Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: CARLYLE INCOME PLUS, LTD. - II
Commission File No. 000-17705
Form 10-Q
Gentlemen:
Transmitted, for the above-captioned registrant, is the electronically filed
executed copy of registrant's current report on Form 10-Q for the quarter
ended September 26, 2000.
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
GJH/jt
Enclosures
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 26, 2000 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) (I.R.S. Employer
Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
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
____ _____
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . 21
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 24
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INCOME PLUS, L.P. - II
(a Limited Partnership)
Section I - Audited Financial Statements
Independent Auditors' Report
Balance Sheets, September 26, 2000 (immediately prior to final liquidating
distribution) and December 31, 1999
Statement of Operations, Period from January 1, 2000 through September 26,
2000 (immediately prior to final liquidating distribution)
Statement of Partners' Capital Accounts (Deficits), Period from January 1,
2000 through September 26, 2000 (immediately prior to final liquidating
distribution)
Statement of Cash Flows, Period from January 1, 2000 through September 26,
2000 (immediately prior to final liquidating distribution)
Notes to Financial Statements
Section II - Unaudited Financial Statements
Statements of Operations, Three and Nine Months ended September 30, 1999
Statement of Cash Flows, Nine Months ended September 30, 1999
Notes to Financial Statements
Independent Auditors' Report
The Partners
CARLYLE INCOME PLUS, L.P. - II
We have audited the financial statements of Carlyle Income Plus, L.P. -
II (a limited partnership) as listed in Section I of the accompanying index.
These financial statements are the responsibility of the General Partners of
the Partnership. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by the General Partners of the Partnership, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Carlyle Income Plus, L.P.
- II at September 26, 2000 (immediately prior to final liquidating
distribution ) and December 31, 1999, and the results of its operations and
its cash flows for the period from January 1, 2000 through September 26, 2000
(immediately prior to final liquidating distribution), in conformity with
generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
November 8, 2000
<PAGE>
<TABLE>
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 26, 2000 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND DECEMBER 31, 1999
A s s e t s
--------------
SEPTEMBER 26, DECEMBER 31,
2000 1999
<S> --------- ------------
Current assets: <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 1,412,002 2,500,970
Interest and other receivables. . . . . . . . . . . . . . . -- 9,713
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . 1,412,002 2,510,683
---------- ----------
Investment in unconsolidated affiliated
corporation, at equity. . . . . . . . . . . . . . . . . . . -- 32,617
---------- ----------
$ 1,412,002 2,543,300
========== ==========
<PAGE>
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
--------------------------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ -- 33,261
Amounts due to affiliates . . . . . . . . . . . . . . . . . -- 8,385
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . -- 41,646
---------- ----------
Commitments and contingencies
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . 765,734 25,000
Cumulative net earnings (losses) . . . . . . . . . . . . 563,428 809,128
Cumulative cash distributions. . . . . . . . . . . . . . (1,329,162) (1,278,423)
--------- ---------
-- (444,295)
--------- ---------
Limited partners (64,269.53 interests):
Capital contributions, net of
offering costs and
purchase discounts. . . . . . . . . . . . . . . . . . . 55,256,131 55,256,131
Cumulative net earnings (losses) . . . . . . . . . . . . 13,586,932 13,514,141
Cumulative cash distributions. . . . . . . . . . . . . . (67,431,061) (65,824,323)
---------- ----------
1,412,002 2,945,949
---------- ----------
Total partners' capital accounts . . . . . . . . . 1,412,002 2,501,654
---------- ----------
$ 1,412,002 2,543,300
========== ==========
<FN> See accompanying notes to financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 26, 2000 AND PERIOD
FROM JANUARY 1, 2000 THOUGH SEPTEMBER 26, 2000
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
<CAPTION>
PERIOD FROM
JANUARY 1, 2000
QUARTER ENDED THREE MONTHS ENDED THROUGH NINE MONTHS ENDED
