June 23, 1994
U.S. Securities and Exchange Commission
Operations Center, Stop 0-7
6432 General Green Way
Alexandria, Virginia 22312
Re: Arvida/JMB Partners, L.P.
Commission File No. 0-16976
Form 10-Q
Gentlemen:
Transmitted, for the above-captioned registrant, is the electronically filed
executed copy of registrant's current report on Form 10-Q\A for the quarter
ended March 31, 1994.
Thank you.
Very truly yours,
ARVIDA/JMB PARTNERS, L.P.
By: Arvida/JMB Managers, Inc.
(The General Partner)
By: C. SCOTT NELSON
C. Scott Nelson, Vice President
Accounting Officer
CSN:tm
Enclosures
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q\A
AMENDMENT NO. 1
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
The undersigned registrant hereby amends the following sections of its
Report for March 31, 1994 on Form 10-Q as set forth in the pages attached
hereto:
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Pages 3 through 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pages 22 through 26
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARVIDA/JMB PARTNERS, L.P.
BY: Arvida/JMB Managers, L.P.
(The General Partner)
By: C. SCOTT NELSON
C. Scott Nelson, Vice President
Accounting Officer
Dated: June 23, 1994
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
------------ -----------
<S> <C> <C>
Cash and cash equivalents (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,610,044 18,906,679
Restricted cash (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,424,745 12,645,678
Trade and other accounts receivable (net of allowance for doubtful accounts of $396,587 at
March 31, 1994 and $381,151 at December 31, 1993). . . . . . . . . . . . . . . . . . . . . . . . 3,706,928 7,298,714
Mortgages receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,291,622 2,940,961
Real estate inventories (note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,870,642 188,679,152
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,170,543 66,989,577
Investments in and advances to joint ventures, net . . . . . . . . . . . . . . . . . . . . . . . . 24,238,767 24,731,852
Equity memberships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,145,297 15,146,661
Amounts due from affiliates (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,799 88,389
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,267,524 9,007,402
------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $341,856,911 346,435,065
============ ============
3
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1994 1993
------------ -----------
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,957,778 10,667,317
Deposits and unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,686,202 22,010,408
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,609,403 13,896,171
Notes and mortgages payable, net (note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,730,307 147,770,992
------------ ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,983,690 194,344,888
------------ ------------
Partners' capital accounts (deficits):
General Partner and Associate Limited Partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,941,389 33,739,753
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,609,346) (33,466,823)
------------ ------------
352,043 292,930
------------ ------------
Limited Partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . . . . . . . . . 364,841,815 364,841,815
Cumulative net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,674,329) (78,963,692)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (136,646,308) (134,080,876)
------------ ------------
157,521,178 151,797,247
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . . . . . . . . . . . . . 157,873,221 152,090,177
------------ ------------
Commitments and contingencies (notes 1, 4, 5, 6, 7 and 8)
Total liabilities and partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . $341,856,911 346,435,065
============ ============
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
4
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,907,079 7,921,490
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,096,734 10,836,164
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,438,398 3,017,998
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,512,475 7,113,728
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,786,435 7,039,136
----------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,741,121 35,928,516
----------- ----------
Cost of revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,986,943 6,549,319
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,138,056 7,219,696
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570,393 2,448,436
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,640,339 8,718,517
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,948,063 5,978,631
----------- ----------
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,283,794 30,914,599
----------- ----------
Gross operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,457,327 5,013,917
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,964,808) (3,637,018)
----------- ----------
Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,492,519 1,376,899
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,145 254,302
Equity in earnings of unconsolidated ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . 53,191 172,974
Interest and real estate taxes, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,161,856) (3,064,405)
----------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,490,999 (1,260,230)
=========== ==========
Net income (loss) per Limited Partnership Interest . . . . . . . . . . . . . . . . . . . $ 20.52 (3.12)
=========== ==========
Cash distributions per Limited Partnership Interest. . . . . . . . . . . . . . . . . . . $ 6.35 --
=========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Net income (loss). . .
Charges (credits) to net income (loss) not using (providing) cash:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,430,840 1,727,116
Equity in earnings of unconsolidated ventures. . . . . . . . . . . . . . . . . . . . . . . . . . (53,191) (172,974)
Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 25,336
(Gain) loss on sale of property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 32,968 (6,510)
Changes in:
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (779,067) 60,691
Trade and other accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,591,786 40,174
Real estate inventories:
Additions to real estate inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,990,850) (13,849,875)
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,695,392 16,217,451
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,970,221) (2,098,296)
Capitalized real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (925,811) (994,538)
Equity memberships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001,364 1,241,315
Amounts due from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,410) (696,940)
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (447,058) 1,071,153
Accounts payable, accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . 3,101,635 897,292
Deposits and unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,794 2,701,721
------------ -----------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,678,829) 6,163,116
------------ -----------
Net cash provided by operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,812,170 4,902,886
------------ -----------
6
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
1994 1993
------------ -----------
Cash flows from investing activities:
Mortgages receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649,339 190,837
Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,459,912) (1,050,356)
Proceeds from disposals of property and equipment. . . . . . . . . . . . . . . . . . . . . . . . 2,074 7,746
Joint venture distributions (contributions), net . . . . . . . . . . . . . . . . . . . . . . . . 272,473 (81,000)
Payments from (advances to) joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,862 (2,323,220)
Proceeds from acquisition of joint venture interest. . . . . . . . . . . . . . . . . . . . . . . -- 6,614
------------ -----------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . (360,164) (3,249,379)
------------ -----------
Cash flows from financing activities:
Proceeds from notes and mortgages payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591,957 3,770,366
Payments of notes and mortgages payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,632,642) (10,529,634)
Distributions to General Partner and Associate Limited Partners. . . . . . . . . . . . . . . . . (142,523) --
Distributions to Limited Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,565,433) --
------------ -----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . (16,748,641) (6,759,268)
------------ -----------
Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,296,635) (5,105,761)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 18,906,679 7,634,320
------------ -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,610,044 2,528,559
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest, net of amounts capitalized. . . . . . . . . . . . . . $ 1,451,118 2,376,361
============ ===========
Non-cash investing and financing activities:
Acquisition of joint venture interests (note 5). . . . . . . . . . . . . . . . . . . . . . . . $ -- 324,169
------------ -----------
$ -- 324,169
============ ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
7
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1993,
which are included in the Partnership's 1993 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
Principles of Consolidation
The consolidated financial statements include the accounts of Arvida/JMB
Partners, L.P. (the "Partnership") and its consolidated ventures (note 5).
All material intercompany balances and transactions have been eliminated in
consolidation.
Recognition of Profit from Sales of Real Estate
For sales of real estate, profit is recognized in full when the
collectibility of the sales price is reasonably assured and the earnings
process is virtually complete. When the sale does not meet the requirements
for recognition of income, profit is deferred until such requirements are met.
For sales of residential units, profit is recognized at the time of closing
or, if certain criteria are met, on the percentage of completion method.
