will use reasonable
procedures to confirm that they are. This includes asking identifying
questions and tape recording calls. As long as the procedures are followed,
neither IDS Life nor its affiliates will be liable for any loss resulting from
fraudulent requests. At times when the volume of telephone requests is
unusually high, IDS Life will take special measures to ensure your call is
answered as promptly as possible. A telephone surrender request will not be
allowed within 30 days of a phoned-in address change. You may request that
telephone withdrawals not be authorized from your account by writing IDS Life.
The surrender value will be paid within seven days after the date on which a
proper request is received by IDS Life, except that under certain circumstances
IDS Life may delay or suspend payments. See the Suspension and Delay of
Payments section.
An owner may surrender all or a portion of the contract value. Any partial
surrender must be for at least $250, and no partial surrender can be made if
it would reduce the contract value after such surrender to less than $600.
Automated partial surrenders may be made through a one-time written request (or
other method acceptable to IDS Life). The minimum surrender amount from the
Contract is $50, and such surrender can be made on a monthly, quarterly,
semi-annual or annual basis. You may start or stop this service at any time,
but you must give IDS Life 30 days' notice to change any automated surrender
instructions that are currently in place. Automated partial surrenders are
subject to all of the other contract provisions and terms. Automated partial
surrenders may be restricted by applicable law. In addition, the payment of
additional purchase payments, if allowed under the Contract, while automated
partial surrenders are in effect, may not be appropriate and therefore is not
permitted. Automated partial surrenders may result in taxes and penalties
being applied to all or a portion of the amount surrendered. See the Certain
Federal Income Tax Considerations section. You should consult your tax adviser
if you have any questions about the taxation of your annuity.
No surrender can be made after the retirement date or the death of the first
to die of the annuitant or owner. Any amounts surrendered and charges that may
apply cannot be repaid. A surrender charge, which is a contingent deferred
sales charge, will be imposed for any surrender made during the first eight
payment years of any purchase payment. The surrender charge applies separately
<PAGE>
PAGE 2
to the initial purchase payment and to each additional purchase payment.
Regardless of when a purchase payment is made, the contract year in which a
purchase payment is made is the first payment year for that purchase payment,
and succeeding payment years continue to be measured separately for that
purchase payment.
For a partial surrender, accumulation units attributable to the earliest
payment year are surrendered first. The surrender charge is 8 percent of the
amount surrendered during the first payment year and decreases by 1 percent per
year thereafter to 1 percent in the eighth payment year. There is no surrender
charge on amounts surrendered after the eighth payment year. In no event will
the aggregate surrender charges imposed exceed 8.5 percent of the aggregate
purchase payments received. IDS Life may, in its discretion, reduce or
eliminate surrender charges for certain group sales of the Contracts. See the
Contract Charges and Deductions -- Surrender Charges section. Owners should
also be aware that, under certain circumstances, a surrender before the owner
has reached the age of 59-1/2 may be subject to a penalty under the Code. See
the Certain Federal Income Tax Considerations section.
An owner may return the Contract for cancellation and receive a full refund of
the contract value within 10 days after the Contract has been delivered to the
owner and no fees or charges will be deducted. The owner will bear the
investment risk of the Contract until the contract value is determined at the
next valuation date after the Contract has been received by IDS Life for
cancellation. However, if applicable state law so requires, the full amount
of the aggregate purchase payments received by IDS Life will be refunded. A
Contract may be returned for cancellation to the owner's IDS Life
representative or to the IDS Life home office.
Surrender Charges
A surrender charge, which is a contingent deferred sales charge payable to IDS
Life, will be assessed against the Contract after the initial 10-day period of
the Contract and during the first eight years after any purchase payment. The
surrender charge is 8 percent of the amount surrendered during the first
payment year and decreases by 1 percent per year thereafter to 1 percent in the
eighth payment year. There is no surrender charge on amounts surrendered after
the eighth payment year. See the Contract Surrender section.
Suspension and Delay of Payments
IDS Life will attempt to make payments under the Contracts within seven days
whenever the Account has cash available. However, IDS Life reserves the right
to defer making any such payments under the Contracts for up to six months.
This reservation of the right to suspend payments is only intended to be
utilized in the emergency circumstances set forth in the remainder of this
section. Subject to any suspension of payments described below, IDS Life
guarantees that payments on death of the first to die of the annuitant or owner
prior to the retirement date will be made within seven days of receipt by IDS
Life of its death claim requirements after the death of the annuitant or owner,
whichever occurs first. In addition, payment of surrender values may be
delayed if a check for a purchase payment has not cleared the bank on which it
was drawn.
IDS Life may suspend any payments due under the Contracts beyond the seven-day
period for up to six months when IDS Life determines that there is insufficient
cash available to meet all current surrender requests and other payment<PAGE>
PAGE 3
obligations of the Account and the sale of the real estate related assets of
the Account could not be made on a timely basis on commercially reasonable
terms. In the event of any suspension of payments, the cash available will be
used in the following order of priority:
First -- to meet any obligations the Account has other than Contract
obligations. Such obligations would include those expenses necessary to
continue the operation of the Account, other than fees to IDS Life, which fees
will be deferred until ALL Contract obligations are satisfied.
Second -- to make annuity payments in full or pro rata depending on the cash
available. All annuitants will be treated as a class, including those who
annuitize during the suspension. No other payments will be made until all
unpaid annuity payments are made.
Third -- to make payments due on the death of the annuitant or the owner that
became due and payable after the declaration of suspension. All payees of
payments on death will be treated as a class and payments may be made pro rata
depending upon the cash available.
Finally -- no payments of surrender values will be permitted during such a
suspension while any annuity payments or payments on death remain unpaid.
Depending upon the cash available, any payments of surrender values during such
suspension will be made in accordance with the order in which surrender
requests are received by IDS Life.
If a payment of a surrender or an annuity payment is deferred, the amount will
be determined as of the end of the valuation period during which the surrender
request was received or the annuity payment was due, and, with respect to such
amount, participation in the investment experience of the Account will cease.
If IDS Life defers a payment of a surrender or an annuity payment for 30 days
or more, IDS Life will credit interest on the amount of the payment at a rate
of 3 percent per year or such higher rate as IDS Life, in its discretion,
establishes. If IDS Life defers payment on death for more than seven days,
IDS Life will credit interest on the amount of payment at a rate of 3 percent
per year or such higher rate as IDS Life, in its discretion, establishes or
that which is required by law.
Owners who remain in the Account will bear the investment risk that real estate
related investments of the Account will have to be sold under emergency
circumstances that could result in the realization by the Account of less than
the investment value of such investments notwithstanding any suspension or
delay in payments as permitted under the Contracts. <PAGE>
<PAGE>
PAGE 1
Summary of Investments
The following is a table which sets forth all real estate related
investments presently made or committed to be made by the Account as
of the date of this prospectus.
Real Property Investments
Long-Term
Cash payments made Indebtedness
or to be made (a) Amount Rate
Shopping Centers
Northridge Mall
Milwaukee, Wis. (b)........ $5,838,000 ----------- -----
Southridge Mall
Greendale/Greenfield
Milwaukee, Wis. (b)........ 6,170,000 $2,072,000 8.35%
Office Building
1225 Connecticut Avenue
Washington, D.C. (b)........ 9,000,000 1,141,000 6.98
Apartment Complex
West Springfield Terrace
Fairfax County, VA.......... 9,214,000 7,832,500 9.50
$30,222,000 $11,045,500
Mortgage Loan and Land Sale-Leaseback Investments
Cash payments made
or to be made (a)
Shopping Centers
Monmouth Mall
Eatontown, New Jersey (b)...................... $10,727,000
Riverpoint Center
Chicago, Illinois (c).......................... 2,876,000
$13,603,000
(a)Includes cash down payments, amounts funded or committed to be
funded for mortgage loans, prepayment premiums, special reserves
and other cash payments made or expected to be made out of the
Account's net assets but does not include acquisition and
mortgage placement fees, mortgage financing fees and other
acquisition, placement or financing costs.