SEPTEMBER 26, 2000 SEPTEMBER 30, 1999 SEPTEMBER 26, SEPTEMBER 30, 1999
(UNAUDITED) (UNAUDITED) 2000 (UNAUDITED)
----------------------------------- ------------- ------------------
<S> <C> <C> <C> <C>
Income:
Interest income . . . . . . $ 10,579 21,918 47,677 163,519
------- ------- ------- -------
Expenses:
Professional services . . . 41,875 -- 77,285 40,400
General and
administrative . . . . . 80,799 13,322 167,443 110,925
------- ------- ------- -------
122,674 13,322 244,728 151,325
------- ------- ------- -------
(112,095) 8,596 (197,051) 12,194
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS - CONTINUED
Partnership's share of
operations of
unconsolidated
affiliated corporation . . . . . . . (3,285) (26,121) 24,142 498,040
-------- --------- -------- ---------
Net operating earnings (loss) . . . . (115,380) (17,525) (172,909) 510,234
Partnership's share of loss on
sale of investment property by
unconsolidated affiliated
corporation . . . . . . . . . . . . . -- -- -- (7,141)
-------- --------- -------- ---------
Net earnings (loss) before
extraordinary items. . . . . . . . . (115,380) (17,525) (172,909) 503,093
Partnership's share of
extraordinary items of
unconsolidated affiliated
corporation . . . . . . . . . . . . . -- -- -- (122,456)
-------- -------- -------- ---------
Net earnings (loss) . . . . . . . . . $(115,380) (17,525) (172,909) 380,637
======== ======== ======== =========
Net earnings (loss) per
limited partnership interest:
Net operating earnings (loss). . . . . $ 2.81 (.26) 1.13 7.54
Partnership's share of loss on
sale of investment property
by unconsolidated affiliated
corporation . . . . . . . . . . . . . -- -- -- (.11)
Partnership's share of
extraordinary items of
unconsolidated affiliated
corporation . . . . . . . . . . . . . -- -- -- (1.81)
--------- -------- --------- ---------
$ 2.81 (.26) 1.13 5.62
========= ======== ========= =========
Cash distributions per limited
partnership interest. . . . . . . . . $ -- -- 25.00 300.00
========= ======== ========= =========
<FN>
</TABLE>
See accompanying notes to financial statements.
<TABLE>
CARLYLE INCOME PLUS, L.P. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
PERIOD FROM JANUARY 1, 2000 THROUGH SEPTEMBER 26, 2000
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (64,269.53 INTERESTS)
--------------------------------------------- --------------------------------------
NET NET
CONTRI- EARNINGS CASH CONTRI- EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL BUTIONS, (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit)
at January
1, 2000 . . . . . . 25,000 809,128 (1,278,423) (444,295) 55,256,131 13,514,141 (65,824,323) 2,945,949
Capital
contributions . . . 740,734 -- -- 740,734
Net earnings
(loss). . . . . . . -- (245,700) -- (245,700) -- 72,791 -- 72,791
Cash dis-
tributions
($25.00 per
limited
partnership
interest) . . . . . -- -- (50,739) (50,739) -- -- (1,606,738) (1,606,738)
------- -------- -------- -------- -------- -------- ---------- ----------
Balance (deficit)
at September
26, 2000. . . . . .$ 765,734 563,428 (1,329,162) -- 55,256,131 13,586,932 (67,431,061) 1,412,002
======= ========= ======== ========= =========== ========== ============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1, 2000 THROUGH SEPTEMBER 26, 2000
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND NINE MONTHS ENDED SEPTEMBER 30, 1999
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
JANUARY 1, 2000 THROUGH SEPTEMBER 30, 1999
SEPTEMBER 26, 2000 (UNAUDITED)
---------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $ (172,909) 380,637
Items not requiring (providing)
cash or cash equivalents:
Partnership's share of operations
of unconsolidated affiliated
corporation. . . . . . . . . . . . . . . . . . . (24,142) (498,040)
Partnership's share of loss on sale of
investment property by unconsolidated
affiliated corporation . . . . . . . . . . . . . -- 7,141
Partnership's share of total
extraordinary items of unconsolidated
affiliated corporation . . . . . . . . . . . . . -- 122,456
Changes in:
Interest and other receivables. . . . . . . . . . 9,713 (3,309)
Accounts payable. . . . . . . . . . . . . . . . . (33,261) (4,097)
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999
------ -------
Amounts due to affiliates . . . . . . . . . . . . (8,385) 491
---------- ----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . (228,984) 5,279
---------- ----------
Cash flows from investing activities:
Partnership's dividends from
unconsolidated affiliated corporation. . . . . . 56,759 20,031,360
---------- ----------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . 56,759 20,031,360
---------- ----------
