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, 1999.
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
Enclosures
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, 1999 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
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . . . 5
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . . . 5
Item 6. Selected Financial Data. . . . . . . . . . . . . 6
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 9
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk. . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . 13
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . 49
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . 49
Item 11. Executive Compensation . . . . . . . . . . . . . 51
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . 52
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 53
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . 53
PART IV
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 55
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references herein to "Notes" are to
Notes to Consolidated Financial Statements of Carlyle Income Plus, L.P. - II
contained in this annual 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 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 $1,000 per Interest (fractional interests are
due to a Distribution Reinvestment Program) were sold to the public between
May 24, 1988 and June 18, 1990. The offering closed on April 30, 1990. No
holder of Interests (hereinafter sometimes referred to as 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. As of
December 31, 1999, all of the Partnership's investments in real estate have
been sold. Such equity investments were held by fee title and/or through
joint venture partnership interests. None of the Partnership's real property
investments were 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. Upon the sale of
a particular property, the net proceeds, if any, were held for working
capital, distributed or reinvested in existing properties rather than
invested in acquiring additional properties. The Partnership currently
expects 1225 Investment Corporation to wind up its affairs by mid-2000, with
the winding up of the Partnership's affairs expected sometime thereafter in
2000. The termination of the Partnership's affairs generally is contingent
upon, among other things, 1225 Investment Corporation (a real estate
investment trust in which the Partnership owns an approximate 44% interest)
winding up its affairs.
The Partnership made real property investments set forth in the
following table:
<TABLE>
<CAPTION>
NAME, TYPE OF PROPERTY DATE OF SALE OR DISPOSITION
AND LOCATION SIZE PURCHASE DATE 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) (a) (c)
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 (a) (c)
3. 1225 Connecticut
Avenue, N.W.
Office Building
Washington, D.C. . . 203,000 5-24-90 3-29-99 fee ownership of land
sq.ft. and improvements
g.l.a. (through a corporation)
(b) (c)
<FN>
- ----------
(a) Reference is made to the Notes for a description of the joint venture
partnership through which the Partnership made this real property
investment.
(b) Reference is made to the Notes relating to 1225 Investment Corporation
for a description of the corporation through which the Partnership
made this real property investment.
(c) This property has been sold. Reference is made to the Notes for a
further description of the sale of this real property investment.
</TABLE>
Approximate occupancy levels for the Partnership's investment property
which was owed during 1999 are set forth in the table in Item 2 below to
which reference is hereby made.
On March 29, 1999, the Partnership, through 1225 Investment Corporation,
sold the 1225 Connecticut Avenue, N.W. office building. Reference is made to
the Notes for a further description of such transaction.
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 Items 10 and 11
below to which reference is hereby made for a description of such terms and
transactions.
ITEM 2. PROPERTIES
The Partnership 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
1999 and 1998 for the Partnership's remaining investment property owned
during 1999:
<TABLE>
<CAPTION>
1998 1999
------------------------- --- -----------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1225 Connecticut
Avenue, N.W. Office
Building. . . . . . . . . .
Washington, D.C.. . . . . . Public 95% 100% 98.5% 98.5% N/A N/A N/A N/A
Accounting/
Financial Services
<FN>
- ----------
An "N/A" indicates that the property was sold and not owned by the Partnership's unconsolidated affiliated
corporation at the end of the period.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material 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
1998 and 1999.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
As of December 31, 1999, there were 6,484 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
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.
<TABLE>
<caption
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
YEARS ENDED DECEMBER 31, 1999, 1998, 1997, 1996 AND 1995
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1999 1998 1997 1996 1995
------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . .$ 189,547 102,972 190,289 2,885,863 3,498,456
============== ============ ============ ============ =============
Earnings (loss)
before gains (losses)
on sales of investment
properties and extra-
ordinary items. . . . . .$ 537,807 1,252,220 2,315,269 (658,715) 636,648
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 -- --
Partnership's share
of loss on sale of
investment proper-
ty by unconsoli-
dated affiliated
corporation . . . . . . . (7,141) -- -- -- --
Partnership's share
of extraordinary
items of unconsoli-
dated affiliated
corporation . . . . . . . (122,456) -- -- -- --
------------- ------------- ------------- ------------ ------------
Net earnings (loss). . . . $ 408,210 1,252,220 3,284,688 1,865,447 636,648
============= ============ ============ ============ ============
Net earnings (loss)
per Interest (b):
Earnings (loss)
before gains (losses)
on sales of
investment
properties
and extraordinary
items . . . . . . . . . $ 7.95 16.06 34.22 (9.74) 9.41
Gain on sale of
investment property,
net of venture
partner's share . . . . -- -- -- 38.88 --
Partnership's share of
gain on sale of
investment property
by unconsolidated
venture . . . . . . . . -- -- 14.93 -- --
Partnership's share
of loss on sale of
investment property
by unconsolidated
affiliated corpo-
ration. . . . . . . . . (.11) -- -- -- --
Partnership's share
of extraordinary
items of unconsoli-
dated affiliated
corporation . . . . . . (1.81) -- -- -- --
------------ ------------ ------------ ----------- ------------
Net earnings . . . . . . . $ 6.03 16.06 49.15 29.14 9.41
============ ============ ============ ============ ============
Total assets . . . . . . . $ 2,543,300 21,406,362 29,020,192 28,511,534 49,373,424
============ ============ ============ ============ ============
<PAGE>
Cash distributions
per Interest
(c) . . . . . . . . . . .$ 300.00 134.00 40.00 265.00 56.00
============ ============ ============ ============ ============
<FN>
- -------------
(a) The above selected 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 each
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 (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>
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 for
working capital requirements. A portion of such proceeds was utilized to
acquire the properties described in Item 1 above.
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. During
1996, some of the holders of Interests in the Partnership received from third
parties unaffiliated with the Partnership or the General Partners unsolicited
tender offers to purchase up to 4.9% of the Interests in the Partnership at
amounts between $350 and $400 per Interest. During 1997 and early 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. Certain of these unaffiliated third parties made additional
unsolicited tender offers in May and October, 1998. These offers each sought
to purchase up to 4.9% of the Interests in the Partnership at amounts between
$150 and $215 per Interest. In early 1999, another unaffiliated third party
made an unsolicited tender offer to purchase up to 4.9% of the Interests at
$170 per Interest. All of the above offers have expired. 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 5.96% of the outstanding Interests have
been purchased by all such unaffiliated third parties either pursuant to such
tender offers or through negotiated purchases.
The Partnership distributed approximately $18,960,000 in late May 1999
to the Holders of Interests ($295 per Interest) from the proceeds of the
March 1999 sale of the 1225 Connecticut Avenue, N.W. office building and
approximately $321,000 to the holders of Interests ($5 per Interest) from
Partnership operational cash flow and reserves, including those from offering
proceeds. The Partnership also distributed $16,913 to the General Partners,
which represented their share of Partnership operational cash flow and
reserves, including those from offering proceeds.
