SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1995 Commission file number 0-17705
CARLYLE INCOME PLUS, L.P. - II
------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 36-3555432
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . . . 5
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters . . . . . . . . . 5
Item 6. Selected Financial Data . . . . . . . . . . . . . 6
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . 11
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . . 15
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . 55
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . . . . . . 55
Item 11. Executive Compensation. . . . . . . . . . . . . . 58
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . . 59
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . . 60
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.. . . . . . . . . . . . . 60
PART IV
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 63
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, Carlyle Income Plus, L.P.-II (the "Partnership"), is a
limited partnership formed in December of 1987 and currently governed by
the Revised Uniform Limited Partnership Act of the State of Delaware to
invest in income-producing commercial and residential real property. On
May 24, 1988, the Partnership commenced an offering to the public of
$100,000,000 in Limited Partnership Interests ("Interests") pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933 (No.
33-19463). A total of 64,264.53 Interests (at an offering price of $1,000
per Interest before discounts) were issued to the public between May 24,
1988 and June 18, 1990. The holders of 24,515.18 Interests were admitted
to the Partnership in 1988, the holders of 31,069.80 Interests were
admitted to the Partnership in 1989 and the holders of 8,679.55 Interests
were admitted to the Partnership in 1990. The offering closed on April 30,
1990. No holder of Interests (hereinafter, a "Limited Partner") has made
any additional capital contribution after such date. Upon admittance to
the Partnership, the Limited Partners of the Partnership share in their
portion of the benefits of ownership of the Partnership's real property
investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title and/or through joint venture
partnership interests. The Partnership's real property investments are
located throughout the nation and it has no real estate investments located
outside of the United States. A presentation of information about industry
segments, geographic regions, raw materials or seasonality is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole. Pursuant to the Partnership
Agreement, the Partnership is required to terminate no later than December
31, 2038. The Partnership is self-liquidating in nature. At sale of a
particular property, the net proceeds, if any, are generally distributed or
reinvested in existing properties rather than invested in acquiring
additional properties. As discussed further in Item 7, the marketplaces in
which the portfolio operates and real estate markets in general are in a
recovery mode. The Partnership currently expects to conduct an orderly
liquidation of its remaining investment portfolio as quickly as practicable
and to wind up its affairs not later than December 31, 1999 (sooner if the
properties are sold in the nearer term), barring any unforeseen economic
developments. (Reference is also made to Note 1.)
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1995,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. The Landings
Shopping Center
Sarasota, Florida. . 94,000 8/16/88 13% fee ownership of land and
sq.ft. improvements (through a
n.r.a. joint venture partnership)
(b)
2. Ashby at McLean
Apartments
McLean, Virginia
(e). . . . . . . . . 250 units 2/28/90 38% fee ownership of land and
improvements (through a
joint venture partnership)
(c)(f)
3. 1225 Connecticut
Avenue, N.W.
Office Building
Washington, D.C. . . 202,915 5/24/90 49% fee ownership of land and
sq.ft. improvements (through a
g.l.a. corporation) (d)(f)
<FN>
- ----------
(a) The computation of this percentage for properties held at December 31, 1995 does not include amounts
invested from sources other than the original net proceeds of the public offering described above and in Item 7.
(b) Reference is made to Note 2(b) for a description of the joint venture partnership through which the
Partnership has made this real property investment.
(c) Reference is made to Note 2(c) for a description of the joint venture partnership through which the
Partnership has made this real property investment.
(d) Reference is made to Note 2(d) and Note 1 of 1225 Investment Corporation for a description of the
corporation through which the Partnership has made this real property investment.
(e) Reference is made to Item 8 - Schedule III filed with this annual report for further information
concerning real estate taxes and depreciation.
(f) Reference is made to Item 6 - Selected Financial Data for additional operating and lease expiration
data concerning this investment property.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned or advised by affiliates of the General Partners) in the respective
vicinities in which they are located. Such competition is generally for
the retention of existing tenants. Additionally, the Partnership is in
competition for new tenants in markets where significant vacancies are
present. Reference is made to Item 7 below for a discussion of competitive
conditions and future renovation and capital improvement plans of the
Partnership and certain of its significant investment properties.
Approximate occupancy levels for the properties are set forth in the table
in Item 2 below to which reference is hereby made. The Partnership
maintains the suitability and competitiveness of its properties in its
markets primarily on the basis of effective rents, tenant allowances and
service provided to tenants. In the opinion of the Corporate General
Partner of the Partnership, all of the investment properties held at
December 31, 1995 are adequately insured.
Reference is made to Note 4 for a schedule of minimum lease payments
to be received in each of the next five years, and in the aggregate
thereafter, under leases in effect at the Partnership's consolidated
property as of December 31, 1995.
The Partnership has no employees other than personnel performing on-
site duties at certain of the Partnership's properties, none of whom are
officers or directors of the Partnership.
The terms of transactions between the Partnership, the General
Partners of the Partnership and their affiliates are set forth in Item 11
below to which reference is hereby made for a description of such terms and
transactions.
ITEM 2. PROPERTIES
The Partnership owns through joint venture partnerships and a
corporation, interests in the properties referred to under Item 1 above to
which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1995 and 1994 for the Partnership's investment properties owned
during 1995:
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. The Landings Shopping Center
Sarasota, Florida. . . . Retail 90% 87% 91% 92% 93% 91% 88% 95%
2. The Ashby at McLean
McLean, Virginia . . . . Residential 98% 97% 97% 96% 97% 97% 98% 96%
3. 1225 Connecticut
Washington, D.C. . . . . Office 95% 93% 97% 100% 100% 100% 100% 100%
<FN>
- ----------
Reference is made to Item 6, Item 7 and Note 4 for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1994 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were 7,019 record holders of Interests
of the Partnership. There is no public market for Interests, and it is not
anticipated that a public market for Interests will develop. Upon request,
the Corporate General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any other
economic aspects of the transaction, will be subject to negotiation by the
investor.
There are certain conditions and restrictions on the transfer of
Interests, including, among other things, the requirement that the
substitution of a transferee of Interests as a Limited Partner of the
Partnership be subject to the written consent of the Corporate General
Partner. The rights of a transferee of Interests who does not become a
substituted Limited Partner will be limited to the rights to receive his
share of profits or losses and cash distributions from the Partnership, and
such transferee will not be entitled to vote such Interests. No transfer
will be effective until the first day of the next succeeding calendar
quarter after the requisite transfer form satisfactory to the Corporate
General Partner has been received by the Corporate General Partner. The
transferee consequently will not be entitled to receive any cash
distributions or any allocable share of profits or losses for tax purposes
until such next succeeding calendar quarter. Profits or losses from
operations of the Partnership for a calendar year in which a transfer
occurs will be allocated between the transferor and the transferee based
upon the number of quarterly periods in which each was recognized as the
holder of the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee.
Profits or losses arising from the sale or other disposition of Partnership
properties will be allocated to the recognized holder of the Interests as
of the last day of the quarter in which the Partnership recognized such
profits or losses. Cash distributions to a holder of Interests arising
from the sale or other disposition of Partnership properties will be
distributed to the recognized holder of the Interests as of the last day of
the quarterly period with respect to which such distribution is made.
Reference is made to Item 6 for a discussion of cash distributions to
Limited Partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1995 1994 1993 1992 1991
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . $ 3,498,456 3,366,928 3,259,899 3,231,036 3,185,607
============ ============ ============ ============ ============
Operating earnings
(loss). . . . . . . . . . $ 1,061,407 (6,678,918) 721,730 714,966 741,803
Partnership's share
of earnings of
unconsolidated
corporation . . . . . . . 1,443,793 1,115,481 1,319,328 1,586,707 1,529,996
Partnership's share
of operations of
unconsolidated
venture . . . . . . . . . (1,517,118) 245,774 219,250 196,978 156,562
Venture partner's
share of venture's
operations. . . . . . . . (351,434) 2,041,247 (283,530) (265,863) (243,738)
------------ ------------ ------------ ------------ ------------
Net earnings (loss). . . . $ 636,648 (3,276,416) 1,976,778 2,232,788 2,184,623
============ ============ ============ ============ ============
Net earnings (loss)
per Interest (b). . . . . $ 9.41 (48.43) 29.22 33.00 32.29
============ ============ ============ ============ ============
Total assets . . . . . . . $ 49,373,424 52,629,847 61,350,856 61,464,441 61,584,825
============ ============ ============ ============ ============
Cash distributions
per Interest
(c) . . . . . . . . . . . $ 56.00 32.00 32.50 40.00 40.00
============ ============ ============ ============ ============
<FN>
- -------------
(a) The above summary of financial data should be read in conjunction
with the consolidated financial statements and the related notes appearing
elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of
Interests outstanding at the end of the period (64,269.53).
(c) Cash distributions from the Partnership are generally not equal to
Partnership income (loss) for financial reporting or Federal income tax
purposes. Each Partner's taxable income (or loss) from the Partnership in
each year is equal to his allocable share of the taxable income (loss) of
the Partnership, without regard to the cash generated or distributed by the
Partnership. Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to
such Limited Partners and have therefore represented a return of capital.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTIES - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1995
<CAPTION>
Property
- --------
1225 Connecticut
Avenue, N.W.
Office Building a) The gross leasable area ("GLA") occupancy rate and average base rent
per square foot as of December 31 for each of the last five years
were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991 . . . . . . . 99% 19.48
1992 . . . . . . . 99% 19.78
1993 . . . . . . . 95% 27.63
1994 . . . . . . . 100% 33.49
1995 . . . . . . . 100% 32.98
<FN>
(1) Average base rent per square foot is based on GLA occupied
as of December 31 of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenant Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ernst & Young 161,667 $5,448,800 6/2007 Yes
(Accounting Firm)
</TABLE>
<TABLE>
<CAPTION>
c) The following sets forth certain information with respect to
the expiration of leases for the next ten years at the
1225 Connecticut Avenue, N.W. Office Building.
Annualized Percent of
Number of Approx. Total Base Rent Total 1995
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases (1) Leases (1) Leases Expiring
------------ ------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1996 1 3,026 136,200 2.0%
1997 -- -- -- --
1998 -- -- -- --
1999 -- -- -- --
2000 3 22,103 781,000 11.7%
2001 1 3,026 114,600 1.7%
2002 1 9,909 297,300 4.4%
2003 -- -- -- --
2004 -- -- -- --
2005 1 5,263 233,300 3.5%
<FN>
(1) Excludes leases that expire in 1996 for which renewal leases or leases
with replacement have been executed as of March 25, 1996.