Real Estate Inventories and Cost of Real Estate Revenues
Real estate inventories are carried at cost, including capitalized
interest and property taxes, but not in excess of the net realizable value
determined by the evaluation of individual projects. Management's evaluation
of net realizable value is based on each project's estimated selling price in
the ordinary course of business less estimated costs of completion, holding
and disposal. These estimates are reviewed periodically and compared to each
project's recorded book value. Adjustments to book value, as they become
necessary, are reported in the period in which they become known. The total
cost of land, land development and common costs are apportioned among the
projects on the relative sales value method. Costs pertaining to the
Partnership's housing, homesite and land and property revenues reflect the
cost of the acquired assets as well as development costs, construction costs,
capitalized interest, capitalized real estate taxes and capitalized overheads.
Certain marketing costs relating to housing projects, including exhibits and
displays, and certain planning and other pre-development activities, excluding
normal period expenses, are capitalized and charged to housing cost of
revenues as related units are closed. A warranty reserve is provided as
residential units are closed. This reserve is reduced by the cost of
subsequent work performed.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Capitalized Interest and Real Estate Taxes
Interest and real estate taxes incurred are capitalized to qualifying
assets, principally real estate inventories. Such capitalized interest and
real estate taxes are charges to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $2,835,588 and $3,713,100 was incurred for the three months ended
March 31, 1994 and 1993, respectively, of which $1,970,221 and $2,098,296 was
capitalized, respectively. Interest payments, including amounts capitalized,
of $3,421,339 and $4,474,657 were made during the three months ended March 31,
1994 and 1993, respectively.
Real estate taxes of $2,222,300 and $2,444,139 were incurred for the
three months ended March 31, 1994 and 1993, respectively, of which $925,811
and $994,538 were capitalized, respectively. Real estate tax payments of
$79,744 and $150,912 were made during the three months ended March 31, 1994
and 1993, respectively. The preceding analysis of real estate taxes does not
include real estate taxes incurred or paid with respect to the Partnership's
club facilities and operating properties as these taxes are included in cost
of revenues for operating properties.
Property and Equipment and Other Assets
Property and equipment are carried at cost less accumulated depreciation
and are depreciated on the straight-line method over the estimated useful
lives of the assets, which range from two to 40 years. Expenditures for
maintenance and repairs are charged to expense as incurred. Costs of major
renewals and improvements which extend useful lives are capitalized. Other
assets are amortized on the straight-line method over the useful lives of the
assets which range from one to five years. Depreciation expense of
approximately $1,244,000 and $1,498,200 was incurred for the three month
periods ended March 31, 1994 and 1993, respectively. Amortization of other
assets, excluding loan fees, of approximately $56,000 and $57,000 was incurred
for the three months ended March 31, 1994 and 1993, respectively.
Amortization of loan fees, which is included in interest expense, of
approximately $131,900 and $171,900 was incurred for the three months ended
March 31, 1994 and 1993, respectively.
Investments in and Advances to Joint Ventures, Net
In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments for which the Partnership does not have majority control and where
the Partnership's ownership interest is 50% or less (note 5). The cost method
of accounting has been applied in the accompanying consolidated financial
statements with respect to the Coto de Caza joint venture, effective September
15, 1992, as a result of the Partnership's decrease in its ownership interest
and its joint venture partner's control over the future operations of the
Community. The cost method of accounting is used when a limited partner has
virtually no influence over the venture operations and financial policies.
Under the cost method, income is generally recorded only to the extent of
distributions received.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Investments in joint ventures are carried at the Partnership's
proportionate share of the ventures' assets (not in excess of their net
realizable value determined by evaluation of individual projects), net of
their related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ from
the recorded cost of the Partnership's proportionate share of the joint
ventures' net assets.
The Partnership periodically advances funds to its joint ventures in
which it holds ownership interests when deemed necessary and economically
justifiable. Such advances are generally interest bearing and are repaid to
the Partnership from amounts earned through joint venture operations.
Equity Memberships
The amenities within certain of the Partnership's Boca Raton and
Jacksonville, Florida Communities, as well as its Community near Highlands,
North Carolina are sold to the respective homeowners through the sale of
equity memberships. The amounts recorded as equity memberships in the
accompanying Consolidated Balance Sheets represent the accumulation of costs
incurred in constructing clubhouses, golf courses, tennis courts and various
other related assets less amounts allocated to memberships sold not in excess
of their net realizable value determined by evaluations of individual
amenities. Equity membership revenues and related cost of revenues are
included in land and property in the accompanying Consolidated Statement of
Operations.
Partnership Records
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect the
Partnership's accounts in accordance with generally accepted accounting
principles ("GAAP") and to consolidate the accounts of the ventures as
described above. The net effect of these items is summarized as follows for
the three months ended March 31:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net income (loss). . . . . $8,490,999 9,767,077 (1,260,230) (819,217)
Net income (loss) per
Limited Partnership
Interest. . . . . . . . . $ 20.52 23.64 (3.12) (1.99)
Cash distributions per
Limited Partnership
Interest. . . . . . . . . $ 6.35 6.35 -- --
========== ========= =========== ===========
</TABLE>
Reference is made to note 9 for further discussion of the allocation of
profits and losses to the General Partner, Associate Limited Partners and
Limited Partners.
During February 1994, the Partnership paid a distribution of $2,565,433
to the Limited Partners and $142,523 to the General Partner and Associate
Limited Partners, collectively.
The net income (loss) per Limited Partnership Interest is based upon the
Limited Partnership Interests outstanding at the end of each period.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Reclassifications
Certain reclassifications have been made to the 1993 financial statements
to conform to the 1994 presentation.
Income Taxes
No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the Partnership.
However, in certain instances, the Partnership has been required under
applicable state law to remit directly to the state tax authorities amounts
representing withholding on applicable taxable income allocated to partners.
(2) INVESTMENT PROPERTIES
The Partnership's assets consist principally of interests in land which
is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial
properties; mortgage notes and accounts receivable; management and other
service contracts; construction, brokerage and other support activities; real
estate assets held for investment; club and recreational facilities; and cable
television businesses serving certain of its Communities.
For a discussion of a lawsuit initiated by the General Partner, on behalf
of the Partnership, against The Walt Disney Company ("Disney"), which arose
out of the Partnership's acquisition of substantially all of the real estate
and other assets of Arvida Corporation, a subsidiary of Disney, in September
1987, reference is made to Note 2 of Notes to Consolidated Financial
Statements of the Partnership's report on Form 10-K (File No. 0-16976) filed
on March 25, 1994.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
At March 31, 1994 and December 31, 1993, cash and cash equivalents
primarily consisted of U.S. Government obligations with original maturities of
three months or less, money market demand accounts and repurchase agreements,
the costs of which approximate market value. Cash and cash equivalents
include treasury bills with original maturity dates of three months or less of
approximately $1,661,000 and $3,900,000 at March 31, 1994 and December 31,
1993, respectively. Included in restricted cash are amounts restricted under
various escrow agreements. Credit risk associated with cash, cash equivalents
and restricted cash is considered low due to the quality of the financial
institutions in which these assets are held.
(4) NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable consists of a term loan in the amount of
$126,805,195, a revolving line of credit facility up to $45 million, an income
property term loan of $20 million and a $15 million letter of credit facility.