At December 31, 1999, the Partnership had cash and cash equivalents of
approximately $2,501,000. The Partnership distributed $1,606,738 ($25 per
Interest) in February 2000 to the holders of Interests, which included $10.00
per Interest from the aforementioned sale proceeds and $15 per Interest from
Partnership operational cash flow and reserves, including those from offering
proceeds. The Partnership also distributed $50,739 to the General Partners,
which represented their share of Partnership operational cash flow and
reserves, including those from offering proceeds. No further distributions
of cash flow will be made until the liquidation of the Partnership. The
General Partners have not received and will not receive their share of any
distributions of proceeds from sales, as the subordination requirements of
the Partnership Agreement necessary for the retention of sales proceeds by
the General Partners will not be met.
1225 CONNECTICUT AVENUE, N.W.
In March 1999, 1225 Investment Corporation executed an agreement with
BRE/Connecticut L.L.C. for the sale of the 1225 Connecticut Avenue,N.W.
office building. On March 29, 1999, 1225 Investment Corporation completed
the sale of the property for a sale price of $52,960,000 payable in cash at
closing (subject to adjustment for selling costs of approximately $1,103,000
and operating prorations of approximately $515,000). The
<PAGE>
Partnership's share of
the sale proceeds, after payment by 1225 Investment Corporation to retire the
existing mortgage indebtedness (scheduled to mature
in February 2001) with a principal balance of $7,000,000 and payment of the
associated prepayment penalty of approximately $247,000, was approximately
$19,420,000. The sale resulted in no significant gain or loss on sale for
financial reporting purposes to 1225 Investment Corporation, primarily as a
result of value impairment provisions totaling $7,765,956 recorded by 1225
Investment Corporation in 1996 and 1998 (of which Partnership's share was
$3,381,297). Additionally, 1225 Investment Corporation recognized a loss on
sale in 1999 for Federal income tax purposes of approximately $1,900,000.
However, the tax consequences to the Partnership are expected to consist of
a loss on its investment in unconsolidated affiliated corporation, 1225
Investment Corporation, of approximately $1,450,000 in 2000.
In connection with the sale of this property, as is customary in such
transactions, 1225 Investment Corporation agreed to certain representations
and warranties, with a stipulated survival period which expired, with no
liability to 1225 Investment Corporation, as scheduled on December 10, 1999.
In April 1999, the Partnership received a dividend of $19,596,000 from
1225 Investment Corporation, of which $18,987,600 represented the
Partnership's share of current distributable proceeds from the sale of the
1225 Connecticut Avenue, N.W. office building and $608,400 represented the
Partnership's share of operations. In December 1999, after the expiration of
the aforementioned survival period for representations and warranties, the
Partnership received a dividend of $573,120 from 1225 Investment Corporation,
of which $435,360 represented the Partnership's residual share of proceeds
from the sale of the 1225 Connecticut Avenue, N.W. office building and
$137,760 represented the Partnership's share of cash flow from operations.
The Partnership also received an operating dividend of $435,360 from 1225
Investment Corporation in February 1999.
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.
ASHBY APARTMENTS
In August 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.
GENERAL
There are certain risks associated with the Partnership's investments
made through joint ventures or corporations, including the possibility that
the Partnership's joint venture partners or other stockholders in an
investment might become unable or unwilling to fulfill their financial or
other obligations, or that such joint venture partners or other stockholders
may have economic or business interests or goals that are inconsistent with
those of the Partnership.
With the sale of the 1225 Connecticut Avenue, N.W. office building, the
Partnership has sold its interest in its last investment property. The
termination of the Partnership's affairs generally is contingent upon, among
other things, 1225 Investment Corporation winding up its affairs.
The Partnership currently expects 1225 Investment Corporation to wind up its
affairs by mid-2000, with the winding up of the Partnership's affairs
expected sometime thereafter in 2000.
RESULTS OF OPERATIONS
Reference is made to the Notes for additional information concerning
the Partnership's real estate investments.
At December 31, 1998, the Partnership owned, through an investment in
an unconsolidated corporation, an interest in one operating investment
property. This remaining investment property was sold in 1999.
The increase in cash and cash equivalents and decrease in investment in
unconsolidated affiliated corporation at December 31, 1999 as compared to
December 31, 1998 is due primarily to the sale of 1225 Connecticut Avenue,
N.W. office building and the Partnership's receipt of $20,604,480 of
dividends from distributable sale proceeds and operational cash flow from
1225 Investment Corporation in 1999. The Partnership distributed
approximately $19,281,000 ($300 per Interest) of such dividends to the
holders of Interests and $16,913 to the General Partners in 1999.
The increase in interest income for the year ended December 31, 1999 as
compared to the year ended December 31, 1998 is attributable primarily to
interest earned on the Partnership's share of distributable proceeds
received from the March 1999 sale of the 1225 Connecticut Avenue, N.W. office
building. Such increase in interest income was partly offset by interest
earned in 1998 on distributions totaling $5,100,000 received by the
Partnership from the JMB/Landings venture during the three months ended March
31, 1998, a substantial portion of which represented the Partnership's share
of the proceeds from the December 1997 sale of the Landings Shopping Center.
The decrease in interest income for the year ended December 31, 1998 as
compared to the year ended December 31, 1997 is due primarily to smaller
average outstanding balances in the Partnership's interest-bearing cash and
cash equivalents in 1998.
The provision for value impairment of $241,000 in 1998 is due to the
Partnership's reduction of the net carrying value of its investment in its
unconsolidated affiliated corporation, 1225 Investment Corporation, as of
December 31, 1998.
The decrease in Partnership's share of operations of unconsolidated
affiliated corporation for the year ended December 31, 1999 as compared to
the year ended December 31, 1998 is attributable primarily to the March 1999
sale of the 1225 Connecticut Avenue, N.W. office building by 1225 Investment
Corporation. The decrease in Partnership's share of operations of
unconsolidated affiliated corporation for the year ended December 31, 1998 as
compared to the year ended December 31, 1997 is attributable primarily to the
Partnership's share ($529,882) of the total provision for value impairment
of $1,217,000 recorded by 1225 Investment Corporation at December 31, 1998.
The decrease in Partnership's share of operations of unconsolidated
venture for the year ended December 31, 1998 as compared to the year ended
December 31, 1997 is due primarily to the December 1997 sale of the Landings
Shopping Center by the JMB/Landings venture.
Partnership's share of loss on sale of property by unconsolidated
affiliated corporation in 1999 is attributable to the March 1999 sale of the
1225 Connecticut Avenue, N.W. office building by 1225 Investment Corporation.
Partnership's share of gain on sale of investment property by
unconsolidated venture in 1997 is attributable to the December 1997 sale of
the Landings Shopping Center by the JMB/Landings venture.