Cash flows from financing activities:
Contributions from general partners . . . . . . . 740,734 --
Distributions to limited partners . . . . . . . . (1,606,738) (19,280,858)
Distributions to general partners . . . . . . . . (50,739) (16,913)
---------- ----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . (916,743) (19,297,771)
---------- ----------
CARLYLE INCOME PLUS, L.P.-II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . (1,088,968) 738,868
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . . . 2,500,970 1,194,778
--------- ----------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . . . . . $ 1,412,002 1,933,646
========= ==========
Supplemental disclosure of
cash flow information:
Cash paid for mortgage and
other interest . . . . . . . . . . . . . . . . . $ -- --
========= ==========
Non-cash investing and
financing activities . . . . . . . . . . . . . . $ -- --
========= ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CARLYLE INCOME PLUS L.P. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 2000 THROUGH SEPTEMBER 26, 2000
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
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.
The equity method of accounting had been applied in the accompanying
financial statements with respect to the Partnership's interest in 1225
Investment Corporation ("1225 Connecticut Avenue, N.W."), whose property was
sold in March 1999. Accordingly, the accompanying financial statements do
not include the accounts of 1225 Connecticut Avenue, N.W.
The Partnership's records were 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 Partnership's accounts in
accordance with generally accepted accounting principles ("GAAP"). Such GAAP
adjustments were not recorded on the records of the Partnership. The net
effect of these items for the period from January 1, 2000 through September
26, 2000 (immediately prior to final liquidating distribution) is summarized
as follows:
TAX BASIS
GAAP BASIS (Unaudited)
------------ -----------
[S] [C] [C]
Total assets . . . . . . . . . . . . . $ 1,412,002 1,412,002
Partners' capital
accounts (deficit):
General Partners . . . . . . . . . . . -- --
Limited Partners . . . . . . . . . . . 1,412,002 1.412,002
Net earnings (loss):
General Partners . . . . . . . . . . . (245,700) (24,622)
Limited Partners . . . . . . . . . . . . . 72,791 (1,558,672)
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . . . . . . . . 1.13 (24.25)
=========== ===========
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). Also, because net earnings (loss) was computed immediately
prior to dissolution, Holders of Interests may have an additional capital
gain or loss on dissolution depending on the Holders' basis for Federal
income tax purposes.
The preparation of financial statements in accordance with GAAP
required the Partnership to make estimates and assumptions that affected the
reported or disclosed amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could have differed 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 were considered
cash flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership recorded
amounts held in U.S. Government obligations at cost, which approximated
market. For the purposes of these statements, the Partnership's policy was
to consider all such amounts held with original maturities of three months
or less (none at September 26,2000 and $2,300,000 at December 31, 1999) as
cash equivalents, which included investments in an institutional mutual fund
which held 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. All of the properties have been 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 of
carrying value or fair value less costs to sell. The adoption of SFAS 121
did not have any significant effect on the Partnership's financial position,
results of operations or liquidity.
The accompanying financial statements include $24,142 and $498,040,
respectively, of the Partnership's share of total operations of $63,000 and
$1,144,000 for the period from January 1, 2000 through September 26, 2000
(immediately prior to final liquidating distribution) and the nine months
ended September 30, 1999 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 sold this property in December 1997.
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, located in McLean, Virginia. CIP/Ashby sold this property in
August 1996.
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 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 received
approximately 44% of 1225 Investment Corporation's dividends. Such dividends
distributed from operations generally constituted taxable income to the
Partnership.