The term loan, the revolving line of credit and the letter of credit facility
are secured by recorded mortgages on all otherwise unencumbered real property
assets of the Partnership, as well an assignment of all mortgages receivable,
equity memberships, certain joint venture interests or joint venture proceeds
and cash balances (with the exception of deposits held in escrow). The income
property term loan is secured by the recorded first mortgages on a mixed-use
center and an office building in Boca Raton, Florida. All of the notes under
the facility are cross-collateralized and cross-defaulted. The term loan, the
revolving line of credit and the income property term loan bear interest
based, at the Partnership's option, on one of the lenders' prime rate plus 1%
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
per annum or the relevant London Inter-Bank Offering Rate (LIBOR) plus 2.25%
per annum. At December 31, 1993, $75 million of the Partnership's outstanding
credit facility was under two interest rate swap arrangements. However, one
of the interest rate swap arrangements matured in February 1994, and at March
31, 1994, only $25 million of the Partnership's outstanding credit facility
was under an interest rate swap arrangement. The remaining interest rate swap
arrangement matures in October 1994. For the three month period ended March
31, 1994, the effective interest rate for the combined term loan, income
property term loan and revolving line of credit facility was approximately
8.5% per annum. This rate includes the effect of the interest rate swap
arrangements.
Under the term loan agreement, the Partnership made the first required
principal repayments of $8 million in February 1993 and $10 million in March
1994. Principal repayments of $10 million on the term loan are due in each of
the years 1995 and 1996, and the remaining balance outstanding is due in July
1997. In addition, the term loan agreement provides for additional principal
repayments based upon a specified percentage of available cash flow and upon
the sale of certain assets. For the three months ended March 31, 1994, the
Partnership made additional term loan payments totalling approximately $6.2
million. Under the income property term loan, monthly principal and interest
payments are required to be paid on a 25-year amortization schedule with the
remaining balance outstanding due in July 1994. The revolving line of credit
and letter of credit facility also mature in July 1994. The Partnership is in
the process of negotiating a renewal of its credit facilities. Although the
Partnership is hopeful these renewals will be obtained, there can be no
assurance that such will occur or that the terms, amounts and restrictions of
the renewed credit facilities will be similar to those under the Partnership's
existing facilities. The credit agreement contains significant restrictions
with respect to the payment of distributions to partners, the maintenance of
certain loan-to-value ratios, the use of proceeds from the sale of the
Partnership's assets and advances to the Partnership's joint ventures. At
March 31, 1994, all of the term loan proceeds had been borrowed with a
remaining outstanding balance of $92,097,206, and $0, $18,733,327 and
$11,884,393 were outstanding on the revolving line of credit facility, the
income property term loan and the letter of credit facility, respectively.
Loan fees incurred in connection with the Partnership's credit facility
have been capitalized and are being amortized over the lives of the loans
included in the credit facility using the straight-line method, which
approximates the interest method.
Also included in notes and mortgages payable at March 31, 1994 is
approximately $6.9 million representing project specific financing for the
Partnership's retail property located in its Weston Community, approximately
$8.4 million of debt attributable to the Cullasaja Joint Venture, which is now
consolidated with the Partnership (note 5), and a $2.5 million note executed
in conjunction with the Partnership's repurchase of a land parcel in Weston's
Increment III (note 7).
In addition to the above, during November 1993, the Partnership received
a commitment from a lender for a $24 million revolving construction line of
credit for the first building and certain amenities within the Partnership's
new condominium project on Longboat Key, Florida know as Grand Bay. This note
was subsequently executed in January 1994. At March 31, 1994, approximately
$2.6 million was outstanding under this note. The Grand Bay project is
planned to consist of six condominium buildings on 24 acres and will offer
certain amenities including a recreation facility with a community pool and
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
two tennis courts. The Partnership intends to obtain additional lines of
credit prior to the construction of each of the remaining five buildings at
Grand Bay, which are planned to be constructed over the next five years.
Certain of the Partnership's property within the Cullasaja Community is
encumbered by a mortgage note with an outstanding principal balance of
approximately $5.4 million at March 31, 1994. This note matured on March 1,
1994. The Partnership is currently seeking an extension of this loan,
however, there can be no assurance the Partnership will obtain an extension.
This note is collateralized by a first mortgage on certain real estate
inventories and 12.5% of the outstanding balance is guaranteed by the
Partnership.
(5) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
The Partnership has numerous investments in real estate joint ventures
with ownership interests ranging from 20% to 50%. Under certain
circumstances, either pursuant to the venture agreement or due to the
Partnership's obligations as a general partner, the Partnership may be
required to make cash advances or contributions to the ventures. Such
advances totalled approximately $4.1 million and $4.2 million at March 31,
1994 and December 31, 1993, respectively, and are included in Investments in
and Advances to Joint Ventures in the accompanying Consolidated Balance
Sheets. In addition, there are certain risks associated with the
Partnership's investments made through joint ventures, including the
possibility that the Partnership's joint venture partners in an investment
might become unable or unwilling to fulfill their financial obligations, or
that such joint venture partners may have economic or business interests or
goals that are inconsistent with those of the Partnership.
During the first quarter of 1993, the Partnership reached a settlement
agreement with AOK Group, its joint venture partner in a property located in
Ocala, Florida, whereby in exchange for its joint venture partner's 50%
interest in the venture, the Partnership agreed to dismiss a lawsuit
previously filed against its joint venture partner for failure to perform in
accordance with the terms of a $1,600,000 note which had been issued to the
Partnership by the joint venture. This agreement was pursued as a more
favorable remedy to other alternatives available to the Partnership. As a
result of this transaction, the Partnership has changed from the equity method
of accounting to the consolidated method of accounting for the joint venture
effective March 1, 1993. This transaction resulted in an increase in the
Partnership's total assets of approximately $324,000.
The Partnership incurs certain general and administrative expenses which
are paid by the Partnership on behalf of the joint ventures in which it holds
interests. The Partnership receives reimbursements from the joint ventures
for such costs. For the three months ended March 31, 1994, the Partnership
was entitled to receive approximately $255,000 from certain of the joint
ventures in which it holds interests. At March 31, 1994, approximately
$27,000 was owed to the Partnership of which $1,000 was received as of May 6,
1994.
(6) TRANSACTIONS WITH AFFILIATES
The Partnership, subject to certain limitations, may engage affiliates of
the General Partner for certain administrative services to be performed in
connection with the administration of the Partnership and its assets. The
total of such costs (consisting primarily of insurance commissions) for the
three months ended March 31, 1994 was approximately $27,000, all of which was
paid as of March 31, 1994. The total of such costs for the three months ended
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1993 was approximately $10,000. In addition, the General Partner
and its affiliates are entitled to reimbursements for salaries and salary-
related costs relating to the administration of the Partnership and the
operation of the Partnership's properties. Such costs were approximately
$94,000 for the year ended December 31, 1993, none of which has been paid as
of March 31, 1994.