<PAGE>
Partnership's share of extraordinary items of unconsolidated affiliated
corporation in 1999 is due to the payment of a prepayment penalty associated
with the retirement of the existing mortgage indebtedness by 1225 Investment
Corporation with a portion of the sale proceeds from the March 1999 sale of
the 1225 Connecticut Avenue, N.W. office building and the write-off of
unamortized deferred financing costs.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on the operations of the
Partnership. Due to the Partnership's sale of its last remaining investment
property in 1999 and the expected winding up of the Partnership in 2000,
inflation is not expected to significantly impact future operations.
YEAR 2000
The Partnership has not experienced any material disruption in its
operations in connection with the century change and does not expect any such
disruption in the future. The Partnership has not needed to implement
contingency plans, has not had any material remediation costs and does not
anticipate that its future costs of remediation will be material. However,
there can be no assurance that disruption may not occur in the future or that
the costs of any required remediation may not be material. With the sale of
its last investment property, the 1225 Connecticut Avenue N.W. office
building and barring any unforeseen circumstances, the Partnership expects to
terminate its affairs in 2000.
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, 1999 and 1998
Consolidated Statements of Operations, years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Partners'
Capital Accounts (Deficits),
years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows, years ended
December 31, 1999, 1998 and 1997
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, 1999 and 1998
Statements of Operations, years ended December 31,
1999, 1998 and 1997
Statements of Changes in Shareholders' Equity, years
ended December 31, 1999, 1998 and 1997
Statements of Cash Flows, years ended December 31,
1999, 1998 and 1997
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.
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, 1999 and
1998, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
March 20, 2000
<TABLE>
<CAPTION>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
------
1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 2,500,970 1,194,778
Interest and other receivables . . . . . . . . . . . . . . . . . . . . . 9,713 4,289
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 2,510,683 1,199,067
------------ -----------
Investment in unconsolidated affiliated corporation,
at equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,617 20,207,295
------------ -----------
$ 2,543,300 21,406,362
============ ===========
<PAGE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,261 5,688
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . . 8,385 9,459
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 41,646 15,147
------------ -----------
Commitments and contingencies
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 809,128 788,432
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (1,278,423) (1,261,510)
------------ -----------
(444,295) (448,078)
------------ -----------
Limited partners (64,269.53 interests):
Capital contributions, net of offering
costs and purchase discounts . . . . . . . . . . . . . . . . . . . 55,256,131 55,256,131
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 13,514,141 13,126,627
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (65,824,323) (46,543,465)
------------ -----------
2,945,949 21,839,293
------------ -----------
Total partners' capital accounts
(deficits) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,501,654 21,391,215
------------ -----------
$ 2,543,300 21,406,362
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Interest income. . . . . . . . . . . . . . . . . . . . $ 189,547 102,972 190,289
------------ ----------- -----------
Expenses:
Professional services. . . . . . . . . . . . . . . . . 60,400 87,539 91,925
General and administrative . . . . . . . . . . . . . . 150,739 178,613 194,876
Provision for value impairment . . . . . . . . . . . . -- 241,000 --
------------ ----------- -----------
211,139 507,152 286,801
------------ ----------- -----------
(21,592) (404,180) (96,512)
Partnership's share of operations of uncon-
solidated affiliated corporation . . . . . . . . . . . 559,399 1,651,955 2,078,083
Partnership's share of operations of
unconsolidated venture . . . . . . . . . . . . . . . . -- 4,445 320,377
Venture partner's share of consolidated
venture's operations . . . . . . . . . . . . . . . . . -- -- 13,321
------------ ----------- -----------
Earnings (loss) before gains (losses)
on sales of investment properties and
extraordinary items. . . . . . . . . . . . . . . 537,807 1,252,220 2,315,269
------------ ----------- ------------
Partnership's share of loss on sale of investment
property by unconsolidated affiliated corporation . . . (7,141) -- --
Partnership's share of gain on sale of
investment property by unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . . . . -- -- 969,419
------------ ----------- -----------
Earnings (loss) before extraordinary
items. . . . . . . . . . . . . . . . . . . . . . . . 530,666 1,252,220 3,284,688
Partnership's share of extraordinary items
of unconsolidated affiliated corporation. . . . . . . . (122,456) -- --
------------ ----------- -----------
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 408,210 1,252,220 3,284,688
============ =========== ===========
Net earnings (loss) per
limited partnership interest:
Earnings (loss) before gains
(losses) on sales of investment
properties and extraordinary items. . . . . . . . . $ 7.95 16.06 34.22
Partnership's share of loss on sale of
investment property by unconsolidated
affiliated corporation. . . . . . . . . . . . . . . (.11) -- --
Partnership's share of gain on sale
of investment property by unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . . -- -- 14.93
Partnership's share of extraordinary
items (net) of unconsolidated
affiliated corporation. . . . . . . . . . . . . . . (1.81) -- --
----------- ---------- ------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 6.03 16.06 49.15
=========== ========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<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,
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
Net earnings
(loss). . . . . -- 219,869 -- 219,869 -- 1,032,351 -- 1,032,351
Cash dis-
tributions
($134.00 per
limited
partnership
interest) . . . -- -- (219,869) (219,869) -- -- (8,612,116) (8,612,116)
------- --------- --------- --------- ----------- ---------- ----------- -----------
Balance (deficit)
at December
31, 1998. . . . 25,000 788,432 (1,261,510) (448,078) 55,256,131 13,126,627 (46,543,465) 21,839,293
Net earnings
(loss). . . . . -- 20,696 -- 20,696 -- 387,514 -- 387,514
Cash dis-
tributions
($300.00 per
limited
partnership
interest) . . . -- -- (16,913) (16,913) -- -- (19,280,858) (19,280,858)
------- -------- -------- -------- -------- -------- ---------- ----------
Balance (deficit)
at December
31, 1999. . . .$ 25,000 809,128 (1,278,423) (444,295) 55,256,131 13,514,141 (65,824,323) 2,945,949
======= ========= ======== ========= =========== ========== ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 408,210 1,252,220 3,284,688
Items not requiring (providing) cash or
cash equivalents:
Provision for value impairment . . . . . . . . . . . -- 241,000 --
Partnership's share of operations of
unconsolidated corporation,
net of dividends . . . . . . . . . . . . . . . . . (559,399) (1,651,955) (2,078,083)
Partnership's share of operations of
unconsolidated venture, net of
distributions. . . . . . . . . . . . . . . . . . . -- (4,445) (320,377)
Venture partner's share of consolidated
venture's operations . . . . . . . . . . . . . . . -- -- (13,321)
Partnership's share of loss on sale of
investment property by unconsolidated
affiliated corporation. . . . . . . . . . . . . . . 7,141 -- --
Partnership's share of gain on sale
of investment property by unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . . -- -- (969,419)
Partnership's share of total extraordinary
items of unconsolidated affiliated corporation. . . 122,456 -- --
Changes in:
Interest and other receivables . . . . . . . . . . . (5,424) 8,617 12,442
Accounts payable . . . . . . . . . . . . . . . . . . 27,573 (26,073) (40,097)
Amounts due to affiliates. . . . . . . . . . . . . . (1,074) (7,992) 12,063
----------- ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . (517) (188,628) (112,104)
----------- ----------- -----------
Cash flows from investing activities:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998 1997
<S> ----------- ----------- -----------
Partnership's dividends from <C> <C> <C>
unconsolidated affiliated corporation. . . . . . . . 20,604,480 1,806,240 1,893,840
Partnership's distributions from
unconsolidated venture . . . . . . . . . . . . . . . -- 5,428,163 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . 20,604,480 7,234,403 1,893,840
----------- ----------- -----------
Cash flows from financing activities:
Distributions to venture partner . . . . . . . . . . . -- -- (28,589)
Distributions to limited partners. . . . . . . . . . . (19,280,858) (8,612,116) (2,570,781)
Distributions to general partners. . . . . . . . . . . (16,913) (219,869) (135,305)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . (19,297,771) (8,831,985) (2,734,675)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . 1,306,192 (1,786,210) (952,939)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . 1,194,778 2,980,988 3,933,927
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . . $ 2,500,970 1,194,778 2,980,988
=========== =========== ===========
Supplemental disclosure of cash
flow information:
Cash paid for mortgage and other interest. . . . . . . $ -- -- --
=========== =========== ===========
Non-cash investing and financing activities. . . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
OPERATIONS AND BASIS OF ACCOUNTING
General
The Partnership held, (either by purchase of stock or through joint
ventures) an equity investment portfolio of real estate in the United States.
