SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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 [NO FEE REQUIRED]
For the transition period from _____________ to _____________
Commission File No. 0-19246
CLOVER INCOME PROPERTIES III, L.P.
(Exact name of registrant as specified in its charter)
Delaware 22-2935727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 W. PARK AVENUE, MERCHANTVILLE, NJ 08109
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (609) 662-1116
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest.
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.
The registrant has no voting stock. The registrant's outstanding voting
securities consist of units of limited partnership interest which have no
readily ascertainable market value since there is no public trading market for
these securities on which to base a calculation of aggregate market value.
<PAGE>
Documents incorporated by reference: The Prospectus of the registrant dated
September 18, 1987 filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933 on September 30, 1987 is incorporated herein by reference
in Parts I, II and III of this Annual Report on Form 10-K and Supplement No. 3
to the Prospectus dated September 12, 1988 and filed with the Commission as part
of Post-Effective Amendment No. 4 to the Registrant's Registration Statement on
September 13, 1988, is incorporated by reference in Part I of this Annual Report
on Form 10-K. Registrant's Current Report on Form 8-K filed with the Securities
and Exchange Commission on March 4, 1996 is incorporated by reference in Part I
of this Annual Report on Form 10-K.
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<PAGE>
PART I
ITEM l. Business
The Registrant, Clover Income Properties III, L.P. (the "Partnership"), is
a limited partnership formed in May 1988 under the Revised Uniform Limited
Partnership Act of the State of Delaware to invest in existing income-producing
residential real estate properties. Crown Management Corporation, a New Jersey
corporation which is a wholly-owned subsidiary of Clover Financial Corporation
("Clover"), a New Jersey corporation, is the General Partner (the "General
Partner") of the Partnership. The Partnership made a public offering (the
"Offering") of units (the "Units") of limited partnership interest pursuant to a
Prospectus (the "Prospectus") contained in Pre-Effective Amendment No. 1 to the
Partnership's Form S-11 Registration Statement (the "Registration Statement")
filed with the Commission under the Securities Act of 1933 (No. 33-26129) on
March 30, 1989. The Partnership supplemented the Prospectus by Supplement No. 1
dated August 25, 1989 ("Supplement No. 1"), Supplement No. 2 dated December 11,
1989 ("Supplement No. 2"), Supplement No. 3 dated February 14, 1990 ("Supplement
No. 3"), and Supplement No. 4 dated March 27, 1990 ("Supplement No. 4") which
incorporated and superseded Supplement No. 3, Supplement No. 5 dated April 25,
1990 (the "Cumulative Supplement") which incorporated and superseded Supplement
No. 1, 2 and 4, and Supplement No. 6 dated March 27, 1991 ("Supplement No. 6").
On March 16, 1992, the Partnership terminated the Offering upon the sale of
7,300 Units to 743 limited partners. The gross proceeds to the Partnership from
the sale of such Units was $7,295,440, which amount reflects purchases net of
selling commissions by officers, directors, and employees of the Partnership and
its affiliates and purchases subject to reduced commissions by certain other
subscribers.
On July 1, 1994, the Partnership sold the Mallard Green Apartments
("Mallard Green"), a 76-unit garden-style residential apartment complex located
outside the city limits of Charlotte, North Carolina, together with all related
improvements and intangible and tangible property, to United Dominion Realty
Trust, Inc. ("United Dominion") for a cash purchase price of $2,700,000. The
Purchaser is not affiliated with the Partnership, and the sale was negotiated on
an arms-length basis. The Partnership incurred expenses of $28,813 in connection
with the sale, which were paid from the proceeds of the sale. The Partnership
also set aside additional working capital reserves of $58,487 at the time of the
sale. No expenses or commissions were paid to the General Partner or its
affiliates in connection with the sale.
The Partnership had acquired Mallard Green in April 1990 from an affiliate
at a purchase price of $3,307,721 (the price paid by the affiliate plus its net
acquisition and carrying costs), plus acquisition expenses of $14,933 and an
acquisition fee of $151,456
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<PAGE>
paid to the General Partner. A more complete description of the Mallard Green
Apartments and the terms of its acquisition by the Partnership is contained in
the section of the Cumulative Supplement titled "Real Property Investments", and
such description is incorporated herein by reference.
The Partnership continues to own a l4.18% interest in The Willowbrook Joint
Venture, a joint venture among the Partnership, Clover Income Properties, L.P.
("CIP") and Clover Income Properties II, L.P. ("CIP II"), both of which are
affiliates of the Partnership. The Partnership acquired its interest in The
Willowbrook Joint Venture effective April 1, 1992. The Willowbrook Joint Venture
owns The Willowbrook Apartments, a 299-unit mid-rise residential apartment
complex located in Baltimore, Maryland, which it acquired on December 17, 1987,
at a purchase price of $12,500,000. The Partnership acquired its interest in The
Willowbrook Joint Venture for a cash purchase price of $2,200,000, and the
Partnership paid an acquisition fee to the General Partner in the amount of
$212,030 as well as $17,609 in expenses, including legal, appraisal, accounting,
title insurance and miscellaneous expenses.
The Willowbrook Apartments are subject to risks, including competition from
other rental apartment and townhouse developments in the Baltimore area, adverse
local market conditions due to changes in economic conditions in the Baltimore
market, the Mid-Atlantic region or nationally, area characteristics, interest
rates, availability and cost of insurance coverage, changes in real estate tax
rates or laws, rising utilities costs and operating expenses, rent control,
governmental regulations, acts of God and other factors which are beyond the
control of the Partnership.
Services at The Willowbrook Apartments are performed by on-site personnel
all of whom are employees of NPI-CL Management L.P. ("NPI"), an unaffiliated
third party. Such services are provided pursuant to a written agreement
providing for fees equal to 5% of the gross revenues from The Willowbrook
Apartments. NPI replaced Allstate Management Corp., an affiliate of the General
Partner, as the property manager effective February 21, 1995. At the same time,
other partnerships affiliated with the General Partner also engaged NPI as a
property manager at rates equivalent to the rates previously paid to the prior
property manager of each partnership.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. According to Commercial Property News and the National Multi-Housing
Council, Insignia, together with its affiliates, is the largest property manager
in the United States. The General Partner does not believe this transaction will
have a significant impact on the Partnership.
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<PAGE>
On February 7, 1996, The Willowbrook Joint Venture, Berwind Property Group,
Inc. ("Berwind") and First Montgomery Properties, Ltd. ("First Montgomery", and
with Berwind, the "Buyers") executed an Agreement of Sale (as amended, the "Sale
Agreement") concerning the sale of The Willowbrook Apartments (the "Sale").
Pursuant to the terms of the Sale Agreement, the Buyers have agreed to
purchase The Willowbrook Apartments for a purchase price of $9,850,000. The
completion of the Sale is contingent upon the approval of the holders of more
than 50% of the outstanding Units and the holders of more than 50% of the
outstanding units of limited partnership interest in each of CIP and CIP II. If
such approval is not obtained on or before June 30, 1996, the Sale Agreement
shall be automatically cancelled and terminated.
The preceding two paragraphs modify and supercede the description of the
Sale in the Partnership's Current Report on Form 8-K, filed with the Commission
pursuant to the Securities Exchange Act of 1934 on March 4, 1996.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion of the
operations of the Partnership's business.
PART II
ITEM 5. Market for the Partnership's Units of Limited Partnership Interest
and Related Security Holder Matter
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership's
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") included as an Exhibit to the Prospectus and incorporated herein by
reference. As of March 1, 1996, 701 limited partners held 7,300 Units.
Cash distributions, if any, to be distributed to the partners of the
Partnership are described generally at pages 21-22 in the Prospectus, and such
description is incorporated herein by reference. Distributions for 1995 and 1994
were paid quarterly in the annual amounts set forth under Item 6. Selected
Financial Data.
The General Partner maintains a policy that the only cash distributions
made to the Partnership's limited partners are distributions of "net cash
receipts," as defined on page A-4 of the Prospectus, which definition is
incorporated herein by reference (other than distributions of proceeds from the
sale of Partnership property or the liquidation of the Partnership). The total
net
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<PAGE>
cash receipts of the Partnership from inception through December 31, 1995 were
$4,510,462. Total distributions from inception through December 31, 1995 were
$4,362,904 and $9,954 was subsequently distributed in January 1996 with respect
to the fourth quarter of 1995 for a total of 4,372,858. Of that amount,
$3,688,192 represents a return of capital and the balance of $684,666 represents
a distribution of income. Except for the July 1, 1994 distribution of $2,700,000
of the proceeds from the sale of Mallard Green, all distributions to Partners
have been funded by current year net cash receipts and undistributed net cash
receipts from prior years and all distributions have been made on a quarterly
basis.