(b)The interest of the Account in this investment is owned by the
Account through a joint venture. The amount shown for the
property under "Cash payments made or to be made" includes only
the cash investment of the Account in the joint venture for this
investment and does not reflect any investment by any other
joint venturers in the investment owned by the joint venture.
For real property investments in which the Account has an equity
interest, the amount shown for the investment under Long-Term
Indebtedness reflects the Account's proportionate share, based
upon its percent interest in the joint venture, of the amount of
financing which is encumbering the property held by the joint
venture.<PAGE>
PAGE 2
(c)The interest of the Account in this investment is as a
participant in the funding of a mortgage loan secured by the
property.
The Account's investments in Northridge Mall and Southridge Mall and
in the land sale-leaseback investment and first leasehold mortgage
loan secured by Monmouth Mall have been made through two joint
venture partnerships, the other partners of which include
institutional investors. The percent interest of each partner in
these two joint ventures is determined generally based on the timing
and amount of capital contributed by all partners.
The Account made a capital contribution of approximately $12,008,000
in return for an approximate 5.92 percent interest in N/S Associates,
which owns interests in Northridge Mall and Southridge Mall, and made
an initial capital contribution of $10,000,000 in return for an
approximate 6.97 percent interest in Monmouth Associates, which owns
the underlying land subject to a ground lease of, and holds a first
leasehold mortgage on, Monmouth Mall. JMB Group Trust IV, which had
been advised by an affiliate of the Investment Adviser but is
currently advised by an unaffiliated third party, owns the majority
percent interest in each of N/S Associates and Monmouth Associates.
In May 1994, Monmouth Associates agreed to finance the cost of a
renovation of Monmouth Mall. The maximum amount of the renovation
loan is $29,100,000. Certain of the fundings for the renovation loan
have been or will be made out of cash reserves and the cash flow of
Monmouth Associates. Based upon Monmouth Associates' current
estimated cash flow and the anticipated amount of its loans for
tenant improvements or other ordinary capital expenditures additional
fundings of the renovation loan of up to approximately $10,430,000
are expected to be made by additional capital contributions to
Monmouth Associates made pro rata based upon the respective interests
of its joint venture partners. The Account's share of such
additional capital contributions would be approximately $727,000
based on its approximate 6.97 percent interest in Monmouth
Associates. The renovation of the shopping center includes, among
other things, the addition of a food court and cinema and the re-
merchandising of approximately 300,000 square feet of space.
In general, joint venture partnership agreements for N/S Associates
and Monmouth Associates provide that decisions concerning the joint
ventures and their real estate investments are to be made by the vote
or approval of the joint venture partner or partners holding a
majority of the percent interests in the respective joint ventures.
Under the respective joint venture partnership agreements, in the
event that one or more, but less than all, of the joint venture
partners propose to sell the joint venture's entire interest in a
real estate related investment during a specified period commencing
generally not earlier than the end of the fourth year after the
funding of the investment and ending 10 years after such funding,
each other joint venture partner not approving such sale will have a
right of first offer to purchase such investment on the terms set
forth in a notice of the proposed sale from the joint venture
partners desiring such sale. If more than one joint venture<PAGE>
PAGE 3
partner elects to exercise a right of first offer, each of the joint
venture partners making such election will have the right to purchase
an interest in such investment based upon the proportion of its
percent interest in the respective joint venture to the aggregate
percent interests of all joint venture partners making such election.
If no joint venture partner elects to exercise the right of first
offer, the joint venture partners approving the sale may effect such
sale on behalf of the respective joint venture for a sales price of
not less than 90 percent of the proposed sales price and on other
terms at least as favorable to the respective joint venture as those
set forth in the notice of proposed sale.
In general, each joint venture partner may sell its interest in the
respective joint venture subject to each other joint venture
partner's right of first refusal to purchase the interest, and any
such sale may not be made without the consent of all other joint
venture partners unless it is to be made to an affiliate of the
selling joint venture partner or to certain institutional investors,
a "Fortune 500" corporation or an affiliate thereof, or to an entity
of similar financial standing or sophistication of the foregoing or
of the selling joint venture partner.
Northridge Mall
Milwaukee, Wisconsin
Northridge Mall, located in Milwaukee, Wisconsin, was completed in
1972. The mall shops and four adjacent department stores comprising
the shopping center contain approximately 1,053,000 square feet of
gross leasable area, of which N/S Associates owns approximately
399,000 square feet. The remaining 654,000 square feet of gross
leasable area are occupied by four department stores, three of which
own their own stores and a portion of the parking area. These four
stores are Younkers, which leases its store from an unaffiliated
third party (approximately 166,000 square feet), J.C. Penney
(approximately 168,000 square feet), Sears (approximately 169,000
square feet) and Boston Store (approximately 151,000 square feet).
Existing operating covenants for occupancy of their stores by
Younkers extend through January 1999 and by Boston Store through
2000. J.C. Penney and Sears, whose operating covenants expired in
August 1992, continue to operate their respective stores at the
shopping center.
Carson Pirie Scott & Co., which owns a Boston Store at each of
Northridge and Southridge Malls, has made a bid to acquire Younkers,
which also has department stores at those shopping centers. If it
were to acquire Younkers, Carson Pirie Scott & Co. would have two
department stores at both Northridge and Southridge Malls and could
seek to sell or otherwise cease to operate some of those stores.
However, Younkers is subject to operating covenants at each of the
shopping centers that generally require a store to be operated
through January 1999. N/S Associates expects to review the possible
alternatives in the event that Younkers is acquired.
The shopping center is located on an approximate 105-acre site, of
which N/S Associates owns approximately 32 acres, at the northwest
corner of West Brown Deer Road and North 76th Street on the north
side of Milwaukee. The shopping center is a two-level center of<PAGE>
PAGE 4
masonry construction and contains a large center court atrium with a
fountain and skylights. The entire parking lot contains parking for
approximately 7,800 automobiles.
Real estate taxes on the portion of the shopping center owned by N/S
Associates were approximately $3,176,000 for the 1994 tax year and
are estimated to be approximately $3,335,000 for the 1995 tax year.
In 1988 real estate taxes for the property increased by more than 110
percent over the prior year's taxes as a result of a reassessment of
the property. N/S Associates was able to obtain a reduction in tax
assessment for the property for 1994. However, high real estate tax
rates continue to adversely affect occupancy and effective rental
rates at the shopping center.
The shopping center is subject to competition from other retail
properties in the vicinity. In the opinion of the Investment
Adviser, the portion of the shopping center owned by N/S Associates
is adequately insured.
The portion of the shopping center owned by N/S Associates consists
of approximately 388,000 square feet of mall space and 11,000 square
feet of storage space. The mall space is currently approximately 82
percent leased and occupied by 124 tenants. Tenant leases for mall
space have minimum terms, not including renewal options, ranging from
one to 20 years, with current annual base rents ranging from
approximately $4 to $150 per square foot. The current average annual
base rent for mall space is approximately $21.85 per square foot.
The average annual occupancy rates (based upon occupancy at the end
of each month during the year) and approximate average annual base
rents per square foot for the mall space for the past five years are
as follows:
Average Annual
Average Annual Base Rent
Year Occupancy Rate Per Square Foot
1990 93% $20.60
1991 93 21.50
1992 87 22.10
1993 87 22.30
1994 80 22.65
Substantially all of the leases contain provisions pursuant to which
N/S Associates is entitled to participate in tenant gross receipts
above certain minimum amounts, and most leases entitle N/S Associates
to receive tenants' contributions for operating expenses and real
estate taxes. Certain of the more recent leases provide for N/S
Associates' participation in tenant gross receipts above certain
minimum amounts without receipt by N/S Associates of any specified
annual base rent or tenant contributions for operating expenses or
real estate taxes.
N/S Associates acquired its interest in the shopping center in April
1988 for a purchase price of approximately $89,653,000 paid in cash
at closing, subject to the existing mortgage loans with a then
outstanding aggregate balance of approximately $18,454,000. <PAGE>
PAGE 5
At closing, N/S Associates established a reserve of approximately
$8.9 million that has been used to pay for certain capital
improvements made at the shopping center, including certain asbestos
removal, construction of a food court and center and side court
improvements. It is expected that additional asbestos removal will be
undertaken from time to time. For 1995 N/S Associates has currently
budgeted approximately $2,470,000 for completion of the partial roof
replacement, tenant improvements and asbestos abatement for certain
tenant spaces at Northridge Mall. Such amount is expected to be paid
out of proceeds from the refinancing described below and cash flow
from the property.