Business activities consisted of rentals to a variety of commercial and
retail entities, rentals to individuals, and the ultimate sale of such real
estate. All properties have been sold as of December 31, 1999. The
Partnership currently expects 1225 Investment Corporation to wind up its
affairs by mid-2000, with the winding up of the Partnership's affairs
expected sometime thereafter in 2000. The termination of the Partnership's
affairs generally is contingent upon, among other things, 1225 Investment
Corporation winding up its affairs.
The accompanying consolidated financial statements include the accounts
of the Partnership and its majority-owned venture, CIP/Ashby Partners
("CIP/Ashby"), whose property was sold in August 1996. 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"), whose
property was sold in December 1997, and 1225 Investment Corporation ("1225
Connecticut Avenue, N.W."), whose property was sold in March 1999.
Accordingly, the accompanying consolidated financial statements do not
include the accounts of JMB/Landings or 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,
1999 and 1998 is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
1999 1998
------------------------------- ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $ 2,543,300 12,662,080 21,406,362 31,954,945
Partners' capital
accounts (deficit):
General Partners . . . . . . . . . . (444,295) (665,373) (448,078) (647,647)
Limited Partners . . . . . . . . . . 2,945,949 13,300,591 21,839,293 32,596,907
Net earnings (loss):
General Partners . . . . . . . . . . 20,696 (813) 219,869 78,901
Limited Partners . . . . . . . . . . 387,514 (15,458) 1,032,351 1,499,083
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . . . . . 6.03 (.24) 16.06 23.32
=========== =========== =========== ===========
</TABLE>
The net earnings (loss) per limited partnership interest
("Interest") is based upon the number of 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 ($2,300,000 and $1,119,778 at December 31, 1999 and 1998, 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 had acquired, either by purchase of stock or through
joint ventures, interests in an apartment building, a shopping center and an
office building. At December 31, 1999, all of these properties were sold.
Under certain circumstances, the Partnership may have been 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 properties represented the total cost to the Partnership plus
certain acquisition costs.
Depreciation on the properties had 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 were charged to operations as
incurred. Significant betterments and improvements were 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 required that the Partnership record an impairment loss on
its properties to be held for investment whenever their carrying value could
not be fully recovered through estimated undiscounted future cash flows from
their operations and sale. The amount of the impairment loss to be recognized
would have been the difference between the property's carrying value and the
property's estimated fair value. The Partnership's policy was to consider a
property to be held for sale when the Partnership had committed to a plan to
sell such property and active marketing activity had commenced or was
expected to commence in the near term. The Partnership and its
unconsolidated affiliated corporation had committed to such a plan as of
December 31, 1996 for 1225 Connecticut Avenue, N.W. office building, which
was sold in March 1999.
<PAGE>
In accordance with SFAS 121, any properties identified
as "held for sale or disposition" were no longer depreciated. Adjustments for
impairment loss for such properties (subsequent to the date of adoption of
SFAS 121) were made in each period as necessary to report these properties at
the lower ofcarrying 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 $559,399,
$1,656,400 and $2,398,460, respectively, of the Partnership's share of total
operations of $1,284,938, $3,803,422, and $5,413,567 for the years ended
December 31, 1999, 1998 and 1997 of unconsolidated properties sold or held
for sale or disposition.
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 The Landings Shopping Center, located in Sarasota, Florida.
JMB/Landings purchased the shopping center for a purchase price of
$13,100,000, which was paid in cash at closing. The terms of the
JMB/Landings partnership agreement provided generally that annual cash flow,
sale proceeds and tax items were to be distributed or allocated based on the
capital contributions made by each partner. Distributions and allocations
were 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 as of
that date.
JMB/Landings sold the land and related improvements of The Landings
Shopping Center in December 1997 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 (of which the Partnership's
share was approximately $970,000), 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. 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
expired, with no liability to JMB/Landings, as scheduled in late June, 1998.
The remaining funds of the JMB/Landings venture were distributed to the
venture partners in late June, 1998.
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 year ended December 31, 1997 were $41,809.
CIP/Ashby
In February 1990, the Partnership, through CIP/Ashby, a joint venture
partnership with CIP-I, acquired a 69% interest in The Ashby at McLean
Apartments ("The Ashby"), an apartment building located in McLean, Virginia.
The Ashby had 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.
In August 1996, CIP/Ashby sold The Ashby for a sale price of
$21,400,000, which was paid in cash at closing.
In connection with the sale of this property, as is customary in such
transactions, CIP/Ashby agreed to certain representations and warranties,
with a stipulated survival period which expired, with no liability to
CIP/Ashby, as scheduled in late August, 1997. The CIP/Ashby venture was
liquidated in 1997.
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 entities originally advised by affiliates of the General
Partners. 1225 Investment Corporation acquired an office building located in
Washington, D.C., known as 1225 Connecticut Avenue, N.W., an eight-story
building with approximately 203,000 rentable square feet and three levels of
subsurface parking.
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 Partnership
contributed $24,000,000 for its approximate 44% interest in the stock of 1225
Investment Corporation. 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 has received
approximately 44% of 1225 Investment Corporation's dividends. Such dividends
distributed from operations generally constitute taxable income to the
Partnership.
As the 1225 Investment Corporation had committed to a plan to sell the
property, the property was classified as held for sale as of December 31,
1996 and, therefore, was not subject to continued depreciation as of that
date. 1225 Investment Corporation began marketing the 1225 Connecticut
Avenue office building for sale during the second quarter of 1998.
