SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _____________
Commission File No. 0-17689
CLOVER INCOME PROPERTIES II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 22-2811188
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 W. PARK AVENUE, MERCHANTVILLE, NJ 08109
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (609) 662-1116
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The registrant has no voting stock. The registrant's outstanding voting
securities consist of units of limited partnership interest which have no
readily ascertainable market value since there is no public trading market for
these securities on which to base a calculation of aggregate market value.
<PAGE>
Documents incorporated by reference: The Prospectus of the registrant dated
September 18, 1987 filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933 on September 30, 1987 is incorporated herein by reference
in Parts I, II and III of this Annual Report on Form 10-K and Supplement No. 3
to the Prospectus dated September 12, 1988 and filed with the Commission as part
of Post-Effective Amendment No. 4 to the Registrant's Registration Statement on
September 13, 1988, is incorporated by reference in Part I of this Annual Report
on Form 10-K. Registrant's Current Report on Form 8-K filed with the Securities
and Exchange Commission on March 4, 1996 is incorporated by reference in Part I
of this Annual Report on Form 10-K.
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<PAGE>
PART I
ITEM 1. Business
The Registrant, Clover Income Properties II, L.P. (the "Partnership"), is a
limited partnership formed in June 1987 under the Revised Uniform Limited
Partnership Act of the State of Delaware to invest in existing income-producing
residential real estate properties. C.I.P. II Management Corp., a New Jersey
corporation which is a wholly-owned subsidiary of Clover Financial Corporation
("Clover"), a New Jersey Corporation, is the General Partner (the "General
Partner") of the Partnership. The Partnership sold $17,432,290 of units (the
"Units") of limited partnership interest in a public offering made pursuant to a
Prospectus (the "Prospectus") contained in the Partnership's Registration
Statement on Form S-11 under the Securities Act of 1933 (No. 33-15487). The
Partnership supplemented the Prospectus by supplements dated December 29, 1987
and June 9, 1988, and by supplement dated September 12, 1988 (the "Supplement")
which incorporated and superseded the two previous supplements.
On July 1, 1994, the Partnership sold its entire interest in the Knolls at
Newgate Apartments (the "Knolls"), a 144-unit garden apartment complex located
in Centreville, Fairfax County, Virginia, together with all related improvements
and intangible and tangible personal property, to United Dominion Realty Trust,
Inc. ("United Dominion") for a cash purchase price of $3,750,000. United
Dominion acquired the land, which was formerly subject to a long-term ground
lease, from the owner of the land for $1,550,000. Both United Dominion and the
owner of the land are unaffiliated with the General Partner, and the sale of the
Knolls and the land was negotiated on an arms-length basis. The Partnership
incurred expenses of $46,556 in connection with the sale, which were paid from
the proceeds of the sale. The Partnership also set aside additional working
capital reserves of $76,879 at the time of the sale. No expenses or commissions
were paid to the General Partner or its affiliates in connection with the sale.
The General Partner did not receive any proceeds of the sale.
The Partnership had acquired the Knolls in April 1989, generally upon the
terms discussed under "Real Property Investments - The Knolls at Newgate" at
pages 4-7 of the Supplement, which discussion is incorporated herein by
reference. The Partnership purchased the Knolls from an affiliate at a purchase
price of $6,864,301 (the price paid by the affiliate plus its net acquisition
and carrying costs), plus acquisition expenses of $14,615 and an acquisition fee
paid to the General Partner in the amount of $225,738.
The Partnership continues to own a 42.91% interest in The Willowbrook Joint
Venture, a joint venture among the Partnership, Clover Income Properties, L.P.
("CIP") and Clover Income Properties III, L.P. ("CIP III"), both of which are
affiliates of
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<PAGE>
the Partnership. The Willowbrook Joint Venture owns The Willowbrook Apartments,
a 299-unit mid-rise residential apartment complex located in Baltimore,
Maryland, which it acquired on December 17, 1987, at a purchase price of
$12,500,000.
The Partnership and CIP each acquired a 50% interest in The Willowbrook
Joint Venture in December 1987 for an investment by each of $6,450,000. In April
1992, the interest of each of the Partnership and CIP in The Willowbrook Joint
Venture was reduced to 42.9l% as a result of a purchase by CIP III of a 14.18%
interest for a cash purchase price of $2,200,000. In the transaction, the
Partnership and CIP each received a distribution from The Willowbrook Joint
Venture in the amount of $1,100,000. The Partnership incurred $10,758 in
expenses, including legal, appraisal, accounting, title insurance and
miscellaneous expenses, in connection with the transaction, which amounts were
paid from the distribution. Reference is made to the Prospectus and the
Supplement for a more detailed discussion of The Willowbrook Joint Venture, The
Willowbrook Apartments and the acquisition of The Willowbrook Apartments, which
discussions are incorporated herein by reference.
The Willowbrook Apartments are subject to risks, including competition from
other rental apartment and townhouse developments in the Baltimore area, adverse
local market conditions due to changes in economic conditions in the Baltimore
market, the Mid-Atlantic region or nationally, area characteristics, interest
rates, availability and cost of insurance coverage, changes in real estate tax
rates or laws, rising utilities costs and operating expenses, rent control,
governmental regulations, acts of God and other factors which are beyond the
control of the Partnership.
Services at The Willowbrook Apartments are performed by on-site personnel
all of whom are employees of NPI-CL Management L.P. ("NPI"), an unaffiliated
third party. Such services are provided pursuant to a written agreement
providing for fees equal to 5% of the gross revenues from The Willowbrook
Apartments. NPI replaced Allstate Management Corp., an affiliate of the General
Partner, as the property manager effective February 21, 1995. At the same time,
other partnerships affiliated with the General Partner also engaged NPI as a
property manager at rates equivalent to the rates previously paid to the prior
property manager of each partnership.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. According to Commercial Property News and the National Multi-Housing
Council, Insignia, together with its affiliates is the largest property manager
in the United States. The General Partner does not believe this transaction will
have a significant impact on the Partnership.
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<PAGE>
On February 7, 1996, The Willowbrook Joint Venture, Berwind Property Group,
Inc. ("Berwind") and First Montgomery Properties, Ltd. ("First Montgomery", and
with Berwind, the "Buyers") executed an Agreement of Sale (as amended, the "Sale
Agreement") concerning the sale of The Willowbrook Apartments (the "Sale").
Pursuant to the terms of the Sale Agreement, the Buyers have agreed to
purchase The Willowbrook Apartments for a purchase price of $9,850,000. The
completion of the Sale is contingent upon the approval of the holders of more
than 50% of the outstanding Units and the holders of more than 50% of the
outstanding units of limited partnership interest in each of CIP and CIP III. If
such approval is not obtained on or before June 30, 1996, the Sale Agreement
shall be automatically cancelled and terminated.
The preceding two paragraphs modify and supersede the description of the
Sale in the Partnership's Current Report on Form 8-K, filed with the
Commissioner pursuant to the Securities Exchange Act of 1934 on March 4, 1996.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion of the
operations of the Partnership's business.
PART II
ITEM 5. Market for the Partnership's Units of Limited Partnership
Interests and Related Security Holder Matters
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership's
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") included as an Exhibit to the Prospectus and incorporated herein by
reference. As of March 28, 1996, 1,670 limited partners held 17,500 Units.
Cash distributions, if any, to be distributed to the partners of the
Partnership are described generally at pages 23-24 in the Prospectus, and such
description is incorporated herein by reference. Distributions for 1995 and 1994
were paid quarterly in the annual amounts set forth under Item 6. Selected
Financial Data.
The General Partner maintains a policy that the only cash distributions
made to the Partnership's limited partners are distributions of "net cash
receipts," as defined on page A-4 of the Prospectus, which definition is
incorporated herein by reference
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<PAGE>
(other than distributions of proceeds from the sale of Partnership property or
the liquidation of the Partnership). The total net cash receipts of the
Partnership from inception through December 31, 1995 were $9,984,039. Total
distributions from inception through December 31, 1995 were $9,743,450 and
$55,676 was subsequently distributed in January 1996 with respect to the fourth
quarter of 1995 for a total 9,799,126. Of that amount, $8,428,014 represents a
return of capital and the balance of $1,371,112 represents a distribution of
income. Except for the April 1992 distribution of $1,000,000 of the proceeds
from the reduction of the Partnership's interest in The Willowbrook Joint
Venture and the July 15, 1994 distribution of $3,446,975 of the proceeds from
the sale of Knolls, all distributions to partners have been funded by current
year net cash receipts and undistributed net cash receipts from prior years and
all distributions have been made on a quarterly basis.
On or about July 15, 1994, the Partnership distributed $3,550,050 to its
Limited Partners, including $3,446,975 of net sales proceeds and $103,075 of
second quarter cash flow, representing a distribution of $202.86 for each Unit
of limited partnership interest owned. The Partnership also distributed $1,041
of second quarter cash flow to the General Partner; however, the General Partner
received no proceeds from the sale of the Knolls. See Item 1. Business.
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<PAGE>
PART III
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition, Liquidity and Capital Resources
The Partnership's only remaining interest in real estate is a 42.91%
interest in The Willowbrook Joint Venture, which owns The Willowbrook
Apartments. Consequently, the Partnership's primary remaining source of
operating cash flow will be distributions from The Willowbrook Joint Venture.
On December 31, 1995, the Partnership had cash on hand of $231,081 as
compared to $209,407 on December 31, 1994. These funds, along with future
operating cash flow, will be utilized for working capital needs and for
distributions to the Limited Partners.
