UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number 0-18149
DEAN WITTER REALTY YIELD PLUS II, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3469111
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports re-
quired 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 nonaffiliates of
the registrant. Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
None
1 of 5<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this
Annual Report on Registrant's Form 10-K for the year
ended December 31, 1995:
1. Financial Statements (see Index to Financial Statements filed
as part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial
Statements filed as part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Amended and Restated Agreement of Limited Partnership
dated as of June 24, 1988 set forth in Exhibit A to the
Prospectus included in Registration Statement Number 33-
20475 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of June 24,
1988 incorporated by reference in Registration Statement
Number 33-20475 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership
dated as of June 24, 1988 set forth in Exhibit A to the
Prospectus included in Registration Statement Number 33-
20475 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of June 24,
1988 incorporated by reference in Registration Statement
Number 33-20475 is incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated
March 14, 1988 was filed as Exhibit 10.1 (a) to
Amendment No. 1 to Registrant's Registration Statement
on Form S-11 and is incorporated herein by reference.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989,
between the Government Center Garage Realty Trust Maker)
and Dean Witter Realty Yield Plus II, L.P. was filed as
Exhibit to Amendment No. 2 to Current Report on Form 8-K
on April 26, 1989 and is incorporated herein by
reference.
(10)(c) Construction Loan Agreement, dated April 26, 1989,
between Government Center Garage Realty Trust, as
Borrower and Dean Witter Realty Yield Plus, L.P. and
Dean Witter Realty Yield Plus II, L.P., as Lender was
filed as Exhibit to Amendment No. 2 to Current Report on
Form 8-K on April 26, 1989 and is incorporated herein by
reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield
Plus, L.P., and Realty Management Services Inc. dated as
of April 26, 1989 was filed as Exhibit to Amendment No.
2 to Current Report on Form 8-K on April 26, 1989 and is
incorporated herein by reference.
(10)(e) First Amendment to Construction Loan Agreement dated
October 12, 1989 between Government Center Garage Realty
Trust, as Borrower and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P., as
Lender.
(10)(f) Amended and Restated Construction Loan/Office Loan
Promissory Note dated October 12, 1989 between
Government Center Garage Realty Trust (Maker) and Dean
Witter Realty Yield Plus II, L.P. (Holder).
(10)(g) Second Amendment to Construction Loan Agreement dated
June 22, 1990 between Government Center Garage Realty
Trust, as Borrower and Dean Witter Realty Yield Plus,
L.P. and Dean Witter Realty Yield Plus II, L.P., as
Lender.
(10)(h) First Amendment to Amended and Restated Construction
Loan/Office Loan Promissory Note dated June 22, 1990
between Government Center Garage Realty Trust (Maker)
and Dean Witter Realty Yield Plus II, L.P. (Holder).
(10)(i) Supplemental Loan Agreement dated September 20, 1993
between Government Center Garage Realty Trust, as
Borrower and Dean Witter Realty Yield Plus, L.P. and
Dean Witter Realty Yield Plus II, L.P., as Lender.
(10)(j) Second Amendment to Notes dated September 20, 1993
between Government Center Garage Realty Trust (Maker)
and Dean Witter Realty Yield Plus, L.P. and Dean Witter
Realty Yield Plus II, L.P., (Holders).
(16) Letter regarding change in certifying accountant.
Incorporated by reference to the Partnership's Current
Report on Form 8-K dated December 31, 1994 is
incorporated herein by reference.
<PAGE>
(27) Financial Data Schedule
(d) 1. Financial statements of GCGA Limited Partnership, owner of
an office building/parking garage located in Boston,
Massachusetts.
2. Financial statements of Michelson Co., an office building
located in Irvine, California.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DEAN WITTER REALTY YIELD PLUS II, L.P.
By: Dean Witter Realty Yield Plus II Inc.
Managing General Partner
By: /s/E. Davisson Hardman, Jr. Date: April 25, 1997
E. Davisson Hardman, Jr.
President
By: /s/Lawrence Volpe Date: April 25, 1997
Lawrence Volpe
Controller
(Principal Financial and Accounting Officer)
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.