On or about July 15, 1994, the Partnership distributed $2,775,022 to its
Limited Partners, including $2,692,897 of net sales proceeds and $82,125 of
second quarter cash flow, representing a distribution of $380.14 for each Unit
of limited partnership interest owned. The Partnership also distributed $830 of
second quarter cash flow to the General Partner; however, the General Partner
received no proceeds from the sale of Mallard Green.
-6-
<PAGE>
PART III
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition, Liquidity and Capital Resources
The Partnership's only remaining interest in real estate is a 14.18%
interest in The Willowbrook Joint Venture, which owns The Willowbrook
Apartments. Consequently, the Partnership's primary remaining source of
operating cash flow will be distributions from The Willowbrook Joint Venture.
Cash on hand on December 31, 1995 was $122,873 as compared to $116,337 on
December 31, 1994. These funds, along with future operating cash flow, will be
utilized for working capital needs and for distributions to the limited
partners.
The Partnership's net cash flow from operations was $(13,337) for 1995 as
compared to $71,070 for 1994 and $208,687 for 1993. The decrease in net cash
flow from operations for 1995 and 1994 is attributable to a decrease in cash
received from rentals partially offset by a corresponding decrease in cash paid
for operating expenses as a result of the sale of Mallard Green on July 1, 1994.
The Willowbrook Joint Venture's net cash flow from operations was $797,919
for 1995 as compared to $820,992 for 1994 and $715,533 for 1993. The decrease in
cash flow from operations for 1995, as compared to 1994 was due to a decrease in
cash received from rentals, interest and other income. The increase in cash flow
from operations in 1994, as compared to 1993, was primarily due to an increase
in cash received from rentals combined with an increase in other income and a
decrease in cash paid for operating expenses.
The General Partner believes that the Partnership's current and future cash
flows will be sufficient to meet the Partnership's liquidity requirements over
the next twelve months and the foreseeable future, absent unanticipated
operating cost increases or adverse market conditions.
If the Sale is approved by the Limited Partners and completed, the proceeds
from the Sale distributed by the Joint Venture will be sufficient to cover the
anticipated costs of the Sale estimated to be $832,000.
As of December 31, 1995, the Partnership had paid all outstanding amounts
owed to the General Partner and its affiliates. As of December 31, 1995, The
Willowbrook Joint Venture, however, owed a total of approximately $326,000 to
Allstate Management Corp., an affiliate of the General Partner, for reimbursable
costs and accrued and unpaid property management fees. The payment of
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<PAGE>
such amounts will be made from The Willowbrook Joint Venture's cash flow when
available and from the proceeds of any sales or refinancing of the assets of The
Willowbrook Joint Venture.
During 1995, one elevator at The Willowbrook Apartments was replaced at a
cost of $22,958; air conditioning equipment was purchased at a cost of $18,422
and other capital improvements were made at a cost of $10,810. These amounts are
reflected in the Statement of Cash Flows as cash paid for investing activities.
In addition, common area hallways were recarpeted in 1995. Major projects
planned for 1996 at The Willowbrook Apartments, at an estimated total cost of
$188,000, include the replacement of carpets and tiles, the resurfacing of the
parking lot and the painting of certain hallways. Funding for these projects
will be provided by The Willowbrook Joint Venture's operating cash flow. It is
not anticipated that these projects will cause any increase in the realty taxes
at The Willowbrook Apartments.
Results of Operations
Until the sale of Mallard Green, the Partnership earned revenues primarily
from rental income from Mallard Green. Revenues from The Willowbrook Apartments
are not included in the Partnership's revenues.
No rental income was recorded in 1995. Rental income was $240,573 in 1994
as compared to $468,295 in 1993. The decrease in 1995 from 1994 and in 1994 from
1993 is attributable to the sale of Mallard Green on July 1, 1994.
Operating expenses were $2,402 for 1995, $121,577 for 1994 and $242,056 for
1993. The decrease in 1995 and in 1994 was due to the sale of Mallard Green.
The Partnership had a loss after depreciation and amortization of $704,736
in 1995 and $408,670 in 1994 and income after depreciation and amortization of
$92,573 in 1993. The increased loss in 1995 over 1994 was primarily due to an
impairment loss on the Partnership's investment in the Joint Venture and the
write off of deferred costs offset by a loss on the sale of Mallard Green
incurred in 1994 and the elimination of operating and depreciation expenses in
1995, partially offset by the elimination of rental income and by legal and
accounting fees incurred during 1995 in connection with efforts to sell The
Willowbrook Apartments. For a further discussion of the impairment loss, see
Note 3 in the Financial Statements of the Partnership on page F-11. The
impairment loss on the Partnership's investment in the Joint Venture in the
amount of $472,947 and the write off of deferred costs in the amount of $190,315
was based upon a proposed sale of The Willowbrook Apartments and subsequent
liquidation of the Partnership. The Partnership has reflected its investment in
the Joint Venture at the lower of cost or market. Market value is
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<PAGE>
based on the cash proceeds (net of settlement costs) from the sale of The
Willowbrook Apartments after allocation of proceeds to The Willowbrook Joint
Venture Partners. The decrease from income after depreciation and amortization
in 1993, to a loss in 1994, is primarily attributable to the decrease in rental
income due to the sale of Mallard Green and to the loss on the sale incurred in
1994, partially offset by the corresponding decrease in operating and
depreciation expenses.
Rental income for The Willowbrook Apartments, as operated by the Joint
Venture, was $2,013,638 in 1995, as compared to $2,013,518 in 1994 and
$1,928,002 in 1993. Other income was $34,414 in 1995 as compared to $48,416 in
1994 and $34,772 in 1993. Interest income was $1,051 in 1995 as compared to
$3,032 in 1994 and $5,135 in 1993.
Rental income for 1995 was virtually unchanged from 1994. A slight
improvement in occupancy rates was essentially offset by a slight decrease in
rental rates. The increase in rental income for 1994 as compared to 1993 was
primarily due to an increase in occupancy. The increase in other income from
1993 to 1994 and the decrease from 1994 to 1995 is primarily attributable to a
$17,000 refund of health benefit overpayments received in 1994. Interest income
decreased in 1994 and 1995 due to lower cash balances being maintained.
The average effective annual rental rates per unit for The Willowbrook
Apartments were $7,180 in 1995, $7,218 in 1994 and $7,270 in 1993. The average
occupancy rates were 93.9% in 1995, 93.3% in 1994 and 88.7% in 1993.
Operating expenses for The Willowbrook Apartments for 1995 were $1,225,052
as compared to $1,219,161 for 1994 and $1,186,441 for 1993. The slight increase
in 1995 over 1994 was primarily due to increases in advertising expenses and
repairs and maintenance, substantially offset by a decrease in real estate taxes
resulting from a reduction in the property tax rates from the period ended June
30, 1994 to the period ended June 30, 1995. The increase in operating expenses
for 1994 over 1993 was primarily due to increases in salaries and wages, repairs
and maintenance and utilities, partially offset by decreases in advertising and
marketing expenses and decreases in real estate taxes from the period ended June
30, 1993 to the period ended June 30, 1994.
The Willowbrook Joint Venture's income after depreciation and amortization
was $295,191 for 1995 as compared to $310,701 for 1994 and $251,109 for 1993.
The decrease in income after depreciation and amortization in 1995 as compared
to 1994 is due to a decrease in other income combined with increases in
operating expenses and professional services, partially offset by a decrease in
general and administrative expenses. The increase in income after depreciation
and amortization in 1994 as compared to 1993 is due to
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<PAGE>
increases in rental and other income, partially offset by increases
in operating expenses.
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<PAGE>
ITEM 8. Financial Statements and Supplementary Data.
INDEX
-----
Report of Independent Certified Public Accountants for F-1
Clover Income Properties III, L.P.