</TABLE>
<TABLE>
<CAPTION>
Property
- --------
The Ashby at
McLean
Apartments a) The unit occupancy rate and average base rent per square foot as of
December 31 for each of the last five years were as follows:
Unit Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991 . . . . . . . 90% 11.25
1992 . . . . . . . 97% 10.96
1993 . . . . . . . 96% 11.55
1994 . . . . . . . 96% 11.79
1995 . . . . . . . 96% 11.78
<FN>
(1) Average base rent per square foot is based on GLA occupied as of
December 31 of each year.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
b) No single tenant represents more than 10% of the total gross leasable
area at the property.
c) Apartment complex leases in effect at December 31, 1995 are generally for a term of
one year or less and provide for aggregate annual rents of approximately $2,895,000.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $3,607,000. Such funds are
available for tenant and capital improvements at The Ashby investment
property, contributions to its joint ventures, distributions to partners
and for other working capital requirements. The Partnership and its
consolidated venture have currently budgeted in 1996 approximately $350,000
for tenant improvements and other capital expenditures. The Partnership's
share of similar items for its unconsolidated venture and corporation in
1996 is currently budgeted to be approximately $55,000. Actual amounts
expended in 1996 may vary depending on a number of factors including actual
leasing activity, results of property operations, liquidity considerations
and other market conditions over the course of the year. The source of
capital (in addition to the cash and cash equivalents noted above) for such
items and for both future short-term and long-term liquidity and
distributions to the Limited and General Partners is expected to be from
net cash generated by the Partnership's investment properties and from the
sale of such investments. In such regard, reference is made to the
Partnership's property specific discussions below. The General Partners do
not intend to incur any additional indebtedness secured by a mortgage or
otherwise, unless it is determined by the Corporate General Partner that it
is in the best interests of the Holders of Interests.
The Ashby at McLean investment property is 96% occupied at December
31, 1995. However, two apartment complexes (one to contain 624 units, the
other 600 units) are being developed in the sub-market. These new
properties are expected to compete directly with The Ashby upon their
projected completion and occupancy in the latter part of 1996, which could
adversely affect future cash flow.
In August 1993, 1225 Investment Corporation agreed with its major
financial services tenant (Ernst & Young) to extend the initial term of its
existing lease from June 2000 to June 2007 at the same annual base rent,
but with a slight decrease in occupancy. This lease extension would have
reduced Ernst & Young's square footage from approximately 79% of the total
building to approximately 65%, effective January 1, 1995. However, during
1994 Ernst & Young and 1225 Investment Corporation agreed to extend the
lease for the additional space which had been leased by Ernst & Young on a
temporary basis and which was scheduled to expire on December 31, 1994.
This extension is coterminous with the existing long-term lease in effect
(as discussed above) and will keep Ernst & Young's occupancy at
approximately 80% of the building until June, 2007. Also in 1994, 1225
Investment Corporation leased the building's remaining unoccupied space to
another financial services company. This increased the occupancy of the
building to 100%. 1225 Investment Corporation currently expects to incur
approximately $5,500,000 of tenant improvement costs, lobby renovation and
sprinkler system costs related to the lease extension for Ernst & Young, as
well as anticipated tenant improvement costs for other tenants
(approximately $5,300,000 of such costs have been incurred at December 31,
1995). Such costs were paid in 1994 and 1995 from the approximately
$1,500,000 of working capital reserves held by the 1225 Investment
Corporation and from the net proceeds of approximately $5,300,000 from the
January 1994 refinancing of the existing mortgage loan secured by the
property. The remaining costs to be incurred are also expected to be
funded by the loan proceeds, as discussed above. The existing loan had an
outstanding balance of $1,667,247 at the time of refinancing and would have
matured in March, 1998. The refinanced mortgage loan is in the amount of
$7,000,000 and requires payments of interest only, at an annual interest
rate of 6.98%, for a period of 7 years. The loan matures February 1, 2001.
During 1995, the Partnership negotiated a three-year lease renewal
(through May 31, 1998) with a tenant occupying 9,211 square feet
(approximately 10%) of the owned leasable space at The Landings Shopping
Center. In July 1995, this tenant's parent company filed for Chapter 11
bankruptcy protection. In January 1996, this tenant vacated its space, at
which time it was approximately $27,000 in arrears with respect to its
lease obligations. The Partnership is pursuing its legal remedies
concerning these arrearages, however, collection of all or any of these
past-due amounts is doubtful. The Partnership is pursuing potential
replacement tenants for this space. Occupancy at the property increased to
95% during 1995, up from 92% in the previous year. In addition, tenant
leases representing approximately 10%, 22% and 25% of the leasable space at
the property are scheduled to expire in 1996, 1997 and 1998, respectively,
not all of which are expected to be renewed.
There are certain risks associated with the Partnership's investments
made through joint ventures, including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. By conserving working capital, the Partnership will be in a
better position to meet the future needs of its properties since the
availability of satisfactory outside sources of capital may be limited. In
an effort to reduce Partnership operating expenses, the Partnership expects
to make semiannual rather than quarterly distributions of available
operating cash flow beginning in November 1995. After reviewing the
Partnership's properties and marketplaces in which they operate, the
General Partners of the Partnership expect to be able to conduct an orderly
liquidation of its investment portfolio as quickly as practicable.
Therefore, the affairs of the Partnership are expected to be wound up no
later than December 31, 1999 (sooner if the properties are sold in the
nearer term), barring any unforeseen economic developments.
RESULTS OF OPERATIONS
At December 31, 1995 and 1994, the Partnership owned an interest in
three operating investment properties.
The aggregate decrease in cash and cash equivalents and short-term
investments at December 31, 1995 as compared to December 31, 1994 is
attributable primarily to the Partnership's election to make semiannual
rather than quarterly distributions of operating cash flow beginning in
November 1995. An additional decrease in cash and cash equivalents and
short-term investments is attributable primarily to a special distribution
of operating cash flow of $8 per Interest (for the fourth quarter of 1994)
paid in February 1995 and a special distribution of $8 per Interest
included in the November 1995 distribution. Such decreases were partly
offset by the Partnership's receipt in 1995 of distributions of $250,000
(all of which represented a return of capital) from its unconsolidated
venture, JMB/Landings and the receipt of approximately $1,960,000 of
dividends from 1225 Connecticut. The decrease in short-term investments at
December 31, 1995 as compared to December 31, 1994 is also attributable to
the Partnership having all of its investments in U.S. Government
obligations at December 31, 1995 classified as cash and cash equivalents
and a portion of the Partnership's investments in U.S. Government
obligations at December 31, 1994 being classified as short-term
investments. Reference is made to Note 1.
The decrease in investment in unconsolidated venture at December 31,
1995 as compared to December 31, 1994 and in Partnership's share of
operations of unconsolidated venture for the year ended December 31, 1995
as compared to the year ended December 31, 1994 is attributable primarily
to the Partnership's share ($1,750,000) of the provision for value
impairment recorded by JMB/Landings at September 30, 1995. Reference is
made to Notes 1 and 2(b).
The decrease in accounts payable at December 31, 1995 as compared to
December 31, 1994 is due primarily to the timing of payments of operating
expenses at the Ashby at McLean Apartments.
The decrease in unearned rents at December 31, 1995 as compared to
December 31, 1994 is due primarily to the timing of rental collections at
the Ashby at McLean Apartments.
The increase in rental income in 1995 as compared to 1994 is
attributable primarily to higher effective rents at The Ashby due to rental
increases implemented during 1995.
The increase in interest income in 1995 as compared to 1994 is due
primarily to higher average investment balances in 1995 in the
Partnership's and its consolidated venture's short-term investments and the
related increase in interest earned.
The increase in interest income in 1994 as compared to 1993 is
attributable primarily to higher yields in 1994 on the Partnership's and
its consolidated venture's short-term investments.
The decreases in depreciation expense in 1995 as compared to 1994 and
in 1994 as compared to 1993 are due primarily to the provision for value
impairment of $7,572,479 which was recorded at September 30, 1994 relating
to The Ashby at McLean Apartments (Notes 1 and 2(c)).
The increase in general and administrative expenses in 1995 as
compared to 1994 is attributable primarily to an increase in reimbursable
costs to affiliates of the General Partners in 1995 and the recognition of
certain additional prior year reimbursable costs to such affiliates.
Reference is made to Note 5.
The provision for value impairment in the amount of $7,572,459
recorded in 1994 was due to the uncertainty of the joint venture's ability
to recover the net carrying value of the Ashby at McLean Apartments (Note
2(c)).
The increase in Partnership's share of earnings of unconsolidated
corporation in 1995 as compared to 1994 is due primarily to an increase in
average occupancy in 1995 due to Ernst & Young's lease renewals and the
corresponding increase in rental income.
The decrease in the Partnership's share of earnings of unconsolidated
corporation in 1994 as compared to 1993 is due primarily to 1225
Connecticut Avenue, N.W. office building's increased debt service interest
payments associated with the refinanced mortgage loan and to lower net
effective rents due to Ernst & Young's lease renewals in 1993 and 1994
which extended the terms of the lease to the year 2007.
The increase in Partnership's share of operations of unconsolidated
venture for 1994 as compared to 1993 is attributable primarily to an
increase in occupancy and rental income and a decrease in real estate and
other taxes and repairs and maintenance in 1994 at The Landings Shopping
Center.