DEAN WITTER REALTY YIELD PLUS II INC.
Managing General Partner
/s/William B. Smith Date: April 25, 1997
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: April 25, 1997
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: April 25, 1997
Lawrence Volpe
Director
/s/Ronald T. Carman Date: April 25, 1997
Ronald T. Carman
Director
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Two World Trade Center
New York, New York 10048
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Pursuant to discussion with the staff, attached is Registrant's Form
10-K/A by which the financial statements of GCGA Limited Partnership
are filed as financial statement schedules to Registrant's annual
report on Form 10-K for the year ended December 31, 1995.
Very truly yours,
DEAN WITTER REALTY YIELD PLUS
II, L.P.
By: Dean Witter Realty Yield Plus II
Inc.
Managing General Partner
By: /s/C.M. Charrow
Charles M. Charrow
Assistant Controller
1
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Financial Statements
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Partners
GCGA Limited Partnership (Debtor-in-Possession):
We have audited the accompanying balance sheets of GCGA
Limited Partnership (debtor-in-possession) as of December
31, 1995 and 1994, and the related statements of operations,
changes in partners' deficit, and cash flows for each of the
years in the three-year period ended December 31, 1995.
These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financials statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of GCGA Limited Partnership (debtor-in-possession)
as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the partnership will continue as a going
concern. As discussed in note 1, the Partnership filed a
voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States
Bankruptcy Court (the Bankruptcy Court) on October 15, 1996.
As discussed in note 4 to the financial statements, the
Partnership's first and second mortgage loans are in
default. These matters raise substantial doubt about the
Partnership's ability to continue as a going concern. The
Partnership is currently operating its business as a debtor-
in-possession under the jurisdiction of the Bankruptcy
Court, and continuation of the Partnership as a going
concern is contingent upon its ability to formulate a plan
of reorganization that will be confirmed by the Bankruptcy
Court, including restructuring its existing long-term debt
arrangements. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
August 1, 1996, except for note 1 as to
which the date is October 15, 1996.
Washington, D.C. /s/KPMG Peat Marwick
LLP
<PAGE>
<TABLE>
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Balance Sheets
December 31, 1995 and 1994
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Real estate, at cost (notes 4 and 5):
Land $ 4,892,336 $
4,892,336
Building and improvements 70,934,457
70,934,457
Furniture and equipment 5,965
5,965
75,832,758
75,832,758
Accumulated depreciation 12,369,304
10,589,746
63,463,454
65,243,012
Cash
435,732 91,984
Escrow deposit for miscellaneous items 75,673
97,048
Accounts receivable - tenants, net of allowance for
doubtful accounts of $499,321 in 1994 (note 2)
5,432,364 5,810,084
Deferred costs, net of accumulated amortization of
$2,153,009 in 1995 and $1,699,874 in 1994
838,803 1,269,596
Due from general partner 119,976
99,183
Other assets 17,625
13,210
$ 70,383,627 $
72,624,117
Liabilities and Partners' Deficit
Liabilities:
First mortgage loan (note 4) $ 37,750,000 $
37,750,000
Second mortgage loan (note 4) 59,200,000
58,806,742
Note payable - Kinney System of Sudbury St., Inc.