In January 1994, 1225 Investment Corporation refinanced the existing
mortgage loan (which had an outstanding principal balance of approximately
$1,667,000 and which was secured by the property) with a mortgage loan in the
amount of $7,000,000, which was scheduled to mature in February 2001. 1225
Investment Corporation used the approximately $5,300,000 of loan proceeds to
partially fund tenant improvement costs, as required by certain tenant leases
at the property.
As the 1225 Investment Corporation 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 for financial reporting
purposes, 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 1225 Connecticut Avenue, N.W. office
building. On March 29, 1999, 1225 Investment Corporation completed the sale
of the 1225 Connecticut Avenue, N.W. office building for a sale price of
$52,960,000, paid 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
(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 the
Partnership's share was $3,381,297). 1225 Investment Corporation recognized
a loss on sale in 1999 for Federal income tax purposes of approximately
$2,100,000, and the Partnership is expected to recognize a loss in 2000 for
Federal income tax purposes on its investment in its unconsolidated
affiliated corporation, 1225 Investment Corporation (which dissolved in
August 2000), of approximately $1,400,000.
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.
The Partnership received a dividend from cash flow from operations of
$435,360 from 1225 Investment Corporation in February 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 cash
flow from 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 received a final dividend from 1225 Investment Corporation of
$56,759 in August 2000.
The Partnership distributed approximately $ 18,960,000 in late May 1999
to the Holders of Interests ($295 per Interest) from the aforementioned sale
proceeds 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, representing their share of Partnership operational
cash flow and reserves, including those from offering proceeds.
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 cash flow from
operations and reserves, including those from offering proceeds. The
Partnership also paid a distribution of $50,739 to the General Partners,
which represented their share of cash flow from operations and reserves,
including those from offering proceeds. The General Partners did not receive
any distributions of proceeds from sale, as the subordination requirements of
the Partnership Agreement necessary for the retention of sales proceeds by
the General Partners were not met.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, profits and losses
of the Partnership from operations generally were 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%. However, during
2000, a reallocation of prior years' operating losses was made among the
partners for financial reporting purposes only. Such reallocation did not
have an effect on total assets, total partners' capital or net earnings.
Profits from the sale or other disposition of investment properties generally
were 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 generally were allocated 1% to the General Partners.
The General Partners made initial capital contributions of $25,000.
Pursuant to the terms of the Partnership Agreement, the General Partners also
were required to contribute a total of $740,734 to the Partnership upon
liquidation of the Partnership, such amount representing the restoration of
the deficit balances in the General Partners' tax basis capital accounts.
"Disbursable Cash" of the Partnership was 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 was
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" were 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 were to be repaid to the Partnership to the extent that the
Holders of Interests had 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 were to be allocated to the General Partners until the General
Partners had 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 were subordinate to the Holders of Interests' receipt of a
9% return on their investment. Since the Holders of Interests did 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 did 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, was 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 for
the period from January 1, 2000 through September 26,2000 (immediately prior
to final liquidating distribution) and for the nine months ended September
30, 1999 were as follows:
<PAGE>
<TABLE>
<CAPTION>
UNPAID AT
SEPTEMBER 26,
2000 1999 2000
-------- -------- -----------
<S> <C> <C> <C>
Insurance commissions. . . . . . . . . . . . . . $ 338 452 --
Reimbursement (at cost) for
accounting services . . . . . . . . . . . . . . 16,561 1,193 --
Reimbursement (at cost) for
portfolio management services . . . . . . . . . 4,722 15,985 --
Reimbursement (at cost) for
legal services. . . . . . . . . . . . . . . . . 4,805 3,962 --
Reimbursement (at cost) for
administrative charges and
other out-of-pocket-expenses . . . . . . . . . 2,097 2,097 --
Partnership winding up fee . . . . . . . . . . . 1,037 -- --
-------- -------- ---------
$ 29,560 23,689 --
======== ======== =========
<FN>
________
</TABLE>
CARLYLE INCOME PLUS L.P. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In connection with its winding up, the Partnership entered into an
agreement (the "Winding Up Agreement") with the Corporate General Partner
pursuant to which the Corporate General Partner generally assumed the
obligation to pay or otherwise discharge expenses and liabilities of the
Partnership not otherwise paid, discharged or provided for by the
Partnership, including contingent liabilities of the Partnership that may
arise after its winding up. In consideration of such assumption, the
Partnership paid the Corporate General Partner approximately $1,037 in cash
and transferred to the Corporate General Partner the Partnership's contingent
rights, if any to indemnification or reimbursement, including coverage and
benefits under contracts of insurance and certain other rights to receive or
collect amounts, if any, that may be payable to the Partnership.