In February 1995, N/S Associates repaid the two mortgage loans
secured by Northridge Mall, as well as the mortgage loan secured by
Southridge Mall, out of the proceeds of a new loan in the principal
amount of $35,000,000 secured by a mortgage on Southridge Mall. In
addition, approximately $2,900,000 of the net proceeds from the new
mortgage loan are expected to be used to pay tenant improvements,
asbestos abatement and other capital costs incurred for Northridge
and Southridge Malls during 1995.
The portion of the shopping center owned by N/S Associates is being
managed by an affiliate of the Investment Adviser under an agreement
pursuant to which it is obligated to manage the property and collect
all receipts from operations of the property. The affiliate of the
Investment Adviser is paid an annual fee equal to 3.75 percent of the
gross receipts of the property plus reimbursement of certain direct
expenses in connection with the management of the property.
Northridge Mall continues to be adversely affected by a perception
that it is an unsafe place to shop. This perception has resulted in
declining sales and occupancy over the past several years.
Compounding the problem of declining sales are the high operating
costs for tenants due to the high real estate taxes at the shopping
center. Occupancy has also been affected by tenant bankruptcies
during 1993 and 1994. To counter the negative image for Northridge
Mall, N/S Associates made certain capital improvements during 1993
and 1994, including parking lot lighting and improved interior
lighting, and implemented operational programs to improve the
shopping center's safety and appearance, as well as instituted
certain marketing efforts to enhance its image. However, elimination
of the negative perception is expected to take some time. In
addition, N/S Associates is seeking to increase occupancy by
aggressively marketing space for new and renewal tenants through
leasing incentives, as well as cooperating with existing tenants who
need short-term rent reductions in order to maintain occupancy of
their space.
<PAGE>
PAGE 6
The following is a schedule of expiration of leases (exclusive of
storage space and assuming no renewals or cancellations) and current
annual base rents allocable thereto as of March 1995:
Year of Number Current Percentage of
Expiration of Square Annual Current Annual
of Leases Tenants Feet Base Rent Base Rent
1995.......... 20 36,105 $ 539,616 7.8%
1996.......... 11 16,138 469,212 6.8
1997.......... 11 56,496 590,604 8.6
1998.......... 21 50,010 1,426,668 20.7
1999.......... 26 52,567 1,317,624 19.1
2000.......... 10 22,608 636,372 9.2
2001.......... 7 17,205 443,880 6.5
2002.......... 10 31,204 623,460 9.1
2003.......... 3 16,620 437,628 6.4
2004.......... 3 6,899 176,496 2.6
2005.......... 1 1,855 78,744 1.1
2008.......... 1 7,500 146,160 2.1
Southridge Mall
Greendale/Greenfield (Milwaukee),
Wisconsin
Southridge Mall, completed in 1970, is located in the Village of
Greendale and City of Greenfield south of Milwaukee, Wisconsin. The
mall shops and five adjacent department stores comprising the
shopping center contain approximately 1,295,000 square feet of gross
leasable area, of which N/S Associates owns approximately 435,000
square feet, including the space leased to Kohl's Department Store,
one of the anchor tenants, and approximately 2,000 square feet of
storage space. The remaining approximately 860,000 square feet of
gross leasable area are occupied by four department stores, three of
which own their own stores and a portion of the parking area. These
four stores are Younkers, which leases its store from an unaffiliated
third party (approximately 203,000 square feet), Boston Store
(approximately 221,000 square feet), Sears (approximately 251,000
square feet) and J.C. Penney (approximately 185,000 square feet).
Existing operating covenants for occupancy of their stores by
Younkers extend through January 1999 and by Boston Store through
2000. J.C. Penney and Sears, whose operating covenants have expired,
continue to operate their respective stores at Southridge Mall.
Carson Pirie Scott & Co., which owns a Boston Store at each of
Northridge and Southridge Malls, has made a bid to acquire Younkers,
which also has department stores at those shopping centers. If it
were to acquire Younkers, Carson Pirie Scott & Co., would have two
department stores at both Northridge and Southridge Malls and could
seek to sell or otherwise cease to operate some of those stores.
However, Younkers is subject to operating covenants at each of the
shopping centers that generally require a Younkers store to be
operated through January 1999. N/S Associates expects to review the
possible alternatives in the event that Younkers is acquired.
The shopping center is located on an approximately 105-acre site, of
which N/S Associates owns approximately 34 acres, at the intersection
of West Grange Avenue and South 76th Street in Milwaukee County. It<PAGE>
PAGE 7
is a two-level center of masonry construction and contains a large
center court atrium with a fountain and skylights. The entire
parking lot contains parking for approximately 6,900 automobiles.
Real estate taxes on the portion of the shopping center owned by N/S
Associates were approximately $4,050,000 for the 1994 tax year and
are estimated to be approximately $4,136,000 for the 1995 tax year.
High operating costs for the tenants due to the high real estate
taxes somewhat limits the ability of N/S Associates to increase rents
at Southridge Mall.
The shopping center is subject to competition from other retail
properties in the vicinity. In the opinion of the Investment
Adviser, the portion of the shopping center owned by N/S Associates
is adequately insured.
The portion of the shopping center owned by N/S is currently
approximately 90 percent leased and occupied by 133 tenants. Kohl's
Department Store occupies approximately 66,000 square feet pursuant
to a lease that has an original term of 30 years and requires annual
base rent of $120,000. Other tenant leases (exclusive of storage
space) have minimum terms, not including renewal options, ranging
from 3 to 15 years, with current annual base rents ranging from $8.00
to $116.00 per square foot. The current average annual base rent
(exclusive of storage space) is approximately $22.08 per square foot.
The average annual occupancy rates (based upon occupancy at the end
of each month during the year) and approximate average annual base
rents per square foot for tenant space (inclusive of Kohl's
Department Store but exclusive of storage space) for the past five
years are as follows:
Average Annual
Average Annual Base Rent
Year Occupancy Rate Per Square Foot
1990 93% $16.60
1991 94 19.30
1992 87 20.90
1993 90 21.20
1994 91 20.90
Substantially all of the leases contain provisions pursuant to which
N/S Associates is entitled to participate in tenant gross receipts
above certain minimum amounts and to receive tenants' contributions
for operating expenses and real estate taxes. N/S Associates
acquired its interest in the shopping center in April 1988 for a
purchase price of approximately $96,865,000 paid in cash at closing,
subject to the existing first mortgage loan with a then outstanding
balance of approximately $18,536,000. N/S Associates established a
reserve of approximately $7,250,000 which has been used for certain
capital improvements at the shopping center including, among other
things, asbestos abatement and center and side court improvements.
For 1995 N/S Associates has currently budgeted approximately
$1,415,000 for tenant improvements, asbestos abatement and other<PAGE>
PAGE 8
capital costs at Southridge Mall. Such amount is expected to be paid
out of proceeds from the refinancing of the mortgage loan secured by
the property and cash flow from the property.
In February 1995, N/S Associates repaid the mortgage loan secured by
Southridge Mall, as well as the two mortgage loans secured by
Northridge Mall, out of the proceeds of a new loan in the principal
amount of $35,000,000 secured by a mortgage on Southridge Mall. In
addition, approximately $2,900,000 of net proceeds from the new
mortgage loan are expected to be used to pay for tenant improvements,
asbestos abatement and other capital costs to be incurred for
Northridge and Southridge Malls during 1995. The new mortgage loan
has a term of seven years, bears interest at 8.35 percent per annum
and requires monthly payments of interest only aggregating
approximately $2,923,000 per annum prior to maturity in February
2002, when the entire principal amount and any accrued and unpaid
interest will be due and payable. The new mortgage loan permits only
a prepayment in full, subject to the payment of a premium of the
greater of 1 percent of the outstanding principal balance of the loan
and an amount calculated pursuant to a defined yield maintenance
formula. The remedies under the new mortgage loan are generally
limited to the property securing the loan.