In response to the uncertainty relating to 1225 Investment
Corporation's ability to recover the net carrying value of 1225 Connecticut
Avenue, N.W. office building through future operations and sale, 1225
Investment Corporation, as a matter of prudent accounting practice 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). An additional provision for value impairment of $1,217,000 (of
which the Partnership's share was $529,882) was recorded at December 31, 1998
to reflect the then current estimated fair value, less costs to sell, of the
property.
In response to the uncertainty relating to the Partnership's ability
to recover the net carrying value of its investment in its unconsolidated
affiliated corporation, 1225 Investment Corporation, through future
operations and sale during the estimated holding period, the Partnership
recorded, as a matter of prudent accounting practice, a provision for value
impairment of such investment of $241,000 as of December 31, 1998. Such
provision was recorded to reduce the net carrying value of the investment to
its the then estimated fair value.
The property was managed by a third party management company for a fee
equal to 2.5% of the property's gross operating receipts.
In March 1999, 1225 Investment Corporation executed an agreement
with BRE/Connecticut L.L.C. for the sale of the 1225 Connecticut Avenue,N.W.
office building. On March 29, 1999, 1225 Investment Corporation completed
the sale for a sale price of $52,960,000, payable in cash at closing (subject
to adjustment for selling costs of approximately $1,103,000 and operating
prorations of approximately $515,000). The Partnership's share of the sale
proceeds, after payment by 1225 Investment Corporation to retire the existing
mortgage indebtedness with a principal balance of $7,000,000 and payment of
the associated prepayment penalty of approximately $247,000, was
approximately $19,420,000. The sale resulted in no significant gain or loss
on sale for financial reporting purposes to 1225 Investment Corporation,
primarily as a result of the aforementioned value impairment provisions
totaling $7,765,956 recorded by 1225 Investment Corporation in 1996 and 1998
(of which the Partnership's share was $3,381,297). Additionally, 1225
Investment Corporation expects to recognize a loss on sale in 1999 for
Federal income tax purposes of approximately $1,900,000. However, the tax
consequences to the Partnership are expected to consist of a loss on its
investment in its unconsolidated affiliated corporation, 1225 Investment
Corporation, of approximately $1,450,000 in 2000.
In connection with the sale of this property, as is customary in such
transactions, 1225 Investment Corporation agreed to certain representations
and warranties with a stipulated survival period which expired, with no
liability to 1225 Investment Corporation, as scheduled, on December 10, 1999.
In April 1999, the Partnership received a dividend of $19,596,000 from
1225 Investment Corporation, of which $18,987,600 represented the
Partnership's share of current distributable proceeds from the sale of the
1225 Connecticut Avenue, N.W. office building and $608,400 represented the
Partnership's share of operations. In December 1999, after the expiration of
the aforementioned survival period for representations and warranties, the
Partnership received a dividend of $573,120 from 1225 Investment Corporation,
of which $435,360 represented the Partnership's residual share of proceeds
from the sale of the 1225 Connecticut Avenue, N.W. office building and
$137,760 represented the Partnership's share of cash flow from operations.
The Partnership also received an operating dividend of $435,360 from 1225
Investment Corporation in February 1999.
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 sale or other disposition, plus an amount which would 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 as required upon dissolution and liquidation of the Partnership or the
General Partners' interests in the Partnership, the General Partners are not
required to make any additional capital contributions. (Upon liquidation of
the Partnership, each General Partner will be required to make a capital
contribution to the Partnership in the amount of such General Partner's
deficit balance in its capital accounts as determined for Federal income tax
purposes) "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 to the
General Partners are to be repaid to the Partnership to the extent that the
holders of Interests have not received sale 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 will not 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 will not receive their share of
any distributions of proceeds from sales.
TRANSACTIONS WITH AFFILIATES
All of the Partnership's properties were at one time managed by an
affiliate of the General Partners 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 acting as the
property manager of The Ashby at McLean Apartments and 1225
Connecticut Ave. N.W. office building after the assignment on the same terms
that existed prior to the assignment. The Landings Shopping Center continued
to be managed by an affiliate of the General Partners through the date of its
sale in December 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. Fees, commissions and other expenses required to
be paid by the Partnership to the General Partners and their affiliates as of
December 31, 1999 and for the years ended December 31, 1999, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1999 1998 1997 1999
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Insurance commissions. . . . . . . . . . . $ 603 3,255 3,575 --
Reimbursement (at cost) for
accounting services . . . . . . . . . . . 1,591 8,417 16,910 40
Reimbursement (at cost) for
portfolio management services . . . . . . 21,313 27,437 17,387 5,400
Reimbursement (at cost) for
legal services. . . . . . . . . . . . . . 5,283 3,621 3,322 149
Reimbursement (at cost) for
administrative charges and
other out-of-pocket-expenses . . . . . . 2,796 3,598 3,507 2,796
-------- -------- -------- ------
$ 31,586 46,328 44,701 8,385
======== ======== ======== ======
<FN>
________
</TABLE>
<TABLE>
<CAPTION>
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 financial information for JMB/Landings (which sold its
investment property in December 1997) as of and for the six months ended June
30, 1998 (the date of liquidation of the JMB/Landings venture) is as follows:
1998
-----------
<S> <C>
Current assets . . . . . . . . . . . --
Current liabilities. . . . . . . . . . . . . --
-----------
Working capital. . . . . . . . . . --
Venture partner's equity . . . . . . . . . . --
-----------
Partnership's capital. . . . . --
===========
Represented by:
Invested capital . . . . . . . . . . . . . $ --
Cumulative distributions . . . . . . . . . --
Cumulative earnings. . . . . . . . . . . . --
-----------
--
===========
Total income . . . . . . . . . . . . . . . . $ 18,812
===========
Expenses applicable to
earnings. . . . . . . . . . . . $ 9,498
===========
Earnings (loss). . . . . . . . . . . . . . . $ 9,314
==========
Partnership's share of earnings (loss) . . . $ 4,445
===========
The total income, expenses applicable to operating earnings and net
earnings for the above venture for the year ended December 31, 1997 were
$960,184, $319,430 and $640,754, respectively. Total gain on sale of property
was $1,938,838 for the year ended December 31, 1997.