The Partnership's net cash flow from operations was $59,780 for 1995,
$(154,924) for 1994 and $371,504 for 1993. The increase in net cash flow from
operations for 1995 as compared to 1994, was primarily due to a decrease in cash
paid for expenses, partially offset by a decrease in cash received from rentals
and other income as a result of the sale of the Knolls on July 1, 1994. The
decrease in net cash flow from operations for 1994 as compared to 1993, was
primarily due to a decrease in cash received from rentals as a result of the
sale of the Knolls and an increase in cash paid for expenses.
The Willowbrook Joint Venture's net cash flow from operations was $797,919
for 1995 as compared to $820,992 for 1994 and $715,533 for 1993. The decrease in
cash flow from operations for 1995, as compared to 1994, was due to a decrease
in cash received from rentals, interest and other income. The increase in cash
flow from operations in 1994, as compared to 1993, was primarily due to an
increase in cash received from rentals combined with an increase in other income
and a decrease in cash paid for operating expenses.
The General Partner believes that the Partnership's current and future cash
flows will be sufficient to meet the Partnership's liquidity requirements over
the next twelve months and the foreseeable future, absent any unanticipated cost
increases or adverse market conditions.
If the Sale is approved by the Limited Partners and completed, the proceeds
from the Sale distributed by the Joint Venture will be sufficient to cover the
anticipated costs of the Sale estimated to be $832,000.
-7-
<PAGE>
As of December 31, 1995, the Partnership had paid all outstanding amounts
owed to the General Partner and its affiliates. As of December 31, 1995, The
Willowbrook Joint Venture, however, owed a total of approximately $326,000 to
Allstate Management Corp., an affiliate of the General Partner, for accrued and
unpaid property management fees and reimbursable costs. The payment of such
amounts will be made from The Willowbrook Joint Venture's cash flow when
available and from the proceeds of any sales or refinancing of the assets of The
Willowbrook Joint Venture.
During 1995, one elevator was replaced at a cost of $22,857; air
conditioning equipment was purchased at a cost of $18,422 and other capital
improvements were made at a cost of $10,810. These amounts are reflected in the
Statement of Cash Flows as cash paid for investing activities. In addition,
common area hallways were recarpeted in 1995. Major projects planned for 1996 at
The Willowbrook Apartments, at an estimated total cost of $188,000, include the
replacement of carpets and tiles, the resurfacing of the parking lot and the
painting of certain hallways. Funding for these projects will be provided by The
Willowbrook Joint Venture's operating cash flow. It is not anticipated that
these projects will cause any increase in the realty taxes at The Willowbrook
Apartments.
Results of Operations
Until the sale of the Knolls, the Partnership earned revenues primarily
from rental income from the Knolls. Revenues from The Willowbrook Apartments are
not included in Partnership revenues.
No rental income was recorded in 1995. Rental income was $443,084 in 1994
as compared to $952,004 in 1993. The decrease in 1995 from 1994 and in 1994 from
1993 was the result of the sale of the Knolls on July 1, 1994. No other income
was recorded in 1995, compared to other income of $37,771 in 1994 and $47,695 in
1993. The decrease in 1995 as compared to 1994 is due to refunds of state tax
overpayments recorded in 1994 and the elimination of other income from the
Knolls. The decrease in 1994 as compared to 1993 is due to the sale of the
Knolls, partially offset by the state tax refund.
Operating expenses were $3,940 for 1995, $442,280 for 1994 and $691,076 for
1993. The decrease in 1995 and in 1994 was due to the sale of the Knolls.
Operating expenses were 99.8% of rental income in 1994 as compared to 72.6% in
1993. The increase from 1993 to 1994, as a percentage of rental income, is
primarily due to increases in snow and trash removal costs, higher utility costs
and expenses incurred to prepare the Knolls property for the sale.
The Partnership had a net loss after depreciation and amortization of
$263,894 in 1995, compared to a net loss of $2,507,224 in 1994 and net income of
$143,160 in 1993. The
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<PAGE>
decrease in net loss after depreciation and amortization in 1995, as compared to
1994, was primarily due to the loss of approximately $2.4 million incurred in
1994 on the sale of the Knolls, the elimination of operating expenses and a
reduction of depreciation expense in 1995 and the non-recurring cost of legal
proceedings in 1994, partially offset by the elimination of rental income, an
impairment loss in the Joint Venture, legal and accounting fees incurred during
1995 in connection with efforts to sell The Willowbrook Apartments and
forgiveness of debt recorded in 1994. For a further discussion of the impairment
loss, see Note 3 in the Financial Statement of the Partnership on page F-12. The
decrease in income after depreciation and amortization in 1993 to a loss in 1994
is primarily due to the loss on the sale of the Knolls in 1994, a decrease in
rental and other income due to the sale of the Knolls and the cost of legal
proceedings incurred in 1994, partially offset by a decrease in operating and
depreciation expenses and by the forgiveness of debt recorded in 1994.
The sale of the Knolls and subsequent loss on the sale in 1994 was
significantly impacted by the acquisition of the ground on which the Knolls are
located. The ground was owned by an unrelated third party and there were
negotiations between the landlord, buyer and the Partnership for several months.
The transaction would only take place if the buyer was able to purchase the
ground. The increase in the purchase price of the ground negatively effected the
sale price of the Knolls property.
At the time of the issuance of the Partnership's December 31, 1993
financial statements, there was no indication that there was an impairment in
the value of the asset since there was increased occupancy for several of the
prior years and positive cash flow from operations before distributions received
from the Joint Venture.
Rental income for The Willowbrook Apartments, as operated by The
Willowbrook Joint Venture, was $2,013,638 in 1995 as compared to $2,013,518 in
1994 and $1,928,002 in 1993. Other income was $34,414 in 1995 as compared to
$48,416 in 1994 and $34,772 in 1993. Interest income was $1,051 in 1995 as
compared to $3,032 in 1994 and $5,135 in 1993.
Rental income for 1995 was virtually unchanged from 1994. A slight
improvement in occupancy rates was essentially offset by a slight decrease in
rental rates. The increase in rental income for 1994 as compared to 1993 was
primarily due to an increase in occupancy. The increase in other income from
1993 to 1994 and the decrease from 1994 to 1995 is primarily attributable to a
$17,000 refund of health benefit overpayments received in 1994. Interest income
decreased in 1994 and 1995 due to lower cash balances being maintained.
The average effective annual rental rates per unit for The Willowbrook
Apartments were $7,180 in 1995, $7,218 in 1994 and
-9-
<PAGE>
$7,270 in 1993. The average occupancy rates were 93.9% in 1995,
93.3% in 1994 and 88.7% in 1993.
Operating expenses for The Willowbrook Apartments for 1995 were $1,225,052
as compared to $1,219,161 for 1994 and $1,186,441 for 1993. The slight increase
in 1995 over 1994 was primarily due to increases in advertising expenses and
repairs and maintenance, substantially offset by a decrease in real estate taxes
resulting from a reduction in the property tax rates from the period ended June
30, 1994 to the period ended June 30, 1995. The increase in operating expenses
for 1994 over 1993 was primarily due to increases in salaries and wages, repairs
and maintenance and utilities, partially offset by decreases in advertising and
marketing expenses and decreases in real estate taxes from the period ended June
30, 1993 to the period ended June 30, 1994.
The Willowbrook Joint Venture's income after depreciation and amortization
was $295,191 for 1995 as compared to $310,701 for 1994 and $251,109 for 1993.
The decrease in income after depreciation and amortization in 1995 as compared
to 1994 is due to a decrease in other income combined with increases in
operating expenses and professional services, partially offset by a decrease in
general and administrative expenses. The increase in income after depreciation
and amortization in 1994 as compared to 1993 is due to increases in rental and
other income, partially offset by increases in operating expenses.
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<PAGE>
ITEM 8. Financial Statements and Supplementary Data.
INDEX
Report of Independent Certified Public Accountants for
Clover Income Properties II, L.P. F-1
Clover Income Properties II, L.P. Balance Sheets as of F-2
December 31, 1995 and 1994
Clover Income Properties II, L.P. Statements of F-3
Operations for each of the three years in the period
ended December 31, 1995
Clover Income Properties II, L.P. Statements of F-4
Partners' Capital for each of the three years in the
period ended December 31, 1995
Clover Income Properties II, L.P. Statements of Cash F-5
Flows for each of the three years in the period ended
December 31, 1995
Clover Income Properties II, L.P. Summary of F-7
Significant Accounting Policies
Clover Income Properties II, L.P. Notes to the F-9
Financial Statements
Report of Independent Certified Public Accountants for F-18
The Willowbrook Joint Venture
The Willowbrook Joint Venture Balance Sheets as of F-19
December 31, 1995 and 1994
The Willowbrook Joint Venture Statements of Income for F-20
each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Statements of Partners' F-21
Capital for each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Statements of Cash Flows F-22
for each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Summary of Significant F-24
Accounting Policies
The Willowbrook Joint Venture Notes to the Financial F-25
Statements
Clover Income Properties II, L.P. Schedule III Real F-29
Estate and accumulated depreciation for each of the
three years in the period ended December 31, 1995
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<PAGE>
The Willowbrook Joint Venture Schedule III Real Estate F-30
and accumulated depreciation for each of the three
years in the period ended December 31, 1995
C.I.P. II Management Corporation Independent F-31
Accountants' Report
C.I.P. II Management Corporation Balance Sheets as of F-32
November 30, 1995
C.I.P. II Management Corporation Notes to Financial F-33
Statement
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<PAGE>
Report of Independent Certified Public Accountants
Clover Income Properties II, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheets of Clover Income Properties II,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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.