The Partnership receives reimbursements from or reimburses affiliates of
the General Partner for certain general and administrative expenditures
including, and without limitation, salary and salary-related costs relating to
work performed by employees of the Partnership and certain out-of-pocket
expenditures incurred on behalf of such affiliates. For the three months
ended March 31, 1994, the total of such costs incurred by the Partnership on
behalf of these affiliates totalled approximately $115,000. At March 31,
1994, approximately $99,800 was owed to the Partnership. As of May 6, 1994,
approximately $9,900 was received by the Partnership. For the three month
period ended March 31, 1993, the Partnership was entitled to net
reimbursements of approximately $24,000.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited
partnership affiliated with the General Partner) each employ project related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative costs are incurred and allocated
to each partnership as appropriate. The Partnership receives reimbursements
from or reimburses Arvida/JMB Partners, L.P.-II for such costs (including
salary and salary-related costs). For the three month periods ended March 31,
1994 and 1993, the Partnership was entitled to receive approximately $483,900
and $1,340,000, respectively, from Arvida/JMB Partners, L.P.-II. At March 31,
1994, approximately $483,500 was owed to the Partnership, all of which was
received as of May 6, 1994. In addition, for the three month periods ended
March 31, 1994 and 1993, the Partnership was obligated to reimburse Arvida/JMB
Partners, L.P.-II approximately $104,400 and $318,000, respectively. At March
31, 1994, approximately $49,100 was unpaid, all of which was paid as of May 6,
1994.
Arvida Company ("Arvida"), pursuant to an agreement with the Partnership,
provides development, construction, management and other personnel and
services to the Partnership for all of its projects and operations. Pursuant
to such agreement, the Partnership shall reimburse Arvida for all of its out-
of-pocket expenditures (including salary and salary-related costs), subject to
certain limitations. The total of such costs for the three month periods
ended March 31, 1994 and 1993 were approximately $3,118,000 and $2,468,000,
respectively, of which approximately $314,900 was unpaid at March 31, 1994,
all of which was paid as of May 6, 1994.
In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partners have deferred a portion of their distributions of
net cash flow from the Partnership totalling approximately $936,000. This
amount does not bear interest and is expected to be paid in future periods
subject to certain restrictions contained in the Partnership's credit facility
agreement.
The Partnership pays for certain general and administrative costs,
including certain insurance premiums, on behalf of its affiliated clubs,
homeowners associations and maintenance associations. The Partnership
receives reimbursements from the affiliates for such costs. For the three
month period ended March 31, 1994, the Partnership was entitled to receive
approximately $113,000 from its affiliates. At March 31, 1994, approximately
$5,300 was owed to the Partnership, all of which was received as of May 6,
1994. For the three months ended March 31, 1993, the Partnership was entitled
to receive approximately $224,000 from its affiliates.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
All amounts receivable or payable to affiliates of the General Partner do
not bear interest and are expected to be paid in future periods.
(7) COMMITMENTS AND CONTINGENCIES
As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and
performance bonds for approximately $11,884,000 and $11,146,000, respectively,
at March 31, 1994. At December 31, 1993, the Partnership was contingently
liable under standby letters of credit and performance bonds for approximately
$11,651,000 and $11,146,000, respectively. In addition, certain joint
ventures in which the Partnership holds an interest are also contingently
liable for approximately $1,089,000 at March 31, 1994 and December 31, 1993.
The Partnership is named a defendant in a number of homeowner lawsuits,
certain of which purported to be class actions, that allegedly in part arose
out of or related to Hurricane Andrew, which on August 24, 1992 resulted in
damage to a former community development known as Country Walk. The homeowner
lawsuits allege, among other things, that the damage suffered by the
plaintiffs' homes and/or condominiums within Country Walk was beyond what
could reasonably be expected from the hurricane and/or was a result of the
defendants' alleged defective design, construction, inspection and/or other
improper conduct in connection with the development, construction and sales of
such homes and condominiums, including alleged building code violations. The
various plaintiffs seek varying and, in some cases, unspecified amounts of
compensatory damages and other relief. In certain of the lawsuits injunctive
relief and/or punitive damages are sought. The Partnership intends to
vigorously defend itself in these lawsuits.
The various lawsuits arising out of or relating to Hurricane Andrew
allege that the Partnership is liable, among other reasons, as a result of its
own alleged acts of misconduct or as a result of the Partnership's assumption
of Arvida Corporation's liabilities in connection with the Partnership's
purchase of Arvida Corporation's assets from the Walt Disney Company
("Disney") in 1987, which included certain assets related to the Country Walk
development. Pursuant to the agreement to purchase such assets, the
Partnership obtained indemnification by Disney for certain liabilities
relating to facts or circumstances arising or occurring prior to the closing
of the Partnership's purchase of the assets. Over 80% of the Arvida-built
homes in Country Walk were built prior to the Partnership's ownership of the
Community. Where appropriate, the Partnership has tendered or will tender
each of the above-described lawsuits to Disney for defense and indemnification
in whole or in part pursuant to the Partnership's indemnification rights.
Where appropriate, the Partnership is also tendering these lawsuits to its
various insurance carriers for defense and coverage. The Partnership is
unable to determine at this time to what extent damages in these lawsuits, if
any, against the Partnership, as well as the Partnership's cost of
investigating and defending the lawsuits, will ultimately be recoverable by
the Partnership either pursuant to its rights of indemnification by Disney or
under contracts of insurance.
The Partnership has negotiated the terms of a class action settlement
with opposing counsel in one of the pending homeowners' lawsuits which has the
potential for resolving substantial portions of the pending homeowners'
lawsuits which have been filed. On June 3, 1993, the Circuit Court of Dade
County entered an order preliminarily finding that the Partnership's proposed
class action settlement agreement, as revised, was within the range of what
appeared to be a fair and adequate settlement of the claims filed by single-
family homeowners and condominium owners at Country Walk. On August 10, 1993,
the court issued a final order approving the class action settlement. The
settlement, which is designed to resolve claims arising in connection with
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
estate and patio homes and condominiums sold by the Partnership after
September 10, 1987, is structured to compensate residents for losses not
covered by insurance. Settlement amounts payable are a function of the type
of unit involved and the claimant's proof regarding the adequacy of insurance
proceeds. Homeowners of 188 units in Country Walk have accepted the
settlement. Those who affirmatively rejected the offer may continue to
litigate against the Partnership. The Partnership currently believes that the
class action settlement may cost approximately $2.5 million. The settlement
is being funded by one of the Partnership's insurers, subject to a reservation
of rights. The amount of money, if any, which the insurance company may
recover from the Partnership pursuant to its reservation of rights is
uncertain. Due to this uncertainty, the accompanying Consolidated Financial
Statements do not reflect an accrual for such costs.
On February 24, 1994, the Partnership was dismissed from the pending
class action lawsuits pursuant to the class action settlement. In addition,
the Partnership has been informed that Disney and an insurer have reached
agreements to settle five of the individual homeowners actions which were
tendered by the Partnership to Disney. As proposed, these Disney settlements
would be funded without any contribution from the Partnership. There is no
assurance that the Disney settlements will be finalized.
As noted above, those homeowners who affirmatively rejected the offer of
settlement may continue to litigate. The Partnership is currently a defendant
in numerous lawsuits brought by condominium and patio home owners, all of whom
have declined to accept the terms of the class action settlement. These
lawsuits, involving nineteen named individuals, are pending in the Circuit
Court of Dade County. In these lawsuits, plaintiffs allege a variety of
claims involving, among other things, breach of warranty, negligence and
building code violations. The Partnership intends to vigorously defend itself
in these matters.
