Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Carlyle Income Plus, L.P. - II
Commission File No. 0-17705
Form 10-K
Gentlemen:
Transmitted, for the above-mentioned registrant, is the
electronically filed executed copy of registrant's current report
on Form 10-K for the year ended December 31, 1997.
Thank you.
Very truly yours,
CARLYLE INCOME PLUS, L.P. - II
By: JMB Realty Corporation
Corporate General Partner
By: -------------------------------
Gailen J. Hull, Senior Vice President
and Principal Accounting Officer
CSN:vb
Enclosures <PAGE>
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, 1997 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
AND ASSIGNEE INTERESTS THEREIN
(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<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business. . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . 6
Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . 6
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters . . . . 6
Item 6. Selected Financial Data . . . . . . . . 8
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . 13
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk . . . . . . . . . . . 17
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . 18
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . 70
PART III
Item 10. Directors and Executive Officers
of the Partnership. . . . . . . . . . . 70
Item 11. Executive Compensation. . . . . . . . . 74
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . 75
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . 76
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.. . . . . . . . 76
PART IV
SIGNATURES . . . . . . . . . . . . . . . . . . . . 79
i<PAGE>
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated
Financial Statements contained in this report. Capitalized terms
used herein, but not defined, have the same meanings as used in
the Notes.
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 offering closed on April 30, 1990. No
holder of Interests (hereinafter, a "Limited Partner") has made
any additional capital contribution after such date. 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 last remaining real property investment is located
in Washington, D.C. 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 held for
working capital, distributed or reinvested in existing
properties rather than invested in acquiring additional
properties. As discussed further in Item 7, 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 last remaining property is sold in the nearer term), barring
any unforeseen economic developments.
The Partnership made the real property investments set
forth in the following table:<PAGE>
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE, OR IF OWNED
AT DECEMBER 31, 1997
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 12-30-97 fee ownership of land
sq ft. and improvements
n.r.a. (through a joint venture
partnership) (b) (e)
2. Ashby at McLean
Apartments
McLean, Virginia 250 units 2-28-90 8-26-96 fee ownership of land
and improvements
(through a joint venture
partnership (b) (e)
3. 1225 Connecticut
Avenue, N.W.
Office Building
Washington, D.C. 203,000 5-24-90 49% fee ownership of land
sq.ft. and improvements
g.l.a. (through a corporation)
(c)(d)
<FN>
- ----------
(a) The computation of this percentage for the remaining property held at December 31, 1997
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 the Notes for a description of the joint venture partnership through
which the Partnership has made this real property investment.
(c) Reference is made to the Notes relating to 1225 Investment Corporation for a description
of the corporation through which the Partnership has made this real property investment.
<PAGE>
(d) Reference is made to Item 6 - Selected Financial Data for additional operating and lease
expiration data concerning this investment property.
(e) This property has been sold. Reference is made to the Notes for a further description
of the sale.
/TABLE
<PAGE>
On December 30, 1997, JMB/Landings joint venture sold The
Landings Shopping Center. Reference is made to the Notes for a
further description of such transactions.
The Partnership's last remaining real property investment is
subject to competition from similar types of properties
(including properties owned by affiliates of the General
Partners) in the vicinity in which it is located. Such
competition is generally for the retention of existing tenants.
Additionally, the Partnership is in competition for new tenants.
Reference is made to Item 7 below for a discussion of
competitive conditions and future renovation and capital
improvement plans of the Partnership and the Corporation which
holds the last remaining investment property. Approximate
occupancy levels for the property 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 property in
its market 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, the investment
property held at December 31, 1997 is adequately insured.
The Partnership has no employees.
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 or owned 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 such properties.
The following is a listing of principal businesses or
occupations carried on in and approximate occupancy levels by
quarter during fiscal years 1997 and 1996 for the Partnership's
investment properties owned during 1997:
<PAGE>
<TABLE>
<CAPTION>
1996 1997
------------------------ ---------------------
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 82% 65% 67% 60% 60% 55% 81% N/A
2. 1225 Connecticut
Washington, D.C. . Public 100% 100% 100% 100% 100% 100% 95% 95%
Accounting/
Financial Services
<FN>
- ----------
An N/A indicates that the property was not owned by the Partnership or its joint venture as
of the end of the quarter.
Reference is made to Item 6, Item 7 and to the Notes for further information regarding
property occupancy, competitive conditions and tenant leases at the Partnership's last remaining
investment property.
/TABLE
<PAGE>
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 1996 and 1997.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP
INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1997, there were 6,682 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, which may be granted or withheld in its sole and
absolute discretion. 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 or have other rights
of a Limited Partner. 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<PAGE>
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.
Reference is made to Item 7 for a discussion of unsolicited
tender offers received from unaffiliated third parties.<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . .$ 190,289 2,885,863 3,498,456 3,366,928 3,259,899
============ ============ ============ ============ ============
Earnings
(loss)before gains.
on sales of investment
properties . . . . 2,315,269 (658,715) 636,648 (3,276,416) 1,976,778
Gain on sale of investment
property, net of
venture partner's
share . . . . . . . -- 2,524,162 -- -- --
Partnership's share of
gain on sale of
investment property
by unconsolidated
venture . . . . . . 969,419 -- -- -- --
------------- --------------------------------------- -------------
Net earnings (loss).$ 3,284,688 1,865,447 636,648 (3,276,416) 1,976,778
============= ============ ========================= =============
Net earnings (loss)
per Interest (b):
Earnings
(loss)before gains
on sales of
investment
properties. . . .$ 34.22 (9.74) 9.41 (48.43) 29.22
<PAGE>
Gain on sale of
investment property,
net . . . . . . . -- 38.88 -- -- --
Partnership's share of
gain on sale of
investment property
by unconsolidated
venture . . . . . . 14.93 -- -- -- --
------------ ------------ ------------ ------------ ----------
$ 49.15 29.14 9.41 (48.43) 29.22
============ ============ ============ ============ ============
Total assets . . . .$ 29,020,19228,511,534 49,373,424 52,629,847 61,350,856
============ ============ ============ ============ ============
Cash distributions
per Interest
(c) . . . . .$ 40.00 265.00 56.00 32.00 32.50
============ ============ ============ ============ ============
<FN>
- -------------<PAGE>
(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) and the specified profit and loss allocations
(as discussed in the Notes) between the Limited and
General Partners.
(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
<PAGE>
<TABLE>
SIGNIFICANT PROPERTIES - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997
<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>
1993 . . . . . . 95% 27.63
1994 . . . . . . 100% 33.49
1995 . . . . . . 100% 32.98
1996 . . . . . . 100% 30.84
1997 . . . . . . 95% 35.34
<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>
Ernst & Young 177,242 $5,869,000 6/2007 Yes
(Accounting Firm)
/TABLE
<PAGE>
<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.
Number of Approx. Total Annualized Percent of
Year Ending Expiring GLA of Base Rent Total 1997
December 31, Leases (1) Expiring of Expiring Base Rent
Leases (1) Leases Expiring
------------ ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1998 2 5,666 159,000 2.3%
1999 -- -- -- --
2000 2 17,384 649,000 9.5%
2001 1 3,026 115,000 1.7%
2002 -- -- -- --
2003 -- -- -- --
2004 -- -- -- --
2005 1 5,263 233,000 3.4%
2006 -- -- -- --
2007 9 177,242 5,869,000 86.2%
<FN>
(1) Excludes leases that expire in 1998 for which renewal leases or leases
with replacement tenants have been executed as of March 25, 1998.
/TABLE
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as
described in Item 1, the Partnership had approximately
$55,256,000( after deducting selling expenses and other offering
costs) with which to make investments in income-producing
commercial and residential real property, to pay legal fees and
other costs (including acquisition fees) related to such
investments and to satisfy working capital requirements. A
portion of the proceeds was utilized to acquire the properties
described in Item 1 above.
During 1996 some of the Holders of Interests in the
Partnership received from unaffiliated third parties unsolicited
tender offers to purchase up to 4.9% of the Interests in the
Partnership at amounts between $350 and $400 per Interest. The
Partnership recommended against acceptance of these offers on
the basis that, among other things, the offer prices were
inadequate. Such offers have expired. It is possible that
other offers for Interests may be made by unaffiliated third
parties in the future although there is no assurance that any
other third party will commence an offer for Interests, the
terms of any such offer or whether any such offer, if made, will
be consummated, amended or withdrawn. The board of directors of
JMB Realty Corporation ("JMB"), the corporate general partner of
the Partnership, has established a special committee (the
"Special Committee") consisting of certain directors of JMB to
deal with all matters relating to tender offers for Interests in
the Partnership, including any and all responses to such tender
offers. The Special Committee has retained independent counsel
to advise it in connection with any potential tender offers for
Interests and has retained Lehman Brothers Inc. as financial
advisor to assist the Special Committee in evaluating and
responding to any additional potential tender offers for
Interests.