As discussed in Notes 3 and 5, the 1995 and 1994 financial statements have been
revised.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clover Income Properties II,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Notes 3, 5 and 8
which are May 16, 1996
F-1
<PAGE>
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Clover Income Properties II, L.P.
Balance Sheets
December 31, 1995 1994
- -------------------------------------------------------------------
Assets
Cash $ 231,081 $ 209,407
State tax refund receivable -- 6,772
Investment in The Willowbrook
Joint Venture, at market in 1995
and equity in 1994 3,997,265 4,510,079
---------- ----------
$4,228,346 $4,726,258
========== ==========
Liabilities and Partners' Capital
Liabilities
Accrued expenses $ 19,500 $ 18,250
Due to general partner and affiliates -- 2,000
---------- ----------
Total liabilities 19,500 20,250
---------- ----------
Partners' capital
General partner 88,587 91,185
Limited partners 4,120,259 4,614,823
---------- ----------
Total partners' capital 4,208,846 4,706,008
---------- ----------
$4,228,346 $4,726,258
========== ==========
See accompanying summary of significant accounting policies
and notes to financial statements.
F-2
<PAGE>
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Clover Income Properties II, L.P.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $ -- $ 443,084 $ 952,004
Other income -- 37,771 47,695
Interest income 3,725 7,941 5,625
---------- ------------ ----------
Total revenues 3,725 488,796 1,005,324
---------- ------------ ----------
Expenses
Impairment loss, investment in
The Willowbrook Joint Venture 293,217 -- --
Operating expenses (including affiliate transactions
of $24,005 in 1994 and $77,274 in 1993) 3,940 442,208 691,076
Depreciation and amortization 24,435 134,563 229,835
Costs of legal proceedings -- 98,065 --
Professional services 63,643 25,819 36,675
General and administrative 9,050 10,590 12,329
---------- ------------ ----------
Total expenses 394,285 711,245 969,915
---------- ------------ ----------
Operating (loss) income (390,560) (222,449) 35,409
Share of income from The Willowbrook
Joint Venture 126,666 133,322 107,751
---------- ------------ ----------
(Loss) income before (loss) on sale
of Knolls at Newgate (263,894) (89,127) 143,160
(Loss) on sale of Knolls at Newgate -- (2,418,097) --
---------- ------------ ----------
Net (loss) income $ (263,894) $ (2,507,224) $ 143,160
========== ============ ==========
Net (loss) income per limited partnership unit $ (15.06) $ (141.84) $ 7.87
========== ============ ==========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-3
<PAGE>
------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Statements of Partners' Capital
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1992 $ -- $ 11,317,255 $ 11,317,255
Partners' distributions, $30.64
per limited partnership unit (5,415) (536,200) (541,615)
Net income 5,415 137,745 143,160
--------- ------------ ------------
Balance, December 31, 1993 -- 10,918,800 10,918,800
Partners' distributions, $218.39
per limited partnership unit (3,786) (3,821,825) (3,825,611)
Forgiveness of debt 120,043 -- 120,043
Net (loss) (25,072) (2,482,152) (2,507,224)
--------- ------------ ------------
Balance, December 31, 1994 91,185 4,614,823 4,706,008
Partners' distributions, $13.20
per limited partnership unit (2,334) (230,934) (233,268)
Net (loss) (264) (263,630) (263,894)
--------- ------------ ------------
Balance, December 31, 1995 $ 88,587 $ 4,120,259 $ 4,208,846
========= ============ ============
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-4
<PAGE>
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Clover Income Properties II, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from rentals $ -- $ 438,813 $ 941,791
Other income received -- 30,999 47,695
Interest income received 3,725 7,941 5,625
Distributions received from The
Willowbrook Joint Venture 126,666 133,322 107,751
Cash paid for expenses (70,611) (765,999) (731,358)
--------- ----------- ---------
Net cash provided (used) by operating activities 59,780 (154,924) 371,504
--------- ----------- ---------
Investing activities
Distributions received from
The Willowbrook Joint Venture 195,162 188,506 200,654
Payments made for property -- -- (34,557)
Investment in The Willowbrook Joint Venture -- (4,116) (30,836)
Proceeds from the sale of Knolls at Newgate -- 3,750,000 --
Settlement costs paid from sale of
Knolls at Newgate -- (46,556) --
--------- ----------- ---------
Net cash provided by investing activities 195,162 3,887,834 135,261
--------- ----------- ---------
Financing activities
Partners' distributions (233,268) (3,825,611) (541,615)
--------- ----------- ---------
Net increase (decrease) in cash 21,674 (92,701) (34,850)
Cash, at beginning of year 209,407 302,108 336,958
--------- ----------- ---------
Cash, at end of year $ 231,081 $ 209,407 $ 302,108
========= =========== =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-5
<PAGE>
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Clover Income Properties II, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net cash
provided by operating activities
Net (loss) income $(263,894) $(2,507,224) $ 143,160
--------- ----------- ---------
Adjustments
Impairment loss, investment in
The Willowbrook Joint Venture 293,217 -- --
Depreciation and amortization 24,435 134,563 229,835
Share of income from The Willowbrook
Joint Venture (126,666) (133,322) (107,751)
Loss on sale of Knolls at Newgate -- 2,418,097 --
Distributions received from The Willowbrook
Joint Venture 126,666 133,322 107,751
Decrease (increase) in rents receivable -- 13,808 (10,895)
Decrease (increase) in state tax refund receivable 6,772 (6,772) --
Decrease (increase) in prepaid expenses -- 2,861 (337)
Increase (decrease) in accounts payable 1,250 18,152 (1,301)
(Decrease) increase in accrued expenses -- (104,755) 7,075
(Decrease) in prepaid rents -- (2,275) (6,023)
(Decrease) increase in tenants' security deposits -- (15,804) 6,705
(Decrease) increase in due to general partner
and affiliates (2,000) (105,575) 3,285
--------- ----------- ---------
Total adjustments 323,674 2,352,300 228,344
--------- ----------- ---------
Net cash provided (used) by operating activities $ 59,780 $ (154,924) $ 371,504
========= =========== =========
Supplemental disclosure of cash flow information
Forgiveness of debt $ -- $ 120,043 $ --
========= =========== =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-6
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Summary of Significant Accounting Policies
Rental Revenue
Rental revenue is recognized when earned and represents potential billings, net
of concessions and vacancies.
Capitalization and Amortization of Certain Costs
At December 31, 1995, deferred acquisition fees paid to an affiliate have been
written off (see Note 3). For the years ended December 31, 1994 and prior, these
costs were included in investment in The Willowbrook Joint Venture and were
amortized over a two hundred and eighty five month period (life of the
Partnership) using the straight-line method.
Income Taxes
The Partnership has not provided for federal income taxes, since all income and
losses are to be allocated to the partners for inclusion in their respective tax
returns. The Partnership files a state composite tax return on behalf of its
non-resident partners and remits any taxes due. The tax returns, the status of
the Partnership as such for tax purposes and the amount of allocable Partnership
income or loss are subject to examination by the Internal Revenue Service. If
such examinations result in changes with respect to the Partnership status or in
changes to allocable Partnership income or loss, the tax liability of the
partners could be changed accordingly.
Net Income (Loss) and Distributions Per Partnership Unit
Net income (loss) and distributions per limited partnership unit are computed
from the date of the closing of the Minimum Offering (February 19, 1988) based
upon net income (loss) and distributions allocated to the limited partners and
the weighted average number of limited partnership units outstanding. Per unit
information has been computed based on 17,500 weighted average limited
partnership units.
Investment Property and Depreciation
The investment property was recorded at cost.
Depreciation on the property was provided on a straight-line basis over the
estimated useful lives of the various assets as follows:
Apartment buildings 40 years
Furniture and fixtures 12 years
F-7
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Summary of Significant Accounting Policies
Maintenance and repair expenses were charged to expense as incurred. Significant
betterments and improvements were capitalized and depreciated over their
respective lives.
Impairment of Long-Lived Assets
A writedown for impairment will be recorded when the facts and circumstances
indicate that the cost of the investment in the Willowbrook Joint Venture
including the related deferred acquisition fees may be impaired. To determine
impairment, the estimated undiscounted cash flows associated with the assets are
compared to the investment's carrying amount.
Use of Estimates
The preparation of financial statements in conformity with generally accepted ac
counting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
1. Organization
and Basis of
Accounting
Clover Income Properties II, L.P. ("CIP II") is a limited partnership which was
formed on June 25, 1987, in the State of Delaware for the purpose of acquiring,
operating and holding residential real estate for investment purposes. Leases
primarily have a term of one year or less. The general partner of the
Partnership is C.I.P. II Management Corporation, a wholly-owned subsidiary of
Clover Financial Corporation.
CIP II's records are maintained on the accrual basis of accounting as adjusted
for Federal income tax reporting purposes. The accompanying financial statements
have been prepared from such records after making appropriate adjustments, where
applicable, to reflect the Partnership's accounts on the accrual basis of
accounting according to generally accepted accounting principles (GAAP).