On April 19, 1993, a subrogation claim entitled Village Homes at Country
Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company ("American
Reliance"). Plaintiffs seek to recover damages and pre- and post-judgment
interest in connection with $10,873,000 American Reliance has allegedly paid,
plus amounts it may have to pay in the future, to the condominium association
at Country Walk in the wake of Hurricane Andrew. Disney is also a defendant
in this suit. The Partnership believes that the amount of this claim that
allegedly relates to units it sold is approximately $3,600,000. On July 1,
1993, a subrogation lawsuit entitled Prudential Property and Casualty Company
v. Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for
Dade County. Plaintiff seeks to recover damages, costs, and interest in
connection with $16,679,622 Prudential allegedly paid to its insureds living
in Country Walk at the time of Hurricane Andrew. Disney is also a defendant
in this suit. The Partnership believes that the amount of this claim that
allegedly relates to homes built or sold by it is approximately $1,686,000.
On July 15, 1993, a subrogation lawsuit entitled Allstate Insurance Company v.
Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for Dade
County. Plaintiff seeks to recover damages, costs, and interest in connection
with $18,540,196 Allstate allegedly paid to its insureds living in Country
Walk at the time of Hurricane Andrew. Disney is also a defendant in this
suit. The Partnership believes that the amount of this claim that allegedly
relates to homes it allegedly built or sold is approximately $2,036,000. The
Partnership settled a threatened subrogation action by State Farm Insurance
Company which had been seeking approximately $7.3 million plus pre-judgement
interest, as well as the Allstate subrogation action. The Allstate settlement
was funded by one of the Partnership's insurance carriers subject to a
reservation of rights. The amount of money the insurance carrier may seek to
recover from the Partnership for this and any other settlements it has funded
is uncertain. The Partnership is a defendant in and anticipates other
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
subrogation claims by insurance companies which have allegedly paid policy
benefits to Country Walk residents. The Partnership intends to defend itself
vigorously in all such matters.
The Partnership has resolved a claim for construction related damages
brought by the Villages of Country Walk Homeowners' Association, Inc., among
others. Two of the Partnership's insurance carriers funded a settlement in
the amount of $2,740,000 to resolve claims related to the construction of the
common elements of the condominium units at Country Walk. One of the
insurance carriers which funded approximately $740,000 of the settlement
amount has issued a reservation of rights in connection with these claims and
the extent to which that insurance company may ultimately recover any of these
proceeds from the Partnership is unknown. Therefore, the accompanying
Consolidated Financial Statements do not reflect an accrual for such costs.
The Partnership is involved in an Environmental Protection Agency (EPA)
administrative enforcement proceeding with regard to the Partnership's Water's
Edge property. The EPA has asserted that a dam built to create a lake at the
Community during the time the property was owned by Arvida Corporation was in
violation of Section 404 of the Clean Water Act in that certain wetland areas
had been filled. Pursuant to a Consent Agreement and Order entered into with
the EPA, the Partnership acquired certain land (at a cost of approximately
$400,000) for which it has developed and implemented a plan of mitigation for
the wetlands lost. In accordance with certain provisions of the Consent
Agreement and Order, the Partnership must provide the EPA with periodic
reports regarding the status of the mitigation plan. The Partnership has also
entered into another Consent Agreement and Order with the EPA pursuant to
which the Partnership will pay a civil penalty of $125,000. Finalization of
this Consent Agreement and Order and payment of the civil penalty is subject
to a thirty-day public notice period. The Partnership is actively pursuing
indemnification from Disney for the total costs that will ultimately be
incurred to resolve this issue. There can be no assurance that the
Partnership will be reimbursed by Disney.
On April 25, 1994, an amended complaint captioned Berry v. Merrill Lynch,
Pierce Fenner & Smith, Arvida/JMB Partners, Limited Partner, Arvida/JMB
Managers, Inc. and Does 1 through 100, was filed in the Superior Court of the
State of California in and for the County of San Diego, Case No. 669709. The
lawsuit was purportedly filed as a class action on behalf of the named
plaintiffs and all other persons or entities in the State of California who
bought or acquired, directly or indirectly, limited partnership interests
("Interests") in the Partnership from September 1, 1987 through the present.
The amended complaint in the action alleges, among other things, that the
defendants made misrepresentations and concealed various facts, breached
fiduciary duties, and violated a contractual covenant of good faith in
connection with the sale of Interests in the Partnership. The amended
complaint further alleges that such conduct violated California state law
relating to fraud, breach of fiduciary duty, willful suppression of facts,
breach of the covenant of good faith, and conspiracy. Plaintiffs, on behalf
of themselves and the purported plaintiff class, seek unspecified compensatory
damages, consequential damages, punitive and exemplary damages, interest,
costs of the suit, and such other relief as the court may order. The
Partnership believes that the lawsuit is without merit and intends to
vigorously defend itself.
In addition, the Partnership has been advised by Merrill Lynch that
Merrill Lynch has been named a defendant in actions pending in the Eleventh
and Seventeenth Judicial Circuit Courts in Dade and Broward Counties, Florida
to compel arbitration of claims brought by certain investors of the
Partnership representing approximately 4% of the total Interests outstanding.
Merrill Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
including without limitation attorneys' fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests through Merrill Lynch on
behalf of the Partnership. In the actions to compel arbitration, the
claimants have advised Merrill Lynch that they will seek to file demands for
arbitration and claims for unspecified damages against Merrill Lynch based on
Merrill Lynch's alleged violation of applicable state and/or federal
securities laws and alleged violations of the rules of the National
Association of Securities Dealers, Inc., together with pendent state law
claims. The Agency Agreement generally provides that the Partnership and its
General Partner shall indemnify Merrill Lynch against losses occasioned by any
actual or alleged misstatements or omissions of material facts in the
Partnership's offering materials used in connection with the sale of Interests
and suffered by Merrill Lynch in performing its duties under the Agency
Agreement, under certain specified conditions. The Agency Agreement also
generally provides, under certain conditions, that Merrill Lynch shall
indemnify the Partnership and its General Partner for losses suffered by the
Partnership and occasioned by certain specified conduct by Merrill Lynch in
the course of Merrill Lynch's solicitation of subscriptions for, and sale of,
Interests. The Partnership is unable to determine at this time the ultimate
investment of investors who have filed arbitration claims as to which Merrill
Lynch might seek indemnification in the future. At this time, and based upon
the information presently available about the arbitration statements of claims
filed by some of these investors, the Partnership and its General Partner
believe that they have meritorious defenses to demands for indemnification
made by Merrill Lynch and intend to vigorously pursue such defenses. In the
event Merrill Lynch is entitled to indemnification of its attorney's fees and
expenses or other losses and expenses, these amounts may prove to be material.
The Partnership is also a defendant in several other actions brought
against it arising in the normal course of business. It is the belief of the
General Partner, based on knowledge of facts and advice of counsel, that the
claims made against the Partnership in such actions will not result in any
material adverse effect on the Partnership's consolidated financial position
or results of operations.