The Partnership had been made aware that in March, April
and September of 1997 and February and March of 1998, other
unaffiliated third parties made unsolicited tender offers to
some of the Holders of Interests. These offers each sought to
purchase up to 4.9% of the Interests in the Partnership at
amounts between $250 and $325 per Interest. The 1997 offers
expired in April, July and October 1997, respectively. One 1998
offer expired March 13, 1998 and the other 1998 offer is
scheduled to expire April 3, 1998. The Special Committee
recommended against acceptance of these offers on the basis
that, among other things, the offer prices were inadequate. As
of the date of this report, the Partnership is aware that 4.59%
of the outstanding Interests have been purchased by all such
unaffiliated third parties either pursuant to such tender offers
or through negotiated purchases.
At December 31, 1997, the Partnership and its consolidated
venture had cash and cash equivalents of approximately
$2,981,000. After receiving its share of the proceeds from the<PAGE>
December 1997 sale of the Landings Shopping Center from the
JMB/Landings venture in January 1998, the Partnership
distributed approximately $7,327,000 to the Limited Partners
($114 per interest) during the first quarter of 1998 which
represented substantially all of the proceeds from the December
1997 sale of the Landings Shopping Center and operational cash
flow and working capital reserves of the Partnership. The
General Partners have deferred their share of the distributions
of proceeds from this sale as the subordination requirements
regarding the retention of distributions of sales proceeds by
the General Partners are not expected to be met as described
below. In addition, the Partnership distributed in the first
quarter of 1998 approximately $152,200 to the General Partners
representing their portion of operational cash flow and working
capital reserves of the Partnership. Remaining funds are
available for contributions to its remaining investment
property, distributions to partners and for other working
capital requirements. The Partnership's share of currently
budgeted tenant improvements and other capital expenditures for
its unconsolidated corporation in 1998 is currently budgeted to
be approximately $218,000. Actual amounts expended in 1998 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 remaining investment property and
from the sale of such investment. In such regard, reference is
made to the Partnership's property specific discussion 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.
ASHBY APARTMENTS
On August 26, 1996, the CIP/Ashby joint venture sold the
land and related improvements of The Ashby at McLean Apartments.
The sale price was $21,400,000 (before selling costs and
prorations). Reference is made to the Notes for a further
description of the sale.
1225 CONNECTICUT AVENUE
1225 Investment Corporation incurred approximately
$5,300,000 of anticipated tenant improvement costs, lobby
renovation and sprinkler system costs related to the lease
extension for Ernst & Young, as well as tenant improvement costs
for other tenants in 1994 and 1995. Such costs were paid during
1994 and 1995 from the net proceeds of approximately $5,300,000
from the January 1994 refinancing of the existing mortgage loan
secured by the property. Although the property was 95% occupied
at December 31, 1997 (a decline from 100% at December 31, 1996),<PAGE>
the Corporation has recently signed an extension agreement with
its primary tenant to occupy all of the remaining available
space in the property during 1998.
LANDINGS SHOPPING CENTER
On December 30, 1997, the JMB/Landings joint venture sold
the land and related improvements of the Landings Shopping
Center. The sale price was $9,700,000 (before selling costs and
prorations). Reference is made to the Notes for a further
description of the sale.
General
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 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 property since the availability of
satisfactory outside sources of capital may be limited. In an
effort to reduce Partnership operating expenses, the Partnership
elected to make semiannual rather than quarterly distributions
of available operating cash flow beginning in November 1995.
After reviewing the Partnership's properties and marketplace 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. In such
regard, the unconsolidated Corporation which owns the
Partnership's last remaining investment property (1225
Connecticut) has classified such property as held for sale at
December 31, 1996 and therefore such property is no longer
subject to continuing depreciation. The affairs of the
Partnership are expected to be wound up no later than December
31, 1999 and perhaps in the 1998 time frame, barring any
unforeseen economic developments.
Although the Partnership expects to distribute sale
proceeds from the disposition of the Partnership's remaining
investment property, aggregate distributions from sale proceeds
received by the Limited Partners over the entire term of the
Partnership are expected to approximate slightly more than half
of their original investment. These aggregate sale proceeds
when combined with aggregate distributions of net cash flow over
the entire term of the Partnership are expected to be less then
the Limited Partners' original investment. Accordingly, as the
subordination requirements of the Partnership Agreement for the
retention of sales proceeds by the General Partners are not
expected to be met, the General Partners are currently deferring
their share of distributable sale proceeds.<PAGE>
RESULTS OF OPERATIONS
At December 31, 1997, the Partnership owned, through an
investment in an unconsolidated corporation, an interest in one
operating investment property.
The decrease in cash and cash equivalents at December 31,
1997 as compared to December 31, 1996 is attributable primarily
to operating cash flow distributed in 1997 in excess of
operating cash flow generated in 1997.
The increase in investment in unconsolidated corporation,
at equity at December 31, 1997 as compared to December 31, 1996
and the increase in Partnership's share of operations of
unconsolidated corporation for the year ended December 31, 1997
as compared to the ended December 30, 1996 is attributable
primarily to the suspension of depreciation, effective January
1, 1997, on the 1225 Connecticut Avenue, N.W. office building,
as the property was classified as held for sale as of December
31, 1996. An additional increase in Partnership's share of
operations of unconsolidated affiliated corporation in 1997 is
attributable primarily to the recognition of higher effective
rents at the property in 1997. The decrease in Partnership's
share of operations of unconsolidated corporation in 1996 as
compared to 1995 is attributable primarily to the Partnership's
share ($2,851,415) of the provision for value impairment
recorded by 1225 Investment Corporation at December 31, 1996.
The increase in investment in unconsolidated venture, at
equity at December 31, 1997 as compared to December 31, 1996 and
the increase in Partnership's share of operations of
unconsolidated venture for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 is attributable
primarily to the suspension of depreciation, effective January
1, 1997, on the Landings Shopping Center, as the property was
classified as held for sale as of December 31, 1996 and to the
Partnership's share of the gain on the December 1997 sale of the
Landings Shopping Center. The Partnership received its share of
the proceeds from the December 1997 sale of the Landings
Shopping Center from the JMB/Landings venture in January 1998.<PAGE>
The decreases in rental income and property operating
expenses for the years ended December 31, 1997 and 1996 as
compared to 1995 are primarily due to the August, 1996 sale of
the Ashby at McLean Apartments. The decrease in depreciation
expense for the years ended December 31, 1997 and 1996 as
compared to 1995 is primarily due to the sale of the property in
August 1996 and the suspension of depreciation as of April 1,
1996 on the Ashby at McLean Apartments as such property was
classified as held for sale as of such date.
The decrease in interest income for the year ended December
31, 1997 and the increase in interest income for 1996 as
compared to the year ended December 31, 1995 is primarily
attributable to CIP/Ashby's temporary investment in 1996 of the
proceeds of the August 1996 sale of the Ashby at McLean
Apartments.
Fees for professional services increased in 1996 as
compared to 1995 primarily as a result of expenses incurred in
connection with tender offer matters, as discussed above.
The Partnership's share of operations of unconsolidated
venture in 1995 contains the Partnership's share ($1,750,000) of
the provision for value impairment record by JMB/Landings.
Operations of JMB/Landings decreased in 1996 primarily as a
result of a decrease in occupancy and a corresponding decrease
in rental income at The Landings Shopping Center in 1996.
The gain on sale of investment property in 1996 is
attributable to the August 1996 sale of the Ashby at McLean
Apartments.
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 property have escalation clauses covering increases
in the cost of operating and maintaining the property as well as
real estate taxes. Therefore, there should be little effect on
operating earnings if the property remains substantially
occupied.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
<PAGE>
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, 1997 and 1996
Consolidated Statements of Operations, years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Partners'
Capital Accounts (Deficits),
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
SCHEDULES NOT FILED:
All schedules 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, 1997 and 1996
Statements of Operations, years ended December 31,
1997, 1996 and 1995
Statements of Changes in Shareholders' Equity, years
ended December 31, 1997, 1996 and 1995
Statements of Cash Flows, years ended December 31,
1997, 1996 and 1995
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.<PAGE>
JMB/LANDINGS ASSOCIATES
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1997 and 1996
Statements of Operations, years ended December 31, 1997, 1996,
and 1995
Statements of Changes in Partner's Capital Accounts (Deficits),
years ended December 31, 1997, 1996 and 1995
Statements of Cash Flows, years ended December 31, 1997, 1996
and 1995
Notes to Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information
is inapplicable or the information is presented in the financial
statements or related notes.