Clover Income Properties III, L.P. Balance Sheets as F-2
of December 31, 1995 and 1994
Clover Income Properties III, L.P. Statements of F-3
Operations for each of the three years in the period
ended December 31, 1995
Clover Income Properties III, L.P. Statements of F-4
Partners' Capital for each of the three years in the
period ended December 31, 1995
Clover Income Properties III, L.P. Statements of Cash F-5
Flows for each of the three years in the period ended
December 31, 1995
Clover Income Properties III, L.P. Summary of F-7
Significant Accounting Policies
Clover Income Properties III, L.P. Notes to the F-9
Financial Statements
Report of Independent Certified Public Accountants for F-17
The Willowbrook Joint Venture
The Willowbrook Joint Venture Balance Sheets as of F-18
December 31, 1995 and 1994
The Willowbrook Joint Venture Statements of Income for F-19
each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Statements of Partners' F-20
Capital for each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Statements of Cash Flows F-21
for each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Summary of Significant F-23
Accounting Policies
The Willowbrook Joint Venture Notes to the Financial F-24
Statements
Clover Income Properties III, L.P. Schedule III Real F-28
Estate and accumulated depreciation for each of the
three years in the period ended December 31, 1995
The Willowbrook Joint Venture Schedule III Real Estate F-29
and accumulated depreciation for each of the three years
in the period ended December 31, 1995
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<PAGE>
Crown Management Corporation Independent Auditors' F-30
Report
Crown Management Corporation Consolidated Balance F-31
Sheet
Crown Management Corporation Notes to Consolidated F-32
Balance Sheet
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<PAGE>
Report of Independent Certified Public Accountants
Clover Income Properties III, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheets of Clover Income Properties III,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for each of
the three years in the 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 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
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 Clover Income Properties III,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except for Note 3 which is February 7, 1996 and Note 7 which
is May 16, 1996.
F-1
<PAGE>
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Clover Income Properties III, L.P.
Balance Sheets
December 31, 1995 1994
- -------------------------------------------------------------------------------
Assets
Cash $ 122,873 $ 116,337
Investment in The Willowbrook
Joint Venture, at market in 1995
and equity in 1994 1,395,454 2,160,483
---------- -----------
$ 1,518,327 $ 2,276,820
=========== ===========
Liabilities and Partners' Capital
Liabilities
Accrued expenses $ 19,500 $ 18,250
Due to affiliates -- 10,395
---------- -----------
Total liabilities 19,500 28,645
---------- -----------
Partners' capital
General partner (deficiency) (44,927) (37,433)
Limited partners 1,543,754 2,285,608
---------- -----------
Total partners' capital 1,498,827 2,248,175
---------- -----------
$ 1,518,327 $ 2,276,820
=========== ===========
See accompanying summary of significant accounting policies and notes
to financial statements.
F-2
<PAGE>
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Clover Income Properties III, L.P.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $ - $ 240,573 $ 468,295
Interest income 2,177 7,098 6,725
Other income - 1,430 1,243
----------- ----------- ----------
Total revenues 2,177 249,101 476,263
----------- ----------- ----------
Expenses
Impairment loss, investment in
The Willowbrook Joint Venture 663,262 - -
Operating expenses (including affiliate transactions
of $18,442 in 1994 and $41,385 in 1993) 2,402 121,577 242,056
Depreciation and amortization 9,516 57,092 106,088
Professional services 42,421 21,242 29,368
General and administrative 3,405 7,795 14,020
----------- ----------- ----------
Total expenses 721,006 207,706 391,532
----------- ----------- ----------
Operating (loss) income (718,829) 41,395 84,731
(Loss) on the sale of investment property - (466,357) -
Share of income from The Willowbrook
Joint Venture 14,093 16,292 7,842
----------- ----------- ----------
Net (loss) income $ (704,736) $ (408,670) $ 92,573
=========== =========== ==========
Net (loss) income per limited partnership unit $ (95.57) $ (55.70) $ 12.24
=========== =========== ==========
</TABLE>
See accompanying summary of significant accounting policies and notes
to financial statements.
F-3
<PAGE>
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Clover Income Properties III, L.P.
Statements of Partners' Capital
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1992 $ (32,769) $ 5,876,049 $ 5,843,280
Partners' distributions, $43.74
per limited partnership unit (3,225) (319,275) (322,500)
Net income 3,225 89,348 92,573
------------ --------------- ---------------
Balance, December 31, 1993 (32,769) 5,646,122 5,613,353
Partners' distributions, $404.64
per limited partnership unit (2,636) (2,953,872) (2,956,508)
Net (loss) (2,028) (406,642) (408,670)
------------ --------------- ---------------
Balance, December 31, 1994 (37,433) 2,285,608 2,248,175
Partners' distributions, $6.05
per limited partnership unit (447) (44,165) (44,612)
Net (loss) (7,047) (697,689) (704,736)
------------ --------------- ---------------
Balance, December 31, 1995 $ (44,927) $ 1,543,754 $ 1,498,827
============ =============== ===============
</TABLE>
See accompanying summary of significant accounting policies and notes
to financial statements.
F-4
<PAGE>
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Clover Income Properties III, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from rentals $ - $ 208,201 $ 478,126
Cash paid for operating expenses (57,373) (189,716) (313,014)
Interest income received 2,177 7,098 6,725
Other income received - 1,430 1,243
Distributions received from The
Willowbrook Joint Venture 41,859 44,057 35,607
------------ ------------- -----------
Net cash (used) provided by operating activities (13,337) 71,070 208,687
------------ ------------- -----------
Investing activities
Distributions received from
The Willowbrook Joint Venture 64,485 62,287 66,317
Proceeds from sale of Mallard Green - 2,700,000 -
Settlement costs paid from sale of Mallard Green - (28,813) -
Investment in The Willowbrook Joint Venture - (1,360) (10,198)
------------ ------------- -----------
Net cash provided by investing activities 64,485 2,732,114 56,119
------------ ------------- -----------
Financing activities
Partners' distributions (44,612) (2,956,508) (322,500)
------------ ------------- -----------
Net increase (decrease) in cash 6,536 (153,324) (57,694)
Cash, at beginning of year 116,337 269,661 327,355
------------ ------------- -----------
Cash, at end of year $ 122,873 $ 116,337 $ 269,661
============ ============= ===========
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-5
<PAGE>
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Clover Income Properties III, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net (loss) income to net cash
provided by operating activities
Net (loss) income $ (704,736) $ (408,670) $ 92,573
------------- ------------- -----------
Adjustments
Impairment loss, investment in
The Willowbrook Joint Venture 663,262 - -
Depreciation and amortization 37,282 84,857 133,853
Share of income from The Willowbrook
Joint Venture (41,859) (44,057) (35,607)
Distributions received from The Willowbrook
Joint Venture 41,859 44,057 35,607
Net loss on the sale of investment property - 466,357 -
Decrease (increase) in rents receivable - 1,022 (897)
Decrease (increase) in prepaid expenses - 2,621 (29)
Decrease in utility deposits - 295 -
Increase (decrease) in accounts payable and
accrued expenses 1,250 (12,845) 6,961
(Decrease) increase in prepaid rents - (7,794) 6,653
(Decrease) increase in tenants' security deposits - (25,600) 4,075
(Decrease) in due to affiliates (10,395) (29,173) (34,502)
------------- ------------- -----------
Total adjustments 691,399 479,740 116,114
------------- ------------- -----------
Net cash (used) provided by operating activities $ (13,337) $ 71,070 $ 208,687
============= ============= ===========
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-6
<PAGE>
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Clover Income Properties III, L.P.
Summary of Significant Accounting Policies
Rental Revenue
Rental revenue is recognized when earned, net of concessions and vacancies.
Capitalization and Amortization of Certain Costs
At December 31, 1995, deferred acquisition fees paid to an affiliate, have been
written off (see Note 3). For the years ended December 31, 1994 and prior, these
costs were included in the investment in The Willowbrook Joint Venture and were
amortized over a two hundred and forty month period (life of the Partnership)
using the straight-line method.
Income Taxes
The Partnership has not provided for federal income taxes, since all income and
losses are to be allocated to the partners for inclusion in their respective tax
returns. The Partnership files a state composite tax return on behalf of its
non-resident partners and remits any taxes due. The tax returns, the status of
the Partnership as such for tax purposes and the amount of allocable Partnership
income or loss are subject to examination by the Internal Revenue Service. If
such examinations result in changes with respect to the Partnership status or in
changes to allocable Partnership income or loss, the tax liability of the
partners could be changed accordingly.