The Partnership owns a 50% joint venture interest in 31 acres located
within a 209-acre commercial/industrial park in Pompano Beach, Florida. The
joint venture's property is encumbered by a mortgage loan in the principal
amount of approximately $4 million as of December 31, 1993. As the
Partnership believes the economics of the project do not warrant making
additional cash investments or providing further financial guarantees, it was
determined in 1991 that the least costly alternative for the venture would be
to convey the land to the lender and to make certain cash payments to the
lender in connection with the existing guarantees under the venture loan
agreement. During April 1992, the Partnership and its joint venture partner
each tendered payment in the amount of approximately $3.1 million for their
respective shares of the guarantee payment and certain other holding costs to
the lender, the majority of which reduced the outstanding mortgage loan to the
current balance. Title to the property was not conveyed at that time pending
resolution of certain general development obligations of the venture and
certain environmental issues. The Partnership has been negotiating with the
lender regarding the scope of the development work required to be done and
does not anticipate the associated costs to be significant. With respect to
the environmental issues, the previous owner remains obligated to undertake
the clean up pursuant to, among other things, a surviving obligation under the
purchase and sale agreement. During January 1994, the Florida Department of
Environmental Protection approved the first phase of a three phase
environmental clean-up program. However, no substantial clean-up has occurred
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
to date. If the previous owner is unable to fulfill its obligations as they
relate to this environmental issue, the resolution of the environmental issue
and its related costs may become an obligation of the venture and ultimately
the Partnership. Should this occur, the Partnership does not anticipate the
cost of this clean-up to be material to its operations. The lender has
asserted the mortgage loan is with recourse to the joint venture partners as a
result of the partners' failure to perform in accordance with the terms of the
loan agreement. The Partnership believes this claim is without merit and will
vigorously defend itself against this allegation. The transfer of title, when
fully consummated, will not have a significant impact on the Partnership's
operations for financial reporting purposes due to the prior payment of the
financial guarantees and certain holding costs. However, the Partnership will
recognize a loss for Federal income tax purposes.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
and are subject to protection as wetlands. The time involved to complete this
process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and other regulatory agencies, is expected to
be lengthy. It is anticipated that certain costs of mitigation will be
incurred in conjunction with obtaining the necessary permits, the amount and
extent of which are unknown at this time. The Partnership had previously gone
through a similar process and was successful in obtaining the approvals for
Increment II of the Weston Community. Although there can be no assurance,
given the Partnership's prior experience and discussions to date with the
appropriate agencies, the Partnership is hopeful that a compromise will
ultimately be reached that will adequately address the concerns of the
environmental agencies, while allowing the Partnership to continue its
development plans for Weston's Increment III.
In June 1993, the Partnership reached an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III in the Partnership's Weston
Community, whereby, in exchange for $5.0 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983 which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at closing and the balance of $2.5 million is payable in
equal annual installments of $500,000 together with interest thereon of 8% per
annum beginning May 1994. The first $500,000 principal repayment was received
by the Partnership in May 1994. The unpaid principal balance is secured by a
mortgage on certain real estate located in the Partnership's Weston Community.
As part of its efforts to obtain the appropriate development permits discussed
in the preceding paragraph, the Partnership has included this land as part of
its proposed mitigation plan for the development of Increment III of its
Weston Community.
The Partnership may be responsible for funding certain other ancillary
activities for related entities in the ordinary course of business which the
Partnership does not currently believe will have any material effect on its
consolidated financial position or results of operations.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(8) TAX INCREMENT FINANCING ENTITIES
In connection with the development of the Partnership's Weston Community,
which is in the mid-stage of development, bond financing is utilized to
construct certain on-site and off-site infrastructure improvements, including
major roadways, lakes, other waterways and pump stations, which the
Partnership would otherwise be obligated to finance and construct as a
condition to obtain certain approvals for the project. This bond financing is
obtained by The Indian Trace Community Development District ("District"), a
local government district operating in accordance with Chapter 190 of the
Florida Statutes. Under this program, the Partnership is not obligated
directly to repay the bonds. Rather, the bonds are expected to be fully
serviced by special assessment taxes levied on the property, which effectively
collateralizes the obligation to pay such assessments. While the owner of the
property, the Partnership is responsible to pay the special assessment taxes
until land parcels are sold. At such point, the liability for the assessments
related to parcels sold will be borne by the purchasers through a tax
assessment on their property. These special assessment taxes are designed to
cover debt service on the bonds, including principal and interest payments, as
well as the operating and maintenance budgets of the District. The use of
this type of bond financing is a common practice for major land developers in
South Florida.
The District issued $64,660,000 of variable rate bonds in November 1989
and $31,305,000 of variable rate bonds in July 1991. These bonds mature in
various years commencing in May 1991 through May 2011. At March 31, 1994, the
amount of bonds issued and outstanding totalled $89,950,000. For the twelve
months ended December 31, 1993, the Partnership paid special assessments
related to these bonds of approximately $5.2 million.
In order to take advantage of historically low interest rates and reduce
the exposure of variable rate debt, the District is pursuing a new bond
issuance. If successful, the proceeds from this offering will be used to
refund 1989 and 1991 bonds currently outstanding.
(9) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2F which allocates Profits, as defined, to the General Partner and
Associate Limited Partners), profits or losses of the Partnership will be
allocated as follows: (i) profits will be allocated such that the General
Partner and the Associate Limited Partners will be allocated profits equal to
the amount of cash flow distributed to them for such fiscal period with the
remainder allocated to the Limited Partners, except that in all events, the
General Partner shall be allocated at least 1% of profits and (ii) losses will
be allocated 1% to the General Partner, 1% to the Associate Limited Partners
and 98% to the Limited Partners.
In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated profits
equal to the amount of cash flow distributed to them for such year. The
Limited Partners will be allocated losses such that the sum of amounts
allocated to the General Partner, Associate Limited Partners, and Limited
Partners equals the net profit for the given year.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
In general, and subject to certain limitations, the distribution of Cash
Flow (as defined) after the initial admission date is allocated 90% to the
Holders of Interests and 10% to the General Partner and the Associate Limited
Partners (collectively) until the Holders of Interests have received
cumulative distributions of Cash Flow equal to a 10% per annum return (non-
compounded) on their Adjusted Capital Investments (as defined) plus the return
of their Capital Investments; provided, however, that 4.7369% of the 10%
amount otherwise distributable to the General Partner and Associate Limited
Partners (collectively) will be deferred, and such amount will be paid to the
Holders of Interests, until the Holders of Interests receive Cash Flow
distributions equal to a cumulative, non-compounded amount of 12% per annum on
their Capital Investments (as defined). This deferral provision is in place
until the Holders of Interests receive total cash distributions equal to their
Capital Investments. Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) will be distributable to them out of
Cash Flow otherwise distributable to the Holders of Interests at such time as
such Holders have received a 12% per annum cumulative, non-compounded return
on their Capital Investments (as defined) or in any event, to the extent of
one-half of Cash Flow otherwise distributable to the Holders of Interests at
such time as they have received total distributions of Cash Flow equal to
their Capital Investments (as defined). Thereafter, all distributions of Cash
Flow will be made 85% to the Holders of Interests and 15% to the General
Partner and the Associate Limited Partners (collectively); provided, however,
that the General Partner and the Associate Limited Partners (collectively)
shall be entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this sentence.