INVESTMENT IN UNCONSOLIDATED AFFILIATED CORPORATION
Summary financial information for 1225 Investment Corporation (which sold
its investment property in March 1999) as of and for the years ended December
31, 1999 and 1998 are as follows:
1999 1998
----------- -----------
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . $ 106,379 1,863,862
Current liabilities. . . . . . . . . . . . . (37,361) (341,903)
----------- -----------
Working capital. . . . . . . . . . 69,018 1,521,959
Property held for sale or
disposition . . . . . . . . . . . . . . . . -- 51,854,000
Other assets . . . . . . . . . . . . . . . . -- 34,295
Long-term debt . . . . . . . . . . . . . . . -- (7,000,000)
Affiliated shareholders' (equity) deficit . 204,599 (25,961,959)
Provision for value impairment . . . . . . . (241,000) (241,000)
----------- -----------
Partnership's equity in
unconsolidated affiliated
corporation . . . . . . . . . . $ 32,617 20,207,295
=========== ===========
Represented by:
Stock purchase and additional
paid-in-capital . . . . . . . . . . . . $ 24,429,164 24,429,164
Cumulative dividends . . . . . . . . . . . (34,631,510) (14,027,030)
Cumulative earnings. . . . . . . . . . . . 10,475,963 10,046,161
Provision for value impairment . . . . . . -- (241,000)
----------- -----------
$ 273,617 20,207,295
=========== ===========
Total income . . . . . . . . . . . . . . . . $ 2,084,269 8,101,051
=========== ===========
Expenses applicable
to operating earnings
(including a $1,217,000 provision
for value impairment in 1998). . . . . . $ 799,331 4,306,943
=========== ===========
Operating earnings (loss). . . . . . . . . . $ 1,284,938 3,794,108
=========== ============
Partnership's share of operating
earnings (loss) . . . . . . . . . . . . . . $ 559,399 1,651,955
=========== ============
Gain (loss) on sale of property. . . . . . . $ (16,402) --
============ =============
Partnership's share of gain (loss)
on sale of property . . . . . . . . . . . . $ (7,141) --
============ =============
Extraordinary items. . . . . . . . . . . . . $ (281,281) --
============ =============
Partnership's share of extraordinary items . $ (122,456) --
============ =============
The total income, expenses applicable to operating earnings and net
earnings (loss) for the above corporation for the year ended December 31,
1997 were $7,878,414, $3,105,601 and $4,772,813, respectively.
SUBSEQUENT EVENT
In February 2000, the Partnership made a cash distribution of
$1,606,738 ($25.00 per Interest) to the holders of Interests, which included
$10 per Interest from the proceeds of the March 1999 sale of the 1225
Connecticut Avenue, N.W. office building and $15 per Interest from
Partnership operational cash flow and reserves. The Partnership also paid a
distribution of $50,739 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 distributions of proceeds from
sale, as discussed above.</TABLE>
INDEPENDENT AUDITORS' REPORT
The Partners
Carlyle Income Plus, L.P.- II:
We have audited the financial statements of 1225 Investment Corporation
as listed in the accompanying index. These financial statements are the
responsibility of the Management of the Corporation. 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 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, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
March 20, 2000
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
------
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 97,957 1,758,120
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . 105,940 75,093
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 30,649
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 203,897 1,863,862
Property held for sale or disposition. . . . . . . . . . . . . . . . . . . -- 51,854,000
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 34,295
------------ -----------
$ 203,897 53,752,157
============ ===========
1225 INVESTMENT CORPORATION
(A CORPORATION)
BALANCE SHEETS - CONTINUED
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 134,879 89,613
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . -- 211,573
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . -- 40,717
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 134,879 341,903
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 7,000,000
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 134,879 7,341,903
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79,545,242) (32,216,751)
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 24,055,688 23,068,433
------------ -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . 69,018 46,410,254
------------ -----------
$ 203,897 53,752,157
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . $ 1,860,447 8,019,745 7,801,276
Interest income. . . . . . . . . . . . . . . . . . . . 151,309 81,306 77,138
----------- ---------- ----------
2,011,756 8,101,051 7,878,414
----------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . 120,793 488,600 488,600
Property operating expenses. . . . . . . . . . . . . . 493,603 2,357,144 2,385,689
Amortization of deferred costs . . . . . . . . . . . . -- 17,147 17,148
General and administrative . . . . . . . . . . . . . . 112,422 227,052 214,164
Provision for value impairment . . . . . . . . . . . . -- 1,217,000 --
----------- ---------- ----------
726,818 4,306,943 3,105,601
----------- ---------- ----------
Earnings before loss on sale of
investment property and extraordinary
items . . . . . . . . . . . . . . . . . . . . 1,284,938 3,794,108 4,772,813
Loss on sale of investment property. . . . . . . . . . (16,402) -- --
------------ ---------- ----------
Earnings (loss) before extraordinary items . . 1,268,536 3,794,108 4,773,813
Extraordinary items:
Long-term debt prepayment penalty. . . . . . . . . . (246,986) -- --
Write-off of unamortized deferred financing costs. . (34,295) -- --
--------- ---------- ---------
Net earnings (loss). . . . . . . . . . . . . . $ 987,255 3,794,108 4,772,813
========= ========== =========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
OTHER SHAREHOLDERS
-----------------------------------------------------------------
NET
NET CAPITAL EARNINGS DIVIDENDS
INVESTED (LOSS) PAID TOTAL
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
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
Net earnings (loss). . . . . . . . . . . . . -- 2,142,153 -- 2,142,153
Dividends paid . . . . . . . . . . . . . . . -- -- (2,342,693) (2,342,693)
----------- ----------- ----------- -----------
Balance at December 31, 1998 . . . . . . . . 31,129,408 13,022,272 (18,189,721) 25,961,959
Net earnings (loss). . . . . . . . . . . . . -- 557,453 -- 557,453
Dividends paid . . . . . . . . . . . . . . . -- -- (26,724,011) (26,724,011)
---------- ----------- ----------- -----------
Balance at December 31, 1999 . . . . . . . . $ 31,129,408 13,579,725 (44,913,732) (204,599)
=========== =========== ============ ===========
</TABLE>
<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, 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
Net earnings (loss). . . . . . -- 1,651,955 -- 1,651,955 3,794,108
Dividends paid . . . . . . . . -- -- (1,806,240) (1,806,240) (4,148,933)
------------ ----------- ----------- ----------- -----------
Balance at December 31, 1998 . 24,429,164 10,046,161 (14,027,030) 20,448,295 46,410,254
Net earnings (loss). . . . . . -- 429,802 -- 429,802 987,255
Dividends paid . . . . . . . . -- -- (20,604,480) (20,604,480) (47,328,491)
------------ ---------- ----------- ----------- -----------
Balance at December 31, 1999 . $ 24,429,164 10,475,963 (34,631,510) 273,617 69,018
============ ========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . $ 987,255 3,794,108 4,772,813
Items not requiring (providing) cash:
Amortization of deferred costs . . . . . . . . . . . . -- 17,147 17,148
Write-off of unamortized deferred financing costs. . . 34,295 -- --
Long-term debt prepayment penalty. . . . . . . . . . . 246,986 -- --
Provision for value impairment . . . . . . . . . . . . -- 1,217,000 --
Loss on sale of investment property. . . . . . . . . . 16,402 -- --
Changes in:
Rents and other receivables. . . . . . . . . . . . . (30,847) (69,339) 86,183
Prepaid expenses . . . . . . . . . . . . . . . . . . 30,649 (14,114) 370
Accounts payable . . . . . . . . . . . . . . . . . . 45,266 23,849 (17,671)
Accrued real estate taxes. . . . . . . . . . . . . . (211,573) 5,070 --
Accrued interest payable . . . . . . . . . . . . . . (40,717) -- --
Tenant security deposits . . . . . . . . . . . . . . -- (652) (14,825)
----------- ----------- -----------
Net cash provided by (used in) 1,077,716 4,973,069 4,844,018
operating activities . . . . . . . . . . . . . ----------- ----------- -----------
Cash flows from investing activities:
Additions to investment property . . . . . . . . . . . (19,000) (562,969) (508,031)
Cash proceeds from sale of investment property . . . . 51,856,598 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . 51,837,598 (562,969) (508,031)
----------- ----------- -----------
1225 INVESTMENT CORPORATION
(A CORPORATION)
STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998 1997
----------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term debt. . . . . . . . . . . . . . (7,246,986) -- --
Cash dividends paid to shareholders. . . . . . . . . . (47,328,491) (4,148,933) (4,350,150)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . (54,575,477) (4,148,933) (4,350,150)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . (1,660,163) 261,167 (14,163)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . 1,758,120 1,496,953 1,511,116
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . .$ 97,957 1,758,120 1,496,953
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . .$ 161,510 488,600 488,600
=========== =========== ===========
Non-cash investing and financing activities. . . . . .$ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
1225 INVESTMENT CORPORATION
(A CORPORATION)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
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 certain other parties that were originally advised or managed by
affiliates of the General Partners of Carlyle Income Plus, L.P.- II are
shareholders.