Investment Property and Depreciation
The investment property was recorded at cost.
Depreciation was provided over the estimated useful lives of the various assets
using the straight-line method. The estimated lives were 40 years for apartment
buildings and twelve years for furniture and fixtures for financial reporting
and income tax purposes. Maintenance and repair costs were charged to expense as
incurred. Significant betterments and improvements were capitalized.
Impairment of Long-Lived Assets
A writedown for impairment will be recorded when the facts and circumstances
indicate that the cost of the investment in the The Willowbrook Joint Venture
including the related deferred acquisition fees may be impaired, the estimated
undiscounted cash flows associated with the assets are compared to the
investment's carrying amount.
F-7
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Summary of Significant Accounting Policies
Net (Loss) Income and Distributions Per Partnership Unit
Net (loss) income and distributions per limited partnership unit are computed
from the date of the closing of the Minimum Offering (October 31, 1989) based
upon net (loss) income and distributions allocated to the limited partners and
the weighted average number of limited partnership units outstanding. Per unit
information has been computed based on 7,300 weighted average limited
partnership units.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts 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 differ from those estimates.
F-8
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
1. Organization
and Basis of
Accounting
Clover Income Properties III, L.P. ("CIP III") is a limited partnership which
was formed on November 30, 1988, in the State of Delaware for the purpose of
acquiring, operating and holding, directly or indirectly, residential real
estate for investment purposes. Leases primarily have a term of one year or
less. The general partner of the Partnership is Crown Management Corporation
(Crown), a wholly-owned subsidiary of Clover Financial Corporation.
CIP III'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, where
applicable, to reflect the Partnership's accounts on the accrual basis of
accounting according to generally accepted accounting principles (GAAP).
Depreciation of the property owned by The Willowbrook Joint Venture for
financial reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets, while alternative methods are used for
federal income tax purposes. The net effect of these items is summarized as
follows:
December 31, 1995 1994
- -------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- -------------------------------------------------------------------------------
Total assets $1,518,327 $2,317,290 $2,276,820 $2,376,292
========== ========== ========== ==========
Partners' capital $1,498,827 $2,297,790 $2,248,175 $2,347,646
========== ========== ========== ==========
F-9
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
Reconciliation of (loss) income per financial statement to (loss) income per
Federal income tax return is as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (loss) income per
financial statement $(704,736) $(408,670) $ 92,573
Reconciling items
Depreciation (13,704) (13,762) (13,762)
Impairment loss, investment in
The Willowbrook Joint Venture
(currently not deductible for
tax purposes) 663,262 -- --
Additional income from The
Willowbrook Joint Venture
resulting from different
depreciation methods 49,933 49,933 49,933
---------- --------- ---------
Net (loss) income per federal
income tax return $ (5,245) $(372,499) $ 128,744
========= ========= =========
</TABLE>
2. Sale of
Investment
Property
On July 1, 1994, CIP III sold the Mallard Green Apartments ("Mallard Green"), a
76 unit garden-style residential apartment complex located outside the city
limits of Charlotte, North Carolina, together with all related improvements and
intangible and tangible property to United Dominion Realty Trust, Inc. (the
"Purchaser") for a cash purchase price of $2,700,000. The purchaser is not
affiliated with the Partnership. A loss of $466,357 (the same as for tax
purposes) has been included in operations for the year ended December 31, 1994.
F-10
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
3. Investment
in The
Willowbrook
Joint Venture
On April 8, 1992, CIP III acquired a 14.18% interest in The Willowbrook Joint
Venture for $2,200,000 in cash based on an independently appraised value of
$15,650,000 as of February 11, 1992. The Joint Venture was The Willowbrook
Apartments, a 299 unit midrise apartment complex located in Baltimore, Maryland.
The excess of the amount paid over the net book value of the 14.18% interest in
the Joint Venture purchased by CIP III amounted to $651,876. This amount has
been allocated by the Joint Venture to land and building in the amounts of
$75,452 and $576,124, respectively.
The excess costs allocable to the building are being amortized over the
remaining estimated useful life of the building on April 1, 1992, which is 20
years and 9 months.
On February 7, 1996, the Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement, the Joint Venture will sell the Willowbrook
Apartments (including land), all related improvements and tangible and
intangible property for $10,500,000 less a $315,000 credit for capital
improvements (see Note 7 for additional information).
The sale is contingent upon, among other things, the approval by a majority of
the limited partners of CIP, CIP II and CIP III. If the sale is approved by a
majority of the limited partners and all the other conditions to the sale are
met, the sale will be completed.
Concurrent with the sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP I and CIP II) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, the limited partnership
will then liquidate the net assets, distribute the proceeds and be dissolved.
Due to the proposed sale of the Willowbrook Apartments and subsequent
liquidation of the Partnership, CIP III has reflected its investment in the
Joint Venture at the lower of cost or market. Market value is based on the
estimated cash proceeds (net of settlement costs) from the sale of the
Willowbrook Apartments after allocation of these proceeds to CIP, CIP II and CIP
III. At December 31, 1995, the charge to operations amounting to $663,262 has
been reflected as an impairment loss in the statement of operations.
A summary of the Joint Venture's financial statements is as follows:
December 31, 1995 1994
- -------------------------------------------------------------------------------
Other assets $ 322,078 $ 331,731
Investment property held for sale,
net of accumulated depreciation 9,396,753 9,858,484
F-11
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
- -------------------------------------------------------------------------------
$ 9,718,831 $ 10,190,215
============ ============
Liabilities (including $326,293
in 1995 and $326,240
in 1994 to affiliates) $ 403,359 $ 419,934
Capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
----------- ------------
$ 9,718,831 $ 10,190,215
============ ============
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Revenues $ 2,049,103 $ 2,064,966 $ 1,967,909
Expenses 1,753,912 1,754,265 1,716,800
--------------- ------------- -------------
Net income $ 295,191 $ 310,701 $ 251,109
=============== ============= =============
Depreciation on the Willowbrook Property has been provided on a straight-line
basis over the estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
The Joint Venture made distributions to the Partnership in the amount of
$106,344 during 1995 and 1994. The distributions represent 14.18% of the total
distributions made by The Willowbrook Joint Venture.
Due to the adjustment of the investment in Joint Venture to market value, it is
likely that the value of the deferred costs has been significantly impaired and
recovery seems doubtful. Therefore, the costs have been written off in the
current year and have been reflected as an impairment loss in the Company's
statement of operations.
For the year ended December 31, 1994, deferred acquisition fees amounted to
$199,831, net of accumulated amortization of $26,169.
4. Partnership
Agreement
Pursuant to the terms of the Partnership Agreement, the net losses through
October 1989 were allocated 1% to the initial limited partner and 99% to the
general partner. After the sale of the Minimum Offering and the admission of
F-12
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
additional limited partners to the Partnership, all items of income, gain and
loss and distributions of cash are allocated as follows:
Net income of the Partnership from operations will be allocated as follows:
(a) first, if the Partnership made net cash receipts distributions with
respect to such period, an amount of net income up to the amount of
such net cash receipts distributions shall be allocated among the
partners in the same proportions as such net cash receipts
distributions were distributed provided, however, that if the total
amount of net income is less than the amount of net cash receipts
distributions for such a period, an amount of net income equal to
the amount of net cash receipts distributions distributed to the
general partner and all remaining net income shall be allocated to
the limited partners,
(b) second, to those partners having deficit balances in their capital
accounts in proportion to and to the extent of such deficits,
(c) third, to those partners, if any, who have received cumulative net
cash receipts distributions in the current and prior periods in an
amount in excess of the cumulative amount of net income allocated to
such partners in proportion to and to the extent of any such excess
and,
(d) fourth, the balance, if any, shall be allocated 10% to the general
partner and 90% to the limited partners in proportion to their
relative ownership of units.
Net income or gain realized by the Partnership on a sale shall be allocated in
the following order of priority:
(a) first, to the partners with negative capital account balances,
proportionately based on the respective negative balances in their
capital accounts until each such partner has a zero capital account
balance,
(b) second, to the limited partners until the capital account balance of
each limited partner equals his adjusted capital contribution, as
determined without reduction for any sale or refinancing proceeds
distributed or to be distributed for the current period,
(c) third, to the limited partners until the capital account of each
limited partner equals the sum of the priority returns distributed or
to be distributed to the limited partners and the amount described in
subparagraph (b),
(d) fourth, 85% to all limited partners and 15% to the limited partners
entitled to receive additional returns until the capital account of
F-13
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
each limited partner entitled to receive additional returns equals
the sum of the additional return distributed or to be distributed to
such limited partner and the amount described in subparagraph (c),
and, then,
(e) any remaining amounts of net income or gain shall be allocated 15%
to the general partner and 85% to the limited partners in proportion
to their relative ownership of units.