SUMMARY OF JOINT VENTURE INVESTMENTS
Summary income statement information for 1225 Investment Corporation
for the period from January 1, 2000 through September 26, 2000 and the nine
months ended September 30, 1999 is as follows:
2000 1999
--------- ---------
Total income . . . . . . . . . . . $ 76,000 2,070,000
========= =========
Operating earnings . . . . . . . . $ 63,000 1,144,000
========= =========
Partnership's share of
earnings. . . . . . . . . . . . . $ 24,142 498,040
========= =========
Gain (loss) on sale of
investment property . . . . . . . $ -- (16,402)
========= ==========
Partnership's share of gain
(loss) on sale of
investment property. . . . . . . . $ -- (7,141)
========== ==========
Extraordinary items . . . . . . . . $ -- (281,281)
========== ==========
Partnership's share of
extraordinary items. . . . . . . . $ -- (122,456)
========== ==========
SUBSEQUENT EVENT
The Partnership made a final liquidating cash distribution of $1,412,002
($21.97 per Interest) to its Holders of Interests and wound up its affairs
effective September 26, 2000.
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures for the quarter ended
September 26, 2000, the period from January 1, 2000 through September 26,
2000 and for the three and nine months ended September 30, 1999.
[FN]
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Reference is made to the notes to the accompanying financial statements
for information concerning the Partnership's investment in 1225 Investment
Corporation.
On March 29, 1999, 1225 Investment Corporation completed the sale of the
1225 Connecticut Avenue, N.W. office building 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
(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 the
Partnership's share was $3,381,297). 1225 Investment Corporation recognized
a loss on sale in 1999 for Federal income tax purposes of approximately
$2,100,000, and the Partnership is expected to recognize a loss in 2000 for
Federal income tax purposes on its investment in its unconsolidated
affiliated corporation, 1225 Investment Corporation (which dissolved in
August 2000), of approximately $1,400,000.
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.
The Partnership received a dividend from cash flow from operations of
$435,360 from 1225 Investment Corporation in February 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 cash
flow from 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 received a final dividend from 1225 Investment
Corporation in the amount of $56,759 in August 2000.
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 cash flow from operations and reserves,
including those from offering proceeds.
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 cash flow from
operations and reserves, including those from offering proceeds. The
Partnership also paid a distribution of $50,739 to the General Partners,
which represented their share of cash flow from operations and reserves,
including those from offering proceeds. The General Partners did not receive
any distributions of proceeds from sale, as the subordination requirements of
the Partnership Agreement necessary for the retention of sales proceeds by
the General Partners were not met.
With the sale of the 1225 Connecticut Avenue, N.W. office building, the
Partnership has sold its interest in its last investment property. 1225
Investment Corporation paid its final dividends and was dissolved in August
2000.
Pursuant to the terms of the Partnership Agreement, the General Partners
were required to contribute a total of $740,734 to the Partnership upon
liquidation of the Partnership, such amount representing the restoration of
the deficit balances in the General Partners' tax basis capital accounts.
<PAGE>
The Partnership made a final liquidating cash distribution of $1,412,002
($21.97 per Interest) to its Holders of Interests and wound up its affairs
effective September 26, 2000. However, the Partnership's goal of capital
appreciation was not achieved. Aggregate sale distributions received by
Holders of Interests over the entire term of the Partnership were less than
their original investment.