The changes in venture partner's share of venture's operations in 1995
as compared to 1994 and in 1994 as compared to 1993 are due primarily to
the venture partner's share of the provision for value impairment recorded
by CIP/Ashby at September 30, 1994 and to the related decrease in
depreciation expense recorded at the Ashby at McLean Apartments as a result
of the above-mentioned value impairment.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the properties remain substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investment contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Operations, years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Partners' Capital Accounts,
years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows, years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Schedule
--------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.
1225 INVESTMENT CORPORATION
(A CORPORATION)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1995 and 1994
Statements of Operations, years ended December 31,
1995, 1994 and 1993
Statements of Changes in Shareholders' Equity, years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows, years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements
Schedule
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE INCOME PLUS, L.P. - II:
We have audited the consolidated financial statements of Carlyle
Income Plus, L.P.-II (a limited partnership) and consolidated venture as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Carlyle Income Plus, L.P.-II and consolidated venture as of December 31,
1995 and 1994 and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . $ 3,606,715 2,024,097
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . -- 2,109,006
Interest, rents and other receivables. . . . . . . . . . . . . . . . . 54,610 43,467
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,986 12,073
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . 3,673,311 4,188,643
------------ -----------
Investment property, at cost (note 2(c)) - Schedule III:
Land. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,586,545 4,586,545
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . 16,793,928 16,672,244
------------ -----------
21,380,473 21,258,789
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . 3,945,031 3,364,658
------------ -----------
Total investment property,
net of accumulated depreciation. . . . . . . . . . . . . . . 17,435,442 17,894,131
------------ -----------
Investment in unconsolidated corporation,
at equity (notes 1, 2(d) and 7). . . . . . . . . . . . . . . . . . . . 24,284,252 24,799,536
Investment in unconsolidated venture,
(notes 1, 2(b) and 6). . . . . . . . . . . . . . . . . . . . . . . . . 3,980,419 5,747,537
------------ -----------
$ 49,373,424 52,629,847
============ ===========
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1995 1994
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,939 86,728
Amounts due to affiliates (note 5) . . . . . . . . . . . . . . . . . . 26,687 14,953
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 10,900
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . 48,626 112,581
------------ -----------
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 107,369 111,900
------------ -----------
Commitments and contingencies (notes 2 and 4)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 155,995 224,481
------------ -----------
Venture partner's subordinated equity
in venture (notes 1 and 2(c)). . . . . . . . . . . . . . . . . . . . . 5,523,770 5,559,836
Partners' capital accounts (deficits)
(notes 1 and 3):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . 450,800 418,968
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . (771,032) (581,606)
------------ -----------
(295,232) (137,638)
------------ -----------
Limited partners (64,269.53 interests):
Capital contributions, net of offering
costs and purchase discounts . . . . . . . . . . . . . . . . . . 55,256,131 55,256,131
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . 7,061,904 6,457,088
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . (18,329,144) (14,730,051)
------------ -----------
43,988,891 46,983,168
------------ -----------
Total partners' capital accounts
(deficits) . . . . . . . . . . . . . . . . . . . . . . . . . 43,693,659 46,845,530
------------ -----------
$ 49,373,424 52,629,847
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 3,276,045 3,212,142 3,167,534
Interest income. . . . . . . . . . . . . . . . . . . 222,411 154,786 92,365
------------ ----------- -----------
3,498,456 3,366,928 3,259,899
------------ ----------- -----------
Expenses:
Depreciation . . . . . . . . . . . . . . . . . . . . 580,373 665,737 747,099
Property operating expenses. . . . . . . . . . . . . 1,576,669 1,600,383 1,586,288
Professional services. . . . . . . . . . . . . . . . 76,500 89,825 86,208
General and administrative . . . . . . . . . . . . . 203,507 117,422 118,574
Provision for value impairment (note 2(c)) . . . . . -- 7,572,479 --
------------ ----------- -----------
2,437,049 10,045,846 2,538,169
------------ ----------- -----------
Operating earnings (loss). . . . . . . . . . 1,061,407 (6,678,918) 721,730
Partnership's share of earnings of uncon-
solidated corporation (notes 2(d) and 7) . . . . . . 1,443,793 1,115,481 1,319,328
Partnership's share of operations of
unconsolidated venture (notes 2(b) and 6). . . . . . (1,517,118) 245,774 219,250
Venture partner's share of venture's
operations (note 2(c)) . . . . . . . . . . . . . . . (351,434) 2,041,247 (283,530)
------------ ----------- -----------
Net earnings (loss). . . . . . . . . . . . . $ 636,648 (3,276,416) 1,976,778
============ =========== ===========
Net earnings (loss) per
limited partnership interest
(note 1) . . . . . . . . . . . . . . . . . $ 9.41 (48.43) 29.22
============ =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (64,269.53 INTERESTS)
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992. . . . . .$25,000 483,950 (363,428) 145,522 55,256,131 7,691,744 (10,584,659) 52,363,216
Net earnings
(note 3). . . . -- 98,839 -- 98,839 -- 1,877,939 -- 1,877,939
Cash distri-
butions
($32.50 per
limited
partnership
interest) . . . -- -- (109,935) (109,935) -- -- (2,088,767) (2,088,767)
------- -------- --------- --------- ---------- --------- ----------- -----------
Balance at
December 31,
1993. . . . . . 25,000 582,789 (473,363) 134,426 55,256,131 9,569,683 (12,673,426) 52,152,388
Net earnings
(loss)
(note 3). . . . -- (163,821) -- (163,821) -- (3,112,595) -- (3,112,595)
Cash distri-
butions
($32.00 per
limited
partnership
interest) . . . -- -- (108,243) (108,243) -- -- (2,056,625) (2,056,625)
------- -------- --------- --------- ---------- --------- ----------- -----------
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS (64,269.53 INTERESTS)
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS,
NET OF
CONTRI- NET CASH OFFERING NET CASH
BUTIONS EARNINGS DISTRIBUTIONS TOTAL COSTS EARNINGS DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
Balance
(deficit) at
December 31,
1994. . . . . .$25,000 418,968 (581,606) (137,638) 55,256,131 6,457,088 (14,730,051) 46,983,168
Net earnings . . -- 31,832 -- 31,832 -- 604,816 -- 604,816
(note 3). . . .
Cash distri-
butions
($56.00 per
limited
partnership
interest) . . . -- -- (189,426) (189,426) -- -- (3,599,093) (3,599,093)
------- -------- --------- --------- ---------- --------- ----------- -----------
Balance
(deficit) at
December 31,
1995. . . . . .$25,000 450,800 (771,032) (295,232) 55,256,131 7,061,904 (18,329,144) 43,988,891
======= ======== ========= ========= ========== ========= =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . $ 636,648 (3,276,416) 1,976,778
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . 580,373 665,737 747,099
Partnership's share of earnings of
unconsolidated corporation,
net of dividends . . . . . . . . . . . . . . . . 370,372 596,519 324,672
Partnership's share of operations of
unconsolidated venture, net of
distributions. . . . . . . . . . . . . . . . . . 1,517,118 -- 193,691
Venture partner's share of venture
operations . . . . . . . . . . . . . . . . . . . 351,434 (2,041,247) 283,530
Provision for value impairment . . . . . . . . . . -- 7,572,479 --
Changes in:
Interest, rents and other receivables. . . . . . . (11,143) (17,172) 12,482
Prepaid expenses . . . . . . . . . . . . . . . . . 87 1,308 8,101
Accounts payable . . . . . . . . . . . . . . . . . (64,789) 306 (11,932)
Amounts due to affiliates. . . . . . . . . . . . . 11,734 (18,675) 2,760
Unearned rents . . . . . . . . . . . . . . . . . . (10,900) 10,012 (55,984)
Tenant security deposits . . . . . . . . . . . . . (4,531) (5,621) (9,285)
----------- ----------- -----------
Net cash provided by
operating activities . . . . . . . . . . . 3,376,403 3,487,230 3,471,912
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments. . . . . . . . . . . . . 2,109,006 1,727,751 (1,589,758)
Partnership's distributions from
unconsolidated corporation . . . . . . . . . . . . 144,912 -- --
Partnership's distributions from
unconsolidated venture . . . . . . . . . . . . . . 250,000 279,226 412,059
Additions to investment property . . . . . . . . . . (121,684) (348,151) (330,001)
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . 2,382,234 1,658,826 (1,507,700)
----------- ----------- -----------
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994 1993
----------- ----------- -----------
Cash flows from financing activities:
Distributions to venture partner . . . . . . . . . . (387,500) (1,224,500) (100,750)
Distributions to limited partners. . . . . . . . . . (3,599,093) (2,056,625) (2,088,767)
Distributions to general partners. . . . . . . . . . (189,426) (108,243) (109,935)
----------- ----------- -----------
Net cash used in financing activities. . . . (4,176,019) (3,389,368) (2,299,452)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . 1,582,618 1,756,688 (335,240)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . 2,024,097 267,409 602,649
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . $ 3,606,715 2,024,097 267,409
=========== =========== ===========
Supplemental disclosure of cash
flow information:
Cash paid for mortgage and other interest. . . . . . $ -- -- --
=========== =========== ===========
Non-cash investing and financing activities. . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The Partnership holds, through joint ventures and a corporation, an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a variety of commercial and retail
companies, rentals to individuals, and the ultimate sale or disposition of
such real estate. The Partnership currently expects to conduct an orderly
liquidation of its remaining investment portfolio and wind up its affairs
not later than December 31, 1999.
The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated venture, CIP/Ashby
Partners ("CIP/Ashby") (note 2(c)). The effect of all transactions between
the Partnership and the consolidated venture has been eliminated. The
equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interests in JMB/Landings Associates ("JMB/Landings") (note 2(b)), and 1225
Investment Corporation ("1225 Connecticut Avenue, N.W.") (note 2(d)).