Net losses of the Partnership shall be allocated 1% to the general partner and
99% to the limited partners, in accordance with their relative ownership of
units.
Net cash receipts shall, to the extent determined by the general partner, be
distributed first until the priority distributions (a 7.0% annual noncompounded
cumulative return on the adjusted capital contributions) have been fully paid,
1% to the general partner and 99% to the limited partners. Any remaining net
cash receipts shall be distributed 10% to the general partner and 90% to the
limited partners. Sale or refinancing proceeds shall be distributed first to the
limited partners in an amount equal to their adjusted capital contributions,
second, in an amount of the priority returns payable (a 12% annual noncompounded
cumulative return on their adjusted capital contributions), third, 85% to all
limited partners and 15% to the limited partners entitled to receive additional
returns (a noncompounded, cumulative annual return with a range of 13.0% to
14.0% which is determined by partnership subscription dates) until the limited
partners so entitled have received their additional returns, and fourth, any
remaining proceeds to be distributed 15% to the general partner and 85% to the
limited partners.
5. Transactions
With Affiliates
Clover or its affiliates are entitled to reimbursement for administrative
services rendered to the Partnership, direct expenses of Partnership operations,
and goods and services used by and for the Partnership.
As compensation for property management services performed by an affiliate of
the general partner with respect to the Property, prior to its sale on July 1,
1994, the affiliate was entitled to a management fee in an amount not to exceed
5% of gross revenues.
Transactions with affiliates are summarized below:
Reimbursable
Management Costs and
Fees Advances Total
- -------------------------------------------------------------------------------
Amount payable at
January 1, 1993 $ 52,262 $ 21,808 $ 74,070
Incurred during 1993 24,101 31,418 55,519
F-14
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
Payments during 1993 (46,176) (43,845) (90,021)
------- ------- -------
Amount payable at
December 31, 1993 30,187 9,381 39,568
Incurred during 1994 11,716 14,521 26,237
Payments during 1994 (33,508) (21,902) (55,410)
------- ------- -------
F-15
<PAGE>
- -------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
Reimbursable
Management Costs and
Fees Advances Total
- -------------------------------------------------------------------------------
Amount payable at
December 31, 1994 $ 8,395 $ 2,000 $ 10,395
Incurred during 1995 - 3,405 3,405
Payments during 1995 (8,395) (5,405) (13,800)
--------- --------- ---------
Amount payable at
December 31, 1995 $ - $ - $ -
========== ========= =========
6. Subsequent
Distributions
In January 1996, the Partnership made cash distributions of $99 to the general
partner and $9,855 to the limited partners.
7. Subsequent
Event
On May 16, 1996, the agreement to sell the Willowbrook Apartments was amended.
The amendment, among other things, reduced the sales price from $10,500,000 less
a $315,000 credit for capital contributions to $9,850,000.
F-16
<PAGE>
Report of Independent Certified Public Accountants
The Willowbrook Joint Venture
Merchantville, New Jersey
We have audited the accompanying balance sheets of The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the related statements of income,
partners' capital, and cash flows for each of the three years in the 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 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
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 The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Note 2, which is
February 7, 1996
and Note 5 which
is May 16, 1996.
F-17
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Balance Sheets
December 31, 1995 1994
- -------------------------------------------------------------------------------
Assets
Cash $ 141,494 $ 146,687
Cash held for security deposits - restricted 34,868 46,394
Rents receivable 7,602 868
Prepaid expenses 137,014 136,682
Utility deposit 1,100 1,100
Investment property held for sale, net of
accumulated depreciation 9,396,753 9,858,484
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
Liabilities and Partners' Capital
Liabilities
Accounts payable $ - $ 17,447
Accrued expenses 36,956 26,563
Tenants' security deposits 32,222 40,748
Prepaid rents 7,888 8,936
Due to affiliates 326,293 326,240
----------- -----------
Total liabilities 403,359 419,934
----------- -----------
Commitment
Partners' capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
----------- -----------
Total partners' capital 9,315,472 9,770,281
----------- -----------
$ 9,718,831 $10,190,215
=========== ===========
See accompanying summary of significant accounting policies and notes to
financial statements.
F-18
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $ 2,013,638 $ 2,013,518 $ 1,928,002
Other income 34,414 48,416 34,772
Interest income 1,051 3,032 5,135
--------------- ------------- -------------
Total revenues 2,049,103 2,064,966 1,967,909
--------------- ------------- -------------
Expenses
Depreciation and amortization 514,843 512,242 508,510
Operating expenses (including affiliate
transactions of $17,905 in 1995, $112,445
in 1994 and $115,451 in 1993) 1,225,052 1,219,161 1,186,441
Professional services 14,017 11,173 12,068
General and administrative, affiliates - 11,689 9,781
--------------- ------------- -------------
Total expenses 1,753,912 1,754,265 1,716,800
--------------- ------------- -------------
Net income $ 295,191 $ 310,701 $ 251,109
=============== ============= =============
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-19
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Partners' Capital
<TABLE>
<CAPTION>
Clover Clover Clover
Income Income Income
Properties, Properties Properties
L.P. II, L.P. III, L.P. Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $ 4,220,846 $ 4,220,846 $ 2,154,052 $ 10,595,744
Capital contributions 30,836 30,836 10,197 71,869
Net income 107,751 107,751 35,607 251,109
Partners' distributions (308,405) (308,405) (101,924) (718,734)
------------ ------------ ------------ ------------
Balance, December 31, 1993 4,051,028 4,051,028 2,097,932 10,199,988
Capital contributions 4,116 4,116 1,360 9,592
Net income 133,322 133,322 44,057 310,701
Partners' distributions (321,828) (321,828) (106,344) (750,000)
------------ ------------ ------------ ------------
Balance, December 31, 1994 3,866,638 3,866,638 2,037,005 $ 9,770,281
Capital contributions -- -- -- --
Net income 126,666 126,666 41,859 295,191
Partners' distributions (321,828) (321,828) (106,344) (750,000)
------------ ------------ ------------ ------------
Balance, December 31, 1995 $ 3,671,476 $ 3,671,476 $ 1,972,520 $ 9,315,472
============ ============ ============ ============
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-20
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from rentals $ 2,005,856 $ 2,020,702 $ 1,926,352
Interest income received 1,051 3,032 5,135
Other income received 34,414 48,416 34,772
Security deposits paid 11,526 4,051 15,521
Cash paid for operating expenses (1,254,928) (1,255,209) (1,266,247)
---------------- ------------- --------------
Net cash provided by operating activities 797,919 820,992 715,533
---------------- ------------- --------------
Investing activities
Cash paid for investment property (53,112) (62,265) (94,426)
---------------- ------------- --------------
Financing activities
Partners' distributions (750,000) (750,000) (718,734)
Partners' contributions - 9,592 71,869
---------------- ------------- --------------
Net cash (used) in financing activities (750,000) (740,408) (646,865)
---------------- ------------- --------------
Net (decrease) increase in cash (5,193) 18,319 (25,758)
Cash, at beginning of year 146,687 128,368 154,126
---------------- ------------- --------------
Cash, at end of year $ 141,494 $ 146,687 $ 128,368
================ ============= ==============
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-21
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities
Net income $ 295,191 $ 310,701 $ 251,109
---------------- ------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 514,843 512,242 508,510
(Increase) decrease in cash held
for security deposits 11,526 4,051 15,521
(Increase) decrease in rents receivable (6,734) 2,428 (1,929)
(Increase) decrease in prepaid expenses (332) 15,508 320
(Decrease) increase in accounts payable (17,447) (11,091) 9,308
Increase (decrease) in accrued expenses 10,393 526 (2,146)
(Decrease) in tenants' security deposits (8,526) (5,816) (15,874)
(Decrease) increase in prepaid rents (1,048) 4,756 279
Increase (decrease) in due to affiliates 53 (12,313) (49,565)
---------------- ------------- --------------
Total adjustments 502,728 510,291 464,424
---------------- ------------- --------------
Net cash provided by operating activities $ 797,919 $ 820,992 $ 715,533
================ ============= ==============
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-22
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Summary of Significant Accounting Policies
Impairment of
Long-Lived Assets
In the event that facts and circumstances indicate that the cost of the
investment property may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated undiscounted cash flows
associated with the assets would be compared to the asset's carrying amount.