Depreciation of the property owned by The Willowbrook Joint Venture for
financial reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets, while alternative methods are used for
Federal income tax purposes. The net effect of these items is summarized as
follows:
December 31, 1995 1994
- --------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- --------------------------------------------------------------------------------
Total assets $4,228,346 $5,061,193 $4,726,258 $5,198,628
========== ========== ========== ==========
Partners' capital $4,208,846 $5,041,693 $4,706,008 $5,178,377
========== ========== ========== ==========
F-9
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
Reconciliation of income (loss) per financial statement to income (loss) per
Federal income tax return is as follows:
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Net (loss) income per
financial statement $(263,894) $(2,387,181) $143,160
Reconciling items
Impairment loss, investment in
The Willowbrook Joint Venture
(currently not deductible for
tax purposes) 293,217 -- --
Additional income from The
Willowbrook Joint Venture
resulting from different
depreciation methods 67,259 67,082 67,082
--------- ----------- --------
Net income (loss) per
federal income tax return $ 96,582 $(2,320,099) $210,242
========= =========== ========
2. Sale of
Investment
Property
On July 1, 1994, CIP II sold its entire interest in the Knolls at Newgate
Apartments, a 144 unit garden-style residential apartment complex located in
Centreville, Virginia, together with all related improvements and intangible and
tangible property to United Dominion Realty Trust (the Purchaser), an
unaffiliated party, for a cash purchase price of $3,750,000. The Purchaser also
acquired the land, which was formerly subject to a long-term ground lease, from
the owner of the land (also an unaffiliated party) for $1,550,000. The loss on
the sale of the investment property of $2,418,097, the same for tax purposes,
has been recorded in income for the year ended December 31, 1994. As of December
31, 1993, the property was not considered to be impaired based on undiscounted
estimated future operating cash flows. The sale of the Knolls Apartments and
related loss were significantly impacted by the acquisition of the land on which
the Knolls Apartments are located. The transaction was contingent upon the
buyer's ability to purchase the land. The purchase price of the land, required
by its' owner, negatively affected the sales price of the Knolls Apartments
property.
F-10
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
3. Investment
in The
Willowbrook
Joint Venture
On December 17, 1987, CIP II acquired a 50% interest in The Willowbrook Joint
Venture for $6,450,000. The Willowbrook Joint Venture owns the Willowbrook
Apartments, a 299-unit mid-rise apartment complex located in Baltimore,
Maryland.
On April 8, 1992, CIP II and Clover Income Properties, L.P., an affiliated
partnership, consummated an agreement which was effective April 1, 1992 with
Clover Income Properties III, L.P. (CIP III), an affiliated partnership,
pursuant to which CIP III acquired an interest in The Willowbrook Joint Venture
for $2,200,000 in cash. The Partnership reduced its interest from 50% to 42.91%
and received a distribution of $1,100,000 from the Joint Venture, based on an
independently appraised value of the Willowbrook Apartments of $15,650,000 as of
February 11, 1992. The excess of the amount paid over the net book value of the
14.18% interest in the Joint Venture purchased by CIP III amounted to $325,788.
The $325,788 was credited to the partners' capital accounts as of that date.
On February 7, 1996, the Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement, the Joint Venture will sell the Willowbrook
Apartments (including land), all related improvements and tangible and
intangible property for $10,500,000 less a $315,000 credit for capital
improvements. See note 8 for additional information.
The sale is contingent upon, among other things, the approval by a majority of
the limited partners of CIP, CIP II and CIP III. If the sale is approved by a
majority of the limited partners and all the other conditions to the sale are
met, the sale will be completed.
Concurrent with the sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP I and CIP II) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, the limited partnership
will then liquidate the net assets, distribute the proceeds and be dissolved.
Due to the proposed sale of the Willowbrook Apartments and subsequent
liquidation of the Partnership, CIP II has reflected its investment in the Joint
Venture at the lower of cost or market. Market value is based on the estimated
cash proceeds (net of settlement costs) from the sale of the Willowbrook
Apartments after allocation of proceeds to CIP, CIP II and CIP III. In May 1996,
the Partnership
F-11
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
reevaluated its investment in Willowbrook Apartments, including an impairment
loss amounting to $293,217, which has been charged to operations in the 1995
year.
A summary of the Joint Venture's financial statements is as follows:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Other assets $ 322,078 $ 331,731
Investment property held for sale,
net of accumulated depreciation 9,396,753 9,858,484
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
December 31, 1995 1994
- --------------------------------------------------------------------------------
Liabilities (including
$326,293 in 1995 and $326,240
in 1994 to affiliates) $ 403,359 $ 419,934
Capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Revenues $ 2,049,103 $ 2,064,966 $ 1,967,909
Expenses 1,753,912 1,754,265 1,716,800
----------- ----------- -----------
Net income $ 295,191 $ 310,701 $ 251,109
=========== =========== ===========
F-12
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
Depreciation on the Willowbrook Property has been provided on a straight-line
basis over the estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
The Joint Venture made distributions to the Partnership totaling $321,828,
$321,828 and $308,405 during 1995, 1994 and 1993, respectively. These
distributions represent 42.91% of the total distributions made during 1995, 1994
and 1993.
For the year ended December 31, 1994, deferred acquisition fees amounted to
$317,652, net of accumulated amortization of $166,971.
4. Partnership
Agreement
Pursuant to the terms of the Partnership Agreement, the net profits or losses
for 1987 were allocated 1% to the initial limited partner and 99% to the general
partner. After the sale of the Minimum Offering and the admission of additional
limited partners to the Partnership, all items of income, gain and loss and
distributions of cash are allocated as follows:
Net income of the Partnership from operations will be allocated as follows:
(a) first, if the Partnership made net cash receipts distributions with respect
to such period, an amount of net income up to the amount of such net cash
receipts distributions shall be allocated among the partners in the same
proportions as such net cash receipts distributions were distributed
provided, however, that if the total amount of net income is less than the
amount of net cash receipts distributions, an amount of net income equal to
the amount of net cash receipts distributions to the general partner shall
be allocated to the general partner and the balance shall be allocated to
the limited partners,
(b) second, to those partners having deficit balances in their capital accounts
in proportion to and to the extent of such deficits,
F-13
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
(c) third, to those partners, if any, who have received cumulative net cash
receipts distributions in the current and prior periods in an amount in
excess of the cumulative amount of net income allocated to such partners in
proportion to and to the extent of any such excess and, then,
(d) fourth, the balance, if any, shall be allocated 1% to the general partner
and 99% to the limited partners in proportion to their relative ownership
of units.
Net income or gain realized by the Partnership on a sale shall be allocated in
the following order of priority:
(a) first, to the partners with negative capital account balances, until each
such partner has a zero capital account balance,
(b) second, to the limited partners until the capital account balance of each
limited partner shall equal his adjusted capital contribution,
(c) third, to the limited partners until the capital account of each limited
partner shall equal his adjusted capital contribution and an amount equal
to the priority return (10%) distributed or to be distributed to each
limited partner in proportion to each limited partner's relative share of
such priority return,
(d) fourth, to the limited partners whose subscriptions were received by the
Partnership prior to June 1, 1988, until the capital account of each
limited partner shall equal the amount described in (c) above and an amount
equal to the additional return (up to 2%) distributed or to be distributed
to each limited partner in proportion to each such limited partner's
relative share of such additional returns and, then, any remaining amounts
of net income or gain shall be allocated 15% to the general partner and 85%
to the limited partners in proportion to their relative ownership of units.
Net losses of the Partnership shall be allocated 1% to the general partner and
99% to the limited partners.
F-14
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
Net cash receipts shall, to the extent determined by the general partner, be
distributed to the partners in the following manner:
(a) first, 1% to the general partner and 99% to the limited partners until the
limited partners receive a 7% annual noncompounded cumulative return, and
(b) second, 10% to the general partner and 90% to the limited partners of any
remaining net cash receipts.
Sale proceeds shall be distributed in the following manner:
(a) First, an amount up to the aggregate amount of the adjusted capital
contributions of all the limited partners immediately prior to such
distribution shall be distributed to the limited partners, in proportion to
the relative amounts of their adjusted capital contributions,
(b) second, an amount up to the aggregate amount of the priority returns, if
any, payable to the limited partners shall be distributed to the limited
partners, in proportion to the relative amounts of their priority returns,
(c) third, an amount up to the aggregate amount of the additional returns, if
any, payable to the limited partners whose subscriptions for units were
received by the Partnership prior to June 1, 1988, shall be distributed to
such limited partners in proportion to the relative amounts of their
additional returns, and then,
(d) any remaining amounts shall be distributed 15% to the general partner and
85% to the limited partners, with all the amounts distributed to the
limited partners as a group being divided among the limited partners in
accordance with their relative ownership of units.
F-15
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
5. Transactions
with Affiliates
The general partner and its affiliates are entitled to reimbursement for
administrative services rendered to the Partnership, direct expenses of the
Partnership, operations and goods and services used by and for the Partnership.
The Knolls, which was sold July 1, 1994, was managed by an affiliate of the
general partner pursuant to a management agreement which provided for an annual
fee not to exceed 5% of the gross rentals of the property.
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
- --------------------------------------------------------------------------------
Amount payable at
January 1, 1993 $ 120,560 $ 103,773 $ 224,333
Incurred during 1993 49,089 40,514 89,603
Payments during 1993 (46,260) (40,058) (86,318)
--------- --------- ---------
Amount payable at
December 31, 1993 123,389 104,229 227,618
Incurred during 1994 23,903 10,692 34,595
Payments during 1994 (132,021) (8,149) (140,170)
Amounts forgiven in 1994 (15,271) (104,772) (120,043)
--------- --------- ---------
Amount payable at
December 31, 1994 -- 2,000 2,000
Incurred during 1995 -- 9,050 9,050
Payments during 1995 -- (11,050) (11,050)
--------- --------- ---------
Amount payable at
December 31, 1995 $ -- $ -- $ --
========= ========= =========
F-16
<PAGE>
- --------------------------------------------------------------------------------
Clover Income Properties II, L.P.