(note 5) 2,631,260
2,681,570
Related party loan (note 6) 219,094
80,000
Deferred rental revenue 257,454
411,927
Accounts payable and accrued expenses 813,443
1,000,921
Total liabilities 100,871,251
100,731,160
Partners' deficit (note 3) (30,487,624)
(28,107,043)
Contingencies (notes 4 and 5)
$ 70,383,627 $
72,624,117
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994
1993
<S> <C> <C>
<C>
Revenue:
Rental, including escalation income
of $1,846,475 in 1995, $2,065,462 in
1994, and 1,790,824 in 1993 $ 12,986,313 $
12,425,230 $ 11,883,245
Supplemental rent (note 5) 316,200
316,200 316,200
Interest and other 102,906
27,595 63,282
Total revenue 13,405,419
12,769,025 12,262,727
Expenses:
Interest (notes 4 and 5) 8,559,012
8,430,761 8,418,372
Depreciation 1,779,558
1,779,558 1,769,936
Amortization 453,135
476,211 372,773
Real estate taxes 2,821,441
2,782,248 2,682,802
Utilities 737,485
656,224 625,989
General and administrative 1,081,944
1,309,469 898,040
Management fee (note 6) 353,425
282,607 345,901
Total expenses 15,786,000
15,717,078 15,113,813
Net loss $ (2,380,581) $
(2,948,053) $ (2,851,086)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Statements of Changes in Partners' Deficit
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
General Limited
Total Partners
Partners
<S> <C> <C>
<C>
Partners' deficit at January 1, 1993 $(22,307,904)
$(2,191,880) $(20,116,024)
Allocated net loss from January 1, 1993
through September 20, 1993 (note 3) (2,054,447)
(41,089) (2,013,358)
Allocated net loss from September 21,
1993 to December 31, 1993 (note 3) (796,639)
(7,966) (788,673)
Partners' deficit at December 31, 1993 (25,158,990)
(2,240,935) (22,918,055)
Net loss (2,948,053)
(29,481) (2,918,572)
Partners' deficit at December 31, 1994 (28,107,043)
(2,270,416) (25,836,627)
Net loss (2,380,581)
(23,806) (2,356,775)
Partners' deficit at December 31, 1995 $(30,487,624)
$(2,294,222) $(28,193,402)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994
1993
<S> <C> <C>
<C>
Cash flows from operating activities:
Net loss $(2,380,581)
$(2,948,053) $(2,851,086)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 2,232,693
2,255,769 2,142,709
Decrease (increase) in:
Escrow deposit 21,375
196,630 (69,410)
Accounts receivable-tenants 377,720
(357,888) (6,091)
Deferred costs (22,342)
(434,528) -
Due from general partner (20,793)
(8,293) (7,601)
Other assets (4,415)
(1,148) 472
Increase (decrease) in:
Accounts payable and accrued
expenses (187,478)
(89,150) (255,510)
Deferred rental revenue (154,473)
(652,010) 1,063,937
Net cash provided by (used in) operating
activities (138,294)
(2,038,671) 17,420
Cash flows from investing activities -
investment in real estate - (151,103)
- -
Cash flows from financing activities:
Proceeds of second mortgage loan 393,258
1,319,809 -
Proceeds of related party loan 139,094
80,000 -
Repayment of notes payable to
Kinney System (50,310)
(45,542) (41,196)
Net cash provided by (used in) financing
activities 482,042
1,354,267 (41,196)
Increase (decrease) in cash 343,748
(835,507) (23,776)
Cash at beginning of year 91,984
927,491 951,267
Cash at end of year $ 435,732
91,984 927,491
Supplemental disclosure of cash paid
during the year for interest $ 8,548,352 $
8,416,486 $ 8,418,685
See accompanying notes to financial statements.
</TABLE>
<PAGE>
GCGA LIMITED PARTNERSHIP
(Debtor-in-Possession)
Notes to Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
GCGA Limited Partnership (the Partnership) is a limited
partnership organized under the laws of the Commonwealth of
Massachusetts. Until September 20, 1993, the general
partners of the Partnership were Government Center Garage
Associates Limited Partnership (GCA) and LS Government
Center Limited Partnership (LSA). GCA and LSA each owned a
1% general partnership interest, and a 65-2/3% and 32-1/3%
limited partnership interest, respectively.
On September 20, 1993, LSA withdrew from the Partnership.
In conjunction with its withdrawal from the Partnership, LSA
transferred its 1% general partnership interest and 31-1/3%
of its limited partnership interest to GCA. The 1% general
partnership interest was then converted to a limited
partnership interest by GCA. LSA transferred its remaining
1% limited partnership interest to Richard Rubin.