Income Taxes
The Joint Venture has not provided for income taxes, since all income and losses
are to be allocated to the partners for inclusion in their respective tax
returns. The tax returns, the status of the Joint Venture as such for tax
purposes and the amount of allocable Joint Venture income or loss are subject to
examination by the Internal Revenue Service. If such examinations result in
changes with respect to the joint venture status or in changes to allocable
Joint Venture income or loss, the tax liability of the partners could be changed
accordingly.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts 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 differ from those estimates.
F-23
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
1. Organization
and Basis of
Accounting
The Willowbrook Joint Venture ("Joint Venture") was formed on December 17, 1987,
by Clover Income Properties, L.P. (CIP) and Clover Income Properties II, L.P.
(CIP II) for the purpose of acquiring, operating and holding the Willowbrook
Apartments. Leases primarily have a term of one year or less. The life of the
joint venture was initially set at 20 years.
On April 8, 1992, Clover Income Properties III, L.P. ("CIP III") acquired a
14.18% interest in the Joint Venture for $2,200,000 in cash, effective April 1,
1992, from CIP and CIP II, which reduced their respective ownership interest in
the Joint Venture from 50% to 42.91% each. The life of the Joint Venture was
extended for an additional 8 years, at that time.
The Joint Venture'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, where applicable, to reflect the Joint Venture's accounts on the
accrual basis of accounting according to generally accepted accounting
principles (GAAP). Depreciation for financial reporting purposes is provided
using the straight-line method over the estimated useful lives of the assets,
while alternative methods are used for Federal income tax purposes. The net
effect of this difference is summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total assets $ 9,718,831 $ 11,481,249 $ 10,190,215 $11,809,659
============= ============== ============== ===========
Partners' capital $ 9,315,472 $ 11,077,891 $ 9,770,281 $11,389,717
============= ============== ============== ===========
</TABLE>
F-24
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
Reconciliation of income per financial statement to income per Federal income
tax return is as follows:
Year ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
Net income per financial
statements $295,191 $310,701 $251,109
Reconciling item
Depreciation 142,983 142,571 142,571
-------- -------- --------
Tax basis income $438,174 $453,272 $393,680
======== ======== ========
2. Investment
Property Held
for Sale
On December 17, 1987, the Joint Venture acquired the Willowbrook Apartments (the
Property), a mid-rise apartment complex comprising 299 apartment units contained
in eight five-story buildings. The complex is located in Baltimore, Maryland.
On February 7, 1996, the Joint Venture entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd. Under the
terms of the agreement, the Joint Venture will sell The Willowbrook Apartments
(including land), all related improvements and tangible and intangible property
for $10,500,000 less a $315,000 credit for capital improvements (see Note 5 for
additional information).
The sale is contingent upon, among other things, the sale of all of the
properties owned by affiliates of Clover Financial Corporation which are also
under agreement of sale with Berwind and First Montgomery. Clover Financial
Corporation is the parent company of the general partner of CIP, CIP II and CIP
III. The sale must be approved by a majority of the limited partners of CIP, CIP
II and CIP III. Upon sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will then be distributed to its
owners (CIP, CIP II and CIP III) and the Joint Venture dissolved.
Due to the proposed sale of the Willowbrook Apartments and subsequent
liquidation of the Partnership, the Joint Venture has reflected the investment
property held for sale at the lower of cost or market. Market value is based on
the estimated cash proceeds (net of settlement costs) from the sale of the
Willowbrook Apartments. At December 31, 1995, the investment property held for
sale was not impaired.
The following is a summary of investment property held for sale which is carried
at the lower of cost or market:
December 31, 1995 1994
- -------------------------------------------------------------------------------
Land $ 1,421,205 $1,421,205
Apartment buildings 11,006,247 10,980,891
F-25
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
Furniture and fixtures 1,004,545 976,789
------------ -------------
13,431,997 13,378,885
Less accumulated depreciation (4,035,244) (3,520,401)
------------- -------------
$ 9,396,753 $ 9,858,484
============= =============
Depreciation on the property has been provided on a straight-line basis over the
estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
Maintenance and repair expenses are charged to expense as incurred. Significant
betterments and improvements are capitalized and depreciated over their useful
lives.
3. Transactions
with
Affiliates
Effective February 21, 1995, NPI-CL Management, L.P. ("NPI") which is
unaffiliated with the Partners, replaced an affiliate of the Partners as
Property Manager. Until that time, the property was managed by the affiliate
pursuant to a management agreement which provided for an annual fee not to
exceed 5% of the gross revenues from the Property.
The general partner of CIP, CIP II, and CIP III and their affiliates are
entitled to reimbursement for administrative services rendered to the Joint
Venture, direct expenses of operations and goods and services used by and for
the Joint Venture.
F-26
<PAGE>
- -------------------------------------------------------------------------------
The Willowbrook Joint Venture
Notes to Financial Statements
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
- -------------------------------------------------------------------------------
Amount payable at
January 1, 1993 $ 334,953 $ 53,165 $ 388,118
Incurred during 1993 98,313 26,919 125,232
Payments during 1993 (114,616) (60,181) (174,797)
--------- --------- ---------
Amount payable at
December 31, 1993 318,650 19,903 338,553
Incurred during 1994 102,734 21,400 124,134
Payments during 1994 (102,252) (34,195) (136,447)
--------- --------- ---------
Amount payable at
December 31, 1994 319,132 7,108 326,240
Incurred during 1995 12,750 5,155 17,905
Payments during 1995 (12,750) (5,102) (17,852)
--------- --------- ---------
Amount payable at
December 31, 1995 $ 319,132 $ 7,161 $ 326,293
========= ========= =========
4. Subsequent
Distributions
In January 1996, the Joint Venture made cash distributions of $26,819, $26,819
and $8,862 to Clover Income Properties, L.P., Clover Income Properties II, L.P.
and Clover Income Properties III, L.P., respectively.
5. Subsequent
Event
On May 16, 1996, the agreement to sell the Willowbrook Apartments was amended.
The amendment, among other things, reduced the sales price from $10,500,000 less
a $315,000 credit for capital contributions to $9,850,000.
F-27
<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE III
Clover Income Properties III, L.P.
Schedules of Real Estate and Accumulated Depreciation
Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
----------------------- -----------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
76-unit garden apartment complex
located in Charlotte, North Carolina None $363,597 $3,111,700 $- $35,379
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $ - $3,510,676 $3,506,941
Dispositions during year:
Cost of real estate sold - (3,510,676) -
Additions during year:
Acquisition and improvements - - -
------------- ---------- ----------
Balance, at end of year $ - $ - $3,510,676
============= ========== ==========
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ - $ 325,555 $ 236,316
Depreciation expense - 47,577 89,239
Accumulated depreciation - disposal of assets - (373,132) -
------------- ---------- ----------
Balance, at end of year $ - $ - $ 325,555
============= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at December 31, 1995 (A)
- ------------------------------------------------------------------ Life on Which
Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - 1985 4/2/90 12-40 years
</TABLE>
F-28
<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE III
The Willowbrook Joint Venture
Schedules of Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Years Ended December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------- -------------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
299-unit mid-rise apartment complex
located in Baltimore, Maryland None $1,421,205 $11,289,276 $- $721,516
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the
amount at which the real estate is carried for financial reporting
purposes, plus the additional stepped up basis due to a Section 754
election in the amount of $556,439.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, at beginning of year $ 13,378,885 $ 13,316,620 $ 13,222,194
Additions during year:
Improvements, etc. 53,112 62,265 94,426
-------------- -------------- --------------
Balance, at end of year $ 13,431,997 $ 13,378,885 $ 13,316,620
============== ============== ==============
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ 3,520,401 $ 3,008,159 $ 2,499,649
Depreciation expense 514,843 512,242 508,510
-------------- -------------- --------------
Balance, at end of year $ 4,035,244 $ 3,520,401 $ 3,008,159
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at December 31, 1995 (A)
- ----------------------------------------------------------- Life on Which
Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$1,421,205 $12,010,792 $13,431,997 $4,035,244 1966 12/17/87 12-25 years
</TABLE>
F-29
<PAGE>
Independent Auditors' Report
Crown Management Corporation and Subsidiaries
Merchantville, New Jersey
We have audited the accompanying consolidated balance sheet of Crown Management
Corporation and subsidiaries (a wholly-owned subsidiary of Clover Financial
Corporation) as of November 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 consolidated balance sheet is free of
material misstatement. an audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated balance sheet. an
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Crown Management
Corporation and subsidiaries as of November 30, 1995, in conformity with
generally accepted accounting principles.