The portion of the shopping center owned by N/S Associates is being
managed by an affiliate of the Investment Adviser under an agreement
pursuant to which it is obligated to manage the property and collect
all receipts from operations of the property. The affiliate of the
Investment Adviser is paid a fee equal to 3.75 percent of the gross
receipts of the property plus reimbursement of certain direct
expenses in connection with the management of the property.
The following is a schedule of expiration of leases (inclusive of
Kohl's Department Store but exclusive of storage space and assuming
no renewals or cancellations) and current annual base rents allocable
thereto as of March 1995:
Year of Number Current Percentage of
Expiration of Square Annual Current Annual
of Leases Tenants Feet Base Rent Base Rent
1995.......... 9 15,076 $ 465,672 5.4%
1996.......... 21 45,724 1,094,136 12.7
1997.......... 9 20,155 554,040 6.4
1998.......... 17 40,578 1,218,024 14.1
1999.......... 14 24,946 580,764 6.7
2000.......... 19 45,419 1,295,364 15.0
2001.......... 18 106,553 1,113,360 12.9
2002.......... 8 16,879 537,456 6.3
2003.......... 8 32,651 752,676 8.8
2004.......... 6 25,126 576,012 6.7
2005.......... 2 3,725 145,596 1.7
2006.......... 1 6,000 120,000 1.4
2009.......... 1 7,507 165,156 1.9
<PAGE>
PAGE 9
Monmouth Mall
Eatontown, New Jersey
In October 1988 Monmouth Associates (i) acquired certain land
underlying a super regional shopping center in Eatontown, New Jersey
known as Monmouth Mall, (ii) leased the land to the owner of the
shopping center pursuant to a long-term ground lease, and (iii) made
a first mortgage loan to the owner of the shopping center secured by
the leasehold estate and the improvements thereon. The borrower
under the first leasehold mortgage loan and lessee under the ground
lease (hereinafter the "borrower/lessee") is a partnership whose
partners are not affiliated with Monmouth Associates or any of its
joint venture partners.
The shopping center is being reconfigured in connection with the
renovation discussed below. Upon completion of the renovation, the
shopping center will contain approximately 1,503,000 square feet of
gross leasable area, of which approximately 614,000 square feet will
consist of mall shops (approximately 470,000 square feet), a fifteen
screen cinema (approximately 77,000 square feet), outparcel buildings
(approximately 17,000 square feet) and storage and basement area
(approximately 50,000 square feet). The remaining gross leasable
area includes four department stores, which are Macy's (approximately
262,000 square feet), J.C. Penney (approximately 203,000 square
feet), Abraham & Straus (approximately 265,000 square feet) and Lord
& Taylor (approximately 159,000 square feet). Existing operating
covenants of the anchor department stores for reimbursement of a
specified amount of common area maintenance expenses and operation of
a retail business at their stores (which may be different from the
current retail business), generally extend to 1998 for Abraham &
Straus, 2005 for Macy's and Lord & Taylor, and 2006 for J.C. Penney,
with certain option or renewal rights thereafter in favor of Abraham
& Straus and Lord & Taylor.
In December 1994, Federated Department Stores, which owns Abraham &
Straus, completed its merger with Macy's, and in January 1995
Federated Department Stores announced that it will close the entire
Abraham & Straus chain of stores and either convert them to other
stores or sell them. Federated Department Stores has indicated that
it intends to convert the Abraham & Straus store at Monmouth Mall to
a Stern's store in the spring of 1995, as permitted under the terms
of its operating agreement. Monmouth Associates and the
borrower/lessee intend to consider alternatives in connection with
the replacement of the Abraham & Straus store. Monmouth Associates
may provide additional financing to the borrower/lessee to pay future
costs necessary for a long-term solution to replace Abraham & Straus
as a department store tenant.
The shopping center is located on an approximately 104-acre site
located at the intersection of Routes 35 and 36 and Wyckoff Road in
Eatontown, New Jersey. Macy's owns its own department store and
approximately 2 acres of underlying land, and J.C. Penney owns its
own store and approximately 12 acres of underlying land. The
remaining approximately 90 acres of land underlying the shopping<PAGE>
PAGE 10
center were acquired by Monmouth Associates subject to the right of
Abraham & Straus to acquire the land underlying its store. Abraham
& Straus, which currently leases its store and the approximately 14
acres of underlying land for nominal base rent, has the right to
acquire the underlying land at any time after 1998 and to acquire its
store at any time after 2028, in each case for nominal consideration.
The shopping center is a multi-level super regional center
constructed of structural steel framing with concrete block facing.
The entire parking lot (a portion of which is owned by certain of the
department stores) contains combined surface and deck parking for
approximately 8,225 automobiles.
The Lord & Taylor lease provides for annual base rent of
approximately $60,400 and an initial term of 16 years ending in 2006
with six 10-year renewal options at the same annual base rent. Each
of Lord & Taylor and Abraham & Straus pay a percentage of its gross
receipts above a certain minimum amount as well as a pro rata share
of the real estate taxes as additional rent. Sony Theaters operates
the cinema under a lease that commenced in 1994 and provides for an
initial term of 21 years with a current annual base rent of
approximately $711,000 with specified periodic increases. The lease
also requires the tenant to pay a specified amount of operating
expense reimbursements and a pro rata share of the real estate taxes,
as well as a percentage of its gross receipts above a certain minimum
amount as additional rent. The lease also provides for five 5-year
renewal options with specified increases in annual base rent. In
addition to its own department store, Macy's also leases
approximately 36,400 square feet of space from the borrower/lessee
for its children's store at the shopping center.
Real estate taxes on the portion of the shopping center owned by the
borrower/lessee were approximately $2,132,000 for the 1994 tax year
and are expected to decrease to approximately $2,094,000 for the 1995
tax year due to a re-assessment of the property. The shopping center
is subject to competition from other retail properties in the area,
including an approximately 1,300,000 square foot shopping center that
opened in the general vicinity in August 1990. In the opinion of the
Investment Adviser, the portion of the shopping center owned by the
borrower/lessee is adequately insured.
The mall shops and outparcel space at the shopping center are
currently 82 percent leased by 137 tenants with current annual base
rents ranging from approximately $1.00 to $97.00 per square foot and
a current average annual base rent of approximately $22.34 per square
foot. Leases for mall shops and outparcel space have minimum terms,
not including renewal options, ranging from 5 to 15 years. Due to
the renovation of the shopping center discussed below, the current
occupancy of the mall shops and outparcel space is approximately 63
percent. However, the mall shops and outparcel space are currently
approximately 82 percent leased including leases whose terms will
commence after renovation of tenant space permits occupancy. The
average annual occupancy rates (based upon occupancy at the end<PAGE>
PAGE 11
of each month during the year) and approximate average annual base
rents per square foot for the mall shops and outparcel space for the
past five years are as follows:
Average Annual
Average Annual Base Rent
Year Occupancy Rate Per Square Foot
1990 91% $15.50
1991 83 18.25
1992 82 19.85
1993 81 19.95
1994 67 21.40
Substantially all of the leases contain provisions pursuant to which
tenants are required to pay specified percentages of their gross
receipts above certain minimum amounts as additional rent and to pay
their pro rata share of the operating expenses and real estate taxes
of the shopping center.