<PAGE>
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. These
consolidated financial statements are the responsibility of the
General Partners of the Partnership. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
As discussed in the Notes to the consolidated financial
statements, in 1996 the Partnership and its consolidated venture
changed their method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of
Financial Accounting Standards No. 121.
Chicago, Illinois KPMG PEAT MARWICK LLP
March 25, 1998<PAGE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . .$ 2,980,988 3,933,927
Interest, rents and other receivables. . . . . . . . . . . 12,906 25,348
------------ -----------
Total current assets . . . . . . . . . . . . . . . 2,993,894 3,959,275
------------ -----------
Investment in unconsolidated corporation,
at equity . . . . . . . . . . . . . . . . . . . . . . . . 20,602,580 20,418,337
Investment in unconsolidated venture,
at equity. . . . . . . . . . . . . . . . . . . . . . . . . 5,423,718 4,133,922
------------ -----------
$ 29,020,192 28,511,534
============ ===========
<PAGE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . .$ 31,761 71,858
Amounts due to affiliates . . . . . . . . . . . . . . . . 17,451 5,388
------------ -----------
Total current liabilities. . . . . . . . . . . . . 49,212 77,246
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . 49,212 77,246
------------ -----------
Venture partner's subordinated equity
in venture . . . . . . . . . . . . . . . . . . . . . . . . -- 41,910
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . 25,000 25,000
Cumulative net earnings. . . . . . . . . . . . . . . . 568,563 443,106
Cumulative cash distributions. . . . . . . . . . . . . (1,041,641) (906,336)
------------ -----------
(448,078) (438,230)
------------ -----------
Limited partners (64,269.53 interests):
Capital contributions, net of offering
costs and purchase discounts . . . . . . . . . . . . 55,256,131 55,256,131 <PAGE>
Cumulative net earnings. . . . . . . . . . . . . . . . 12,094,276 8,935,045
Cumulative cash distributions. . . . . . . . . . . . . (37,931,349) (35,360,568)
------------ -----------
29,419,058 28,830,608
------------ -----------
Total partners' capital accounts
(deficits) . . . . . . . . . . . . . . . . . . . 28,970,980 28,392,378
------------ -----------
$ 29,020,192 28,511,534
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . .$ -- 2,377,068 3,276,045
Interest income. . . . . . . . . . . . . . 190,289 508,795 222,411
------------ ----------- -----------
190,289 2,885,863 3,498,456
------------ ----------- -----------
Expenses:
Depreciation . . . . . . . . . . . . . . . -- 145,870 580,373
Property operating expenses. . . . . . . . -- 1,188,800 1,576,669
Professional services. . . . . . . . . . . 91,925 115,616 76,500
General and administrative . . . . . . . . 194,876 205,938 203,507
------------ ----------- -----------
286,801 1,656,224 2,437,049
------------ ----------- -----------
(96,512) 1,229,639 1,061,407
Partnership's share of operations of uncon-
solidated corporation . . . . . . . . . . 2,078,083 (1,623,860) 1,443,793
Partnership's share of operations of
unconsolidated venture . . . . . . . . . . 320,377 153,503 (1,517,118)
Venture partner's share of consolidated
venture's operations . . . . . . . . . . . 13,321 (417,997) (351,434)
------------ ----------- -----------
Earnings (loss) before gains on sales of
investment properties. . . . . . . . 2,315,269 (658,715) 636,648
Gain on sale of investment property,
net of venture partner's share of
$1,134,043 . . . . . . . . . . . . . . . -- 2,524,162 --
------------ ----------- ------------
<PAGE>
Partnership's share of gain on sale of
investment property by unconsolidated
venture . . . . . . . . . . . . . . . . . . 969,419 -- --
------------ ----------- -----------
Net earnings (loss). . . . . . . . . . . . $ 3,284,688 1,865,447 636,648
============ =========== ===========
Net earnings (loss) per
limited partnership interest:
Earnings (loss) before gains on sales of
investment properties . . . . . . . . .$ 34.22 (9.74) 9.41
Net gain on sale of investment
property. . . . . . . . . . . . . . . . -- 38.88 --
Partnership's share of gain on sale
of investment property by unconsolidated
venture . . . . . . . . . . . . . . . . 14.93 -- --
----------- ---------- ------------
$ 49.15 29.14 9.41
=========== ========== ============
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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
(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
(loss). . . .-- 31,832 -- 31,832 -- 604,816 -- 604,816
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. . . . .25,000450,800 (771,032) (295,232)55,256,131 7,061,904 (18,329,144) 43,988,891
Net earnings
(loss). . . .-- (7,694) -- (7,694) -- 1,873,141 -- 1,873,141 <PAGE>
Cash
distri-
butions
($265.00 per
limited
partnership
interest). . -- -- (135,304) (135,304) -- -- (17,031,424) (17,031,424)
------ ------- --------- --------- -------- -------- ------------ ------------
Balance
(deficit) at
December 31,
1996 . . . .25,000 443,106 (906,336) (438,230) 55,256,131 8,935,045 (35,360,568) 28,830,608
Net earnings
(loss) . . . -- 125,457 -- 125,457 -- 3,159,231 -- 3,159,231
Cash dis-
tributions
($40.00 per
limited
partnership
interest). . -- -- (135,305) (135,305) -- -- (2,570,781) (2,570,781)
-------- --------- -------- --------- ---------- ---------- ----------- -----------
Balance (deficit)
at December
31, 1997$. .25,000 568,563(1,041,641) (448,078) 55,256,131 12,094,276 (37,931,349) 29,419,058
======= ========= ======== ========= =========== ========== ============ ============
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . $ 3,284,6881,865,447 636,648
Items not requiring (providing) cash or
cash equivalents:
Depreciation . . . . . . . . . . . . . . . -- 145,870 580,373
Total gain on sale of investment
property . . . . . . . . . . . . . . . . -- (3,658,205) --
Partnership's share of operations of
unconsolidated corporation,
net of dividends . . . . . . . . . . . . (2,078,083) 1,623,860 370,372
Partnership's share of operations of
unconsolidated venture, net of
distributions. . . . . . . . . . . . . . (320,377) (153,503) 1,517,118
Venture partner's share of consolidated
venture's operations and gain on sale. . (13,321) 1,552,040 351,434
Partnership's share of gain on sale
of investment property by unconsolidated
venture . . . . . . . . . . . . . . . . . (969,419) -- --
Changes in:
Interest, rents and other receivables. . . 12,442 41,248 (11,056)
Accounts payable . . . . . . . . . . . . . (40,097) 49,919 (75,689)
Amounts due to affiliates. . . . . . . . . 12,063 (21,299) 11,734
Tenant security deposits . . . . . . . . . -- (107,369) (4,531)
----------- ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . (112,104) 1,338,008 3,376,403
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities
of short-term investments. . . . . . . . . -- -- 2,109,006 <PAGE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Additions to investment property . . . . . . -- (48,234) (121,684)
Partnership's distributions from
unconsolidated corporation . . . . . . . . 1,893,840 2,242,055 144,912
Partnership's distributions from
unconsolidated venture . . . . . . . . . . -- -- 250,000
Cash proceeds from sale of investment
property, net of selling expenses . . . . . -- 20,996,011 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . 1,893,840 23,189,832 2,382,234
----------- ----------- -----------
Cash flows from financing activities:
Distributions to venture partner . . . . . . (28,589) (7,033,900) (387,500)
Distributions to limited partners. . . . . . (2,570,781) (17,031,424) (3,599,093)
Distributions to general partners. . . . . . (135,305) (135,304) (189,426)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . (2,734,675) (24,200,628) (4,176,019)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . (952,939) 327,212 1,582,618
Cash and cash equivalents,
beginning of year. . . . . . . . . 3,933,927 3,606,715 2,024,097
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . 2,980,988 3,933,927 3,606,715
=========== =========== ===========
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>
<PAGE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
OPERATIONS AND BASIS OF ACCOUNTING
General
At December 31, 1997, the Partnership holds, through a
corporation, an equity investment in an office building.
Business activities consist of rentals to a variety of
commercial and retail companies, 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 majority-owned venture,
CIP/Ashby Partners (property sold in August 1996) ("CIP/Ashby").