The Partnership is the sole beneficiary of Government Center
Garage Realty Trust (the Trust) which owns One Congress
Street (the Property), an 11-story structure containing
approximately 260,000 square feet of office and retail space
in addition to a 2,200-space parking garage, located in
Boston, Massachusetts.
On October 15, 1996, the Partnership filed a voluntary
petition for relief under Chapter 11 ("Chapter 11") of Title
11 of the United States Code in the United States Bankruptcy
Court for the District of Maryland (the Bankruptcy Court).
The Partnership is presently operating its business as
debtor-in-possession under the jurisdiction of the
Bankruptcy Court and intends to propose a plan of
reorganization pursuant to Chapter 11. As debtor-in-
possession, the Partnership may not engage in transactions
outside of the ordinary course of business without approval
of the Bankruptcy court, after notice and hearing. Since
the Chapter 11 filing on October 15, 1996, the Partnership
continued discussions with the holder of its second mortgage
loan relating to restructuring alternatives.
1. Organization (continued)
As described in note 4, the general partner in one of the
Partnership's general partners filed a voluntary petition
under Chapter 11 of the Bankruptcy Code. This constitutes a
technical event of default under the first and second
mortgage loans. The lenders' remedies include accelerating
the maturity date and demanding immediate payment of the
loans.
At December 31, 1995, 94% of the office building and retail
rental space and 100% of the garage space is under lease.
However, on August 22, 1996, a major tenant vacated
approximately 68,000 net square feet of office space. The
vacancy of this space, which comprises 26% of the total
office and retail space, will cause a significant decrease
in the Partnership's cash flow from operations. The
Partnership is actively pursuing a new tenant for this
vacated space. As a result of the decrease in cash flow,
the Partnership was delinquent in making the October 1, 1996
payment on its second mortgage loan. Due to this
delinquency, the second mortgagor filed for receivership of
the assets of the Partnership on October 15, 1996. These
events led to the Partnership's decision to file for
protection under Chapter 11 to enable the Partnership to
restructure its financial arrangements under the
jurisdiction of the Bankruptcy Court.
The liabilities subject to compromise at October 15, 1996
are comprised primarily of the second mortgage loan and
related accrued interest. These liabilities and other
operating liabilities are subject to adjustment in the
reorganization process. Under Chapter 11, actions to
enforce certain claims against the Partnership are stayed if
the claims arose, or are based on events that occurred, on
or before the petition date of October 15, 1996. The
ultimate terms of settlement of these liabilities and claims
will be determined in accordance with a plan of
reorganization which requires the approval of impaired
prepetition creditors and confirmation by the Bankruptcy
Court. Other liabilities may arise or be subject to
resolution of claims for contingencies and other disputed
amounts. The ultimate resolution of such liabilities will
be part of reorganization.
The accompanying financial statements have been presented on
the basis that the Partnership is a going concern, which
contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As a
result of the Chapter 11 filing and circumstances relating
to this event, realization of assets and satisfaction of
liabilities is subject to uncertainty. A plan of
reorganization could materially change the amounts reported
in the
1. Organization (continued)
accompanying financial statements, which may be necessary as
a consequence of a plan of reorganization. The ability of
the Partnership to continue as a going concern is dependent
on, among other things, confirmation of an acceptable plan
of reorganization.
2. Summary of Significant Accounting Policies
Basis of Accounting
The Partnership uses the accrual basis of accounting for
financial reporting purposes in conformity with generally
accepted accounting principles. The preparation of
financial statements in conformity with generally accepted
accounting principles requires the use of management
estimates that affect certain reported amounts and
disclosures. Actual results could differ from those
estimates.
Real Estate
Real estate and related improvements are recorded at cost
less accumulated depreciation and amortization. Cost
includes land and improvements, direct construction costs,
indirect project costs, and carrying costs, including real
estate taxes and interest incurred during the construction
period.
Depreciation is recorded on the straight-line basis over the
estimated useful lives of the assets: building and building
improvements, 40 years; furniture and equipment, 15 years.