The Limited owns a number of apparel store tenants who have the
following leases of mall space at Monmouth Mall:
Current
Square Annual Original
Tenant Feet Base Rent Term
The Limited 8,470 $199,045 12 years
The Limited Too 3,952 92,872 12 years
Learner New York 7,045 140,900 12 years
Compagine International
Express 10,957 257,490 12 years
Structure 5,849 137,451 12 years
Victoria's Secret 6,908 162,338 12 years
Lane Bryant 4,137 44,010 13 years
In October 1988, Monmouth Associates (i) purchased approximately 88.5
acres of land underlying the shopping center (subject to the right of
Abraham & Straus to acquire the approximately 14 acres underlying its
store) for $13,000,000 paid in cash; (ii) leased the land back to the
borrower/lessee pursuant to a long-term ground lease; and (iii) made
a first mortgage loan in the principal amount of $128,920,000 to the
borrower/lessee secured by the leasehold estate and the improvements
thereon. The ground lease, which has a term of 75 years commencing
in October 1988 (subject to earlier termination in the event of a
sale of the land as described below), provides for monthly base rent
aggregating $780,000 per annum for the first two lease years,
$1,040,000 per annum for the third lease year, and $650,000 per annum
for each lease year thereafter. The ground lease also provides for
contingent rent (payable quarterly out of the excess, if any, of
substantially all of the gross receipts from the operations of the
shopping center received by the borrower/lessee over certain base
amounts) equal to the sum of (x) a specified annual amount
(commencing in the fourth lease year at $390,000 per annum and
increasing in the sixth lease year to $520,000 per annum), increased
until paid at the "applicable rate" of interest payable under the
first leasehold mortgage loan described below (such amount as so<PAGE>
PAGE 12
increased herein called the "rent shortfall amount"), plus (y) 15
percent of the balance of such excess gross receipts remaining after
deducting the aggregate amount paid at such time of the rent
shortfall amount under the ground lease and the "interest shortfall
amount" under the first leasehold mortgage loan as described below.
The first leasehold mortgage loan has a term of 15 years to October
2003, which may be extended from time to time at the option of
Monmouth Associates for up to an additional 20 years, subject to
acceleration of the loan in the event of a joint sale of the property
or a purchase by either Monmouth Associates or the borrower/lessee of
the other party's entire interest in the property.
The first leasehold mortgage loan provides for monthly payments of
base interest at a base rate of 5.98 percent per annum for the first
two loan years, 7.97 percent per annum for the third loan year and 5
percent per annum for each loan year thereafter. The first leasehold
mortgage loan also provides for quarterly payments of contingent
interest (payable out of the excess, if any, of substantially all of
the gross receipts from the operations of the shopping center
received by the borrower/lessee over certain base amounts) equal to
the sum of (x) the difference between the amount of interest payable
on the loan at the "applicable rate" and that payable at the base
rate described above, increased until paid at the applicable rate
(such amount as so increased herein called the "interest shortfall
amount"), plus (y) 45 percent of the balance of such excess gross
receipts remaining after deducting the aggregate amount paid at such
time of the rent shortfall amount under the ground lease and the
interest shortfall amount under the first leasehold mortgage loan.
The "applicable rate" under the loan is 5.98 percent per annum for
the first two loan years, 7.97 percent per annum for the next three
loan years and 8.97 percent per annum for each loan year thereafter.
In May 1994, Monmouth Associates agreed to provide a loan to the
borrower/lessee for a renovation of the shopping center. The
renovation, which commenced in July 1994, includes the
reconfiguration of certain portions of the shopping center, the
addition of a food court and cinema and the re-merchandising of
approximately 300,000 square feet of space and is expected to be
completed in late 1995. The renovation loan, which has a maximum
principal amount of $29,100,000, bears interest on the outstanding
principal amount at a rate of 10.5 percent per annum. Prior to
completion of the renovation (and subject to funding of the maximum
amount of the renovation loan), monthly interest may be accrued and
added to principal, and after completion of the renovation the loan
requires monthly payments of interest only until maturity of the
loan, when the entire principal balance and any accrued and unpaid
interest will be due. As additional consideration for the renovation
loan, Monmouth Associates' participation in certain levels of
proceeds from a joint sale or refinancing of the fee and leasehold
interests in the shopping center will be increased until Monmouth
Associates has received aggregate payments equal to an internal rate
of return of 11 percent per annum on its investments in the first
leasehold mortgage loan and the land subject to the ground lease. <PAGE>
PAGE 13
The renovation loan will mature contemporaneously with the first
leasehold mortgage loan in October 2003, subject to (i) acceleration
in the event of default or certain other events, including a joint
sale of the entire fee and leasehold interests in Monmouth Mall, or
(ii) extension of the loan maturity by Monmouth Associates under
certain circumstances for up to 20 years on the same loan terms prior
to the extension (other than the maturity date). The renovation loan
is secured by a leasehold mortgage subordinated to the leasehold
mortgages securing the first leasehold mortgage loan and certain
other loans made for tenant improvements or other ordinary capital
expenditures and is cross-defaulted with those loans as well as the
ground lease. The remedies under the renovation loan are generally
limited to the property securing the obligation. Payment of
principal and accrued interest of the renovation loan is subordinated
to the payment of certain other amounts payable to Monmouth
Associates in connection with the ground lease and the first
leasehold mortgage loan.
Under the terms of the ground lease, as amended in connection with
the renovation loan, upon a joint sale or refinancing of the land and
the improvements thereon, Monmouth Associates generally will be
entitled to receive out of the proceeds of such sale or refinancing
the sum of (a) any accrued and unpaid rent shortfall amount plus
$13,000,000 (and any other amounts invested in the land), plus (b)
after payment of principal and any accrued and unpaid base interest
on the first leasehold mortgage loan and the renovation loan, the
return to the borrower/lessee of payments made to cover any cost
overruns in connection with the renovation, and payment of any
outstanding additional loans by Monmouth Associates and any advances
by the borrower/lessee to pay the cost of certain capital or tenant
improvements described below, together with any accrued and unpaid
interest thereon, 17.5 percent of such remaining sale or refinancing
proceeds until Monmouth Associates has received aggregate payments
under the ground lease equal to an internal rate of return of 11
percent per annum on its investment in the land, plus (c) thereafter,
12.5 percent of any such remaining sale or refinancing proceeds. In
general, the remedies under the ground lease are limited to the
property securing such obligation.
Under the terms of the first leasehold mortgage loan, as amended in
connection with the renovation loan, upon a joint sale or refinancing
of the land and the improvements thereon, Monmouth Associates will be
entitled to receive out of the proceeds of such sale or refinancing,
after deducting the accrued and unpaid rent shortfall amount plus
$13,000,000 (and any other amounts invested in the land) payable to
Monmouth Associates pursuant to the terms of the ground lease, the
sum of (a)(i) any accrued and unpaid interest shortfall amount, (ii)
the outstanding principal amount of the first leasehold mortgage loan
plus any accrued and unpaid base interest thereon, and (iii) after
repayment of the outstanding principal amount of the renovation loan,
and any accrued and unpaid interest thereon, the return to the
borrower/lessee of payments made to cover any cost overruns in
connection with the renovation, and repayment of any additional loans
by Monmouth Associates and any advances by the borrower/lessee to pay
the cost of certain capital or tenant improvements described below,
together with any accrued and unpaid interest thereon, 52.5 percent<PAGE>
PAGE 14
of such remaining sale or refinancing proceeds until Monmouth
Associates has received aggregate payments under the first leasehold
mortgage loan equal to an internal rate of return of 11 percent per
annum on the principal amount of such loan, plus (b) thereafter, 37.5
percent of any such remaining sale or refinancing proceeds. In the
event that the loan continues until its stated maturity date (as it
may be extended from time to time) without a joint sale of the
property or a sale of Monmouth Associates' entire interest in the
property, Monmouth Associates will be entitled to receive an amount
that would provide it the same consideration payable to it as the
first leasehold mortgage lender (but not as the ground lessor) under
a joint sale of the property described above, assuming that the
property were sold for its appraised fair market value. Aggregate
interest payable may not exceed a specified simple interest rate per
annum.
In general, except for a prepayment in connection with a joint sale
of the property or a sale to the borrower/lessee of Monmouth
Associates' entire interest in the property as described below, no
prepayment of the first leasehold mortgage loan may be made. In
general, the remedies under the first leasehold mortgage loan are
limited to the property securing such obligation. The
borrower/lessee is obligated, at its own expense, to remove any
asbestos from the portion of the shopping center owned by the
borrower/lessee under certain circumstances.
Monmouth Associates also is required to make other additional loans
to finance the cost of 60 percent of tenant improvements or other
ordinary capital expenditures that exceed the amounts reserved by the
borrower/lessee for such expenditures, provided that the
borrower/lessee advances the remaining 40 percent of such
expenditures.