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 interest
in JMB/Landings Associates ("JMB/Landings") (property sold
December 1997), and 1225 Investment Corporation ("1225
Connecticut Avenue, N.W."). 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, 1997 and 1996 is summarized as
follows:
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . $ 29,020,192 39,235,019 28,511,534 40,988,399
Partners' capital
accounts (deficit):
General Partners . . . . . . (448,078) (506,679) (438,230) (447,922)
Limited Partners . . . . . . 29,419,058 39,709,940 28,830,608 41,405,331
Net earnings (loss):
General Partners . . . . . . 125,457 76,548 (7,694) 92,695
Limited Partners . . . . . . 3,159,231 875,390 1,873,141 (197,732)
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . 49.15 13.62 29.14 (3.08)
=========== =========== =========== ===========
/TABLE
<PAGE>
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 ($ 2,966,544 and $3,808,897 at December 31,
1997 and 1996, respectively) as cash equivalents, which includes
investments in an institutional mutual fund which holds United
States Government obligations, with any remaining amounts
(generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
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.
INVESTMENT PROPERTIES
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. At December 31,
1997, the apartment building and the shopping center have been
sold and the remaining investment property is in operation.
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.
<PAGE>
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.
The Partnership adopted Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121")
as required in the first quarter of 1996. SFAS 121 requires that
the Partnership record an impairment loss on its properties to
be held for investment whenever their carrying value cannot be
fully recovered through estimated undiscounted future cash flows
from their operations and sale. The amount of the impairment
loss to be recognized would be the difference between the
property's carrying value and the property's estimated fair
value. The Partnership's policy is to consider a property to be
held for sale when the Partnership has committed to a plan to
sell such property and active marketing activity has commenced
or is expected to commence in the near term. In accordance with
SFAS 121, any properties identified as "held for sale or
disposition" are no longer depreciated. Adjustments for
impairment loss for such properties (subsequent to the date of
adoption of SFAS 121) are made in each period as necessary to
report these properties at the lower of carrying value or fair
value less costs to sell. The adoption of SFAS 121 did not have
any significant effect on the Partnership's financial position,
results of operations or liquidity.
The accompanying consolidated financial statements
include, $2,398,460, $(1,470,357) and $(73,325), respectively,
of the Partnership's share of total operations of $5,413,567,
$(3,422,578) and $281,780 for the years ended December 31, 1997,
1996 and 1995 of unconsolidated properties held for sale as of
December 31, 1997 or sold in 1997.
During the second quarter of 1997, Statements of Financial
Accounting Standards No. 128 ("Earnings per Share") and No. 129
("Disclosure of Information about Capital Structure") were
issued. These standards became effective for reporting periods
after December 15, 1997. As the Partnership's capital structure
only has general and limited partnership interests, the
Partnership will not experience any significant impact on its
consolidated financial statements.
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<PAGE>
a shopping center located in Sarasota, Florida and 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.
As of December 31, 1996, JMB/Landings had committed to a
plan to sell the property and therefore the property was
classified by the JMB/Landings venture as held for sale and was
not subject to continued depreciation.
In response to uncertainty relating to the ability to
recover the net carrying value of the property through future
operations and sale, JMB/Landings, 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 then estimated
fair value.
On November 25, 1997, JMB/Landings entered into an
agreement to sell the Property for a sale price of $9,700,000.
JMB/Landings received the sale price in cash at closing, net of
selling costs and prorations. The sale resulted in a gain of
approximately $1,939,000 to JMB/Landings for financial reporting
purposes, primarily as a result of a value impairment provision
of $3,500,000 (of which the Partnership's share was $1,750,000)
recorded by JMB/Landings in 1995 as discussed above. In
addition, JMB/Landings recognized a loss on sale of
approximately $1,448,000 for Federal income tax reporting
purposes in 1997( of which the Partnership's share was
approximately $724,000).
In connection with the sale of this property, as is
customary in such transactions, JMB/Landings agreed to certain
representations and warranties, with a stipulated survival
period which expires in late June 1998. Although it is not
expected, JMB/Landings may ultimately have some liability under
such representations and warranties which, in no event, is to
exceed $400,000 (of which the Partnership's share would be
$200,000).
An affiliate of the General Partners of the Partnership
managed the property for a fee equal to 4% of the property's
gross receipts. Such property management fees for the years <PAGE>
ended December 31, 1997, 1996 and 1995 aggregated $41,809,
$43,866 and $45,480 respectively.
CIP/Ashby
In February 1990, the Partnership, through CIP/Ashby
Partners ("CIP/Ashby"), 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's total cash investment in
The Ashby was approximately $28,705,000, of which the
Partnership's share was approximately $19,806,000.
The terms of the CIP/Ashby partnership agreement provided
generally that annual cash flow, sale proceeds and tax items
were distributed or allocated based on the capital contributions
made by each partner. Distributions and allocations have been
made 69% to the Partnership.
As CIP/Ashby had committed to a plan to sell the property,
the property was classified as held for sale as of April 1, 1996
and, therefore, was not been subject to continued depreciation
as of that date. The results of operations of the property
included in the accompanying consolidated financial statements
were $930,380 and $782,224 for the years ended December 31,
1996 and 1995, respectively.
In response to the uncertainty relating to CIP/Ashby's
ability to recover the net carrying value of The Ashby through
future operations or sale, CIP/Ashby, as a matter of prudent
accounting practice and for financial reporting purposes,
recorded a provision for value impairment at September 30, 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 then estimated fair
value.
In July 1996, CIP/Ashby entered into a contract with a
potential purchaser for the sale of this property for a sale
price of $21,400,000 (before selling costs and prorations),
payable in cash at closing. Pursuant to such contract, the
property was sold August 26, 1996. CIP/Ashby recognized a gain
on sale of $3,658,205 for financial reporting purposes (of which
the Partnership's share was $2,524,162), primarily as a result
of a value impairment recorded by CIP/Ashby in 1994 discussed
above, and recognized a loss of approximately $3,549,000 for
Federal income tax reporting purposes in 1996 (of which the
Partnership's share was approximately $2,449,000).
A former affiliate of the General Partners managed 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 leased from CIP/Ashby.
<PAGE>
1225 Connecticut Avenue, N.W.
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 had 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,
1997, approximately $78,000 had been spent relating to the
removal of asbestos. Furthermore, the 1225 Investment
Corporation 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 January 1994, 1225 Investment Corporation refinanced
the existing mortgage loan secured by the property. 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. 1225 Investment Corporation used the approximately
$5,300,000 of loan proceeds to partially fund tenant improvement
costs, as required by certain tenant leases, at the property.
As the 1225 Investment Corporation has committed to a plan
to sell the property, the property was classified by the 1225
Investment Corporation as held for sale as of December 31, 1996
and, therefore, is not subject to continued depreciation.
In response to the uncertainty relating to 1225 Investment
Corporation's ability to recover the net carrying value of The
1225 Connecticut Avenue, N.W. office building through future
operations or sale, 1225 Investment Corporation, as a matter of
prudent accounting practice and for financial reporting
purposes, recorded a provision for value impairment in 1996 in
the amount of $6,548,956 (of which the Partnership's share was
$2,851,415). Such provision was applied $3,118,602 to buildings
and improvements, $3,295,006 to accrued rents receivable and<PAGE>
$135,348 to deferred expenses to reduce the net carrying value
of the investment property to its then estimated fair value
based upon an analysis of an independent appraisal received for
the property as of December 31, 1996.
A former affiliate of the General Partners manages the
property for a fee equal to 2.5% of the property's gross
revenues, plus reimbursement for certain expenses of the
manager.
The property's occupancy declined to 95% at December 31,
1997. During the third quarter of 1997, a tenant, which
occupied approximately 9,900 square feet (5% of the property's
leasable space) and whose lease was scheduled to expire in June
2002, vacated its space. The tenant paid $115,000 in
termination fees, which amount is equal to the tenant's lease
obligations through the end of 1997. During early 1998, 1225
Investment Corporation negotiated a lease for space totaling
approximately 15,600 square feet with Ernst & Young, the
principal tenant which will occupy approximately 87% of the
property's leasable space.
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 are generally
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 are to be allocated 1% to the General
Partners.