April 22, 1996
F-30
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subisdiary of Clover Financial Corporation)
Consolidated Balance Sheet
November 30, 1995
Assets
Cash $ 8,918
Prepaid expenses and other assets 1,111
Investment in partnerships 317,886
-----------
$ 327,915
===========
Liabilities and Stockholders' Equity
Liabilities
Share of accumulated losses from partnerships
in exess of investments and advances $ 78,294
Deferred income taxes 35,725
-----------
Total liabilities 114,019
===========
Commitments
Stockholders' equity
Common stock, no par value
Authorized 1,000 shares
Issued 728 shares 1,348,648
(Deficit) (1,134,752)
-----------
Total stockholders' equity 213,896
-----------
$ 327,915
===========
See accompanying notes to
consolidated balance sheet.
F-31
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
1. Organization
and
Principles
Consolidation
Organization
Crown Management Corporation (the "Company"), a wholly-owned of subsidiary of
Clover Financial Corporation (Clover), formed on April 6, 1988, is the general
partner of Clover Appreciation Properties I, L.P. (CAP I) and Clover Income
Properties, III, L.P. (CIP III), real estate limited partnerships.
Principles of Consolidation
The consolidated balance sheet includes the accounts of the Company and its
wholly-owned subsidiaries, Environmental Concepts, Inc., Garden Hill Management
Corporation and CFC Management Corporation, which are the general partners of
three separate real estate limited partnerships. All significant intercompany
accounts and transactions have been eliminated.
2. Summary of
Significant
Accounting
Policies
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return
with Clover. The Company and its subsidiaries have a tax-sharing agreement with
Clover under which Clover agrees to pay to or for the benefit of the Company,
the federal income tax liability of the consolidated group attributable to the
Company and to treat the amount as a contribution to capital. The Company and
its subsidiaries provide for state income taxes.
Income taxes are calculated using the liability method specified by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Deferred income taxes are recorded to reflect the net state tax effect of
temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amount used for income tax purposes.
At November 30, 1995, the Company has a net deferred tax liability of $35,725.
The temporary differences pertain to the Company's investment in Partnerships
and the write-off of a receivable from an affiliate for financial
F-32
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
reporting purposes. A 100% valuation allowance has been established on the
deferred tax assets since the likelihood of recognizing this benefit cannot be
certain.
Had the Company and its subsidiaries provided for federal income taxes on an
individual company basis, the accompanying consolidated balance sheet would have
included a liability for deferred federal income taxes of approximately
$140,000.
Investments
Investments in partnerships are accounted for using the equity method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts 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 differ from those estimates.
2. Investment
in
Partnerships
Environmental Concepts, Inc., Garden Hill Management Corporation and CFC
Management Corporation are the general partners in Mill Village Limited, Mt.
Holly Associates Limited and Community Partners Limited, respectively, all of
which are Clover sponsored limited partnerships. Generally, the profits and
losses from operations, cash distributions, and gains from capital transactions
are allocated 25% to the general partner and 75% to the limited partners as per
their respective partnership agreements.
F-33
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
As of November 30, 1995, Mill Village Limited and Mt. Holly Associates Limited
have ceased operations and the partnerships closed out. the following represents
a summary of the financial position of Community Partners Limited as of December
31, 1995:
December 31, 1995
Mortgage Receivable $3,250,000
Cash 65,000
Other assets 3,000
----------
Total assets $3,318,000
==========
Mortgage payable $1,895,000
Other liabilities 2,000
Partners' capital 1,421,000
----------
Total liabilities and partners' capital $3,318,000
==========
The Company purchased for $1,000 a 1% general partnership interest and a 98%
limited partnership interest in CAP I, a partnership formed in June 1988. On
January 5, 1989, the Company sold its 98% limited partnership interest to
individuals affiliated with Clover for $900.
The Company's allocated losses in excess of its investments in and advances to
CAP I and CIP III amounted to $35,115 and $43,179, respectively, and are
recorded as a liability in the consolidated balance sheet.
4. Commitments
The Company, as a general partner in CAP I and CIP III, could be liable for, or
otherwise committed to provide funds to these partnerships.
F-34
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements. See Index to Financial Statements under Item
8. Financial Statements and Supplementary Data.
(2) Financial statement schedules. See Index to Financial Statements
under Item 8. Financial Statements and Supplementary Data.
(3) Exhibits.
* 3.1 Certificate of Limited Partnership (Exhibit 3.1 to the
registrant's Registration Statement, No. 33-26129 filed with
the Commission on December 16, 1988 (the "Registration
Statement")).
* 3.2 Amended and Restated Agreement of Limited Partnership dated
October 31, 1989 (Exhibit 3.2 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1991 (the
"1991 Form 10-K")).
*10.1 Agreement of Purchase and Sale dated March 30, 1990 between
Mallard Green Limited Partnership and the registrant for the
Mallard Green Apartments (Exhibit 10.6 to Post-Effective
Amendment No. 4 to the Registration Statement filed with the
Commission on April 17, 1990).
10.2 Second Amendment to Agreement of Sale dated May 6, 1996 among
The Willowbrook Joint Venture, Berwind Property Group, Inc.
and Montgomery Properties, Ltd.
10.3 Third Amendment to Agreement of Sale dated May 16, 1996 among
The Willowbrook Joint Venture, Berwind Property Group, Inc.
and First Montgomery Properties, Ltd.
27 Financial Data Schedule
*99.1 The Prospectus of the Partnership dated March 30, 1989, as
filed with the Commission pursuant to Rule 424(b) (3) on April
24, 1989, and included in Amendment No. 1 to the Registration
Statement.
-13-
<PAGE>
*99.2 Supplement No. 5 dated April 25, 1990 to the Prospectus
incorporating and superseding Supplements Nos. 1, 2, 3 and 4,
as filed with the Commission pursuant to Rules 424(b)(3) and
424(c) on May 2, 1990 and included in Post-Effective Amendment
No. 4 filed with the Commission on April 17, 1990.
*99.3 Supplement No. 6 dated March 27, 1991 to the Prospectus and
Supplement No. 5 included in Post-Effective Amendment No. 5
filed with the Commission on March 12, 1991.
*99.4 The Partnership's Current Report on Form 8-K filed with the
Commission on March 4, 1996.
- ----------
* Incorporated by reference.
(b) No reports on Form 8-K were filed during the fourth quarter of 1995.
----------
Pursuant to the Partnership Agreement and certain undertakings in the
Registration Statement, the registrant is obligated to provide an Annual Report
to limited partners of the Partnership on or before April 30, 1995. The
Partnership will furnish copies of such report to the Commission when it is sent
to the limited partners.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CLOVER INCOME PROPERTIES III, L.P.
CROWN MANAGEMENT CORPORATION,
General Partner
Date: June 4, 1996 By: /s/ Donald N. Love
--------------------------------
Donald N. Love, President
Date: June 4, 1996 By: /s/ Stanley E. Borucki
--------------------------------
Stanley E. Borucki, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Date: June 4, 1996 /s/ Donald N. Love
------------------------------------
Donald N. Love, Director and
President of Crown Management
Corporation, the General Partner
Date: June 4, 1996 /s/ Steven R. Zalkind
-----------------------------------
Steven R. Zalkind, Director
and Vice President of Crown
Management Corporation, the General
Partner
-15-
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME
- -------------- ------------
10.2 Second Amendment to Agreement of
Sale dated May 6, 1996 among the
Willowbrook Joint Venture, Berwind
Property Group, Inc. and
Montgomery Properties, Ltd.
10.3 Third Amendment to Agreement of
Sale dated May 16, 1996 among the
Willowbrook Joint Venture, Berwind
Property Group, Inc. and
Montgomery Properties, Ltd.