Accordingly, the accompanying consolidated financial statements do not
include the accounts of JMB/Landings, or of 1225 Connecticut Avenue, N.W.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the venture as described above.
Such GAAP and consolidation adjustments are not recorded on the records of
the Partnership. The net effect of these items for the years ended December
31, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------- ------------------------------
TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . $49,373,424 58,228,874 52,629,847 59,705,223
Partners' capital
accounts (deficit)
(note 3):
General Partners . . . . . . . . . (295,232) (405,313) (137,638) (331,892)
Limited Partners . . . . . . . . . 43,988,891 58,634,487 46,983,168 60,029,479
Net earnings (loss)
(note 3):
General Partners . . . . . . . . . 31,832 116,005 (163,821) 112,820
Limited Partners . . . . . . . . . 604,816 2,204,102 (3,112,595) 2,143,576
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . . . . 9.41 34.29 (48.43) 33.35
=========== =========== =========== ===========
</TABLE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of each
period (64,269.53). Deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and
Federal income tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions or dividends from unconsolidated investments are
considered cash flow from operating activities only to the extent of the
Partnership's cumulative share of net earnings. In addition, the
Partnership records amounts held in U.S. Government obligations at cost,
which approximates market. For the purposes of these statements, the
Partnership's policy is to consider all such amounts held with original
maturities of three months or less ($3,494,383 and $2,024,097 at December
31, 1995 and 1994, respectively) as cash equivalents with any remaining
amounts (generally with original maturities of one year or less) reflected
as short-term investments being held to maturity.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
approximates SFAS 107 value due to the relatively short maturity of these
instruments. The Partnership has no other significant financial
instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either by purchase of stock or through
joint ventures, interests in one apartment building, one shopping center
and one office building, all of which are in operation at December 31,
1994. Under certain circumstances, the Partnership may be required to make
cash contributions to the ventures either pursuant to the venture
agreements or due to the Partnership's obligations as a general partner.
The cost of the investment property represents the total cost to the
Partnership plus certain acquisition costs.
Depreciation on the properties has been provided over the estimated
useful lives of the various components as follows:
YEARS
-----
Buildings and improvements --
straight-line. . . . . . . . . . . . 30
Personal property --
straight-line. . . . . . . . . . . . 5
==
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Under the Partnership's impairment policy, provisions for value
impairment are recorded with respect to its investment property pursuant to
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". Therefore, the Partnership does not anticipate
any effect on its consolidated financial statements upon full adoption of
SFAS 121 as required in the first quarter of 1996.
(b) JMB/Landings
In August 1988, the Partnership, through JMB/Landings Associates, a
joint venture partnership with Carlyle Income Plus, Ltd. ("CIP-I"), another
partnership sponsored by the General Partners of the Partnership, acquired
a 50% interest in a shopping center located in Sarasota, Florida known as
The Landings Shopping Center.
JMB/Landings purchased the shopping center for a purchase price of
$13,100,000 which was paid in cash at closing. The Partnership contributed
one-half of such amount ($6,550,000) to JMB/Landings for its 50% interest.
As certain specified minimum occupancy and income levels were not achieved,
the purchase price was reduced by approximately $532,000 in 1990.
The terms of the JMB/Landings partnership agreement provide generally
that annual cash flow, sale proceeds and tax items will be distributed or
allocated based on the capital contributions made by each partner.
Distributions and allocations to date have been made (and any obligations
to make additional capital contributions will be made) 50% to the
Partnership.
During 1995, the Partnership negotiated a three-year lease renewal
(through May 31, 1998) with a tenant occupying 9,211 square feet
(approximately 10%) of the owned leasable space at The Landings Shopping
Center. In July 1995, this tenant's parent company filed for Chapter 11
bankruptcy protection. In January 1996, this tenant vacated its space, at
which time it was approximately $27,000 in arrears with respect to its
lease obligations. The Partnership is pursuing its legal remedies
concerning these arrearages, however, collection of all or any of these
past-due amounts is doubtful. The Partnership is pursuing potential
replacement tenants for this space. Occupancy at the property increased to
95% during 1995, up from 92% in the previous year. In addition, tenant
leases representing approximately 10%, 22% and 25% of the leasable space at
the property are scheduled to expire in 1996, 1997 and 1998, respectively,
not all of which are expected to be renewed.
The JMB/Landings Associates joint venture, for financial reporting
purposes, recorded a provision for value impairment at September 30, 1995
in the amount of $3,500,000 (of which the Partnership's share was
$1,750,000). Such provision was recorded to reduce the net basis of the
investment property to its estimated fair value (see note 2(a)). There can
be no assurance that any estimated fair value of this investment property
would ultimately be obtained by the Partnership in any future sale or
disposition transaction. An affiliate of the General Partners of the
Partnership manages the property for a fee equal to 4% of the property's
gross receipts. Such property management fees for the year ended December
31, 1995 and 1994 aggregated $45,840 and $46,008, respectively.
(c) CIP/Ashby
In February 1990, the Partnership, through the CIP/Ashby Partners, a
joint venture partnership with CIP-I, acquired a 69% interest in an
apartment building located in McLean, Virginia and, known as The Ashby at
McLean Apartments (The Ashby). The Ashby has 250 units, commercial space
and related parking facilities.
CIP/Ashby purchased the Ashby apartments for a purchase price of
$25,327,132, which was paid in cash at closing. In addition, the joint
venture has incurred approximately $3,380,000 for certain renovations,
leasing and maintenance costs, with the work related to such costs
completed at December 31, 1994. The majority of these costs were
contemplated at the time of the initial acquisition of the property.
CIP/Ashby's total cash investment in The Ashby is approximately
$28,705,000, of which the Partnership's share is approximately $19,806,000.
The terms of the CIP/Ashby partnership agreement provide generally
that annual cash flow, sale proceeds and tax items will be distributed or
allocated based on the capital contributions made by each partner.
Distributions and allocations to date have been made (and any obligations
to make additional capital contributions will be made) 69% to the
Partnership.
In response to the uncertainty relating to CIP/Ashby Partners joint
venture's ability to recover the net carrying value of the Ashby at McLean
Apartments investment property through future operations or sale, the
CIP/Ashby Partners joint venture, as a matter of prudent accounting
practice and for financial reporting purposes, recorded a provision for
value impairment in 1994 in the amount of $7,572,479 (of which the
Partnership's share was $5,225,011). Such provision was recorded to reduce
the net basis of the investment property to its estimated fair value (see
note 2(a)). There can be no assurance that any estimated fair value of
this investment property would ultimately be obtained by the Partnership in
any future sale or disposition transaction.
Upon acquisition, a former affiliate of the General Partners assumed
management of the property for a fee equal to 5% of the property's gross
receipts. The former affiliate also operated the underground parking
facilities which it leases from CIP/Ashby. Reference is made to note 5.
(d) 1225 Connecticut
In May 1990, the Partnership acquired approximately 44% of the common
stock of a newly formed Delaware corporation (1225 Investment Corporation)
owned jointly with affiliates of the General Partners. The 1225 Investment
Corporation has acquired an office building located in Washington, D.C.
known as 1225 Connecticut Avenue, N.W. The eight-story office building has
202,915 rentable square feet and three levels of subsurface parking.
The 1225 Investment Corporation purchased 1225 Connecticut Avenue,
N.W. office building for a purchase price of approximately $54,125,000,
including the assumption of existing indebtedness of $2,700,000. The
purchase price reflected a credit of $600,000, which was intended to allow
the 1225 Investment Corporation to pay certain future expenses related to
the removal of asbestos from the property. As of December 31, 1995,
approximately $78,000 has been spent relating to the removal of asbestos.
Furthermore, the 1225 Investment Corporation has created reserves in the
amount of approximately $532,000 and $1,000,000 for working capital and for
certain possible capital improvements to the property, respectively. The
Partnership contributed $24,000,000 for its approximate 44% interest in the
stock of the 1225 Investment Corporation. The 1225 Investment Corporation
has qualified as a real estate investment trust ("REIT") pursuant to
sections 856 through 860 of the Internal Revenue Code of 1986, as amended.
The Partnership is expected to be distributed approximately 44% of the 1225
Investment Corporation's dividends. Such dividends distributed from
operations will constitute taxable income to the Partnership.
In August 1993, 1225 Investment Corporation agreed with its major
financial services tenant (Ernst & Young) to extend the initial term of its
existing lease from June 2000 to June 2007 at the same annual base rent,
but with a slight decrease in occupancy. This lease extension would have
reduced Ernst & Young's square footage from approximately 79% of the
building total to approximately 65% effective January 1, 1995. However,
during 1994 Ernst & Young and 1225 Investment Corporation agreed to extend
the lease for the additional space which had been leased on a temporary
basis and which was scheduled to expire on December 31, 1994. This
extension is coterminous with the existing long-term lease in effect (as
discussed above) and would keep Ernst & Young's occupancy at approximately
80% of the building until June, 2007. Also, in 1994, 1225 Investment
Corporation leased the remaining unoccupied space to another financial
services company to absorb the remaining unoccupied space in the building.
This raised the occupancy of the building to 100%. 1225 Investment
Corporation currently expects to incur approximately $5,500,000 of tenant
improvement costs, lobby renovation and sprinkler system costs related to
this lease extension for Ernst & Young, as well as anticipated tenant
improvement costs for other tenants (approximately $5,300,000 has been
incurred as of December 31, 1995). Such costs were paid in 1994 and 1995
from the approximately $1,500,000 of working capital reserves (described in
the preceding paragraph) held by the 1225 Investment Corporation and the
net proceeds of approximately $5,300,000 from the January 1994 refinancing
of the existing mortgage loan secured by the property. The remaining costs
to be incurred are also expected to be funded by the loan proceeds as
discussed above. The existing loan had an outstanding balance of
$1,667,247 at the time of the refinancing and would have matured in March,
1998. The refinanced mortgage loan is in the amount of $7,000,000 and
requires payments of interest only, at an interest rate of 6.98%, for a
period of 7 years. The loan matures February 1, 2001.