Notes to Financial Statements
During the year ended December 31, 1994, the general partner and its affiliates
decided to forgive certain amounts due them totalling $120,043. This amount was
originally recorded in the Partnership's financial statements as other income.
In May 1996, the Partnership revised the 1994 financial statements and treated
the forgiveness as a capital contribution. This revision had no effect on and is
not expected to have any effect upon the aggregate partners' capital or
distributions.
6. Commitments
and
Contingencies
The Partnership was a defendant in a lawsuit filed by one of its former
employees for alleged retaliatory termination of employment and sexual
harassment. In the first quarter of 1994, the lawsuit was resolved requiring the
Partnership to pay for all attorney fees totaling $98,065.
7. Subsequent
Distributions
In January 1996, the Partnership made cash distributions of $55,125 to the
limited partners and $551 to the general partner.
8. Subsequent
Event
On May 16, 1996, the agreement to sell the Willowbrook Apartments was amended.
The amendment, among other things, reduced the sales price from $10,500,000 less
a $315,000 credit for capital contributions to $9,850,000.
F-17
<PAGE>
Report of Independent Certified Public Accountants
The Willowbrook Joint Venture
Merchantville, New Jersey
We have audited the accompanying balance sheets of The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the related statements of income,
partners' capital, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Note 2, which is
February 7, 1996
and Note 5 which
is May 16, 1996.
F-18
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Balance Sheets
December 31, 1995 1994
- -------------------------------------------------------------------------------
Assets
Cash $ 141,494 $ 146,687
Cash held for security deposits - restricted 34,868 46,394
Rents receivable 7,602 868
Prepaid expenses 137,014 136,682
Utility deposit 1,100 1,100
Investment property held for sale, net of
accumulated depreciation 9,396,753 9,858,484
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
Liabilities and Partners' Capital
Liabilities
Accounts payable $ -- $ 17,447
Accrued expenses 36,956 26,563
Tenants' security deposits 32,222 40,748
Prepaid rents 7,888 8,936
Due to affiliates 326,293 326,240
----------- -----------
Total liabilities 403,359 419,934
----------- -----------
Commitment
Partners' capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
----------- -----------
Total partners' capital 9,315,472 9,770,281
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
See accompanying summary of significant accounting policies
and notes to financial statements.
F-19
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $2,013,638 $2,013,518 $1,928,002
Other income 34,414 48,416 34,772
Interest income 1,051 3,032 5,135
---------- ---------- ----------
Total revenues 2,049,103 2,064,966 1,967,909
---------- ---------- ----------
Expenses
Depreciation and amortization 514,843 512,242 508,510
Operating expenses (including affiliate
transactions of $17,905 in 1995, $112,445
in 1994 and $115,451 in 1993) 1,225,052 1,219,161 1,186,441
Professional services 14,017 11,173 12,068
General and administrative, affiliates -- 11,689 9,781
---------- ---------- ----------
Total expenses 1,753,912 1,754,265 1,716,800
---------- ---------- ----------
Net income $ 295,191 $ 310,701 $ 251,109
========== ========== ==========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-20
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Partners' Capital
<TABLE>
<CAPTION>
Clover Clover Clover
Income Income Income
Properties, Properties Properties
L.P. II, L.P. III, L.P. Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $ 4,220,846 $ 4,220,846 $ 2,154,052 $ 10,595,744
Capital contributions 30,836 30,836 10,197 71,869
Net income 107,751 107,751 35,607 251,109
Partners' distributions (308,405) (308,405) (101,924) (718,734)
--------- --------- --------- ----------
Balance, December 31, 1993 4,051,028 4,051,028 2,097,932 10,199,988
Capital contributions 4,116 4,116 1,360 9,592
Net income 133,322 133,322 44,057 310,701
Partners' distributions (321,828) (321,828) (106,344) (750,000)
--------- --------- --------- ----------
Balance, December 31, 1994 3,866,638 3,866,638 2,037,005 $ 9,770,281
Capital contributions -- -- -- --
Net income 126,666 126,666 41,859 295,191
Partners' distributions (321,828) (321,828) (106,344) (750,000)
--------- --------- --------- ----------
Balance, December 31, 1995 $ 3,671,476 $ 3,671,476 $ 1,972,520 $ 9,315,472
=========== =========== =========== ============
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-21
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from rentals $ 2,005,856 $ 2,020,702 $ 1,926,352
Interest income received 1,051 3,032 5,135
Other income received 34,414 48,416 34,772
Security deposits paid 11,526 4,051 15,521
Cash paid for operating expenses (1,254,928) (1,255,209) (1,266,247)
---------- ---------- ----------
Net cash provided by operating activities 797,919 820,992 715,533
---------- ---------- ----------
Investing activities
Cash paid for investment property (53,112) (62,265) (94,426)
---------- ---------- ----------
Financing activities
Partners' distributions (750,000) (750,000) (718,734)
Partners' contributions -- 9,592 71,869
---------- ---------- ----------
Net cash (used) in financing activities (750,000) (740,408) (646,865)
---------- ---------- ----------
Net (decrease) increase in cash (5,193) 18,319 (25,758)
Cash, at beginning of year 146,687 128,368 154,126
---------- ---------- ----------
Cash, at end of year $ 141,494 $ 146,687 $ 128,368
=========== =========== ===========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-22
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities
Net income $ 295,191 $ 310,701 $ 251,109
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 514,843 512,242 508,510
(Increase) decrease in cash held
for security deposits 11,526 4,051 15,521
(Increase) decrease in rents receivable (6,734) 2,428 (1,929)
(Increase) decrease in prepaid expenses (332) 15,508 320
(Decrease) increase in accounts payable (17,447) (11,091) 9,308
Increase (decrease) in accrued expenses 10,393 526 (2,146)
(Decrease) in tenants' security deposits (8,526) (5,816) (15,874)
(Decrease) increase in prepaid rents (1,048) 4,756 279
Increase (decrease) in due to affiliates 53 (12,313) (49,565)
--------- --------- ---------
Total adjustments 502,728 510,291 464,424
--------- --------- ---------
Net cash provided by operating activities $ 797,919 $ 820,992 $ 715,533
========= ========= =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-23
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Summary of Significant Accounting Policies
Impairment of
Long-Lived Assets
In the event that facts and circumstances indicate that the cost of the
investment property may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated undiscounted cash flows
associated with the assets would be compared to the asset's carrying amount.
Income Taxes
The Joint Venture has not provided for income taxes, since all income and losses
are to be allocated to the partners for inclusion in their respective tax
returns. The tax returns, the status of the Joint Venture as such for tax
purposes and the amount of allocable Joint Venture income or loss are subject to
examination by the Internal Revenue Service. If such examinations result in
changes with respect to the joint venture status or in changes to allocable
Joint Venture income or loss, the tax liability of the partners could be changed
accordingly.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-24
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
1. Organization
and Basis of
Accounting
The Willowbrook Joint Venture ("Joint Venture") was formed on December 17, 1987,
by Clover Income Properties, L.P. (CIP) and Clover Income Properties II, L.P.
(CIP II) for the purpose of acquiring, operating and holding the Willowbrook
Apartments. Leases primarily have a term of one year or less. The life of the
joint venture was initially set at 20 years.
On April 8, 1992, Clover Income Properties III, L.P. ("CIP III") acquired a
14.18% interest in the Joint Venture for $2,200,000 in cash, effective April 1,
1992, from CIP and CIP II, which reduced their respective ownership interest in
the Joint Venture from 50% to 42.91% each. The life of the Joint Venture was
extended for an additional 8 years, at that time.
The Joint Venture's records are maintained on the accrual basis of accounting as
adjusted for Federal income tax reporting purposes. The accompanying financial
statements have been prepared from such records after making appropriate
adjustments, where applicable, to reflect the Joint Venture's accounts on the
accrual basis of accounting according to generally accepted accounting
principles (GAAP). Depreciation for financial reporting purposes is provided
using the straight-line method over the estimated useful lives of the assets,
while alternative methods are used for Federal income tax purposes. The net
effect of this difference is summarized as follows:
December 31, 1995 1994
- --------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- --------------------------------------------------------------------------------
Total assets $9,718,831 $11,481,249 $10,190,215 $11,809,659
========== =========== =========== ===========
Partners' capital $9,315,472 $11,077,891 $ 9,770,281 $11,389,717
========== =========== =========== ===========
F-25
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
Reconciliation of income per financial statement to income per Federal income
tax return is as follows:
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Net income per financial
statements $295,191 $310,701 $251,109
Reconciling item
Depreciation 142,983 142,571 142,571
-------- -------- --------
Tax basis income $438,174 $453,272 $393,680
======== ======== ========
2. Investment
Property Held
for Sale
On December 17, 1987, the Joint Venture acquired the Willowbrook Apartments (the
Property), a mid-rise apartment complex comprising 299 apartment units contained
in eight five-story buildings. The complex is located in Baltimore, Maryland.
On February 7, 1996, the Joint Venture entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd. Under the
terms of the agreement, the Joint Venture will sell The Willowbrook Apartments
(including land), all related improvements and tangible and intangible property
for $10,500,000 less a $315,000 credit for capital improvements (see Note 5 for
additional information).
The sale is contingent upon, among other things, the sale of all of the
properties owned by affiliates of Clover Financial Corporation which are also
under agreement of sale with Berwind and First Montgomery. Clover Financial
Corporation is the parent company of the general partner of CIP, CIP II and CIP
III. The sale must be approved by a majority of the limited partners of CIP, CIP
II and CIP III. Upon sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will then be distributed to its
owners (CIP, CIP II and CIP III) and the Joint Venture dissolved.