The interest payable on any such additional loans (as well as on any
advances made by the borrower/lessee) is to be at the greater of the
applicable rate under the first leasehold mortgage loan as in effect
from time to time or the market rate of interest charged by
institutional lenders for similar loans. These additional loans
generally require payments of interest only until maturity of the
first leasehold mortgage loan (including any extension thereof
described above), at which time the outstanding principal and any
accrued and unpaid interest under the additional loans will be due
and payable. The additional loans may be prepaid prior to maturity
without a prepayment charge. Pursuant to such requirements,
Monmouth Associates has loaned the borrower/lessee an aggregate of
approximately $3,085,000 at fixed interest rates ranging from 8.25
percent to 10.5 percent per annum in connection with the cost of
tenant improvements and ordinary capital expenditures, including
tenant lease expenditures and termination payments. In connection
with the termination of a previous department store lease, Monmouth
Associates has advanced an additional $1,250,000 as an
expansion/renovation loan, which together with accrued interest
through October 1991, bears interest at 13 percent per annum, and has
permitted the borrower/lessee to defer payment of approximately
$729,000 of base interest, which also bears interest at 13 percent
per annum on the deferred amount. These loan amounts have been<PAGE>
PAGE 15
advanced out of interest and lease payments received under the first
leasehold mortgage loan and ground lease along with the reserves of
Monmouth Associates.
Under the terms of the ground lease, at any time after October 2001
Monmouth Associates has the right, and at any time after October 2002
the borrower/lessee has the right, to cause a joint sale of the land
and the portion of the shopping center owned by the borrower/lessee,
subject to the right of first refusal of the other party to the
ground lease to acquire the entire interest in the property of the
party proposing such joint sale. In the event that the first
leasehold mortgage loan continues until its stated maturity date
(including any extension of such maturity date described above), the
borrower/lessee has the option to purchase Monmouth Associates'
interest in both the land and the first leasehold mortgage loan for
an aggregate amount that would provide Monmouth Associates the same
consideration payable to it as ground lessor and first leasehold
mortgage lender under a joint sale of the property described above,
assuming that the property were sold for its appraised fair market
value.
In general, except for certain transfers by Monmouth Associates to an
affiliate, each of Monmouth Associates and the borrower/lessee may
only transfer its entire respective interest in the property
(including its interest in the first leasehold mortgage loan),
subject to the consent of the other party and the other party's right
of first refusal to acquire such interest. In general, neither
Monmouth Associates nor the borrower/lessee may transfer a portion of
its interest in the property.
The portion of the shopping center owned by the borrower/lessee is
being managed by an affiliate of the borrower/lessee under a
long-term agreement pursuant to which it is obligated to manage the
property and collect all receipts from operations of the property for
a fee equal to 3.5 percent of the base and percentage rents from the
property. In addition, the manager is entitled to compensation for
leasing and re-leasing services at the shopping center. <PAGE>
PAGE 16
The following is a schedule of expiration of present leases for the
mall shops and outparcel space exclusive of storage and basement
space and assuming no renewals or cancellations) and current annual
base rents allocable thereto as of March 1995:
Year of Number Current Percentage of
Expiration of Square Annual Current Annual
of Leases Tenants Feet Base Rent Base Rent
1995.......... 26 52,128 $ 593,359 6.7%
1996.......... 7 14,967 413,064 4.6
1997.......... 5 13,260 298,524 3.3
1998.......... 8 21,921 557,568 6.3
1999.......... 5 7,267 228,900 2.6
2000.......... 9 51,652 859,392 9.6
2001.......... 13 26,128 1,055,712 11.8
2002.......... 12 31,720 1,124,844 12.6
2003.......... 10 33,622 1,012,992 11.3
2004.......... 7 7,452 323,328 3.6
2005.......... 23 58,509 999,676 11.2
2006.......... 1 9,169 81,264 0.9
2007.......... 7 46,679 890,144 10.0
2010.......... 1 1,179 69,996 0.8
2014.......... 1 12,625 206,424 2.3
2015.......... 2 12,288 210,226 2.4
1225 Connecticut Avenue
Washington, D.C.
In May 1990 the Account acquired an interest in a newly formed
Delaware corporation (the Corporation) owned jointly with certain
other persons, as described below. The Corporation has acquired an
office building located in Washington, D.C. known as 1225 Connecticut
Avenue, N.W. (1225 Connecticut), an eight-story reinforced concrete
frame building containing 183,530 square feet of rentable office
space, 18,438 square feet of rentable retail space, 6,416 square feet
of below grade storage space and 100,024 square feet of subsurface
parking space for over 300 automobiles. The building, which was
completed in 1968, is located on an approximately 33,000 square foot
site that fronts Connecticut Avenue, 18th Street and "N" Street, N.W.
The office and retail space of 1225 Connecticut is currently 100
percent leased and occupied under leases having original minimum
terms (not including renewal options) which vary in duration from 6-
1/2 to 14 years with current annual base rents ranging from
approximately $17.50 to $48.90 per rentable square foot. The current
average annual base rent for the office and retail space is
approximately $33.65 per square foot. The storage space is currently
59 percent leased and occupied under leases having original minimum
terms (not including renewal options) that vary in duration from 5 to
12 years with the current annual base rents ranging from
approximately $11.05 to $15.00 per square foot. The current average
annual base rent for the storage space is approximately $11.30 per
square foot. The average annual occupancy rates (based upon<PAGE>
PAGE 17
occupancy at the end of each month during the year) and approximate
average annual base rents per square foot for the office and retail
space for the past four years are as follows:
Average Annual
Average Annual Base Rent
Year Occupancy Rate Per Square Foot
1991 99% $20.05
1992 99 20.35
1993 95 28.60
1994 96 32.60
Substantially all of the office and retail leases contain provisions,
subject to certain limitations, requiring tenants to pay, in addition
to their annual base rent, their pro-rata share of real estate taxes
and operating expenses over certain base amounts. In addition, leases
covering a majority of the office and retail space contain
provisions, subject to certain limitations, pursuant to which rents
may be increased based upon changes in a consumer price index from a
base year.
Ernst & Young currently leases approximately 87 percent of the office
space. During 1993 and 1994 the annual base rents under the Ernst &
Young leases were scheduled to increase to $34 per square foot from
rates ranging from $8.75 to $29.00 per square foot. In 1993 Ernst &
Young agreed to extend the original term of a majority of its
existing leased space from June 2000 to June 2007, subject to the
termination of approximately 9,000 square feet of this space in
December 1994, and to increase the rent for all of the space to $34
per square foot effective upon the agreement. In 1994, Ernst & Young
agreed to lease an additional approximately 26,300 square feet of
space through June 2007. Ernst & Young also leases approximately
1,700 square feet of first floor space through June 2007. As a
result, the Ernst & Young leases generally are as follows:
Current
Annual
Square Base Expiration
Tenant Feet Rent Date
Ernst & Young.......... 1,676 $17.50 June 2007
(1st Floor)
Ernst & Young.......... 157,968 34.00 June 2007
(2nd, 4th, 5th, 6th, 7th
and 8th Floors)
In connection with the extension and expansion of its leases, Ernst
& Young received certain leasing incentives, including a tenant
improvement allowance and a rent credit for its fourth floor space
for a portion of the lease term commencing in 1995. The primary
lease for Ernst & Young, which covers approximately 131,600 square
feet of space and does not include the first and fourth floor space,
provides for two optional renewal periods of five years each with
annual base rent to be based on 90 percent of the fair market rent as
determined at such time. Ernst & Young also has a right of first
opportunity and certain expansion options to lease any space on the
third floor.<PAGE>
PAGE 18
The real estate and vault taxes on 1225 Connecticut were
approximately $869,000 for the tax year ended September 30, 1994, a
decrease of approximately $43,000 from the prior tax year as a result
of assessment appeals. Such taxes are expected to be approximately
$914,000 for the tax year ended September 30, 1995. 1225 Connecticut
is subject to competition from several other commercial projects in
its vicinity, including a number of office buildings owned by
entities either sponsored or advised by an affiliate of the
Investment Adviser. In the opinion of the Investment Adviser, the
building is adequately insured.