Upon acquisition, a former affiliate of the General Partners assumed
management of the property for a fee equal to 2.5% of the property's gross
revenues, plus reimbursement for certain expenses of the manager.
Reference is made to note 5.
(3) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership agreement, profits and losses
of the Partnership from operations are generally allocated first to the
General Partners in an amount equal to the greater of the General Partners'
share of "Disbursable Cash" (as described below) or 1%. Profits from the
sale or other disposition of investment properties generally will be
allocated first to the General Partners in an amount equal to the greater
of the General Partners' share of cash distributions of the proceeds of any
such sale or other disposition (as described below) or 1% of the total
profits from any such sales or other dispositions, plus an amount which
will reduce deficits (if any) in the General Partners' capital accounts to
a level consistent with the gain anticipated to be realized from the sale
of properties. Losses from the sale or other disposition of investment
properties will be allocated 1% to the General Partners.
The General Partners have made capital contributions of $25,000.
Except under certain limited circumstances upon liquidation of the Partner-
ship or the General Partners' interests in the Partnership, the General
Partners are not required to make any additional capital contributions.
"Disbursable Cash" of the Partnership will be distributed 93% to the
Limited Partners and 7% to the General Partners; provided, however, that
receipt by the General Partners of two of such seven percentage points of
Disbursable Cash otherwise distributable to them in any fiscal year will be
subject to receipt by the Limited Partners of a stipulated return for such
years on the Average Adjusted Capital Contribution on a non-cumulative
basis. Distributions of "sale proceeds" are to be allocated 99% to the
Limited Partners and 1% to the General Partners until receipt by the
Limited Partners of an amount equal to their initial contributed capital
plus a stipulated return thereon. Thereafter, distributions of "sale
proceeds" are to be allocated to the General Partners until the General
Partners have received distributions in an amount equal to 3% of the gross
sales price of all properties sold, subject to certain limitations, then
the balance 85% to the Limited Partners and 15% to the General Partners.
(4) LEASES
As Property Lessor
At December 31, 1995, the Partnership's principal consolidated asset
is an apartment building. The Partnership has determined that all leases
relating to this property are properly classified as operating leases;
therefore, rental income is reported when earned and the cost of the
property, excluding cost of land, is depreciated over its estimated useful
life. Apartment complex leases in effect at December 31, 1995 are
generally for a term of one year or less and provide for annual rents of
approximately $2,895,000.
Leases with commercial tenants provide for fixed minimum rent and
partial reimbursement of operating costs. Minimum lease payments,
including amounts representing executory costs (e.g., taxes, maintenance,
insurance) and any related profit to be received in the future under the
commercial tenant operating leases, are as follows:
1996. . . . . . . . . . . . . . . . $221,000
1997. . . . . . . . . . . . . . . . 176,000
1998. . . . . . . . . . . . . . . . 171,000
1999. . . . . . . . . . . . . . . . 102,000
2000. . . . . . . . . . . . . . . . 54,000
Thereafter. . . . . . . . . . . . . 184,000
--------
Total. . . . . . . . . . . . . $908,000
========
(5) TRANSACTIONS WITH AFFILIATES
All of the Partnership's properties were managed by affiliates of the
General Partners or their assignees for fees computed as a percentage of
certain rents received by the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is acting as the
property manager of The Ashby at McLean Apartments and 1225 Connecticut
Ave. N.W. after the sale on the same terms that existed prior to the sale.
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees (note 2). . . . . . . . . $ -- 160,653 158,310 --
Insurance commissions. . . . . . . . . . 2,984 2,986 1,971 --
Reimbursement (at cost) for
accounting services. . . . . . . . . . 45,518 49,928 31,388 --
Reimbursement (at cost) for
portfolio management
services . . . . . . . . . . . . . . . 13,530 11,850 -- --
Reimbursement (at cost) for
legal services . . . . . . . . . . . . 934 4,715 2,240 --
Reimbursement (at cost) for
administrative charges and
other out-of-pocket expenses . . . . . 71,407 997 8,647 26,687
-------- -------- -------- ------
$134,373 231,129 202,556 26,687
======== ======== ======== ======
<FN>
The above table reflects that during 1995, the Partnership recognized and paid certain 1994 administrative
charges of approximately $38,963 that had not previously been reimbursed.
</TABLE>
All amounts payable to the General Partners and their affiliates do
not bear interest and are expected to be paid in future periods.
Effective October 1, 1995, the Corporate General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by and partially reimbursed to, affiliates of the General Partners. Use of
such third parties is not expected to have a material effect on the
operations of the Partnership.
(6) INVESTMENT IN UNCONSOLIDATED VENTURE
Summary of financial information for JMB/Landings (note 2(b)) as of
and for the years ended December 31, 1995 and 1994 are as follows:
1995 1994
----------- -----------
Current assets . . . . . . . . . . . . . . . . $ 580,090 269,128
Current liabilities. . . . . . . . . . . . . . (14,753) (19,626)
----------- -----------
Working capital. . . . . . . . . . . 565,337 249,502
Investment property, net . . . . . . . . . . . 7,210,679 11,029,135
Other assets, net. . . . . . . . . . . . . . . 215,812 246,594
Other liabilities. . . . . . . . . . . . . . . (29,768) (28,934)
Venture partner's equity . . . . . . . . . . . (3,981,641) (5,748,760)
----------- -----------
Partnership's capital. . . . . . . . $ 3,980,419 5,747,537
=========== ===========
Represented by:
Invested capital . . . . . . . . . . . . . . $ 6,704,617 6,704,617
Cumulative distributions . . . . . . . . . . (2,729,801) (2,479,802)
Cumulative earnings. . . . . . . . . . . . . 5,603 1,522,722
----------- -----------
$ 3,980,419 5,747,537
=========== ===========
Total income . . . . . . . . . . . . . . . . . $ 1,272,150 1,224,744
=========== ===========
Expenses applicable to operating income. . . . $ 4,306,385 733,196
=========== ===========
Net earnings (loss). . . . . . . . . . . . . . $(3,034,235) 491,548
=========== ===========
The total income, expenses applicable to operating earnings and net
earnings for the above venture for the year ended December 31, 1993 were
$1,203,246, $764,746 and $438,500, respectively.
(7) INVESTMENT IN UNCONSOLIDATED CORPORATION
Summary financial information for the 1225 Investment Corporation
(note 2(d)) as of and for the years ended December 31, 1995 and 1994 are as
follows:
1995 1994
----------- -----------
Current assets . . . . . . . . . . . . . . . . $ 2,383,361 4,340,583
Current liabilities. . . . . . . . . . . . . . (328,676) (415,167)
----------- -----------
Working capital. . . . . . . . . . . 2,054,685 3,925,416
Investment property, net . . . . . . . . . . . 56,328,487 56,135,266
Other assets . . . . . . . . . . . . . . . . . 3,854,983 3,360,975
Long-term debt . . . . . . . . . . . . . . . . (7,000,000) (7,000,000)
Other liabilities. . . . . . . . . . . . . . . (16,164) (15,680)
Affiliated shareholders' equity . . . . . . . (30,937,739) (31,606,441)
----------- -----------
Partnership's equity in
affiliated corporation . . . . . . $24,284,252 24,799,536
=========== ===========
Represented by:
Stock purchase and additional
paid-in-capital. . . . . . . . . . . . . . $24,429,164 24,429,164
Cumulative dividends . . . . . . . . . . . . (8,084,895) (6,125,818)
Cumulative earnings. . . . . . . . . . . . . 7,939,983 6,496,190
----------- -----------
$24,284,252 24,799,536
=========== ===========
Total income . . . . . . . . . . . . . . . . . $ 7,753,063 6,578,479
=========== ===========
Expenses applicable to operating income. . . . $ 4,437,048 4,016,510
=========== ===========
Net earnings . . . . . . . . . . . . . . . . . $ 3,316,015 2,561,969
=========== ===========
The total income, expenses applicable to operating earnings and net
earnings for the above corporation for the year ended December 31, 1993
were $6,759,094, $3,728,942 and $3,030,152, respectively.
<TABLE> SCHEDULE III
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) ------------- AT CLOSE OF PERIOD (C) (D)
------------------------- LAND, ----------------------------------------
BUILDINGS BUILDINGS PROVISION BUILDINGS
AND AND FOR VALUE AND
LAND IMPROVEMENTS IMPROVEMENTS IMPAIRMENT(B) LAND IMPROVEMENTS TOTAL
----------- ------------ ------------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
APARTMENT
BUILDING:
The Ashby
at McLean
McLean,
Virginia . . . $6,512,075 19,698,665 2,742,212 (7,572,479) 4,586,545 16,793,928 21,380,473
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE> SCHEDULE III
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
APARTMENT
BUILDING:
The Ashby
at McLean
McLean,
Virginia . . . . . . . . . $3,945,031 1982 2/28/90 5-30 Years 233,899
========== =======
<FN>
- ------------------
Notes:
(A) The initial cost to Partnership represents the original purchase price of the property,
including amounts incurred subsequent to acquisition which were contemplated at the
time the property was acquired. The property was acquired on an all-cash unleveraged
basis and, therefore, no encumbrance information is applicable.
(B) Reference is made to Note 2(c) for a further description of such provision for
value impairment
(C) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax purposes
was $28,608,000.