Due to the proposed sale of the Willowbrook Apartments and subsequent
liquidation of the Partnership, the Joint Venture has reflected the investment
property held for sale at the lower of cost or market. Market value is based on
the estimated cash proceeds (net of settlement costs) from the sale of the
Willowbrook Apartments. At December 31, 1995, the investment property held for
sale was not impaired.
F-26
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
The following is a summary of investment property held for sale which is carried
at the lower of cost or market:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Land $ 1,421,205 $ 1,421,205
Apartment buildings 11,006,247 10,980,891
Furniture and fixtures 1,004,545 976,789
----------- -----------
13,431,997 13,378,885
Less accumulated depreciation (4,035,244) (3,520,401)
----------- -----------
$ 9,396,753 $ 9,858,484
=========== ===========
Depreciation on the property has been provided on a straight-line basis over the
estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
Maintenance and repair expenses are charged to expense as incurred. Significant
betterments and improvements are capitalized and depreciated over their useful
lives.
3. Transactions
with
Affiliates
Effective February 21, 1995, NPI-CL Management, L.P. ("NPI") which is
unaffiliated with the Partners, replaced an affiliate of the Partners as
Property Manager. Until that time, the property was managed by the affiliate
pursuant to a management agreement which provided for an annual fee not to
exceed 5% of the gross revenues from the Property.
The general partner of CIP, CIP II, and CIP III and their affiliates are
entitled to reimbursement for administrative services rendered to the Joint
Venture, direct expenses of operations and goods and services used by and for
the Joint Venture.
F-27
<PAGE>
- --------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
- --------------------------------------------------------------------------------
Amount payable at
January 1, 1993 $ 334,953 $ 53,165 $ 388,118
Incurred during 1993 98,313 26,919 125,232
Payments during 1993 (114,616) (60,181) (174,797)
--------- -------- ---------
Amount payable at
December 31, 1993 318,650 19,903 338,553
Incurred during 1994 102,734 21,400 124,134
Payments during 1994 (102,252) (34,195) (136,447)
--------- -------- ---------
Amount payable at
December 31, 1994 319,132 7,108 326,240
Incurred during 1995 12,750 5,155 17,905
Payments during 1995 (12,750) (5,102) (17,852)
--------- -------- ---------
Amount payable at
December 31, 1995 $ 319,132 $ 7,161 $ 326,293
========= ======== =========
4. Subsequent
Distributions
In January 1996, the Joint Venture made cash distributions of $26,819, $26,819
and $8,862 to Clover Income Properties, L.P., Clover Income Properties II, L.P.
and Clover Income Properties III, L.P., respectively.
5. Subsequent
Event
On May 16, 1996, the agreement to sell the Willowbrook Apartments was amended.
The amendment, among other things, reduced the sales price from $10,500,000 less
a $315,000 credit for capital contributions to $9,850,000.
F-28
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE III
Clover Income Properties II, L.P.
Schedules of Real Estate and Accumulated Depreciation
Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------- -------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144-unit garden apartment complex
located in Centreville, Virginia None $- $7,105,605 $- $74,482
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $-- $7,180,087 $7,145,530
Dispositions during year:
Cost of real estate sold -- (7,180,087) --
Additions during year:
Acquisitions -- -- 34,557
--- ---------- ----------
Balance, at end of year $-- $ -- $7,180,087
=== ========== ==========
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $-- $ 948,417 $ 743,336
Depreciation expense -- 110,128 205,081
Accumulated depreciation - disposal of assets -- (1,058,545) --
--- ---------- ----------
Balance, at end of year $-- $ -- $ 948,417
=== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1995 (A)
- ---------------------------------------------------------------------------- Life on Which
Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1995
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$-- $ -- $ -- $ -- 1972 4/14/89 5-40 years
</TABLE>
F-29
<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE III
The Willowbrook Joint Venture
Schedules of Real Estate and Accumulated Depreciation
Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------ ----------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
299-unit mid-rise apartment complex
located in Baltimore, Maryland None $1,421,205 $11,289,276 $-- $721,516
(A) The aggregate cost for federal income tax purposes is equal to the
amount at which the real estate is carried for financial reporting
purposes, plus the additional stepped up basis due to a Section 754
election in the amount of $556,439.
(B) Reconciliation of real estate:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $13,378,885 $13,316,620 $13,222,194
Additions during year:
Improvements, etc. 53,112 62,265 94,426
----------- ----------- -----------
Balance, at end of year $13,431,997 $13,378,885 $13,316,620
=========== =========== ===========
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ 3,520,401 $ 3,008,159 $ 2,499,649
Depreciation expense 514,843 512,242 508,510
----------- ----------- -----------
Balance, at end of year $ 4,035,244 $ 3,520,401 $ 3,008,159
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Gross Amount at Which
Carried at December 31, 1995 (A)
- --------------------------------------------------------------------- Life on Which
Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,421,205 $12,010,792 $13,431,997 $4,035,244 1966 12/17/87 12-25 years
</TABLE>
F-30
<PAGE>
To the Stockholder
CIP II Management Corporation
23 West Park Avenue
Merchantville, New Jersey 08109
We have audited the accompanying balance sheet of CIP II
Management Corporation as of November 30, 1995. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of CIP II Management
Corporation as of November 30, 1995 in conformity with generally accepted
accounting principles.
ALLOY, SILVERSTIEN, SHAPIRO, ADAMS, MULFORD, & CO.
January 15, 1996
Cherry Hill, New Jersey
F-31
<PAGE>
CIP II MANAGEMENT CORPORATION
BALANCE SHEET
NOVEMBER 30, 1995
ASSETS
CURRENT ASSETS
Cash $ 3,801
Prepaid Expenses 13
-----------
TOTAL CURRENT ASSETS 3,814
OTHER ASSETS
Loans Receivable-Clover Financial Corporation 1,002,115
-----------
TOTAL ASSETS $ 1,005,929
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Share of Accumulated Losses from Partnership
in Excess of Investments and Advances $ 23,095
Loans Payable - CIP II, L.P. 4,151
Deferred Tax Liability 920
-----------
TOTAL LIABILITIES 28,166
STOCKHOLDER'S EQUITY
Common Stock, no par value, 1,000 Shares
Authorized, 100 Issued and Outstanding 1,025,0000
Accumulated (Deficit) (47,237)
-----------
TOTAL STOCKHOLDER'S EQUITY 977,763
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,005,929
===========
The accompanying notes are an integral part of this statement.
F-32
<PAGE>
CIP II MANAGEMENT CORPORATION
NOTES TO FINANCIAL STATEMENT
NOVEMBER 30, 1995
1. Organization
CIP II Management Corporation, a wholly-owned subsidiary of Clover Financial
Corporation, is the general partner of Clover Income Properties II, L.P.(CIP
II), a real estate limited partnership. The Company was formed on June 6,
1987.
2. Summary of Significant Accounting Policies
Use of Estimates
Estimates and assumptions are used in preparing financial statements. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses, as applicable. Actual results could differ
from those estimates.
Investments
The Company accounts for its 1% investment in a real estate limited
partnership under the equity method, because the Company exercises
significant influence over its operating and financial activities.
Accordingly, the investment is carried at cost, adjusted for the Company's
proportionate share of earnings or losses.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.
3. Loans Receivable - Clover Financial Corporation
Loans receivable - Clover Financial Corporation, bear interest at 5.86% and
have no scheduled maturity dates.
4. Investment in Partnership
The Company purchased for $1,000 a 1 % general partnership interest in CIP
II and has been allocated losses in the amount of $24,095. This amount
exceeds the Company's investment and advances to the partnership by $23,095.
This amount has been recorded as a liability.
5. Income Taxes
The Company files a consolidated federal income tax return with Clover
Financial Corporation. Temporary differences giving rise to the deferred tax
liability consisted of partnership investment income and deductions
accounted for differently for financial reporting and tax purposes. The
deferred tax liability as of November 30, 1995 was $920.
6. Commitments
The Company, as a general partner in CIP II, could be liable for, or
otherwise committed to provide funds to this partnership.
F-33
<PAGE>
PART IV
ITEM 14. Exhibits. Financial Statement Schedules and
Reports on 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements. See Index to Financial Statements under Item
8. Financial Statements and Supplementary Data.
(2) Financial statement schedules. See Index to Financial Statements
under Item 8. Financial Statements and Supplementary Data.
(3) Exhibits.
*3.1 Certificate of Limited Partnership (Exhibit
3.1 to the Registrant's Registration
Statement, No. 33-15487 filed on September 18,
1987 (the "Registration Statement")).
*3.2 Limited Partnership Agreement (Exhibit 3.2 to
the Registration Statement).
*3.3 Amended and Restated Agreement of Limited Partnership
dated February 19, 1988 (Exhibit 3.3 to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1991 (the "1991 Form 10-K")).
*10.1 $1,000,000 demand note of Clover Financial Corporation
payable to C.I.P. II Management Corp., the general partner
of the registrant (Exhibit 10.1 to the Registration
Statement).
*10.2 Joint Venture Agreement between the registrant
and Clover Income Properties, L.P. dated
December 17, 1987, relating to The Willowbrook
Apartments (Exhibit 10.5 to Post-Effective
Amendment No. 1 to the Registration
Statement).