The Corporation has elected to qualify as a real estate investment
trust (REIT) pursuant to sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the Code). For each taxable year
that the Corporation qualifies as a REIT, the Corporation in general
will not be subject to federal corporate income tax or the
District of Columbia corporate franchise tax on its regular taxable
income and will not be taxable on long-term capital gain income to
the extent its income is distributed as dividends. If the
Corporation were to fail to qualify as a REIT, it would be taxed at
rates applicable to corporations on its taxable income, whether or
not distributed. Because it is a corporation, it will not be subject
to the District of Columbia franchise tax on unincorporated
businesses, which is imposed on any trade or business conducted
within the District by an unincorporated person, including a
partnership.
The Account owns approximately 16.3 percent of the outstanding shares
of common stock of the Corporation. Approximately 44 percent of the
outstanding shares of common stock of the Corporation are owned by a
publicly held real estate limited partnership affiliated with the
Investment Adviser. There is no other class of stock of the
Corporation authorized or outstanding, and no other shares of common
stock may be issued without the consent of shareholders owning at
least 96 percent of the then outstanding shares of common stock of
the Corporation. The major shareholders of the Corporation
(including the Account) owning in excess of 99 percent of the
Corporation's outstanding stock have entered into a shareholders'
agreement which provides, among other things, that upon a proposed
sale of shares the non-selling major shareholders shall have a right
of first refusal to buy out the selling major shareholders' shares in
the Corporation; the approval of shareholders owning at least 96
percent of the outstanding common stock of the Corporation is
required to make certain major decisions; and, in the event of a
disagreement regarding a proposed sale of 1225 Connecticut, the major
shareholders not desiring to sell would have a right of first refusal
to purchase the other major shareholders' shares in the Corporation
and if all of such shares are not acquired pursuant to the exercise
of such right of first refusal, the Corporation may conclude a sale
of the property.
The Corporation purchased 1225 Connecticut from the seller for a
purchase price of approximately $54,125,000, consisting of
$51,425,000 paid in cash and approximately $2,700,000 of mortgage<PAGE>
PAGE 19
indebtedness then encumbering the property. In connection with the
acquisition of the property, the Corporation paid approximately
$2,130,000 for real estate brokerage commissions to an independent
third party and certain closing costs. The Account contributed
$9,000,000 for its interest in the Corporation.
In January 1994 the Corporation refinanced its mortgage loan, which
had an outstanding principal balance of approximately $1,667,000 at
the time of refinancing, with a new first mortgage loan in the
principal amount of $7,000,000 that bears interest at 6.98 percent
per annum. The new loan requires monthly payments of interest only
aggregating $488,600 per annum until maturity in February 2001 when
the entire outstanding principal amount together with accrued
interest will be due and payable. Under certain circumstances, the
principal amount of the loan may be prepaid in whole (but not in
part), subject to a prepayment premium based upon the present value
of the difference, if any, between the remaining scheduled monthly
payments on the loan at the date of prepayment and the amount such
monthly payments would be if the interest rate on the loan were equal
to the yield on a U.S. government security with a comparable maturity
date. Pursuant to the deed of trust securing the mortgage loan, the
Corporation is prohibited from modifying Ernst & Young's primary
lease or from entering into certain other tenant leases without the
lender's consent. Prior to selling the property or encumbering the
property with any additional debt, the Corporation must obtain the
consent of the lender, which may be arbitrarily withheld. However,
subject to certain restrictions, the Corporation has a one-time right
to transfer title to the property together with an assumption of the
mortgage loan. The excess net proceeds from the refinancing in the
amount of approximately $5,300,000 are being used to pay a
substantial portion of the costs for lobby and other common area
renovation costs, a sprinkler system and certain tenant improvement
costs related to the Ernst & Young lease extension. Approximately
$4,300,000 has been spent so far for those costs with an additional
$1,455,000 expected to be spent in 1995.
The property is being managed under an agreement pursuant to which
the manager is obligated to manage 1225 Connecticut, collect all of
the receipts from operations and, to the extent available from such
receipts, pay all of the expenses of the property. The manager is
paid a fee equal to 2.5 percent of the gross revenues of the
property, plus reimbursement for certain direct expenses of the
manager. The property had been managed by JMB Properties Company, an
affiliate of the Investment Adviser, until December 1994, when JMB
Properties Company sold substantially all of its assets to an
unaffiliated third party, and certain management personnel of JMB
Properties Company became management personnel of the third party.
As a result of sale, the successor to JMB Properties Company's assets
now acts as manager of 1225 Connecticut on the same terms that
existed prior to the sale.
An unaffiliated third party leases and operates the entire parking
garage (subject to certain parking rights provided for tenants of the
property) for a term extending until November 1997. The lease
provides for a fixed rent payment of $485,000 a year (which reflects
an increase at the end of 1993 from $430,000 a year), provides that<PAGE>
PAGE 20
the lessee shall pay the operating expenses of the parking garage and
does not provide such lessee with an option to extend the term of the
lease.
The following is a schedule of expiration of leases for office and
retail space assuming no renewals or cancellations) and current
annual base rents allocable thereto as of March 1995:
Year of Current Percentage of
Expiration Number of Square Annual Current Annual
of Leases Tenants Feet Base Rent Base Rent
1995.......... 1 2,023 $ 40,965 0.6%
1996.......... 1 3,026 136,170 2.0
2000.......... 3 22,103 753,689 11.1
2002.......... 1 9,909 277,452 4.1
2005.......... 1 5,263 186,836 2.7
2007.......... 1 159,644 5,400,242 79.5
Riverpoint Center
Chicago, Illinois
The Account entered into a participation agreement to fund up to
$3,000,000 of a first mortgage loan in the maximum principal amount
of $29,250,000. The remaining portion of the loan has been funded by
JMB Mortgage Partners, Ltd.-IV and JMB Mortgage Partners, Ltd.-III,
which are affiliates of the Investment Adviser. (The Account, JMB
Mortgage Partners, Ltd.-IV and JMB Mortgage Partners, Ltd.-III are
collectively called the Lenders). The loan is secured by a first
mortgage on a shopping center known as Riverpoint Center and located
on an approximately 17-acre site at the intersection of Wood Street
and Fullerton Avenue in Chicago, Illinois. The shopping center is
owned by a partnership (the Borrower) whose general partners are not
affiliated with any of the Lenders and is managed by an affiliate of
the Borrower.
The initial funding (the Initial Funding) of the loan, in the amount
of $26,000,000 (of which the Account's share was $2,666,660),
occurred in August 1989. Additional amounts, aggregating
approximately $2,040,000 (of which the Account's share was
approximately $209,000), have been funded since the Initial Funding.
The Borrower did not qualify for any additional fundings above the
$28,040,000 which has been funded to date, and no additional fundings
will be made by the Lenders. The shopping center, which was
completed in June 1989, has masonry walls with interior steel frames
and a brick facade with metal detailing and includes a parking lot
for approximately 860 cars. Real estate taxes on the shopping center
were approximately $1,022,000 for the 1993 tax year and are expected
to be approximately $1,100,000 for the 1994 tax year, the most recent
year of assessment.
In the opinion of the Investment Advisor, the shopping center is
adequately insured. The shopping center is subject to competition
from other retail properties in the area.
The shopping center, which is currently approximately 95 percent
leased and occupied by 23 tenants, consists of approximately 200,800
square feet of gross leasable area. Existing tenant leases have<PAGE>
PAGE 21
minimum terms, not including renewal options, ranging from 3 to 20
years with current annual base rents ranging from $11.60 to $29.00
per square foot. The current average annual base rent is
approximately $14.71 per square foot.