The General Partners have made capital contributions of
$25,000. Except under certain limited circumstances upon
dissolution or liquidation of the Partnership 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 is to be distributed 93%
to the Holders of Interests 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 Holders of Interests of a 6% return for such year
on their "Average Adjusted Capital Contribution" on a
noncumulative basis. Distributions of "Sale Proceeds" are to be
initially allocated 99% to the Holders of Interests and 1% to
the General Partners. However, upon the completion of the
liquidation of the Partnership and final distribution of all
Partnership funds, all previous distributions of sale proceeds<PAGE>
to the General Partners are to be repaid to the Partnership to
the extent that the Holders of Interests have not received sales
proceeds equal to their initial capital investment plus a 6%
return thereon (as defined). After receipt by the Holders of
Interests of such preferred return, further 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 aggregate selling prices of all properties
sold, with the remaining balance to be distributed 85% to the
Holders of Interests and 15% to the General Partners; provided,
however, that such 3% and 15% of sale proceeds distributable to
the General Partners are subordinate to the Holders of
Interests' receipt of a 9% return on their investment. Since
the Holders of Interests are not expected to receive an amount
equal to their initial contributed capital from the aggregate
sale proceeds of all of the Partnership's investment properties,
the General Partners are deferring their 1% share in the
distributions of proceeds from sales at this time.
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 was the property manager of The Ashby at McLean
Apartments prior to its sale in August 1996 and is acting as the
property manager of 1225 Connecticut Ave. N.W. after the
assignment of the management contract on the same terms that
existed prior to the assignment of the management company
contract.
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, 1997
and for the years ended December 31, 1997, 1996 and 1995 are as
follows:<PAGE>
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Insurance commissions. . . . . . .$ 3,575 4,071 6,820 --
Reimbursement (at cost) for
accounting services . . . . . . . 16,910 5,139 45,518 8,277
Reimbursement (at cost) for
portfolio management services . . 17,387 13,311 13,530 5,326
Reimbursement (at cost) for
legal services. . . . . . . . . . 3,322 2,392 934 356
Reimbursement (at cost) for
administrative charges and
other out-of-pocket-expenses . . 3,507 787 71,407 3,492
-------- -------- -------- ------
$ 44,701 25,700 138,209 17,451
======== ======== ======== ======
<FN>
________
/TABLE
<PAGE>
All amounts payable to the General Partners and their
affiliates do not bear interest and are expected to be paid in
future periods.
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary of financial information for JMB/Landings (which
sold its property in December 1997) as of and for the years
ended December 31, 1997 and 1996 is as follows:
1997 1996
----------- -----------
Current assets . . . . . . . . . . .$ 0,863,026 1,141,067
Current liabilities. . . . . . . . . (14,369) (27,202)
---------- -----------
Working capital. . . . . . 10,848,657 1,113,865
Investment property held for
sale. . . . . . . . . . . . . . . . -- 7,075,077
Other assets, net. . . . . . . . . . -- 111,504
Other liabilities. . . . . . . . . . -- (31,382)
Venture partner's equity . . . . . . (5,424,939) (4,135,142)
---------- -----------
Partnership's capital. . .$ 5,423,718 4,133,922
========== ===========
Represented by:
Invested capital . . . . . . . . .$ 6,704,617 6,704,617
Cumulative distributions . . . . . (2,729,801) (2,729,801)
Cumulative earnings. . . . . . . . 1,448,902 159,106
---------- -----------
5,423,718 4,133,922
========== ===========
Total income . . . . . . . . . . . .$ 960,184 1,038,681
========== ===========
Expenses applicable to
income. . . . . . . . . . . . . $ 319,430 731,676
========== ===========
Gain on sale of investment
property. . . . . . . . . . . . . .$ 1,938,838 --
========== ===========
Net earnings (loss). . . $ 2,579,592 307,005
========== ===========
The total income, expenses applicable to operating earnings
and net loss for the above venture for the year ended December
31, 1995 were $1,272,150, $4,306,385 (including a $3,500,000
provision for value impairment and $(3,034,235), respectively.<PAGE>
INVESTMENT IN UNCONSOLIDATED CORPORATION
Summary financial information for the 1225 Investment
Corporation as of and for the years ended December 31, 1997 and
1996 are as follows:
1997 1996
----------- -----------
Current assets . . . . . . . 1,519,242 1,619,958
Current liabilities. . . . . . . . . (312,984) (330,655)
----------- -----------
Working capital. . . . . . 1,206,258 1,289,303
Property held for sale or
disposition . . . . . . . . . . . . 52,508,031 52,000,000
Other assets . . . . . . . . . . . . 51,442 68,590
Long-term debt . . . . . . . . . . . (7,000,000) (7,000,000)
Other liabilities. . . . . . . . . . (652) (15,477)
Affiliated shareholders' equity . .(26,162,499) (25,924,079)
----------- -----------
Partnership's equity in
affiliated corporation . $ 20,602,580 20,418,337
=========== ===========
Represented by:
Stock purchase and additional
paid-in-capital . . . . . . . .$ 24,429,164 24,429,164
Cumulative dividends . . . . . . .(12,220,790) (10,326,950)
Cumulative earnings. . . . . . . . 8,394,206 6,316,123
----------- -----------
$ 20,602,580 20,418,337
=========== ===========
Total income . . . . . . . . . . .$ 7,878,414 7,341,297
=========== ===========
Expenses applicable
to operating income . . . . . . .$ 3,105,601 11,070,880
=========== ===========
Net earnings (loss). . . . . . . .$ 4,772,813 (3,729,583)
=========== ===========
The total income, expenses applicable to operating earnings
and net earnings for the above corporation for the year ended
December 31, 1995 were $7,753,063, $4,437,048 and $3,316,015,
respectively.
SUBSEQUENT EVENT
In February 1998, the Partnership paid a distribution of
$7,326,726 ($114.00 per Interest) to the Holders of Interests,
which included $69 per Interest from the distributions received
from JMB/Landings relating to the December 1997 sale of the
Landings Shopping Center and $45 per Interest from Partnership
operational cash flow and reserves. The Partnership also paid
a distribution of $152,217 to the General Partners, which
represented their share of Partnership operational cash flow and
reserves. The General Partners will not receive their share of
any distribution of proceeds from the sale, as discussed above.<PAGE>
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, 1997 and 1996,
and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1997, 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.
As discussed in the Notes to the financial statements, in
1996 the Corporation changed its method of accounting for long-
lived assets and long-lived assets to be disposed of to conform
with Statement of Financial Accounting Standards No. 121.
Chicago, Illinois KPMG PEAT MARWICK LLP
March 25, 1998<PAGE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . .$ 1,496,953 1,511,116
Rents and other receivables. . . . . . . . . . . . . . . . 5,754 91,937
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 16,535 16,905
------------ -----------
Total current assets . . . . . . . . . . . . . . . 1,519,242 1,619,958
Property held for sale or disposition. . . . . . . . . . . . 52,508,031 52,000,000
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . 51,442 68,590
------------ -----------
$ 54,078,715 53,688,548
============ ===========<PAGE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
1997 1996
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . .$ 65,764 83,435
Accrued real estate taxes. . . . . . . . . . . . . . . . . 206,503 206,503
Accrued interest payable . . . . . . . . . . . . . . . . . 40,717 40,717
------------ -----------
Total current liabilities. . . . . . . . . . . . . 312,984 330,655
Tenant security deposits . . . . . . . . . . . . . . . . . . 652 15,477
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 7,000,000
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . 7,313,636 7,346,132
Shareholders' equity:
Common stock, $1 par value per share
100,000 shares authorized; 55,128 shares issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . 55,128 55,128
Additional paid-in-capital . . . . . . . . . . . . . . . . 55,503,444 55,503,444
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (28,067,818) (23,717,668)
Accumulated earnings . . . . . . . . . . . . . . . . . . . 19,274,325 14,501,512
------------ -----------
Total shareholders' equity . . . . . . . . . . . . 46,765,079 46,342,416
------------ -----------
$ 54,078,715 53,688,548
============ ===========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . $ 7,801,276 7,260,819 7,584,997
Interest income. . . . . . . . . . . . . . 77,138 80,478 168,066
----------- ---------- ----------
7,878,414 7,341,297 7,753,063
----------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . 488,600 488,600 488,600
Depreciation . . . . . . . . . . . . . . . -- 1,281,412 1,287,756
Property operating expenses. . . . . . . . 2,385,689 2,471,625 2,428,540
Amortization of deferred costs . . . . . . 17,148 43,534 78,662
General and administrative . . . . . . . . 214,164 236,753 153,490
Provision for value impairment . . . . . . -- 6,548,956 --
----------- ---------- ----------
3,105,601 11,070,880 4,437,048
----------- ---------- ----------
Net earnings (loss). . . . . . . .$ 4,772,813 (3,729,583) 3,316,015
=========== ========== ==========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
AFFILIATED SHAREHOLDERS
-----------------------------------------------------------------
NET
NET CAPITAL EARNINGS DIVIDENDS
INVESTED (LOSS) PAID TOTAL
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 . . . $ 31,129,408 8,418,890 (7,941,857) 31,606,441
Net earnings . . . . . . . . . . . -- 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
Net earnings (loss). . . . . . . . -- (2,105,723) -- (2,105,723)
Dividends paid . . . . . . . . . . -- -- (2,907,937) (2,907,937)
----------- ----------- ----------- -----------
Balance at December 31, 1996 . . . 31,129,408 8,185,389 (13,390,718) 25,924,079