*10.3 Cross Indemnification Agreement among the
registrant, Clover Income Properties, L.P. and
Landmark Associates dated December 17, 1987,
relating to The Willowbrook Apartments
(Exhibit 10.6 to Post Effective Amendment
No. 1 to the Registration Statement).
<PAGE>
*10.4 Amendment dated November, 1988 to Property
Management Agreement among the registrant,
Clover Income Properties II, L.P., The
Willowbrook Joint Venture and Allstate
Management Corp. relating to The Willowbrook
Apartments (Exhibit 10.8 to the registrant's
Annual Report on Form 10-K for the year ended
December 31, 1988).
10.5 Second Amendment to Agreement of Sale dated
May 6, 1996 among The Willowbrook Joint
Venture, Berwind Property Group, Inc. and
Montgomery Properties, Ltd.
10.6 Third Amendment to Agreement of Sale dated May
16, 1996 among The Willowbrook Joint Venture,
Berwind Property Group, Inc. and Montgomery
Properties, Ltd.
27 Financial Data Schedule
*99.1 The Prospectus of the Partnership dated September 18,
1987, as filed with the Commission pursuant to Rule
424(b), and included in the Registration Statement.
*99.2 Supplement dated September 12, 1988 to Prospectus dated
September 18, 1987, as furnished to limited partners and
filed with the Commission as part of Post-Effective
Amendment No. 4 to the Registration Statement on September
13, 1988.
<PAGE>
*99.4 The Partnership's Current Report on Form 8-K filed with
the Commission on March 4, 1996.
- ----------------------
* Incorporated by reference.
(b) No reports on Form 8-K were filed during the fourth quarter of 1995.
----------
Pursuant to the Partnership Agreement and certain undertakings in the
Registration Statement, the registrant is obligated to provide an annual report
to limited partners of the Partnership on or before April 30, 1995. The
Partnership will furnish copies of such report to the Commission when it is sent
to the limited partners.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CLOVER INCOME PROPERTIES II, L.P.
C.I.P. II MANAGEMENT CORP.,
General Partner
Date: June 4, 1996 By: /s/ Donald N. Love
-----------------------------
Donald N. Love, President
Date: June 4, 1996 By: /s/ Stanley E. Borucki
-----------------------------
Stanley E. Borucki, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Date: June 4, 1996 /s/ Donald N. Love
-----------------------------
Donald N. Love, Director and
President of C.I.P. II
Management Corp., the General
Partner
Date: June 4, 1996 /s/ Steven R. Zalkind
-----------------------------
Steven R. Zalkind, Director
and Vice-President of
C.I.P. II Management Corp.,
the General Partner
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME
- -------------- ------------
10.5 Second Amendment to Agreement of
Sale dated May 6, 1996 among the
Willowbrook Joint Venture, Berwind
Property Group, Inc. and
Montgomery Properties, Ltd.
10.6 Third Amendment to Agreement of
Sale dated May 16, 1996 among the
Willowbrook Joint Venture, Berwind
Property Group, Inc. and
Montgomery Properties, Ltd.
27 Financial Data Schedule
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE made this 6th day of May, 1996
by and between WILLOWBROOK JOINT VENTURE, a New Jersey Joint Venture, of 23
West Park Avenue, Merchantville, New Jersey 08109, hereinafter referred to as
Seller, and BERWIND PROPERTY GROUP, INC., a Pennsylvania Corporation, and FIRST
MONTGOMERY PROPERTIES, LTD., a Pennsylvania Corporation, c/o Berwind Property
Group, Inc., 3000 Centre Square West, 1500 Market Street, Philadelphia,
Pennsylvania 19102, hereinafter collectively referred to as Buyer.
BACKGROUND
A. Buyer and Seller executed a certain Agreement of Sale dated February
7th, 1996 (the "Agreement of Sale"), pursuant to the provisions of which Buyer
agreed to purchase from Seller and Seller agreed to sell to Buyer that certain
tract or parcel of land and premises situate, lying and being in Baltimore,
Maryland, commonly known and referred to as Willowbrook Apartments.
B. Buyer and Seller executed a certain First Amendment to Agreement of Sale
dated February 7, 1996.
C. Buyer and Seller now desire to terminate the First Amendment to
Agreement of Sale and amend the Agreement of Sale pursuant to the provisions
of this Second Amendment.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. Except as specifically defined herein, initially capitalized terms
herein shall have the meaning ascribed thereto in the Agreement of Sale.
2. The First Amendment to Agreement of Sale dated February 7, 1996 is
hereby cancelled and terminated and declared to be null and void.
3. Paragraph 3 of the Agreement of Sale is hereby amended in its entirety
as follows:
"3. CLOSING: The transactions contemplated by this Agreement shall be
consummated (the "Closing") on or before July 6, 1996 (the "Closing Date"),
at 10:00 o'clock A.M. at the offices of Sherman, Silverstein, Kohl, Rose &
Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken, New Jersey
08109. The said time for Closing as well as all other times for performance
set forth in this Agreement are hereby agreed to be of the essence of this
Agreement. Tender of an executed Deed is hereby waived. Immediately prior
to the Closing Date, Buyer shall have the right to close the loan (the
"Purchase Money Mortgage Loan"), if any, which is financing a portion of
the Purchase Price, at a place designated by the lender (the "Purchase
Money Lender") of the Purchase Money Mortgage Loan, if required as a
condition of closing the Purchase Money Mortgage Loan by the Purchase Money
Lender."
4. All references in the Agreement of Sale to the "Extended Closing Date"
are hereby deleted.
5. Paragraph 7(a) of the Agreement of Sale is hereby amended in its
entirety as follows:
"7. FEASIBILITY PERIOD: (a) For a Feasibility Period commencing on the
date of this Agreement and expiring on May 21, 1996 (the "Feasibility
Period"), Buyer is granted the right to conduct physical inspectitons,
tests and investigations of the Premises in such a manner as not to
inconvenience the tenants and to review copies of the Leases, Service
Contracts, bills for calendar years 1994 and 1995 for real estate taxes,
utilities (water, sewer, gas and electric) insurance premiums and trash
removal pertaining to the Premises. At any time during said Feasibility
Period, Buyer shall have the right, for any reason whatsoever, to cancel
and terminate this Agreement by serving written notice thereof upon Seller
on or before the expiration of said Feasibility Period; if Buyer elects to
terminate this Agreement as permitted herein, then this Agreement shall be
cancelled and terminated and the Deposit, together with interest earned
thereon, shall be returned to Buyer and neither party hereunder shall have
an further liability or obligation to the other hereunder except with
respect to the indemnifications contained in this Paragraph 7, Paragraph
5(e) and Paragraph 22; if Buyer fails to exercise its right to terminate
this Agreement as permitted herein, then said right shall automatically
lapse, terminate and become null and void. Buyer shall indemnify and save
harmless the Seller from any liability, loss, cost or expense (including
reasonable attorney's fees) arising from or in connection with such
inspection and/or entry upon the Premises; said indemnification shall
survive Closing and/or termination of this Agreement."
6. All references in the Agreement of Sale to the "Extended Feasibility
Period" are hereby deleted.
7. Paragraph 9 of the Agreement of Sale is hereby deleted and replaced with
the following Paragraph 9:
"9. CONTINGENCIES: Seller's obligation to close under this Agreement
is subject to and conditioned upon the receipt of any and all approvals and
consents necessary for Seller to consummate the transaction contemplated by
this Agreement. Seller will use its best efforts to endeavor to obtain said
approvals and consents. If all such approvals and consents necessary for
Seller to consummate the transaction contemplated by this Agreement are not
received on or before June 30, 1996, then this Agreement shall be
automatically cancelled and terminated, the Deposit, together with interest
earned thereon, shall be returned to the Buyer, and neither party shall
have any further liability or obligation to the other hereunder except with
respect to the indemnifications contained in Paragraphs 5(e), 7 and 22."
8. Exhibit F attached to the Agereement of Sale is hereby deleted and all
references in the Agreement of Sale to Exhibit F and/or to any of the properties
listed thereon are hereby deleted.
9. Except as specifically set forth herein, the Agreement of Sale remains
effective in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Second Amendment to Agreeemnt of Sale to be signed the
day and year first above written.
SIGNED, SEALED AND DELIVERED WILLOWBROOK JOINT VENTURE
IN THE PRESENCE OF: A New Jersey Joint Venture
BY: Clover Income Properties, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
-----------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties II, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. II Management
Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
-----------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties III, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: Crown Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
----------------------------------
Steven Zalkind, Vice President
BERWIND PROPERTY GROUP, INC.,
A Pennsylvania Corporation
/s/ LORETTA M. KELLY BY: /s/ BARRY HOWARD
- ------------------------ -----------------------------------
Loretta M. Kelly Barry Howard
Secretary Vice Chairman
FIRST MONTGOMERY PROPERTIES, LTD.
A Pennsylvania Corporation
BY: /s/ MITCHELL C. MORGAN
-----------------------------------
Mitchell C. Morgan, Pres.
THIRD AMENDMENT TO AGREEMENT OF SALE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE made this 16th day of May, 1996
by and between WILLOWBROOK JOINT VENTURE, a New Jersey Joint Venture, of 23 West
Park Avenue, Merchantville, New Jersey 08109, hereinafter referred to as Seller,
and BERWIND PROPERTY GROUP, INC., a Pennsylvania Corporation, and FIRST
MONTGOMERY PROPERTIES, LTD., a Pennsylvania Corporation, c/o Berwind Property
Group, Inc., 3000 Centre Square West, 1500 Market Street, Philadelphia,
Pennsylvania 19102, hereinafter collectively referred to as Buyer.