Interest, property taxes, and insurance relating to
construction were capitalized during the period in which
construction activities were in progress. Costs incurred
after construction was substantially complete were charged
to expense.
Rental Revenue
Rental revenue is recognized on a straight-line basis over
the life of the respective leases. The cumulative excess of
rental revenue recognized on a straight-line basis over
contract rents is included in accounts receivable. As of
December 31, 1995 and 1994, such amounts included in
accounts receivable were $4,722,299 and $5,552,780,
respectively. The cumulative excess of contract rents over
rental revenue recognized on a straight-line basis is
recorded as deferred rental revenue.
2. Summary of Significant Accounting Policies (continued)
Deferred Costs
Loan costs related to the construction financing have been
capitalized as part of the cost of the building and are
amortized over the life of the building. Loan costs related
to the mortgage payable have been capitalized and are being
amortized over the term of the mortgage.
Lease commission expenses incurred have been capitalized and
are amortized on a straight-line basis over the lives of the
respective leases.
Leasehold improvements have been capitalized are amortized
on a straight-line basis over the lives of their respective
leases.
Income Taxes
No provision for income taxes has been made in the financial
statements because the partners report any income or loss
for tax purposes on their tax returns.
3. Partnership Agreement
The Partnership Agreement and subsequent amendments (the
Agreement) provide that net cash flow, as defined in the
Agreement, generally will be paid to the partners prorata,
in accordance with each of their partnership interests.
Net capital proceeds, as defined in the agreement, generally
will be distributed to the partners prorata in accordance
with each of their partnership interests. However, net
capital proceeds arising from a transaction involving the
disposition of all or substantially all the beneficial
interest in the Trust or property or involving the
liquidation of the Partnership shall be distributed in
accordance with the partners capital accounts, as adjusted,
pursuant to the Agreement.
In consideration of the change in the Partnership, discussed
in note 1, the net loss for 1993 was assumed to have been
incurred evenly throughout the year, and was allocated to
the partners in proportion to their respective partnership
interests before and after September 20, 1993, the effective
date of the change.
4. Mortgage Loans Payable
In October 1989, the Trust obtained a 9.39% fixed rate first
mortgage loan for $37,750,000 from a major insurance
company. The loan requires monthly payments of interest
only and matures November 1, 2001. Interest expense
incurred on this loan was $3,544,725 in 1995, 1994 and 1993.
In April 1989, the Trust also obtained a $57.7 million
second mortgage construction and permanent loan commitment
from Dean Witter Yield Plus, L.P. and Dean Witter Realty
Yield Plus II, L.P. (the Lenders). Subsequently, the
commitment was increased to $59.2 million to fund certain
costs incurred to accelerate the completion of the
construction.
In August 1990, the second mortgage construction and
permanent loan commitment was converted to a permanent
second mortgage loan. Base interest is payable monthly at
8%. Before the loan was modified on September 20, 1993, it
also provided for additional interest of 37% of adjusted
gross receipts, as defined in the loan agreement, and 37% of
net capital proceeds after repayment of the first and second
mortgage loans and other partnership indebtedness. The
balance of the second mortgage loan was $59,200,000 and
$58,806,742 at December 31, 1995 and 1994, respectively.
The second mortgage loan matures November 1, 2001. Interest
expense incurred on this loan for 1995, 1994 and 1993 was
$4,734,619, $4,614,996 and $4,598,955, respectively.
According to the Trust's loan agreement with the Lenders,
the Trust may borrow up to $59.2 million from the Lenders.