Net earnings (loss). . . . . . . . -- 2,694,730 -- 2,694,730
Dividends paid . . . . . . . . . . -- -- (2,456,310) (2,456,310)
----------- ----------- ------------ -----------
Balance at December 31, 1997 . . . $ 31,129,408 10,880,119 (15,847,028) 26,162,499
=========== =========== ============ ===========
/TABLE
<PAGE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
<CAPTION>
CARLYLE INCOME PLUS, L.P. - II
--------------------------------------------------------------
NET
NET CAPITAL EARNINGS DIVIDENDS GRAND
INVESTED (LOSS) PAID TOTAL TOTAL
------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994 . . . . . . . . . $ 24,429,164 6,496,190 (6,125,818) 24,799,536 56,405,977
Net earnings . . . . . . -- 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
Net earnings (loss) . . -- (1,623,860) -- (1,623,860) (3,729,583)
Dividends paid . . . . . -- -- (2,242,055) (2,242,055) (5,149,992)
------------- ----------- ----------- ----------- ------------
Balance at December 31,
1996 . . . . . . . . . . 24,429,164 6,316,123 (10,326,950) 20,418,337 46,342,416
Net earnings (loss). . . -- 2,078,083 -- 2,078,083 4,772,813
Dividends paid . . . . . -- -- (1,893,840) (1,893,840) (4,350,150)
------------ ----------- ----------- ----------- ------------
Balance at December 31,
1997 . . . . . . . . . . $ 24,429,164 8,394,206 (12,220,790) 20,602,580 46,765,079
============ ========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . .$ 4,772,813 (3,729,583) 3,316,015
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . -- 1,281,412 1,287,756
Amortization of deferred costs . . . . . . . 17,148 43,534 78,662
Provision for value impairment . . . . . . . -- 6,548,956 --
Changes in:
Rents and other receivables. . . . . . . . 86,183 (72,809) 18,692
Prepaid expenses . . . . . . . . . . . . . 370 30,001 (6,768)
Accrued rents receivable . . . . . . . . . -- 312,505 (544,645)
Accounts payable . . . . . . . . . . . . . (17,671) 43,780 (106,420)
Accrued real estate taxes. . . . . . . . . -- (41,801) 19,929
Tenant security deposits . . . . . . . . . (14,825) (687) 484
----------- ----------- -----------
Net cash provided by (used in) 4,844,018 4,415,308 4,063,705
operating activities . . . . . . . . ----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments . . . . . . . . . . -- -- 2,948,422
Additions to investment property . . . . . . (508,031) (71,527) (1,480,977)
Payment of deferred costs. . . . . . . . . . -- -- (28,025)
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . (508,031) (71,527) 1,439,420
----------- ----------- -----------
<PAGE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Cash dividends paid to shareholders. . . . . (4,350,150) (5,149,992) (4,500,001)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . (4,350,150) (5,149,992) (4,500,001)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . (14,163) (806,211) 1,003,124
Cash and cash equivalents,
beginning of year. . . . . . . . . 1,511,116 2,317,327 1,314,203
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . .$ 1,496,953 1,511,116 2,317,327
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. .$ 488,600 488,600 488,600
=========== =========== ===========
Non-cash investing and financing activities $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
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, 1997
and 1996 is summarized as follows:
<PAGE>
[CAPTION]
<TABLE>
1997 1996
-----------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . .$ 54,078,715 64,559,766 53,688,548 64,154,246
Shareholders' equity . . . . . 46,765,079 57,246,130 46,342,416 56,808,115
Net earnings (loss). . . . . . 4,772,813 3,559,430 (3,729,583) 3,207,134
=========== =========== =========== ===========
</TABLE>
<PAGE>
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 ($79,660 at December 31, 1996) 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 was (through
December 31, 1996) 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.
Statement of Financial Accounting Standards No. 121 ("SFAS
121") "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of" was issued in March 1995.
The Corporation adopted SFAS 121 as required in the first
quarter of 1996. SFAS 121 requires that the Corporation record
an impairment loss on its property to be held for investment
whenever its carrying value cannot be fully recovered through
estimated undiscounted future cash flows from operations and
sale. The amount of the impairment loss to be recognized would
be the difference between the property's carrying value and the
property's estimated fair value. The Corporation's policy is to
consider the property to be held for sale or disposition when
the Corporation has committed to a plan to sell or dispose of
such property and active marketing activity has commenced or is
expected to commence in the near term. In accordance with SFAS
121, any property identified as "held for sale or disposition"
is no longer depreciated. Adjustments for impairment loss for
such a property (subsequent to a date of adoption of SFAS 121)
are made in each period as necessary to report the property at
the lower of carrying value or fair value less costs to sell.
There can be no assurance that any estimated fair value of the
property would ultimately be realized by the Corporation in any
future sale or disposition transaction.<PAGE>
Under the prior accounting policy, provisions for value
impairment were recorded with respect to the investment property
whenever the estimated future cash flows from the property's
operations and projected sale were less than the property's
carrying value. An impairment loss under SFAS 121 is
determined without regard to the nature or the balance of any
non-recourse indebtedness. Upon the disposition of a property
with the related extinguishment of the long-term debt for which
an impairment loss has been recognized under SFAS 121, the
Corporation would recognize, at a minimum, a net gain for
financial reporting purposes (comprised of gain on
extinguishment of debt and gain or loss on the sale or
disposition of property) to the extent of any excess of the then
outstanding balance of the property's non-recourse indebtedness
over the then carrying value of the property, including the
effect of any reduction for impairment loss under SFAS 121.
In addition, upon the disposition of an impaired property,
the Corporation will generally recognize more net gain for
financial reporting purposes under SFAS 121 than it would have
under the Corporation's prior impairment policy, without regard
to the amount, if any, of cash proceeds received by the
Corporation in connection with the disposition. Although
implementation of this accounting statement could significantly
impact the Corporation's reported earnings, there would be no
impact on cash flows. Further, any such impairment loss is not
recognized for Federal income tax purposes.
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.
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<PAGE>
have not financed the acquisition of shares with "acquisition
indebtedness" as defined under the Code.
INVESTMENT PROPERTY
A description of the acquisition and other events relating
to the property, including the provision for value impairment
and the determination to classify the property as held for sale
or disposition at December 31, 1996, is contained in the Notes
to Consolidated Financial Statements of Carlyle Income Plus,
L.P.- II. Such notes are incorporated herein by reference.
MANAGEMENT AGREEMENT
A description of the terms of the management agreement is
contained in the Notes to Consolidated Financial Statements of
Carlyle Income Plus, L.P.-II. Such note is incorporated herein
by reference.
LONG-TERM DEBT
Long-term debt consists of the following at December 31,
1997 and 1996:
1997 1996
------------------------
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 . . . . $ 7,000,0007,000,000
========== ==========
<PAGE>
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.
LEASES - AS PROPERTY LESSOR
At December 31, 1997, 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 four to eleven 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:
1998 . . . . . . . . . . . . . . .$ 6,747,000
1999 . . . . . . . . . . . . . . . 6,836,000
2000 . . . . . . . . . . . . . . . 6,677,000
2001 . . . . . . . . . . . . . . . 6,163,000
2002 . . . . . . . . . . . . . . . 6,092,000
Thereafter . . . . . . . . . . . .27,061,000
-----------
$59,576,000
===========
The Corporation currently leases approximately 87% of the
available space of the property to one tenant under leases with
remaining terms of 9 1/2 years. For the year ended December 31,
1997, such tenant represented approximately 74% of total
revenue. The tenant's principal business is accounting and
financial services.
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, 1997 and for the years ended December 31, 1997,
1996 and 1995 are as follows:<PAGE>
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Insurance commissions. . . . . . . $ 7,058 4,101 6,083 --
Reimbursement (at cost)
for salary and salary - related
expenses related to the on-site
and other costs for the Partnership
and its investment property . . . -- -- 278 --
------- ------- ------- --------
$ 7,058 4,101 6,361 --
======= ======= ======= ========
<FN>
/TABLE
<PAGE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
COST CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
CORPORATION (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
--------------------------- ---------------------------------------------------------------
BUILDINGS BUILDINGS PROVISION BUILDINGS
AND AND FOR VALUE AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS IMPAIRMENT LAND IMPROVEMENTS TOTAL (D)
--------- ------- ------------ ------------ ----------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
BUILDING:
Washington,
D.C.. . . .$7,000,00024,161,48432,522,877 6,456,777 (3,118,602) 22,958,445 37,064,091 60,022,536
========== ========== ========== ========== ========== ========== ========== ==========
/TABLE
<PAGE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ---------------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE
BUILDING:
Washington,
D.C.. . . . . . . . . $7,514,505 1968 2/28/90 30 years 826,008
========== =======
<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, 1997 for Federal income
tax purposes was $62,887,292.