BACKGROUND
A. Buyer and Seller executed a certain Agreement of Sale dated February
7th, 1996 (the "Agreement of Sale"), pursuant to the provisions of which Buyer
agreed to purchase from Seller and Seller agreed to sell to Buyer that certain
tract or parcel of land and premises situate, lying and being in Baltimore,
Maryland, commonly known and referred to as Willowbrook Apartments.
B. Buyer and Seller executed a certain First Amendment to Agreement of Sale
dated February 7, 1996.
C. Buyer and Seller executed a certain Second Amendment to Agreement of
Sale dated May 6, 1996 pursuant to which the First Amendment to Agreement of
Sale was terminated and the Agreement of Sale was amended.
D. Buyer and Seller now desire to terminate the Second Amendment to
Agreement of Sale, reinstate the First Amendment to Agreement of Sale and
further amend the Agreement of Sale pursuant to the provisions of this Third
Amendment.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. Except as specifically defined herein, initially capitalized terms
herein shall have the meaning ascribed thereto in the Agreement of Sale.
2. The Second Amendment to Agreement of Sale dated May 6, 1996 is hereby
cancelled and terminated and declared to be null and void.
3. The First Amendment to Agreement of Sale dated February 7, 1996 is
hereby reinstated and declared to be in full force and effect and all references
herein to Agreement of Sale shall be deemed to include the First Amendment to
Agreement of Sale.
4. Paragraph 2 of the Agreement of Sale is hereby amended in its entirety
as follows:
"2. PURCHASE PRICE: The total purchase price which the Buyer agrees to
pay to the Seller and which the Seller agrees to accept for the Property is
the sum of NINE MILLION EIGHT HUNDRED FIFTY THOUSAND ($9,850,000.00)
DOLLARS (the "Purchase Price"), which Purchase Price shall be paid by Buyer
to Seller as follows:
(a) The sum of FIFTY THOUSAND ($50,000.00) DOLLARS (the "Initial
Deposit") simultaneously with the execution and delivery of this Agreement
and the further sum of ONE HUNDRED FIFTY THOUSAND ($150,000.00) DOLLARS
(the "Second Deposit") on or before May 16, 1996. The Initial Deposit shall
be hereinafter referred to as the "Deposit" and the Second Deposit shall be
included within the definition of the "Deposit". The Deposit shall be
deposited with the Escrow Agent, as hereinafter defined, to be held subject
to the terms and conditions hereinafter set forth, and shall be treated as
payment on account of the Purchase Price if Closing is made for the
Property.
(b) At the time of Closing, as hereinafter provided, the further sum
of NINE MILLION SIX HUNDRED FIFTY THOUSAND ($9,650,000.00) DOLLARS on
account of the Purchase Price by federal funds wire transfer to Seller's
account as designated to Buyer in writing."
5. Paragraph 3 of the Agreement of Sale is hereby amended in its entirety
as follows:
"3. CLOSING: The transactions contemplated by this Agreement shall be
consummated (the "Closing") on or before July 31, 1996 (the "Closing
Date"), at 10:00 o'clock A.M. at the offices of Sherman, Silverstein, Kohl,
Rose & Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken, New
Jersey 08109. The said time for Closing as well as all other times for
performance set forth in this agreement are hereby agreed to be of the
essence of this Agreement. Tender of an executed Deed is hereby waived.
Immediately prior to the Closing Date, Buyer shall have the right to close
the loan (the "Purchase Money Mortgage Loan"), if any, which is financing a
portion of the Purchase Price, at a place designated by the lender (the
"Purchase Money Lender") of the Purchase Money Mortgage Loan, if required
as a condition of closing the Purchase Money Mortgage Loan by the Purchase
Money Lender."
6. All references in the Agreement of Sale to the "Extended Closing Date"
are hereby deleted.
7. Subparagraph 6(h) of the Agreement of Sale is hereby deleted.
8. The Feasibility Period referred to in subparagraph 7(a) of the Agreement
of Sale is hereby terminated and the rights granted to the Buyer in subparagraph
7(a), including but not limited to the right to cancel and terminate the
Agreement of Sale, are hereby waived and terminated.
9. The rights granted to the Buyer in subparagraph 7(c) of the Agreement of
Sale, including but not limited to the right to cancel and terminate the
Agreement of Sale, are hereby waived and terminated.
10. Paragraph 9 of the Agreement of Sale is hereby deleted and replaced
with the following Paragraph 9:
"9. CONTINGENCIES: Seller's and Buyer's obligation to close under this
Agreement is subject to and conditioned upon the receipt of any and all
approvals and consents necessary for Seller to consummate the transaction
contemplated by this Agreement. Seller will use its best efforts to
endeavor to obtain said approvals and consents. If all such approvals and
consents necessary for Seller to consummate the transaction contemplated by
this Agreement are not received on or before June 30, 1996, then this
Agreement shall be automatically cancelled and terminated, the Deposit,
together with interest earned thereon, shall be returned to the Buyer, and
neither party shall have any further liability or obligation to the other
hereunder except with respect to the indemnifications contained in
Paragraphs 5(e), 7 and 22."
11. Exhibit F attached to the Agreement of Sale is hereby deleted and all
references in the Agreement of Sale to Exhibit F and/or to any of the properties
listed thereon are hereby deleted.
12. The Agreement of Sale is hereby amended to include the following
additional Paragraph 35:
"35. MORTGAGE CONDITION: (a) Buyer represents that Dorman & Wilson,
Inc./Freddie Mac is Buyer's Purchase Money Lender. The Agreement of Sale is
conditioned upon the Purchase Money Lender issuing, and the Buyer
accepting, in Buyer's sole discretion, a commitment (the "Commitment") for
the Purchase Money Mortgage Loan on or before July 1, 1996.
(b) In the event the Purchase Money Lender does not issue, and the
Buyer does not accept, in Buyer's sole discretion, the Commitment on or
before July 1, 1996, then the Agreement of Sale shall be cancelled and
terminated and the Deposit, together with interest earned thereon, shall be
returned to the Buyer and neither party hereunder shall have any further
liability or obligation to the other hereunder except with respect to the
indemnifications contained in Paragraphs 5(e), 7 and 22.
(c) In the event the Purchase Money Lender issues, and the Buyer
accepts, in Buyer's sole discretion, the Commitment on or before July 1,
1996, then the condition contained in this Paragraph 35 shall automatically
lapse, terminate and become null and void and Closing shall be completed in
accordance with the terms of the Agreement of Sale.
(d) Buyer shall lock-in the interest rate on the Purchase Money
Mortgage Loan on or before July 10, 1996; and Buyer's failure to do so
shall be deemed a default by Buyer under the Agreement of Sale and the
Deposit shall be immediately delivered to the Seller who shall retain same
as liquidated damages for said default and the Agreement of Sale shall be
cancelled and terminated; the foregoing merely supplements the provisions
of Paragraph 18 of the Agreement of Sale and is not intended to supercede,
diminish or otherwise alter in any way the rights, remedies and other
provisions contained in Paragraph 18 of the Agreement of Sale.
(e) If the Buyer locks-in the interest rate on the Purchase Money
Mortgage Loan on or before July 10, 1996 then Closing shall be completed in
accordance with the terms of the Agreement of Sale; provided, however, if
the Purchase Money Lender fails to fund the Purchase Money Mortgage Loan
due solely to Buyer's inability to comply with a condition in the
Commitment, compliance of which is beyond Buyer's control, after Buyer
utilizes its best efforts as set forth below, then Closing shall be
extended for a period of ninety (90) days during which time the Buyer shall
proceed with due diligence and in good faith, utilizing its best efforts as
set forth below, to comply with and/or otherwise satisfy such condition. If
such condition is complied with and/or otherwise satisfied within said
ninety (90) day period, then Closing shall be completed in accordance with
the terms of the Agreement of Sale on the expiration of the ninety (90) day
period. If such condition can not be complied with and/or otherwise
satisfied within said ninety (90) day period, then the Agreement of Sale
shall be cancelled and terminated and the Deposit, together with interest
earned thereon, shall be returned to the Buyer and neither party hereunder
shall have any further liability or obligation to the other hereunder
except with respect to the indemnifications contained in Paragraphs 5(e)
and 22. Buyer shall use its best efforts, including, but not limited to,
taking all necessary actions, to comply with all conditions in the
Commitment."
13. Except as specifically set forth herein, the Agreement of Sale remains
effective in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Third Amendment to Agreement of Sale to be signed the
day and year first above written.
SIGNED, SEALED AND DELIVERED WILLOWBROOK JOINT VENTURE
IN THE PRESENCE OF: A New Jersey Joint Venture
BY: Clover Income Properties, L.P.,
--------------------------------
A New Jersey Limited Partnership
Joint Venturer
BY: C.I.P. Management Corporation,
--------------------------------
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
--------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties II, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. II Management
Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
--------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties III, L.P.,
--------------------------------
A New Jersey Limited Partnership
Joint Venturer
By: Crown Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND,
--------------------------------
Steven Zalkind, Vice President
BERWIND PROPERTY GROUP, INC.,
A Pennsylvania Corporation
BY: /s/ LORETTA M. KELLY
----------------------------------
Loretta M. Kelly, Vice President
FIRST MONTGOMERY PROPERTIES, LTD.,
A Pennsylvania Corporation
BY: /s/ MITCHELL C. MORGAN
----------------------------------
Mitchell C. Morgan, President
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 231,081
<SECURITIES> 3,997,265
<RECEIVABLES> 0
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<CURRENT-ASSETS> 4,228,346
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0
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