</TABLE>
<TABLE> SCHEDULE III
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(D) Reconciliation of real estate owned:
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . $ 21,258,789 28,483,117 28,153,116
Additions during period. . . . . . . . . . . . . . 121,684 348,151 330,001
Provision for value impairment . . . . . . . . . . -- (7,572,479) --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . $ 21,380,473 21,258,789 28,483,117
============ ============ ============
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . $ 3,364,658 2,698,921 1,951,822
Depreciation expense . . . . . . . . . . . . . . . 580,373 665,737 747,099
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . . $ 3,945,031 3,364,658 2,698,921
============ ============ ============
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Partners
Carlyle Income Plus, L.P.-II:
We have audited the financial statements of 1225 Investment
Corporation as listed in the accompanying index. In connection with our
audits of the financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These financial
statements and financial statement schedule are the responsibility of the
Management of the Corporation. Our responsibility is to express an opinion
on these financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the Management of the Corporation,
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 1225 Investment
Corporation as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . $ 2,317,327 1,314,203
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . -- 2,948,422
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . 19,128 37,820
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,906 40,138
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . 2,383,361 4,340,583
------------ -----------
Investment property (notes 1 and 2) - Schedule III:
Land. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,161,484 24,161,484
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . 38,400,096 36,919,119
------------ -----------
62,561,580 61,080,603
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . 6,233,093 4,945,337
------------ -----------
Total investment property,
net of accumulated depreciation. . . . . . . . . . . . . . . 56,328,487 56,135,266
------------ -----------
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,472 298,109
Accrued rents receivable (note 1). . . . . . . . . . . . . . . . . . . 3,607,511 3,062,866
------------ -----------
$ 62,566,831 63,836,824
============ ===========
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
1995 1994
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,655 146,075
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . 248,304 228,375
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . 40,717 40,717
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . 328,676 415,167
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . 16,164 15,680
Long-term debt (note 4). . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 7,000,000
------------ -----------
Commitments and contingencies (note 6)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 7,344,840 7,430,847
Shareholders' equity:
Common stock, $1 par value per share
100,000 shares authorized; 55,128 shares issued and
outstanding at December 31, 1995 and December 31, 1994 . . . . . . . 55,128 55,128
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . 55,503,444 55,503,444
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,567,676) (14,067,675)
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . 18,231,095 14,915,080
------------ -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . 55,221,991 56,405,977
------------ -----------
$ 62,566,831 63,836,824
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 7,584,997 6,391,556 6,665,560
Interest income. . . . . . . . . . . . . . . . . . . 168,066 186,923 93,534
----------- ---------- ----------
7,753,063 6,578,479 6,759,094
----------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . 488,600 466,987 119,286
Depreciation . . . . . . . . . . . . . . . . . . . . 1,287,756 1,144,439 1,088,514
Property operating expenses. . . . . . . . . . . . . 2,428,540 2,259,776 2,456,210
Amortization of deferred costs . . . . . . . . . . . 78,662 -- --
General and administrative . . . . . . . . . . . . . 153,490 145,308 64,932
----------- ---------- ----------
4,437,048 4,016,510 3,728,942
----------- ---------- ----------
Net earnings . . . . . . . . . . . . . . . . $ 3,316,015 2,561,969 3,030,152
=========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
AFFILIATED SHAREHOLDERS
-----------------------------------------------------------------
NET CAPITAL NET DIVIDENDS
INVETSTED EARNINGS PAID TOTAL
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 . . . . . . . $ 31,129,408 5,261,578 (3,589,131) 32,801,855
Net earnings (note 5). . . . . . . . . . . -- 1,710,824 -- 1,710,824
Dividends paid . . . . . . . . . . . . . . -- -- (2,132,268) (2,132,268)
------------ ---------- ----------- -----------
Balance at December 31, 1993 . . . . . . . 31,129,408 6,972,402 (5,721,399) 32,380,411
Net earnings (note 5). . . . . . . . . . . -- 1,446,488 1,446,488
Dividends paid . . . . . . . . . . . . . . -- -- (2,220,458) (2,220,458)
------------ ---------- ----------- -----------
Balance at December 31, 1994 . . . . . . . 31,129,408 8,418,890 (7,941,857) 31,606,441
Net earnings (note 5). . . . . . . . . . . -- 1,872,222 -- 1,872,222
Dividends paid . . . . . . . . . . . . . . -- -- (2,540,924) (2,540,924)
------------ ---------- ----------- -----------
Balance at December 31, 1995 . . . . . . . $ 31,129,408 10,291,112 (10,482,781) 30,937,739
============ ========== =========== ===========
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
<CAPTION>
CARLYLE INCOME PLUS, L.P. - II
--------------------------------------------------------------
NET CAPITAL NET DIVIDENDS GRAND
INVESTED EARNINGS PAID TOTAL TOTAL
------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992 . . . . . . . . . . . . $ 24,429,164 4,061,381 (2,769,818) 25,720,727 58,522,582
Net earnings (note 5). . . . . -- 1,319,328 -- 1,319,328 3,030,152
Dividends paid . . . . . . . . -- -- (1,644,000) (1,644,000) (3,776,268)
------------ ---------- ----------- ----------- -----------
Balance at December 31,
1993 . . . . . . . . . . . . 24,429,164 5,380,709 (4,413,818) 25,396,055 57,776,466
Net earnings (note 5). . . . . -- 1,115,481 -- 1,115,481 2,561,969
Dividends paid . . . . . . . . -- -- (1,712,000) (1,712,000) (3,932,458)
------------ ---------- ----------- ----------- -----------
Balance at December 31,
1994 . . . . . . . . . . . . 24,429,164 6,496,190 (6,125,818) 24,799,536 56,405,977
Net earnings (note 5). . . . . -- 1,443,793 -- 1,443,793 3,316,015
Dividends paid . . . . . . . . -- -- (1,959,077) (1,959,077) (4,500,001)
------------ ---------- ----------- ----------- -----------
Balance at December 31,
1995 . . . . . . . . . . . . $ 24,429,164 7,939,983 (8,084,895) 24,284,252 55,221,991
============ ========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 3,316,015 2,561,969 3,030,152
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . . . . . 1,287,756 1,144,439 1,088,514
Amortization of deferred costs . . . . . . . . . . . 78,662 -- --
Changes in:
Rents and other receivables. . . . . . . . . . . . 18,692 220,104 184,952
Prepaid expenses . . . . . . . . . . . . . . . . . (6,768) (326) 5,269
Escrow deposits. . . . . . . . . . . . . . . . . . -- 280,000 (280,000)
Deferred expenses. . . . . . . . . . . . . . . . . -- (251,052) (47,057)
Accrued rents receivable . . . . . . . . . . . . . (544,645) 595,599 172,803
Accounts payable . . . . . . . . . . . . . . . . . (106,420) (454,961) 685,238
Accrued real estate taxes. . . . . . . . . . . . . 19,929 22,840 --
Accrued interest payable . . . . . . . . . . . . . -- 31,543 (1,653)
Tenant security deposits . . . . . . . . . . . . . 484 15,680 --
----------- ----------- -----------
Net cash provided by operating activities. . 4,063,705 4,165,835 4,838,218
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments . . . . . . . . . . . . . . 2,948,422 (1,234,369) 284,850
Additions to investment property . . . . . . . . . . (1,480,977) (3,230,869) (1,098,780)
Payment of deferred costs. . . . . . . . . . . . . . (28,025) -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . 1,439,420 (4,465,238) (813,930)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from refinanced mortgage loan payable . . . -- 7,000,000 --
Principal payments on long-term debt . . . . . . . . -- (1,694,722) (305,313)
Cash dividends paid to shareholders. . . . . . . . . (4,500,001) (3,932,458) (3,776,268)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . (4,500,001) 1,372,820 (4,081,581)
----------- ----------- -----------
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994 1993
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . 1,003,124 1,073,417 (57,293)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . 1,314,203 240,786 298,079
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . $ 2,317,327 1,314,203 240,786
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . $ 488,600 435,444 120,939
=========== =========== ===========
Non-cash investing and financing activities. . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated
corporation, 1225 Investment Corporation, in which Carlyle Income Plus,
L.P.-II and affiliates of the General Partners of Carlyle Income Plus,
L.P.-II are shareholders.
1225 Investment Corporation (the "Corporation") has the exclusive
purpose of owning a 100% interest in the 1225 Connecticut Avenue N.W.
office building, a 202,915 square foot office building located in
Washington, D.C. Endowment and Foundation Realty, Ltd. -- JMB-IV, IDS Life
Account RE, JMB/Northern Real Estate Fund, Carlyle Income Plus, L.P.-II,
and certain other institutional investors collectively hold all of the
common stock of the Corporation and are being advised by Heitman/JMB
Advisory Corporation.
The Corporation'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 to present the Corporation's accounts
in accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Corporation. The effect
of these items for the years ended December 31, 1995 and 1994 is summarized
as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- ------------------------------
TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . $62,566,831 64,846,159 63,836,824 65,602,662
Shareholder's equity . . . . . . . . 55,221,991 57,499,881 56,405,977 57,835,379
Net earnings . . . . . . . . . . . . 3,316,015 3,036,158 2,561,969 3,272,440
=========== =========== =========== ===========
</TABLE>
The preparation of financial statements in accordance with GAAP
requires the Corporation to make estimates and assumptions that affect the
reported or disclosed amount of 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.
Statement of Financial Accounting Standards No. 95 requires the
Corporation to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Corporation distribution or dividends from unconsolidated investments are
considered cash flow from operating activities only to the extent of the
Corporation's cumulative share of net earnings. In addition, the
Corporation records amounts held in U.S. Government obligations at cost
which approximates market. For the purposes of these statements, the
Corporation's policy is to consider all such amounts held with original
maturities of three months or less ($2,200,000 and $1,381,787 at December
31, 1995 and 1994, respectively) as cash equivalents with any remaining
amounts (generally with original maturities of one year or less) reflected
as short-term investments being held to maturity.
Depreciation on buildings and improvements has been provided over the
estimated useful lives of the assets (30 years) using the straight-line
method.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Under the Corporation's impairment policy, provisions for value
impairment are recorded with respect to the investment property pursuant to
Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". Therefore, the Corporation does not anticipate
any effect on its financial statements upon full adoption of SFAS 121 as
required in the first quarter of 1996.