(10) ADJUSTMENTS
In the opinion of the General Partner, all adjustments (consisting solely
of normal recurring adjustments) necessary for a fair presentation have been
made to the accompanying consolidated statements as of March 31, 1994 and
December 31, 1993 and for the three month periods ended March 31, 1994 and
1993.<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
At March 31, 1994 and December 31, 1993, the Partnership had cash and
cash equivalents of approximately $7,610,000 and $18,907,000, respectively.
Such funds were available for debt service, working capital requirements and
distributions to partners. The source of both short-term and long-term future
liquidity is expected to be derived from the sale of housing units, homesites
and land parcels and through the Partnership's credit facilities, which are
discussed below.
As a result of management's efforts to broaden the appeal of the
Partnership's Communities through the introduction of new housing products,
the implementation of a series of cost reductions as well as the upward trends
in housing activity that the nation as well as the markets in which the
Partnership's properties are located have been experiencing, the Partnership
was able to generate significant cash flow before debt service during 1993.
The Partnership utilized this excess cash flow to make scheduled and
accelerated principal repayments on its outstanding debt, as required under
the terms of the credit facility agreement, and to increase its cash reserves.
Furthermore, in February 1994, the Partnership made a distribution for 1993 of
$2,565,433 to its Limited Partners ($6.35 per Interest) and $142,523 to the
General Partner and Associate Limited Partners, collectively. As mentioned
below, the Partnership's income property term loan, revolving line of credit
and letter of credit facility are due for renewal in July 1994. Although the
Partnership is hopeful these renewals will be obtained, there can be no
assurance that such will occur or that the terms, amounts and restrictions of
the renewed credit facilities will be similar to those under the Partnership's
existing facilities. As a result, the Partnership will not be able to assess
whether or not cash distributions to partners can be made for 1994 until the
end of 1994 when the final operating results for the year, as well as the
terms and conditions of a new credit facility, are known.
In October 1992, the Partnership and its lenders executed a binding
agreement to restructure the Partnership's credit facility. The new facility
consists of a term loan in the amount of $126,805,195, a revolving line of
credit facility up to $45 million, an income property term loan of $20 million
and a $15 million letter of credit facility. The term loan, the revolving
line of credit and the letter of credit facility are secured by recorded
mortgages and security interests on all otherwise unencumbered real property
assets of the Partnership as well as an assignment of all mortgages
receivable, equity memberships, certain joint venture interests or proceeds
from joint ventures, and cash balances with the exception of deposits held in
escrow). The income property term loan is secured by the recorded first
mortgages on a mixed-use center and an office building in Boca Raton, Florida.
All of the notes under the new facility are cross-collateralized and cross-
defaulted.
The Partnership made the required principal repayments of $8 million and
$10 million on the term loan in February 1993 and March 1994, respectively.
Principal repayments of $10 million on the term loan are due in each of the
years 1995 and 1996, and the remaining balance outstanding is due in 1997. In
addition, the new term loan agreement provides for additional principal
repayments based upon a specified percentage of available cash flow and upon
the sale of certain assets. For the three months ended March 31, 1994, the
Partnership made additional term loan payments totalling approximately $6.2
million. Under the new income property term loan, monthly principal and
interest payments are required to be paid on a 25-year amortization schedule
with the remaining balance outstanding due in July 1994. The revolving line
of credit and the letter of credit facility also mature in July 1994. The
Partnership is in the process of negotiating a renewal of its credit
facilities. Although the Partnership is hopeful these renewals will be
obtained, there can be no assurance that such will occur or that the terms,
amounts and restrictions of the renewed credit facilities will be similar to
those under the Partnership's existing facilities. At March 31, 1994, all of
the term loan proceeds had been borrowed with a remaining outstanding balance
of $92,097,206, and $0, $18,733,327 and $11,884,393 were outstanding on the
revolving line of credit facility, the income property term loan and the
letter of credit facility, respectively.
The facility contains significant restrictions with respect to the
payment of distributions to partners, the maintenance of certain loan-to-value
ratios, the use of proceeds from the sale of the Partnership's assets, and
advances to the Partnership's joint ventures. Other than the uncertainty
surrounding the funding of any required joint venture advances, which require
the lenders' approval, and subject to the successful renewal of the
Partnership's credit facilities as discussed above, the Partnership believes
that the current and expected future liquidity and capital resources of the
Partnership, including its restructured bank credit facilities, generally
should be adequate to fund currently expected short- and long-term capital
requirements for development and other costs of operations.
During November 1993, the Partnership received a commitment from a lender
for a $24 million revolving construction line of credit for the first building
and certain amenities within the Partnership's new condominium project on
Longboat Key, Florida known as Grand Bay. This line of credit was
subsequently executed in January 1994. The line of credit bears interest at
the lender's prime rate plus 3/4% per annum and matures in January 1996. See
Note 4 for further discussion regarding this line of credit.
Certain of the Partnership's property within the Cullasaja Community is
encumbered by a mortgage note with an outstanding principal balance of
approximately $5.4 million at March 31, 1994. This note matured on March 1,
1994. The Partnership is currently seeking an extension of this loan,
however, there can be no assurance the Partnership will obtain an extension.
This note is collateralized by a first mortgage on certain real estate
inventories and 12.5% of the outstanding balance is guaranteed by the
Partnership.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
and are subject to protection as wetlands. The time involved to complete this
process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and comparable state and local regulatory
agencies, is expected to be lengthy. It is anticipated that certain costs of
mitigation will be incurred in conjunction with obtaining the necessary
permits, the amount and extent of which are unknown at this time. The
Partnership had previously gone through a similar process and was successful
in obtaining approvals for Increment II of the Weston Community. Although
there can be no assurance, given the Partnership's prior experience and
discussions to date with the appropriate agencies, the Partnership is hopeful
that a compromise will ultimately be reached that will adequately address the
concerns of the environmental agencies, while allowing the Partnership to
continue its development plans for Increment III of Weston.
In June 1993, the Partnership executed an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III of the Partnership's Weston
Community, whereby, in exchange for $5 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983 which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at closing and the balance of $2.5 million is payable in
equal annual installments of $500,000 together with interest thereon at 8% per
annum beginning May 1994. The first $500,000 principal repayment was received
in May 1994. The unpaid principal balance is secured by a mortgage on certain
real estate located in the Weston Community. As part of its efforts to obtain
the appropriate development permits discussed in the preceding paragraph, the
Partnership has included this land as part of its proposed mitigation plan for
the development of Increment III of its Weston Community.
During the first quarter of 1993, the Partnership reached a settlement
agreement with its joint venture partner in a property located in Ocala,
Florida, whereby in exchange for its partner's 50% interest in the venture,
the Partnership agreed to dismiss a lawsuit previously filed against its
venture partner for failure to perform in accordance with the terms of a
$1,600,000 note which had been issued to the Partnership by the joint venture.
This agreement was pursued as a more favorable remedy to other alternatives
available to the Partnership. As a result of this transaction, the
Partnership changed from the equity method of accounting to the consolidated
method of accounting for the joint venture effective March 1, 1993.