(C) Reference is made to Notes to Consolidated Financial Statements of Carlyle Income Plus,
L.P. - II for a further description of the total provision for value impairment in the amount of
$6,548,956 recorded as of December 31, 1996.
/TABLE
<PAGE>
<TABLE> SCHEDULE III
1225 INVESTMENT CORPORATION
(A CORPORATION)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(D) Reconciliation of real estate owned:
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . .$ 59,514,505 62,561,580 61,080,603
Additions during period . . . . . . . . . 508,031 71,527 1,480,977
Provision for value impairment
allocable to property . . . . . . . . . -- (3,118,602) --
----------- ----------- -----------
Balance at end of period. . . . . . . . .$ 60,022,536 59,514,505 62,561,580
=========== =========== ===========
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . .$ 7,514,505 6,233,093 4,945,337
Depreciation expense. . . . . . . . . . . -- 1,281,412 1,287,756
----------- ----------- -----------
Balance at end of period. . . . . . . . .$ 7,514,505 7,514,505 6,233,093
=========== =========== ===========
/TABLE
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Carlyle Income Plus, L.P. II.:
We have audited the financial statements of JMB/Landings
Associates ("JMB/Landings"), an unconsolidated venture of
Carlyle Income Plus, L.P - II. (the "Partnership"), as listed in
the accompanying index. These financial statements are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by 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 financial statements referred to above
present fairly, in all material respects, the financial position
of JMB/Landings, an unconsolidated venture of Carlyle Income
Plus, LP.-II., as of December 31, 1997 and 1996, and the results
of its operations and its cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity
with generally accepted accounting principles.
As discussed in the Notes to the financial statements, in
1996 the Partnership changed its method of accounting for long-
lived assets and long-lived assets to be disposed of to conform
with Statement of Financial Accounting Standards No. 121.
Chicago, Illinois KPMG PEAT MARWICK LLP
March 25, 1998<PAGE>
<TABLE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 10,850,862 1,065,499
Rents and other receivables. . . . . . . . . . . . . . . . 12,164 68,810
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . -- 6,758
------------ -----------
Total current assets . . . . . . . . . . . . . . . 10,863,026 1,141,067
------------ -----------
Investment property held for sale . . . . . . . . . . . . . -- 7,075,077
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . -- 2,839
Accrued rents receivable . . . . . . . . . . . . . . . . . . -- 108,666
------------ -----------
$ 10,863,026 8,327,649
============ =========== <PAGE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
----------------------------------------
1997 1996
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . .$ 14,369 27,202
------------ -----------
Total current liabilities. . . . . . . . . . . . . . 14,369 27,202
Tenant security deposits . . . . . . . . . . . . . . . . . . . -- 31,382
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . . 14,369 58,584
Partners' capital accounts:
Carlyle Income Plus, L.P.-II:
Capital contributions. . . . . . . . . . . . . . . . . . . 6,704,617 6,704,617
Cumulative net earnings(loss). . . . . . . . . . . . . . . 1,448,902 159,106
Cumulative cash distributions. . . . . . . . . . . . . . . (2,729,801) (2,729,801)
------------ -----------
5,423,718 4,133,922
------------ -----------
Venture partner capital account:
Capital contributions. . . . . . . . . . . . . . . . . . . 6,705,838 6,705,838
Cumulative net earnings(loss). . . . . . . . . . . . . . . 1,448,902 159,106
Cumulative cash distributions. . . . . . . . . . . . . . . (2,729,801) (2,729,801)
------------ -----------
5,424,939 4,135,143
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . 10,848,657 8,269,065
------------ -----------
$ 10,863,026 8,327,649
============ ===========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
JMB LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . $ 897,486 993,821 1,260,787
Interest income. . . . . . . . . . . . . . 62,698 44,860 11,363
----------- ---------- ----------
960,184 1,038,681 1,272,150
----------- ---------- ----------
Expenses:
Depreciation . . . . . . . . . . . . . . . -- 263,496 333,457
Property operating expenses. . . . . . . . 183,648 283,210 361,107
Amortization of deferred expenses. . . . . 5,935 15,201 9,365
General and administrative . . . . . . . . 129,847 169,769 102,456
Provision for value impairment . . . . . . -- -- 3,500,000
----------- ---------- ----------
319,430 731,676 4,306,385
----------- ---------- ----------
Operating earnings (loss). . . . . 640,754 307,005 (3,034,235)
Gain on sale of investment property. . . . . 1,938,838 -- --
----------- ---------- ----------
Net earnings (loss) $ 2,579,592 307,005 (3,034,235)
=========== ========== ==========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
CARLYLE INCOME AFFILIATED
PLUS, L.P.-II PARTNERSHIP TOTAL
------------- ------------ ------------
<S> <C> <C>
Balance at December 31, 1994 . . . $ 5,747,537 5,748,758 11,496,295
Net earnings (loss). . . . . . . . (1,517,117) (1,517,118) (3,034,235)
Cash distributions . . . . . . . . (250,000) (250,000) (500,000)
------------ ------------ ------------
Balance at December 31, 1995 . . . 3,980,419 3,981,641 7,962,060
Net earnings . . . . . . . . . . . 153,503 153,502 307,005
Cash distributions . . . . . . . . -- -- --
------------ ------------ ------------
Balance at December 31, 1996 . . . 4,133,922 4,135,143 8,269,065
Net earnings (loss). . . . . . . . 1,289,796 1,289,796 2,579,592
Cash distributions . . . . . . . . -- -- --
------------ ------------ ------------
Balance at December 31, 1997 . . . $ 5,423,718 5,424,939 10,848,657
============ ============ ============
/TABLE
<PAGE>
<TABLE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . $ 2,579,592 307,005 (3,034,235)
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . -- 263,496 333,457
Amortization of deferred expenses. . . . . . 5,935 15,201 9,365
Provision for value impairment . . . . . . . -- -- 3,500,000
Gain on sale of investment property. . . . . (1,938,838) -- --
Changes in:
Rents and other receivables. . . . . . . . 56,646 2,493 (54,457)
Prepaid expenses . . . . . . . . . . . . . 6,758 (151) 680
Accrued rents receivable . . . . . . . . . 15,591 89,106 22,416
Accounts payable . . . . . . . . . . . . . (12,833) 12,448 (4,874)
Tenant security deposits . . . . . . . . . (31,382) 1,614 833
----------- ----------- -----------
Net cash provided by (used in) 681,469 691,212 773,185
operating activities . . . . . . . . ----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments . . . . . . . . . . -- -- 198,965
Cash proceeds from sale of investment property 9,298,544 -- --
Additions to investment property . . . . . . (160,510) (127,895) (15,000)
Payment of deferred expenses . . . . . . . . (34,140) -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . 9,103,894 (127,895) 183,965
----------- ----------- -----------
<PAGE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
STATEMENTS OF CASH FLOWS - CONTINUED
1997 1996 1995
----------- ----------- -----------
Cash flows from financing activities:
Cash distributions paid to partners. . . . . -- -- (500,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . -- -- (500,000)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . 9,785,363 563,317 457,150
Cash and cash equivalents,
beginning of year. . . . . . . . . 1,065,499 502,182 45,032
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . .$ 10,850,862 1,065,499 502,182
=========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and
other interest . . . . . . . . . . . . . .$ -- -- --
=========== =========== ===========
Non-cash investing and financing
activities . . . . . . . . . . . . . . . .$ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
/TABLE
<PAGE>
JMB/LANDINGS ASSOCIATES
(AN UNCONSOLIDATED VENTURE OF CARLYLE INCOME PLUS, L.P - II)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
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 joint venture, JMB/Landings
Associates, ("JMB/Landings") in which Carlyle Income Plus, L.P.-
II (the "Partnership") and an affiliate of the General Partners
of Carlyle Income Plus, L.P - II are partners.
JMB/Landings had the exclusive purpose of owning a 100%
interest in the Landings Shopping Center, located in Sarasota,
Florida, which was sold on December 30, 1997.