1225 Investment Corporation (the "Corporation") had 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.,
which was sold on March 29, 1999. Endowment and Foundation Realty, Ltd. --
JMB-IV, IDS Life Account RE, JMB/Northern Real Estate Fund, Carlyle Income
Plus, L.P.- II ("CIP-II"), and certain other institutional investors
collectively hold substantially all of the common stock of the Corporation.
IDS Life Account RE is advised by JMB Annuity Advisers, and the remaining
stockholders, other than CIP-II, are advised by Heitman Capital Management
L.L.C. or its affiliates.
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, 1999 and 1998 is summarized
as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $ 203,897 106,379 53,752,157 65,467,356
Shareholders' equity . . . . . . . . . 69,018 (1,304,210) 46,410,254 58,125,451
Net earnings (loss). . . . . . . . . . 987,255 (1,235,191) 3,794,108 3,797,451
=========== =========== =========== ===========
</TABLE>
The preparation of financial statements in accordance with GAAP
requires the Corporation to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 95 requires the
Corporation to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. 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 (none at December 31, 1999 and 1998) 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 were charged to operations as incurred.
Significant betterments and improvements were capitalized and were
depreciated over their estimated useful lives.
The Corporation adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of ("SFAS 121") as required in the first quarter of
1996. SFAS 121 required that the Corporation record an impairment loss on its
property to be held for investment whenever its carrying value could not 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 was to consider the property
to be held for sale or disposition when the Corporation had committed to a
plan to sell or dispose of such property and active marketing activity had
commenced or was expected to commence in the near term. The Corporation had
committed to such a plan as of December 31, 1996 for its real estate
investment, the 1225 Connecticut Avenue, N.W. office building, which was sold
in March 1999. In accordance with SFAS 121, any property identified as "held
for sale or disposition" was no longer depreciated. Adjustments for
impairment loss for such a property (subsequent to a date of adoption of SFAS
121) were made in each period as necessary to report the property at the
lower of carrying value or fair value less costs to sell. There was no
assurance that any estimated fair value of the property would ultimately be
realized by the Corporation in any future sale or disposition transaction.
Deferred costs consisted of commitment fees incurred in connection with
the refinancing of the property and lease commissions incurred. Deferred
loan fees and lease commissions were 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, the "Code"), and has distributed at least 95% of its
taxable income annually to its shareholders. Since the Corporation has
qualified as a REIT, the Corporation, in general, is not 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 is not taxed on long-term capital gain
income to the extent its income is distributed as dividends. Accordingly, no
provision for income taxes has been made in the accompanying financial
statements. Tax-exempt shareholders generally will not be required to pay
any Federal income tax on the dividends they receive from the Corporation,
provided such shareholders have not financed the acquisition of shares with
"acquisition indebtedness" as defined under the Code.
INVESTMENT PROPERTY
A description of the acquisition and other events relating to the
property, including the provisions for value impairment and the determination
to classify the property as held for sale or disposition at December 31,
1996, and the sale of the property in March 1999, 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 notes are incorporated herein by reference.
LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1999 and
1998:
1999 1998
------------ ------------
6.98% mortgage note, due February 1,
2001; secured by 1225 Connecticut
Avenue, N.W.; payable in monthly
installments of $40,717 (interest
only)-retired in March 1999 . . . . . . . . . . $ -- 7,000,000
---------- ----------
Total debt . . . . . . . . . . . . . . -- 7,000,000
Less current portion
of long-term debt. . . . . . . . . . $ -- --
---------- ----------
Total long-term debt . . . . . . . . . $ -- 7,000,000
========== ==========
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.
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, 1999
and for the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1999 1998 1997 1999
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Insurance commissions. . . . . . . . . . . $ -- 6,091 7,058 --
======= ======= ======= ========
<FN>
</TABLE>
<TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
fiscal years 1999 and 1998.
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 shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB, as the Corporate General Partner, has responsibility for all aspects of
the Partnership's operations. The Associate General Partner of the
Partnership, AGPP Associates, L.P., an Illinois limited partnership with JMB
as its sole general partner, could, 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 current or
former officers and directors of JMB and 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 and
administrative 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 have been in competition with
the Partnership or its investment properties 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 Partnership Agreement, including whether and
when to sell a property, the establishment and maintenance of reasonable
reserves and the determination of the sources (i.e., offering proceeds, cash
generated from operations or sale proceeds) and uses or distribution of such
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 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
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Effective May 31, 1996, the Board of Directors of JMB established a special
committee, consisting of Messrs. Malkin, Glazov, Nathan, Sacks and Schreiber,
to deal with all matters relating to tender offers for Interests.
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
6, 2000. 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 6, 2000. 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-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-
- -XIV"), and Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), and
the managing general partner of JMB Income Properties, Ltd.-V ("JMB
Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), and JMB
Income Properties, Ltd.-XI ("JMB Income-XI"). JMB is also the sole general
partner of the associate general partner of most of the foregoing
partnerships. 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.). 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, among others: the Partnership, Carlyle-XI,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, JMB Income-VII, and JMB Income-XI.
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 62) is an individual general partner of JMB
Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr.
Malkin is also a director of Urban Shopping Centers, Inc., an affiliate of
JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of Chisox
Corporation, which is the general partner of a limited partnership that owns
the Chicago White Sox, a Major League Baseball team, and CBLS, Inc., which is
the general partner of the general partner of a limited partnership that owns
the Chicago Bulls, a National Basketball Association team. He is a Certified
Public Accountant.