The Partnership has been advised by Merrill Lynch that Merrill Lynch has
been named a defendant in actions pending in the Eleventh and Seventeenth
Judicial Circuit Courts in Dade and Broward Counties, Florida to compel
arbitration of claims brought by certain investors of the Partnership
representing approximately 4% of the total Interests outstanding. Merrill
Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
including without limitation attorney's fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 with the Partnership
relating to the sale of Interests in the Partnership through Merrill Lynch on
behalf of the Partnership. The Partnership is unable to determine at this time
the ultimate investment of investors who have filed arbitration claims as to
which Merrill Lynch might seek indemnification in the future. At this time,
and based upon the information presently available about the arbitration
statements of claims filed by some of these investors, the Partnership and its
General Partner believe that they have meritorious defenses to demands for
indemnification made by Merrill Lynch and intend to vigorously pursue such
defenses. In the event Merrill Lynch is entitled to indemnification of its
attorney's fees and expenses or other losses and expenses, these amounts may
prove to be material.
Reference is made to Part II - OTHER INFORMATION - Item 1. Legal
Proceedings, for a discussion of various lawsuits, in which the Partnership is
a defendant, allegedly arising out of or relating to Hurricane Andrew and
certain property damage allegedly suffered by the plaintiffs at a previously
developed community known as Country Walk.
RESULTS OF OPERATIONS
The results of operations for the three months ended March 31, 1994 and
1993 are primarily attributable to the development and sale or operation of
the Partnership's assets. See Note 1 for a discussion regarding the
recognition of profit from sales of real estate.
Revenues from housing and homesite activities are recognized upon the
closing of homes and developed lots, respectively, within the Partnership's
Communities. Land and property revenues are generated from the closing of
developed and undeveloped residential and/or commercial land tracts, as well
as gross revenues earned from the sale of equity memberships in the clubs
within the Partnership's Boca Raton and Jacksonville, Florida Communities, as
well as its Community near Highlands, North Carolina.
Cost of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest, real
estate taxes, marketing, and disposition costs. The costs related to the
Partnership's homesite sales reflect the cost of the acquired assets, related
development expenditures, certain capitalized overhead costs, capitalized
interest, real estate taxes and disposition costs. Land and property costs
reflect the cost of the acquired assets, certain development costs and related
disposition costs, as well as the cost associated with the sale of equity
memberships.
Housing revenues increased significantly for the three month period ended
March 31, 1994 as compared to the same period in 1993 due primarily to an
increase in the number of closings at the Partnership's Weston and Broken
Sound Communities. The Partnership also experienced increased revenues at its
Communities in Tampa and Jacksonville, Florida, due to the introduction of new
products in 1993 which had their initial closings in the fourth quarter of
1993. In an effort to capture additional market share in Broward County,
Florida, the Partnership introduced several new value-oriented products in
Weston in late 1992 and early 1993 which had their initial closings in the
third quarter of 1993. The success of these products contributed
significantly to the increased closings in Weston and the overall increase in
housing revenues for the first three months in 1994 as compared to the same
period in 1993. Revenues increased at Broken Sound due to new products
introduced in late 1992 which had their initial closings in the second quarter
of 1993.
Gross operating profit from housing activities increased for the three
months ended March 31, 1994 as compared to the same period in 1993 due to a
change in the mix of product closed, with more of the higher margin activity
at the Partnership's Broken Sound Community, as well as the effect of a change
in estimated construction costs which resulted in a credit to housing cost of
sales in the first quarter of 1994.
Homesite revenues increased for the three months ended March 31, 1994 as
compared to the same period in 1993 due primarily to the initial closings of
lots in several homesite products introduced early in 1993 in the Weston Hills
Country Club section of the Partnership's Weston Community. This favorable
variance was partially offset, however, by decreased revenues from certain
other homesite products at Weston which had their final closings in 1993, and
a decrease in the number of lots closed at the Partnership's Jacksonville Golf
& Country Club Community.
The increase in gross operating profit from homesite closings is due
primarily to increased revenues realized from location premiums related to the
closings of lots in the Partnership's Weston Hills Country Club section of the
Weston Community.
The decrease in land and property revenues for the three months ended
March 31, 1994 as compared to 1993 is due primarily to decreased equity sales
revenues at the Partnership's clubs in Boca Raton and Jacksonville, Florida.
Gross operating profit from land and property sales increased, however, due to
increased revenue recognition in the first quarter of 1994 for sales for which
profits had previously been deferred, as they did not meet the criteria for
revenue recognition in accordance with generally accepted accounting
principles.
Operating properties represents activity from the Partnership's club and
hotel operations, commercial properties and certain other operating assets.
Revenues generated by the Partnership's operating properties increased for the
three months ended March 31, 1994 as compared to the same period in 1993
primarily as a result of an increase in membership activity at the
Partnership's club facilities in Weston and River Hills, resulting from the
overall increase in sales activity within those Communities. In addition,
revenues from the Partnership's cable operations in Weston increased for the
first quarter in 1994 as compared to the same period in 1993 resulting from an
increase in the number of cable subscribers within that Community as well as a
change in the cable rate structure. These favorable variances were partially
offset, however, as 1994 revenues included no activity from the Oakbridge
Club, which was sold in October 1993 to an unaffiliated third party.
Gross operating profit generated by the Partnership's operating
properties increased for the three months ended March 31, 1994 as compared to
1993 due primarily to the reclassification during the second quarter of 1993
of amounts advanced to the Broken Sound Club which had been recorded to
operating properties cost of sales in the first quarter of 1993. These
amounts were reclassified to accounts receivable in May 1993 as the year-to-
date operations and the club's then current operating budget for the remainder
of the year indicated there would be significant cash available by year end
1993, and all amounts advanced by the Partnership would be reimbursed prior to
December 31, 1993. In addition, gross operating profits increased at the
Partnership's club facility due to the implementation of numerous cost
reduction programs.
Brokerage and other operations represent activity from the sale of
builders' homes within the Partnership's Communities, activity from the resale
of real estate inside and outside of the Partnership's Communities, proceeds
from the Partnership's property management activities, as well as fees earned
from various management agreements with joint ventures.
Selling, general and administrative expenses include all marketing costs,
with the exception of those costs capitalized in conjunction with the
construction of housing units, and project and general administrative costs.
These expenses are net of the marketing fee reimbursements received from
third-party builders. The increase in selling, general and administrative
expenses for the three months ended March 31, 1994 as compared to 1993 is due
primarily to certain non-recurring credits recorded in the first quarter of
1993, reducing expense for that period, as well as an increase in time spent
on the administration of the Partnership in 1994.
Interest and real estate taxes decreased for the three month period ended
March 31, 1994 as compared to the same period in 1993 due primarily to an
overall decrease in the Partnership's average debt balance outstanding as well
as the maturity of one of the Partnership's interest rate swap arrangements in
February 1994.
For the quarter ended March 31, 1994, the Partnership (including its
consolidated and unconsolidated joint ventures accounted for under the equity
method) closed on the sale of 154 housing units, 150 homesites and
approximately 3.4 acres of undeveloped land. This compares to closings in the
first quarter of 1993 of 78 housing units, 153 homesites and approximately one
acre of undeveloped land. Outstanding contracts ("backlog") as of March 31,
1994 were for 577 housing units, 114 homesites, and approximately 45 acres of
developed and undeveloped land tracts. This compares to a backlog as of March
31, 1993 of 314 housing units, 120 homesites and approximately 55 acres of
developed and undeveloped land tracts.