The loan was modified on September 20, 1993. The loan
modification provided that: (1) the Lenders are obligated to
make loan advances to the Trust necessary for the Trust to
pay expenses due and payable in connection with the
ownership and operation of the property during the free rent
period to which GSA is entitled under its lease of the
property (see note 5); (2) the loan advances, in aggregate,
shall not exceed $1,713,067, the amount remaining on the
lenders $59.2 million commitment; and (3) the Lenders are
not obligated to advance to the Trust a portion of the loan
proceeds (which will be at least 50%) that may remain after
any advances made to the Trust to pay expenses during the
GSA free rent period. Under the loan modification, the
Lenders and the Trust also agreed to increase the amount of
"Additional Interest" payable to the Lenders under the
second mortgage loan by (i) providing for the payment of the
first $250,000 of adjusted gross receipts in any calendar
year as additional interest, and (ii) increasing the
additional interest from adjusted gross receipts and net
capital proceeds of the
4. Mortgage Loans Payable (continued)
Property, after payment of the first $250,000, from 37% to
58%. No additional interest was due to the Lenders at
December 31, 1995, 1994, and 1993.
In conjunction with the loan modification and changes in
partnership interests on September 20, 1993, an existing
operating deficit guaranty of the former general partners
was released by the Lenders.
In August 1991, the general partner of one of the
Partnership's general partners filed a voluntary petition
under Chapter 11 of the Bankruptcy Code. In September 1993,
this general partner's interest was converted to a limited
partnership interest. In June 1996, this limited
partnership interest was placed in a trust for the benefit
of the partners' creditors. The above matter constitutes a
technical event of default under the first and second
mortgage loans. Therefore, the loans may be called at any
time. See note 1.
As a result of the partnership's reorganization proceedings,
the repayment terms of the mortgage loans payable will be
determined pursuant to a plan of reorganization confirmed by
the Bankruptcy Court.
5. Leases
The Partnership's rental real estate consists of an 11-story
structure containing a 2,200-space parking garage and
approximately 260,000 square feet of office and retail space
available for lease. As of December 31, 1995, approximately
94% of the office and retail rental space and 100% of the
garage space is under lease. The following table summarizes
future minimum rents under noncancelable operating leases
and the percentage of total rented space expiring each year,
as of December 31, 1995:
Percentage
Future of Space
Under
Year ended December 31 Minimum Rentals Lease
Expiring
1996 $ 11,157,587 27%
1997 7,722,432 60%
1998 4,130,449 -
1999 4,335,515 -
2000 4,402,455 -
Thereafter 13,406,536 13%
$ 45,154,974 100%
5. Leases (continued)
The parking garage is master-leased to Kinney System of
Sudbury St., Inc., a wholly owned subsidiary of Kinney
System, Inc., under a lease agreement which expires in
December 2003. The lease is a triple-net lease with two
five-year options at fair market value.
At the inception of the lease, the lessee granted a
$3,000,000 loan to the Partnership, which is payable in
monthly payments of $26,350, which include interest at 10%
per annum. As of December 31, 1995 and 1994, the balance
outstanding was $2,631,260 and $2,681,570, respectively.
The lease provides for supplemental rental payments to the
Partnership of $26,350 per month to cover loan principal and
interest payments. These amounts are recorded as
supplemental rent. The lease also provides that the unpaid
principal of the loan may be forgiven if certain conditions,
as more fully described in the note agreement, are met.
Interest expense incurred on this loan for 1995, 1994, and
1993 was $266,785, $271,040, and $274,692, respectively.
The retail space represents approximately 15% of the total
leasable office and retail space in the building and is
approximately 17% occupied at December 31, 1995.
The office space represents approximately 85% of the total
leasable office and retail space in the building and is 100%
occupied at December 31, 1995.
The building has one tenant that comprises approximately 87%
of total leasable office and retail space and 65% of total
building cash rents paid during 1995. See note 7.
6. Related-Party Transactions
The Property is managed by an affiliate of the Partnership.
During 1995, 1994 and 1993, the affiliate earned $353,425,
$282,607, and $345,901, respectively, in management fees.
In November 1994, the Partnership obtained an $80,000 short-
term loan from an affiliate. This noninterest-bearing loan
was repaid in January 1995. In March 1995, the Partnership
obtained a $205,000 loan from another affiliate. This loan
accrued interest at a fixed rate of 9%. The balance of the
loan, including accrued interest was $219,094 at December
31, 1995. Principal and accrued interest on this loan were
repaid in July 1996.