The preparation of financial statements in accordance with
GAAP requires the Partnership/Landings 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.
The accounting polices of JMB/Landings are the same as
those of the Partnership. Accordingly, reference is made to the
Notes to the Partnership's consolidated financial statements
filed with this annual report. Such notes are incorporated
herein by reference.
The Landings Shopping Center was classified as held for
sale as of December 31, 1996 and, therefore, was not subject to
continued depreciation beyond that date.
INVESTMENT PROPERTY
A description of the acquisition and other events relating
to the property and the venture partnership agreement, including
the 1995 provision for value impairment and the December 30,
1997 sale of the property is contained in the Notes to
Consolidated Financial Statements of Carlyle Income Plus, L.P -
II. Such notes are incorporated herein by reference.
MANAGEMENT AGREEMENT
A description of the terms of the management agreement is
contained in the Notes to the Partnership's consolidated
financial statements. Such notes are incorporated herein by
reference.
<PAGE>
<TABLE>
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the JMB/Landings to affiliates
of JMB Realty Corporation as of December 31, 1997 and for the years ended December 31, 1997, 1996
and 1995 are as follows:
<CAPTION>
UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . $ 41,809 43,866 45,840 3,221
Insurance commissions. . . . . . . 989 2,696 2,374 --
------- ------ ------ -------
$ 42,798 46,562 48,214 3,221
======= ======= ======= ========
<FN>
/TABLE
<PAGE>
LEASES - As Property Lessor
JMB/Landings sold its principal asset, the Landings
Shopping Center, on December 30, 1997.
JMB/Landings had determined that all leases relating to
this property were classified as operating leases; therefore,
rental income was reported when earned and the cost of the
property, excluding cost of land, was depreciated over the
estimated useful life. Leases with tenants ranged in term from
three to eleven years and provided for fixed minimum rent and
partial to full reimbursement of operating costs. A substantial
portion of the ability of the retail tenants at the Landings
Shopping Center to honor their leases was dependent upon the
retail economic sector.
<PAGE>
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 1997 and 1996.
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, directors,
members of their families and their affiliates. JMB has
responsibility for all aspects of the Partnership's operations.
The Associate General Partner of the Partnership, AGPP
Associates, L.P., is an Illinois limited partnership with JMB as
the sole general partner which may, upon agreement with the
Corporate General Partner, from time to time participate in
managing Partnership properties, including approval of leasing
parameters, property management budgets and changes in
investment objectives based on changes in market conditions.
The limited partners of the Associate General Partner are
generally officers, directors and affiliates of JMB or its
affiliates.
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 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 and/or for the sale of property. 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<PAGE>
Partnership Agreement, including whether and when to sell 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 3, 1998. 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 3, 1998. 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-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.-III ("Mortgage Partners-III"), JMB Mortgage<PAGE>
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.-VII ("JMB Income-VII"), 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")), 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, directly of indirectly, of certain
partnerships which are associate general partners in the
following real estate limited partnerships: the Partnership,
Carlyle-VII, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV,
Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VII, JMB
Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII,
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 60) 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 also a director of
Urban Shopping Centers, Inc. ("USC, 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 60) 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 also a principal of
Walton Street Real Estate Fund I, L.P. and a director of USC,
Inc. He is a member of the Bar of the State of Illinois and a
Certified Public Accountant.
Burton E. Glazov (age 59) 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 56) has been associated with JMB
since July, 1972. He is a member of the Bar of the State of
Illinois.
<PAGE>
A. Lee Sacks (age 64) has been associated with JMB since
December, 1972. He is also President and a director of JMB
Insurance Agency, Inc.
John G. Schreiber (age 51) has been associated with JMB
since December, 1970 and served as an Executive Vice President
of JMB until December 1990. 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 Advisors L.P., an affiliate of
the Blackstone Group, L.P. He is also a director of USC,Inc.,
a trustee of Amli Residential Property Trust and a director of
a number of investment companies advised or managed by T. Rowe
Price Associates and its affiliates. He holds a Masters degree
in Business Administration from Harvard University Graduate
School of Business.
H. Rigel Barber (age 48) 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 50) 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 45) 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 49) 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 62) has been associated with JMB since
March, 1973. He is a Certified Public Accountant.
<PAGE>
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 the Notes for a description of such
distributions and allocations. In 1997, 1996 and 1995, the
General Partners received distributions of $135,305, $135,304,
and $189,426 respectively. The General Partners received a
share of Partnership earnings for tax purposes aggregating
$76,548 in 1997.
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 1997 aggregating $3,575 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 1997 for accounting services,
portfolio management services, legal services and for
administrative charges and other out-of-pocket expenses of
$16,910, $17,387, $3,322 and $3,507, respectively, of which
$17,451 was unpaid at December 31, 1997.
All amounts payable to the General Partners and their
affiliates do not bear interest and are expected to be paid in
future periods.
<PAGE>
<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 and Assignee Corporation indirectly
Interests therein
Limited Partnership Corporate General Partner, 5 Interests (1) Less than 1%
Interests and Assignee its officers and indirectly
Interests therein directors and the
Associate General Partner
as a Group
<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
<PAGE>
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 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.
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 incorpor-
ated 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<PAGE>
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. 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.
10.8 Closing statement date January 28, 1994
relating to the refinancing by 1225 Investment
Corporation which owns 1225 Connecticut Avenue
in Washington, D.C., is 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.
<PAGE>
10.9 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., is 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.
10.10. 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., is 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.
10.11 Real Property Purchase Agreement between
CIP/Ashby Partners and WRIT Limited
Partnership dated July 19, 1996 relating to
the sale by the Partnership (through the
CIP/Ashby joint venture) of the Ashby at
Mclean Apartments is hereby incorporated
herein by reference to the Partnership's
report for August 26, 1996 on Form 8-K (File
No. 0-17705) dated September 6, 1996.
10.12 Real Property Purchase Agreement between
JMB/Landings Associates and Inland Real
Estate Acquisitions, Inc., dated November 25,
1997 relating to the sale of the Landings
Shopping Center is hereby incorporated herein
by reference to the Partnership's report on
Form 8-K (File No. 0-177-5) dated
November 25, 1997.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule
(b) The following report on Form 8-K was filed since the
beginning of the last quarter of the period covered by
this report.
The Partnership's report on Form 8-K (File No. 0-17705)
for November 25, 1997 was filed describing the sale of
the Landings Shopping Center. No financial statements
were required to be filed therewith.
- -------------
No annual report or proxy material for the fiscal year
1997 has been sent to the Partners of the Partnership. An
annual report will be sent to the Partners subsequent to this
filing.<PAGE>
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
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1998
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, 1998
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1998
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1998
GLENN E. EMIG*
By: Glenn E. Emig
Chief Operating Officer
Date: March 25, 1998
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1998
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1998
<PAGE>
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1998
*By: GAILEN J. HULL, Pursuant to a Power of
Attorney
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1998<PAGE>
CARLYLE INCOME PLUS, L.P. - II
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3. Certain pages of the Prospectus Yes
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
4.1. Assignment Agreement, incorporated Yes
by reference to Exhibit B to the
Partnership's Prospectus
10.1.- Material Contracts Yes
10.12.
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
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.
The Partnership is a joint venture partner in
JMB/Landings Associates, a general partnership which held
title to The Landings Shopping Center, located in Sarasota,
Florida.
The Partnership was a joint venture partner in CIP/Ashby
Partners, a general partnership which held title to the Ashby
at McLean Apartments, located in McLean, Virginia.
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, 1997, 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 30th day of January, 1998.
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, 1997, and any and all amendments thereto,
the 30th day of January, 1998.
GARY NICKELE
- -----------------------
Gary Nickele
GAILEN J. HULL
- -----------------------
Gailen J. Hull
DENNIS M. QUINN
- -----------------------
Dennis M. Quinn
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
officers and/or directors 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, 1997, 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 30th day of January, 1998.
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
The undersigned hereby acknowledge and accept such power
of authority to sign, in the name and on behalf of the above
named officers and/or directors, a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1996, and
any and all amendments thereto, the 30th day of January, 1998.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn<PAGE>
<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, 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,980,988
<SECURITIES> 0
<RECEIVABLES> 12,906
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,993,894
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,020,192
<CURRENT-LIABILITIES> 49,212
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,970,980
<TOTAL-LIABILITY-AND-EQUITY> 29,020,192
<SALES> 0
<TOTAL-REVENUES> 190,289
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286,801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (96,512)
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,315,269
<DISCONTINUED> 969,419
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,284,688
<EPS-PRIMARY> 49.15
<EPS-DILUTED> 49.15
<PAGE>
</TABLE>