Deferred costs consist of commitment fees incurred in connection with
the refinancing of the property and lease commissions incurred. Deferred
loan fees and lease commissions are amortized over the terms of the related
debt agreement and leases using the straight-line method.
Although certain leases of the Corporation's office building provide
for increases in minimum lease payments over the term of the lease, the
Corporation accrues rental income for the full period of occupancy on a
straight-line basis.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Corporation believes the carrying amount of its
financial instruments classified as current assets and liabilities
approximates SFAS 107 value due to the relatively short maturity of these
instruments. The Corporation's debt, with a carrying balance of $7,000,000
has been calculated to have an SFAS 107 value of $6,565,257 by discounting
the scheduled loan payments to maturity. Due to restrictions on
transferability and prepayment, there can be no assurance that the
Corporation would be able to refinance its property to obtain such
calculated debt amount. The Corporation has no other significant financial
instruments
The Corporation has qualified as a real estate investment trust
("REIT") pursuant to Sections 856 through 860 of the Internal Revenue Code
of 1986 as amended and intends to distribute at least 95% of its taxable
income annually to its shareholders. Since the Corporation has qualified
as a REIT, the Corporation in general will not be subject to Federal
corporate income tax or the District of Columbia corporate franchise tax
(except for the District of Columbia corporate franchise minimum tax of
$100) on its regular taxable income and will not be taxed on long-term
capital gain income to the extent its income is distributed as dividends.
Accordingly, no provision for income taxes has been made in the
accompanying financial statements. Tax exempt shareholders generally will
not be required to pay any Federal income tax on the dividends they receive
from the Corporation, provided such shareholders have not financed the
acquisition of shares with "acquisition indebtedness" as defined under the
Code.
(2) INVESTMENT PROPERTY
A description of the acquisition of the property is contained in Note
2(d) of Notes to Consolidated Financial Statements of Carlyle Income Plus,
L.P.-II. Such note is incorporated herein by reference.
(3) MANAGEMENT AGREEMENT
A description of the terms of the management agreement is contained in
Note 2(d) of Notes to Consolidated Financial Statements of Carlyle Income
Plus, L.P.-II. Such note is incorporated herein by reference.
(4) LONG-TERM DEBT
In January 1994, 1225 Investment Corporation refinanced the existing
mortgage loan (with an outstanding balance of $1,667,247, which was
scheduled to mature in March 1998) secured by the property in the amount of
$7,000,000.
Long-term debt consists of the following at December 31, 1995 and
1994:
1995 1994
------------ ------------
6.98% mortgage note, due February 1,
2001; secured by 1225 Connecticut
Avenue N.W.; payable in monthly
installments of $40,717 (interest
only) . . . . . . . . . . . . . . . . . . . . $7,000,000 7,000,000
---------- ----------
Total debt . . . . . . . . . . . . . 7,000,000 7,000,000
Less current portion
of long-term debt. . . . . . . . . -- --
---------- ----------
Total long-term debt . . . . . . . . $7,000,000 7,000,000
========== ==========
Five year maturities of long-term debt are summarized as follows:
1996 . . . . . . . . . . . . $ --
1997 . . . . . . . . . . . . --
1998 . . . . . . . . . . . . --
1999 . . . . . . . . . . . . --
2000 . . . . . . . . . . . . --
===========
(5) CORPORATION BY-LAWS
The Corporation's by-laws provide for the shareholders to be allocated
or distributed shares of profits and losses, cash flow from operations and
sale or refinancing proceeds according to their respective ownership
percentages.
(6) LEASES
As Property Lessor
At December 31, 1995, the Corporation's principal asset is an office
building. The Corporation has determined that all leases relating to this
property are properly classified as operating leases; therefore, rental
income is reported when earned and the cost of the property, excluding the
cost of the land, is depreciated over the estimated useful life. Leases
with tenants range in term from one to twelve remaining years and provide
for fixed minimum rent and partial reimbursement of operating costs.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1996 . . . . . . . . . . . . . . . . . . $ 6,799,000
1997 . . . . . . . . . . . . . . . . . . 6,784,000
1998 . . . . . . . . . . . . . . . . . . 6,791,000
1999 . . . . . . . . . . . . . . . . . . 6,836,000
2000 . . . . . . . . . . . . . . . . . . 6,620,000
Thereafter . . . . . . . . . . . . . . . 36,949,000
-----------
$70,779,000
===========
The Corporation leases approximately 80% of the available space of the
property to one tenant under leases with remaining terms of twelve years.
For the year ended December 31, 1995, such tenant represented approximately
77% of total revenue. The tenant's principal business is financial
services.
(7) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Corporation to affiliates of JMB Realty Corporation as of December 31, 1995
and for the years ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . . . . $ -- 181,452 175,910 --
Insurance commissions. . . . . . . . . . 6,083 6,687 6,225 --
Reimbursement (at cost)
for out-of-pocket salary and
salary related expenses . . . . . . . . -- -- 3,201 --
Reimbursement (at cost)
for other out-of-pocket
expenses. . . . . . . . . . . . . . . . 278 4,083 12,873 10
------- ------- ------- ---
$ 6,361 192,222 198,209 10
======= ======= ======= ===
<FN>
(8) SUBSEQUENT EVENT
Cash Distributions
In February 1996, the Corporation paid a dividend of $1,250,000
($22.67 per share) to the shareholders of record as of December 31, 1995.
</TABLE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
CORPORATION (A) AT CLOSE OF PERIOD (B)
--------------------------- COSTS ----------------------------------------
BUILDINGS CAPITALIZED BUILDINGS
AND SUBSEQUENT TO AND
ENCUMBRANCE LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL (C)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
BUILDING:
Washington,
D.C.. . . . . . $7,000,000 24,161,484 32,522,877 5,877,219 24,161,484 38,400,096 62,561,580
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(D) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE
BUILDING:
Washington,
D.C.. . . . . . . . . . . . $6,233,093 1968 2/28/90 30 years 885,148
========== =======
<FN>
- ------------------
Notes:
(A) The initial cost to the Corporation represents the original purchase price of the
property, including amounts incurred subsequent to acquisition which were contemplated at the
time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1995 for Federal income
tax purposes was $62,134,833.
</TABLE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(C) Reconciliation of real estate owned:
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . $61,080,603 57,849,734 56,750,954
Additions during period. . . . . . . . . . . . . . 1,480,977 3,230,869 1,098,780
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . . $62,561,580 61,080,603 57,849,734
=========== =========== ===========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . $ 4,945,337 3,800,898 2,712,384
Depreciation expense . . . . . . . . . . . . . . . 1,287,756 1,144,439 1,088,514
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . . $ 6,233,093 4,945,337 3,800,898
=========== =========== ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during
fiscal years 1995 and 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which is owned, directly or indirectly, by certain of
its officers and directors and members of their families. JMB has
responsibility for all aspects of the Partnership's operations, subject to
the requirement that sales of real property must be approved by the
Associate General Partner of the Partnership, AGPP Associates, L.P., an
Illinois limited partnership (formerly known as Carlyle Income Associates,
II, L.P.) with JMB as the sole general partner. The Associate General
Partner shall be directed by a majority in interest of its limited partners
(who are generally officers, directors and affiliates of JMB or its
affiliates) as to whether to provide its approval of any sale of real
property (or any interest therein) of the Partnership.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President and 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 5, 1996. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 5,
1996. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners,
Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and the
managing general partner of JMB Income Properties, Ltd.-IV ("JMB
Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income
Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII
("JMB Income-VII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB
Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI
("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII"), and
JMB Income Properties Ltd.-XIII ("JMB Income-XIII"). Most of the foregoing
directors and officers are also officers and/or directors of various
affiliated companies of JMB including Arvida/JMB Managers, Inc. (the
general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB
Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II
("Arvida-II") and Income Growth Managers, Inc. (the corporate general
partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such
directors and officers are also partners of certain partnerships which are
associate general partners in the following real estate limited
partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB
Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage Partners-II,
Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus and
IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.,
an affiliate of JMB that is a real estate investment trust in the business
of owning, managing and developing shopping centers. He is a Certified
Public Accountant.
Neil G. Bluhm (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc. an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 57) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December of
1990. He is a member of the Bar of the State of Illinois and a Certified
Public Accountant.
Stuart C. Nathan (age 54) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 62) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 49) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is a director of Urban Shopping Centers,
Inc., an affiliate of JMB that is real estate investment trust in the
business of owning, managing and developing shopping centers. He is also a
director of a number of investment companies advised or managed by T. Rowe
Price Associates and its affiliates. Mr. Schreiber is President of
Schreiber Investments, Inc., a company which is engaged in the real estate
investing business. He is also a senior advisor and partner of Blackstone
Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since
1994, Mr. Schreiber has also served as a Trustee of Amli Residential
Property Trust, a publicly-traded real estate investment trust that invests
in multi-family properties. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 46) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 48) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 43) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 47) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 60) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Limited
Partners, and a share of profits or losses. Reference is also made to Note
3 for a description of such distributions and allocations. In 1995, 1994
and 1993, the General Partners received distributions of $189,426, $108,243
and $109,935, respectively. The General Partners received a share of
Partnership earnings for tax purposes aggregating $116,005 in 1995.
The Partnership, pursuant to the Partnership Agreement is permitted to
engage in various transactions involving the Corporate General Partner and
its affiliates including the reimbursement for salaries and salary related
expenses of its employees, certain of its officers, and other direct
expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
JMB Insurance Agency, Inc., and affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1995
aggregating $2,984 in connection with providing insurance coverage for
certain of the real property investments of the Partnership. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The Corporate General Partner and its affiliates were due
reimbursement (at cost) in 1995 for accounting services, portfolio
management services, legal services and for administrative charges and
other out-of-pocket expenses of $45,518, $13,530, $934 and $32,444,
respectively, of which $26,687 was unpaid at December 31, 1995. Also,
during 1995, the Partnership recognized and paid certain 1994
administrative charges to the Corporate General Partner and its affiliates
of approximately $38,963.