Substantially all existing leases contain provisions pursuant to
which each tenant is required to pay its pro-rata share of operating
expenses and real estate taxes of the shopping center and additional
rent in the form of a percentage of tenant gross receipts above a
certain base amount. The following is a schedule of major tenant
leases:
Current
Annual
Square Base Original
Tenant Feet Rent Term
Dominick's Omni Superstore
(grocery store).......... 85,633 $994,392 20 years
Marshalls
(clothing)............... 36,157 506,196 15 years
Silo Electronics
(consumer electronics)... 12,100 242,004 10 years
The first mortgage loan requires periodic payments of interest only,
matures 10 years after the date of the Initial Funding, and bears
interest as follows:
(1) Basic Interest: Basic Interest is payable monthly in advance
at the rates per annum set forth below:
Loan Years Interest Rate
1............ 8.84%
2-3.......... 8.75
4-6.......... 9.25
7-10.......... 9.50
(2) Accrual Interest: In addition to Basic Interest, interest
accrues at a simple rate of 2.0 percent per annum. The
Accrual Interest is due at maturity (subject to earlier
payment upon sale of the shopping center or prepayment of the
loan). The Accrual Interest is reduced dollar-for-dollar by
the amount of Additional Interest paid as described below.
(3) Additional Interest: The Lenders are entitled to receive
Additional Interest for each calendar year (or portion
thereof) equal to 50 percent of the gross income (exclusive of
tenant reimbursements of expenses) from the shopping center in
excess of a base amount of $2,737,000. The Lenders are also
entitled to receive Additional Interest equal to 50 percent of
the amount by which the value of the shopping center exceeds
$28,040,000, to be paid as follows: (i) upon sale (if any) of
the shopping center, an amount equal to 50 percent of the
amount by which the gross sale proceeds from such sale (net of
customary closing prorations and seller's closing expenses)
exceed the greater of (A) $28,040,000, or (B) the highest
gross proceeds from any single prior sale made after the<PAGE>
PAGE 22
Initial Funding in connection with which Additional Interest
was paid, and (ii) at maturity or upon prepayment, an amount
equal to 50 percent of the amount by which the then current
fair market value of the shopping center (determined by
appraisal) exceeds the greater of (A) $28,040,000, or (B) the
highest gross proceeds from any single prior sale made after
the Initial Funding in connection with which Additional
Interest was paid. Aggregate interest payable over the term
of the loan may not exceed that which would be obtained from a
certain specified simple interest rate per annum.
The loan is generally non-recourse to the Borrower and its partners.
The entire principal balance of the loan and all Accrual and
Additional Interest not previously paid will be due at maturity. In
the event that the Borrower sells or further encumbers the shopping
center without the Lenders' consent, the Lenders will have the option
to accelerate the loan. The loan is not prepayable by the Borrower
for eight years following the Initial Funding. Thereafter, the loan
may be prepaid in full upon payment of a prepayment charge in an
amount equal to 7 percent of the loan's principal balance in the
ninth loan year and 4 percent in the first six months of the tenth
loan year. Thereafter, no prepayment charge will be due. Any action
taken or consent to be given by the Lenders under the loan documents
generally requires the vote or consent of the Lenders representing a
majority of the principal amount of the loan outstanding. In
general, in the event that a Lender proposes to sell or transfer its
interest in the loan, the other Lenders will have a right of first
refusal to acquire such interest. The following is a schedule of
expiration of leases (assuming no renewals or cancellations) and
current annual base rents allocable thereto as of March 1995:
Year of Number Current Percentage of
Expiration of Square Annual Current Annual
of Leases Tenants Feet Base Rent Base Rent
1995.......... 1 2,860 $ 67,462 2.4%
1996.......... 1 1,430 24,312 0.9
1997.......... 2 3,335 57,612 2.0
1998.......... 3 16,394 305,682 10.9
1999.......... 5 14,557 356,013 12.7
2000.......... 3 8,651 137,913 4.9
2001.......... 2 5,853 86,736 3.1
2002.......... 2 6,707 112,488 4.0
2005.......... 1 9,460 160,847 5.7
2007.......... 1 36,157 506,196 18.0
2009.......... 1 85,633 994,392 35.4
West Springfield
Terrace Apartments
Fairfax County, Virginia
In August 1989, the Account acquired a 244-unit garden apartment
complex known as the West Springfield Terrace Apartments, which is
located on an approximately 13.2-acre site at the intersection of Old
Keene Mill Road and Bauer Road in Springfield, Fairfax County,
Virginia.<PAGE>
PAGE 23
The apartment complex, which was completed in 1978, consists of 17
separate three- and four-story buildings of wood frame with brick
veneer construction containing 52 one-bedroom units, 22 one-bedroom
and den units, 118 two-bedroom units, 22 two-bedroom and den units
and 30 three-bedroom units. Each unit has either a patio or balcony
and a washer/dryer. The complex contains a swimming pool, tennis
court, clubhouse and approximately 380 parking spaces. The complex
at present is approximately 97 percent occupied. The average annual
occupancy rates (based upon occupancy at the end of each week during
the year) and approximate average annual rents per unit for the past
five years are as follows:
Average Annual
Average Annual Base Rent Per
Year Occupancy Rate Unit
1990 90% $780
1991 92 793
1992 95 797
1993 96 806
1994 95 837
Current monthly rentals range from $755 to $1,015 per unit. Real
estate taxes on the complex were approximately $192,000 for the 1994
tax year and are expected to be approximately $198,000 for the 1995
tax year.
The complex is subject to competition from other apartment complexes
in the area. The Investment Adviser estimates that there is at
present an approximate 4 percent vacancy rate in the area for
apartment complexes that have sufficient operating experience after
initial rent-up and that might be deemed competitive. In the opinion
of the Investment Adviser, the apartment complex is adequately
insured.
The Account paid $15,222,278 for the apartment complex in cash at
closing (exclusive of closing costs and prorations). In connection
with the acquisition of the property, the Account paid a prepayment
charge at closing of $92,221 to the lender that held the mortgage
loan on the property at the time of its purchase. At the time of the
acquisition it was anticipated that an additional amount of
approximately $1,450,000 would be used by the Account to pay the cost
of upgrading kitchens and bathrooms and certain other upgrades and
capital improvements at the complex. The renovation project was
subsequently increased to include replacing certain carpets in units
as they were renovated and to increase the number of units that
received certain upgrades. The renovation project was completed in
1992 at a cost of approximately $1,900,000. For 1995, approximately
$119,000 has been budgeted for painting, carpet replacement and other
capital costs.
In November 1989, the Account obtained a loan from an institutional
lender in the principal amount of $8,000,000 secured by a first
mortgage on the property. The current outstanding balance of the
loan is approximately $7,833,000. The loan has a term of seven years
and bears interest at a rate of 9.50 percent per annum. The loan<PAGE>
PAGE 24
required monthly payments of interest only until November 1992 and
thereafter is amortizable over a 27-year schedule through monthly
payments of principal and interest aggregating $824,400 per annum
through November 1996 when the remaining principal balance of
approximately $7,704,000, together with accrued and unpaid interest,
is due and payable. The loan permits a prepayment in whole or in
part upon payment of a prepayment charge equal to the present value
of the difference, if any, between the remaining scheduled monthly
payments on the loan at the date of prepayment and the amount such
monthly payments would be if the interest rate on the loan were equal
to the yield on a U.S. Treasury obligation with a comparable maturity
date, plus 1 percent per annum. In general, the remedies under the
first mortgage loan are limited to the property securing such
obligation.
The apartment complex is being managed for a fee equal to 5 percent
of the gross revenues from the property, plus reimbursement of
certain direct expenses. Under the terms of the management
agreement, the manager is obligated to manage the complex, collect
all receipts from operations and, to the extent available from such
receipts, pay all expenses of the property. The property had been
managed by JMB Properties Company, an affiliate of the Investment
Adviser, until December 1994, when JMB Properties Company sold
substantially all of its assets to an unaffiliated third party, and
certain management personnel of JMB Properties Company became
management personnel of the third party. As a result of sale, the
successor to JMB Properties Company's assets now acts as manager of
the apartment complex on the same terms that existed prior to the
sale.
For a description of all types of fees and compensation payable by
the Account to IDS Life or the Investment Adviser in connection with
the acquisition or placement of real estate related investments on
behalf of the Account, see Compensation of IDS Life, the Investment
Adviser and their Affiliates in Connection with Real Estate Related
Services under the Description of the Investment Adviser and
Affiliates section.
For further information regarding the Account's real estate related
investments and their operations see the Management's Discussion and
Analysis of Financial Condition and Results of Operations section.