Neil G. Bluhm (age 62) is an individual general partner of JMB
Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr.
Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors
real estate investment funds, and a director of Urban Shopping Centers, Inc.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Burton E. Glazov (age 61) has been associated with JMB since June, 1971
and served as an Executive Vice President of JMB until December of 1990. Mr.
Glazov is currently retired. He is a member of the Bar of the State of
Illinois
Stuart C. Nathan (age 58) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 66) has been associated with JMB since December,
1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 53) 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 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 Urban Shopping Centers,Inc.,
Host Marriott Corporation, the Brickman Group, Ltd., which is engaged in the
landscape maintenance business, and a number of investment companies advised
by T. Rowe Price Associates, Inc. and its affiliates, and a trustee of Amli
Residential Property Trust. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 51) 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.
Gary Nickele (age 47) 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 51) 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.
<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 made to the Note
entitled "Partnership Agreement" for a description of such distributions and
allocations. In 1999, 1998 and 1997, the General Partners received
distributions of $16,913, $ 219,869 and $135,305, respectively. The General
Partners were allocated taxable loss of $ 813 in 1999.
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., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions totaling $603
from the Partnership in 1999 in connection with providing professional
liability insurance coverage for 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 1999 for accounting services, portfolio management services,
legal services and for administrative charges and other out-of-pocket
expenses of $1,591, $21,313, $5,283 and $2,796, respectively, of which
$8,385 was unpaid at December 31, 1999.
All amounts payable to the General Partners and their affiliates do not
bear interest and are expected to be paid in future periods.
In March 1999 BRE/Connecticut L.L.C. ("BRE/Connecticut") purchased the
1225 Connecticut Avenue office building from 1225 Investment Corporation (the
"Corporation"), a private real estate investment trust in which the
Partnership owns approximately 43.6% of the outstanding stock, for
$52,960,000 in cash, subject to adjustment for prorations and closing costs.
John G. Schreiber is (i) a director of JMB Realty Corporation ("JMB"), which
is the Corporate General Partner of the Partnership, and (ii) a limited
partner in the Associate General partner of the Partnership. (JMB is also the
general partner of the Associate General Partner). Mr Schreiber and his
family members, directly or indirectly, own limited partnership interests in
Blackstone Real Estate Advisors L.P. ("BREA") and certain of its affiliates,
through which Mr Schreiber and his family members have an interest of up to
approximately 2% of the profits of BRE/Connecticut and have also invested in
BRE/Connecticut up to a specified percentage (generally not in excess of 2%)
of the equity capital invested by BREA and its affiliates and will be
entitled to receive any profits from such investment in proportion to their
equity capital invested. Mr. Schreiber or his family members also received
a portion (approximately $76,000) of the acquisition fee paid by
BRE/Connecticut to BREA and are entitled to receive a portion of annual asset
management fees to be paid by affiliates of BRE/Connecticut to BREA. The
price and other terms of the sale of the property, which contains
approximately 200,000 square feet of rentable space and subsurface parking,
were negotiated at arm's length. The decision to approve the sale on behalf
of the Partnership as a stockholder in the Corporation was made by JMB,
which, as noted above, is the Corporate General Partner (and the general
partner of the Associate General Partner) of the Partnership. Mr. Schreiber
did not participate in JMB's decision on behalf of the Partnership to approve
the sale of the property, nor in BRE/Connecticut's decision to purchase the
property.
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 executive officers and directors
and the Associate General Partner of the Partnership beneficially 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 5 Interests (1) Less than 1%
Interests and Assignee Partner, its executive indirectly
Interests therein officers and 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 shared investment
and voting power.
No executive officer or director of the Corporate General Partner of the
Partnership possesses a right to acquire beneficial ownership of Interests of
the Partnership.
Reference is made to Item 10 for information concerning the ownership of
the Corporate General Partner.
(c) There exists no arrangement, known to the Partnership, the operation
of which may at a subsequent date result in a change in control of the
Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, its 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.
3.1. 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, which is Exhibit B of the
Partnership's Prospectus, 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. 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.
10.2 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.
10.3 Closing statement dated 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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 for
December 30, 1997 on Form 8-K (File No. 0-17705) dated
January 12, 1998.
10.8 Real Property Purchase Agreement between 1225 Investment
Corporation and BRE/Connecticut L.L.C., dated February
10, 1999 relating to the sale of the 1225 Connecticut
Avenue office building is hereby incorporated herein by
reference to the Partnership's report for March 29, 1999
on Form 8-K (File No. 0-17705) dated April 8, 1999.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
- -------------
No annual report or proxy material for the fiscal year 1999 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CARLYLE INCOME PLUS, L.P. - II
By: JMB Realty Corporation
Corporate General Partner
____________________________________
By: Gailen J. Hull
Senior Vice President
Date: March 24, 2000
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 24, 2000
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 24, 2000
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 24, 2000
_____________________________________
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 24, 2000
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 24, 2000
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 24, 2000
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
______________________________________
By: Gailen J. Hull, Attorney-in-Fact
Date: March 24, 2000
CARLYLE INCOME PLUS, L.P. - II
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE
------------
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
10.8.
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a stockholder in 1225 Investment Corporation, a
corporation which held title to the 1225 Connecticut Avenue, N.W. Office
Building, located in Washington, D.C.
The Partnership was 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 and/or
directors of JMB Realty Corporation, the corporate general partner of Carlyle
Income Plus, L.P. - II, does 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 or directors, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1999 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 has executed this Power of Attorney the
31st day of January, 2000.
_______________________
Neil G. Bluhm
President and Director
_______________________
Judd D. Malkin
Chairman and Chief Financial Officer
_______________________
A. Lee Sacks
Director of General Partner
_______________________
Stuart C. Nathan
Executive Vice President
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, 1999 and any and all amendments thereto, the 31st day of
January, 2000.
_______________________________
Gary Nickele
_______________________________
Gailen J. Hull
_______________________________
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of Carlyle Income Plus, L.P -
II, does 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, 1999 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 has executed this Power of Attorney
the 31st day of January, 2000.
_____________________________________
H. Rigel Barber
Chief Executive 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, 1999 and any
and all amendments thereto, the 31st day of January, 2000.
_____________________________________
Gary Nickele
_____________________________________
Gailen J. Hull
_____________________________________
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,500,970
<SECURITIES> 0
<RECEIVABLES> 9,713
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,510,683
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,543,300
<CURRENT-LIABILITIES> 41,646
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,501,654
<TOTAL-LIABILITY-AND-EQUITY> 2,543,300
<SALES> 0
<TOTAL-REVENUES> 189,547
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 211,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (21,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> 537,807
<DISCONTINUED> (7,141)
<EXTRAORDINARY> (122,456)
<CHANGES> 0
<NET-INCOME> 408,210
<EPS-BASIC> 6.03
<EPS-DILUTED> 6.03
</TABLE>