All amounts payable to the General Partners and their affiliates do
not bear interest and are expected to be paid in future periods.
Effective October 1, 1995, the Corporate General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by, and partially reimbursed to, affiliates of the General Partners. Use
of such third parties is not expected to have a material effect on the
operations of the Partnership.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially
more than 5% of the outstanding Interests of the Partnership.
(b) The Corporate General Partner, its officers and directors and the
Associate General Partner own the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership JMB Realty 5 Interests (1) Less than 1%
Interests Corporation indirectly
Limited Partnership General Partners 5 Interests (1) Less than 1%
Interests (and their officers, indirectly
directors and
partners)
<FN>
(1)Includes 5 Interests owned by the Initial Limited Partner of the Partnership,
for which JMB Realty Corporation as the indirect majority shareholder of the Initial
Limited Partner is deemed to have the investment and voting power.
No officer or director of the Corporate General Partner of the Partnership possesses
a right to acquire beneficial ownership of Interests of the Partnership.
All of the outstanding shares of the Corporate General Partner of the Partnership
are owned by certain officers and directors (and members of their families) of JMB Realty
Corporation, the Corporate General Partner, as set forth above in Item 10.
(c)There exists no arrangement, known to the Partnership, the operation of which may
at a subsequent date result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the General Partners, affiliates or their management other than those
described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed
with this annual report).
(2) Exhibits.
3. The Prospectus of the Partnership dated May 24, 1988,
as supplemented August 19, 1988, April 28, 1989, December 22, 1989,
February 28, 1990, and June 5, 1990 as filed with the Commission pursuant
to Rules 424(b) and 424(c), is hereby incorporated herein by reference.
Copies of pages 8-11, 12-17, 65-66, and A-11 to A-28 of the prospectus (as
supplemented) are incorporated herein by reference to the Partnership's
report for December 31, 1993 on Form 10-K (File No. 0-17705) dated March
25, 1994.
3.1. Agreement of Limited Partnership is set forth as
Exhibit A of the Partnership's Prospectus, which is incorporated herein by
reference to the Partnership's Registration Statement on Form S-11 (File
No. 33-19463) dated May 24, 1988.
3.2. Copies of pages 1-3 of the Partnership's supplement
dated August 19, 1988 and pages 1-2 of the supplement dated February 28,
1990 to the Partnership's Prospectus dated May 24, 1988 are incorporated
herein by reference to Exhibit 3.2 of the Partnership's report for December
31, 1993 on Form 10-K (File No. 0-17705) dated March 25, 1994.
4.1. Assignment Agreement is hereby incorporated by
reference to Exhibit B of the Partnership's Prospectus, which is hereby
incorporated herein by reference to Exhibit 4.1 of the Partnership's report
for December 31, 1993 on Form 10-K (File No. 0-17705) dated March 25, 1994.
10.1. Escrow Deposit Agreement is hereby incorporated by
reference to the Partnership's Pre-Effective Amendment No. 2 to the Form S-
11 (File No. 33-19463) Registration Statement of the Partnership dated May
16, 1988.
10.2. Purchase Agreement dated as of August 16, 1988, by
and among Sembler Family Partnership #5, Ltd., University Retail
Associates, Ltd. and JMB/Landings Associates and letter agreement with
respect thereto, is hereby incorporated herein by reference to Post-
Effective Amendment No. 1 to the Form S-11 (File No. 33-19463) Registration
Statement of the Partnership dated August 26, 1988.
10.3. Agreement for Operation and Management of Shopping
Center dated as of August 16, 1988, by and between JMB/Landings Associates
and The Sembler Company, is hereby incorporated herein by reference to
Post-Effective Amendment No. 1 to the Form S-11 (File No. 33-19463)
Registration Statement of the Partnership dated August 26, 1988.
10.4. Agreement Respecting Letters of Credit dated as of
August 16, 1988, by and among Sembler Family Partnership #5, Ltd.,
University Retail Associates, Ltd. and JMB/Landings Associates, hereby
incorporated herein by reference to Post-Effective Amendment No. 1 to the
Form S-11 (File No. 33-19463) Registration Statement of the Partnership
dated August 26, 1988.
10.5. Guaranty dated as of August 16, 1988, by and among
Melvin F. Sembler, Betty S. Sembler, M. Steven Sembler, Brent W. Sembler,
Gregory S. Sembler, Craig H. Sher, Thomas G. Dabney, II and JMB/Landings
Associates, hereby incorporated herein by reference to Post-Effective
Amendment No. 1 to the Form S-11 (File No. 33-19463) Registration Statement
of the Partnership dated August 26, 1988.
10.6. Agreement of Partnership of JMB/Landings Associates
dated July 14, 1988, by and between Carlyle Income Plus, Ltd. and the
Partnership, hereby incorporated herein by reference to Post-Effective
Amendment No. 2 to the Form S-11 (File No. 33-19463) Registration Statement
of the Partnership dated September 28, 1988.
10.7. Agreement dated as of January 24, 1990, by and
between McLean Associates Limited Partnership and a partnership to be
formed that will be supervised or advised by an affiliate of JMB Realty
Corporation is hereby incorporated by reference to the Partnership's Post-
Effective Amendment No. 6 to Form S-11 (File No. (33-19463)) Registration
Statement of the Partnership dated February 28, 1990.
10.8. Agreement of Partnership of CIP/Ashby Partners dated
January 30, 1990, by and between Carlyle Income Plus, Ltd. and Carlyle
Income Plus, L.P.-II is hereby incorporated by reference to the
Partnership's Post-Effective Amendment No. 6 to Form S-11 (File No. (33-
19463)) Registration Statement of the Partnership dated February 28, 1990.
10.9. Assumption Agreement dated as of February 21, 1990,
by and between McLean Associates Limited Partnership and CIP/Ashby Partners
is hereby incorporated by reference to the Partnership's Post-Effective
Amendment No. 6 to Form S-11 (File No. (33-19463)) Registration Statement
of the Partnership dated February 28, 1990.
10.10. Acquisition documents relating to the purchase by the
Partnership of a portion of the common stock in 1225 Investment Corporation
which owns 1225 Connecticut Avenue in Washington, D.C. is hereby
incorporated by reference to the Partnership's prospectus on Form S-11
(File No. (33-19463)) dated June 5, 1990 as amended.
10.11. Closing statement date January 28, 1994 relating to
the refinancing by 1225 Investment Corporation which owns 1225 Connecticut
Avenue in Washington, D.C., are hereby incorporated herein by reference to
the Partnership's report for March 31, 1994 on Form 10-Q (File No. 0-17705)
dated May 11, 1994.
10.12. Secured promissory note dated January 28, 1994 in the
amount of $6,500,000 relating to the refinancing by 1225 Investment
Corporation which owns 1225 Connecticut Avenue in Washington, D.C., are
hereby incorporated herein by reference to the Partnership's report for
March 31, 1994 on Form 10-Q (File No. 0-17705) dated May 11, 1994.
10.13. Secured promissory note dated January 28, 1994 in the
amount of $500,000 relating to the refinancing by 1225 Investment
Corporation which owns 1225 Connecticut Avenue in Washington, D.C., are
hereby incorporated herein by reference to the Partnership's report for
March 31, 1994 on Form 10-Q (File No. 0-17705) dated May 11, 1994.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule
(b) No Reports on Form 8-K were required or filed since the beginning
of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 1995 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CARLYLE INCOME PLUS, L.P. - II
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1996
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1996
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1996
GLENN E. EMIG*
By: Glenn E. Emig
Chief Operating Officer
Date: March 25, 1996
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1996
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1996
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1996
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1996
CARLYLE INCOME PLUS, L.P. - II
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3. Copies of pages 8-11, 12-17, Yes
65-66, and A-11 to A-28 of the
Prospectus of the Partnership
dated May 24, 1988, as supplemented
August 19, 1988, April 28, 1989,
December 22, 1989, February 28, 1990
and June 5, 1990.
3.1. Amended and Restated Agreement Yes
of Limited Partnership,
incorporated by reference to
Exhibit A of the Partnership's
Prospectus
3.2. Copies of pages 1-3 of the Yes
Partnership's supplement
dated August 19, 1988
4.1. Assignment Agreement, incorporated Yes
by reference to Exhibit B to the
Partnership's Prospectus
10.1.- * Material Contracts Yes
10.13.
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
* Previously filed as exhibits to the Partnership's Registration
Statement (as amended) on Form S-11 (File No. 33-19463) to the Securities
Act of 1933.
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a joint venture partner in The JMB/Landings
Associates, a general partnership which holds title to The Landings
Shopping Center, located in Sarasota, Florida.
The Partnership is a joint venture partner in The CIP/Ashby Partners,
a general partnership which holds title to The Ashby at McLean Apartments,
located in McLean, Virginia.
The Partnership is a stockholder in the 1225 Investment Corporation, a
corporation which holds title to the 1225 Connecticut Avenue, N.W. Office
Building located in Washington, D.C.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE INCOME PLUS,
LTD. - II, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE INCOME PLUS,
LTD. - II, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
A. Lee Sacks
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000827086
<NAME> CARLYLE INCOME PLUS, L.P. - II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,606,715
<SECURITIES> 0
<RECEIVABLES> 54,610
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,673,311
<PP&E> 21,380,473
<DEPRECIATION> 3,945,031
<TOTAL-ASSETS> 49,373,424
<CURRENT-LIABILITIES> 48,626
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 43,693,659
<TOTAL-LIABILITY-AND-EQUITY> 49,373,424
<SALES> 3,276,045
<TOTAL-REVENUES> 3,498,456
<CGS> 0
<TOTAL-COSTS> 2,157,042
<OTHER-EXPENSES> 280,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,061,407
<INCOME-TAX> 0
<INCOME-CONTINUING> 636,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 636,648
<EPS-PRIMARY> 9.41
<EPS-DILUTED> 9.41
</TABLE>