In connection with its winding up, the Partnership entered into an
agreement (the "Winding Up Agreement") with the Corporate General Partner
pursuant to which the Corporate General Partner generally assumed the
obligation to pay or otherwise discharge expenses and liabilities of the
Partnership not otherwise paid, discharged or provided for by the
Partnership, including contingent liabilities of the Partnership that may
arise after its winding up. In consideration of such assumption, the
Partnership paid the Corporate General Partner approximately $1,037 in cash
and transferred to the Corporate General Partner the Partnership's contingent
rights, if any, to indemnification or reimbursement, including coverage and
benefits under contracts of insurance and certain other rights to receive or
collect amounts, if any, that may be payable to the Partnership.
The Partnership's annual report for 2000, which will include audited
financial statements as of September 26, 2000 and for the period from January
1, 2000 through September 26, 2000, will be sent to all investors of the
Partnership. As a consequence of the winding up of the Partnership's
affairs, there will be no further periodic reports filed with the Securities
and Exchange Commission.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents at September 26, 2000 as
compared to December 31, 1999 is due primarily to the Partnership's cash
distribution in February 2000 of $1,606,738 ($25 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 cash flow operations and reserves, including those from
offering proceeds. The Partnership also made a cash distribution in February
2000 of $50,739 to the General Partners, which represented their share of
cash flow from operations and reserves, including those from offering
proceeds. The General Partners did not receive any distributions of proceeds
from sale of the Partnership's assets, as the subordination requirements of
the Partnership Agreement necessary for the retention of sales proceeds by
the General Partners were not met. The aforementioned decrease in cash and
cash equivalents was offset in part by the General Partners' capital
contributions totaling $740,734 upon liquidation of the Partnership in
September 2000. Such amount represented the restoration of the deficit
balances in the General Partners' tax basis capital accounts, pursuant to the
terms of the Partnership Agreement.
The decrease in Partnership's investment in unconsolidated affiliated
corporation, at equity at September 26, 2000 as compared to December 31, 1999
is due primarily to the Partnership's receipt in August 2000 of its final
dividend from 1225 Investment Corporation in the amount of $56,759. This
decrease was offset in part by the Partnership's share of operations in 2000
of 1225 Investment Corporation in the amount of $24,142.
The decrease in interest income for the period from January 1, 2000
through September 26, 2000 as compared to the nine months ended September 30,
1999 is attributable primarily to interest earned in 1999 on the
Partnership's share of distributable proceeds received from the March 1999
sale of the 1225 Connecticut Avenue office building by 1225 Investment
Corporation prior to the distribution to the Holders of Interests in May
1999.
The increase in fees for professional services and in general and
administrative expenses for the quarter ended September 26, 2000 and period
from January 1, 2000 through September 26, 2000 as compared to the three and
nine months ended September 30, 1999 is attributable primarily to payments
made during the quarter ended September 26, 2000 representing final
Partnership fees and expenses, as the Partnership made its final liquidating
distribution and wound up its affairs effective September 26, 2000.
The decrease in Partnership's share of operations of unconsolidated
affiliated corporation for the period from January 1, 2000 through September
26, 2000 as compared to the nine months ended September 30, 1999 is
attributable primarily to the March 1999 sale of the 1225 Connecticut Avenue,
N.W. office building.
Partnership's share of loss on sale of investment property by
unconsolidated affiliated corporation for the nine months ended September 30,
1999 is attributable to the March 1999 sale of the 1225 Connecticut Avenue,
N.W. office building.
Partnership's share of extraordinary items of unconsolidated affiliated
corporation for the nine months ended September 30, 1999 is due to the
payment of a prepayment penalty associated with the retirement of the
existing mortgage indebtedness by 1225 Investment Corporation funded by 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.
Inflation in future periods is not applicable since the Partnership wound up
its affairs effective September 26, 2000.
PART II. OTHER INFORMATION
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) 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.
3.2 Assignment Agreement is hereby incorporated by reference to
Exhibit B of the Partnership's Prospectus which is 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.
27. Financial Data Schedule
________________
(b) No reports on Form 8-K have been filed during the period covered
by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CARLYLE INCOME PLUS, L.P.-II
BY: JMB Realty Corporation
(Corporate General Partner)
By: Gailen J. Hull,
Senior Vice President
Date: November 10, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person in the capacity and on
the date indicated.
By: Gailen J. Hull,
Principal Accounting Officer
Date: November 10, 2000