27 Financial Data Schedule
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE made this 6th day of May, 1996
by and between WILLOWBROOK JOINT VENTURE, a New Jersey Joint Venture, of 23
West Park Avenue, Merchantville, New Jersey 08109, hereinafter referred to as
Seller, and BERWIND PROPERTY GROUP, INC., a Pennsylvania Corporation, and FIRST
MONTGOMERY PROPERTIES, LTD., a Pennsylvania Corporation, c/o Berwind Property
Group, Inc., 3000 Centre Square West, 1500 Market Street, Philadelphia,
Pennsylvania 19102, hereinafter collectively referred to as Buyer.
BACKGROUND
A. Buyer and Seller executed a certain Agreement of Sale dated February
7th, 1996 (the "Agreement of Sale"), pursuant to the provisions of which Buyer
agreed to purchase from Seller and Seller agreed to sell to Buyer that certain
tract or parcel of land and premises situate, lying and being in Baltimore,
Maryland, commonly known and referred to as Willowbrook Apartments.
B. Buyer and Seller executed a certain First Amendment to Agreement of Sale
dated February 7, 1996.
C. Buyer and Seller now desire to terminate the First Amendment to
Agreement of Sale and amend the Agreement of Sale pursuant to the provisions
of this Second Amendment.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. Except as specifically defined herein, initially capitalized terms
herein shall have the meaning ascribed thereto in the Agreement of Sale.
2. The First Amendment to Agreement of Sale dated February 7, 1996 is
hereby cancelled and terminated and declared to be null and void.
3. Paragraph 3 of the Agreement of Sale is hereby amended in its entirety
as follows:
"3. CLOSING: The transactions contemplated by this Agreement shall be
consummated (the "Closing") on or before July 6, 1996 (the "Closing Date"),
at 10:00 o'clock A.M. at the offices of Sherman, Silverstein, Kohl, Rose &
Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken, New Jersey
08109. The said time for Closing as well as all other times for performance
set forth in this Agreement are hereby agreed to be of the essence of this
Agreement. Tender of an executed Deed is hereby waived. Immediately prior
to the Closing Date, Buyer shall have the right to close the loan (the
"Purchase Money Mortgage Loan"), if any, which is financing a portion of
the Purchase Price, at a place designated by the lender (the "Purchase
Money Lender") of the Purchase Money Mortgage Loan, if required as a
condition of closing the Purchase Money Mortgage Loan by the Purchase Money
Lender."
4. All references in the Agreement of Sale to the "Extended Closing Date"
are hereby deleted.
5. Paragraph 7(a) of the Agreement of Sale is hereby amended in its
entirety as follows:
"7. FEASIBILITY PERIOD: (a) For a Feasibility Period commencing on the
date of this Agreement and expiring on May 21, 1996 (the "Feasibility
Period"), Buyer is granted the right to conduct physical inspectitons,
tests and investigations of the Premises in such a manner as not to
inconvenience the tenants and to review copies of the Leases, Service
Contracts, bills for calendar years 1994 and 1995 for real estate taxes,
utilities (water, sewer, gas and electric) insurance premiums and trash
removal pertaining to the Premises. At any time during said Feasibility
Period, Buyer shall have the right, for any reason whatsoever, to cancel
and terminate this Agreement by serving written notice thereof upon Seller
on or before the expiration of said Feasibility Period; if Buyer elects to
terminate this Agreement as permitted herein, then this Agreement shall be
cancelled and terminated and the Deposit, together with interest earned
thereon, shall be returned to Buyer and neither party hereunder shall have
an further liability or obligation to the other hereunder except with
respect to the indemnifications contained in this Paragraph 7, Paragraph
5(e) and Paragraph 22; if Buyer fails to exercise its right to terminate
this Agreement as permitted herein, then said right shall automatically
lapse, terminate and become null and void. Buyer shall indemnify and save
harmless the Seller from any liability, loss, cost or expense (including
reasonable attorney's fees) arising from or in connection with such
inspection and/or entry upon the Premises; said indemnification shall
survive Closing and/or termination of this Agreement."
6. All references in the Agreement of Sale to the "Extended Feasibility
Period" are hereby deleted.
7. Paragraph 9 of the Agreement of Sale is hereby deleted and replaced with
the following Paragraph 9:
"9. CONTINGENCIES: Seller's obligation to close under this Agreement
is subject to and conditioned upon the receipt of any and all approvals and
consents necessary for Seller to consummate the transaction contemplated by
this Agreement. Seller will use its best efforts to endeavor to obtain said
approvals and consents. If all such approvals and consents necessary for
Seller to consummate the transaction contemplated by this Agreement are not
received on or before June 30, 1996, then this Agreement shall be
automatically cancelled and terminated, the Deposit, together with interest
earned thereon, shall be returned to the Buyer, and neither party shall
have any further liability or obligation to the other hereunder except with
respect to the indemnifications contained in Paragraphs 5(e), 7 and 22."
8. Exhibit F attached to the Agereement of Sale is hereby deleted and all
references in the Agreement of Sale to Exhibit F and/or to any of the properties
listed thereon are hereby deleted.
9. Except as specifically set forth herein, the Agreement of Sale remains
effective in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Second Amendment to Agreeemnt of Sale to be signed the
day and year first above written.
SIGNED, SEALED AND DELIVERED WILLOWBROOK JOINT VENTURE
IN THE PRESENCE OF: A New Jersey Joint Venture
BY: Clover Income Properties, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
-----------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties II, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. II Management
Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
-----------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties III, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: Crown Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
-----------------------------------
Steven Zalkind, Vice President
BERWIND PROPERTY GROUP, INC.,
A Pennsylvania Corporation
/s/ LORETTA M. KELLY BY: /s/ BARRY HOWARD
- ------------------------ -----------------------------------
Loretta M. Kelly Barry Howard
Secretary Vice Chairman
FIRST MONTGOMERY PROPERTIES, LTD.
A Pennsylvania Corporation
BY: /s/ MITCHELL C. MORGAN
-----------------------------------
Mitchell C. Morgan, Pres.
THIRD AMENDMENT TO AGREEMENT OF SALE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE made this 16th day of May, 1996
by and between WILLOWBROOK JOINT VENTURE, a New Jersey Joint Venture, of 23 West
Park Avenue, Merchantville, New Jersey 08109, hereinafter referred to as Seller,
and BERWIND PROPERTY GROUP, INC., a Pennsylvania Corporation, and FIRST
MONTGOMERY PROPERTIES, LTD., a Pennsylvania Corporation, c/o Berwind Property
Group, Inc., 3000 Centre Square West, 1500 Market Street, Philadelphia,
Pennsylvania 19102, hereinafter collectively referred to as Buyer.
BACKGROUND
A. Buyer and Seller executed a certain Agreement of Sale dated February
7th, 1996 (the "Agreement of Sale"), pursuant to the provisions of which Buyer
agreed to purchase from Seller and Seller agreed to sell to Buyer that certain
tract or parcel of land and premises situate, lying and being in Baltimore,
Maryland, commonly known and referred to as Willowbrook Apartments.
B. Buyer and Seller executed a certain First Amendment to Agreement of Sale
dated February 7, 1996.
C. Buyer and Seller executed a certain Second Amendment to Agreement of
Sale dated May 6, 1996 pursuant to which the First Amendment to Agreement of
Sale was terminated and the Agreement of Sale was amended.
D. Buyer and Seller now desire to terminate the Second Amendment to
Agreement of Sale, reinstate the First Amendment to Agreement of Sale and
further amend the Agreement of Sale pursuant to the provisions of this Third
Amendment.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto, intending to be legally bound
hereby, do covenant and agree with each other as follows:
1. Except as specifically defined herein, initially capitalized terms
herein shall have the meaning ascribed thereto in the Agreement of Sale.
2. The Second Amendment to Agreement of Sale dated May 6, 1996 is hereby
cancelled and terminated and declared to be null and void.
3. The First Amendment to Agreement of Sale dated February 7, 1996 is
hereby reinstated and declared to be in full force and effect and all references
herein to Agreement of Sale shall be deemed to include the First Amendment to
Agreement of Sale.
4. Paragraph 2 of the Agreement of Sale is hereby amended in its entirety
as follows:
"2. PURCHASE PRICE: The total purchase price which the Buyer agrees to
pay to the Seller and which the Seller agrees to accept for the Property is
the sum of NINE MILLION EIGHT HUNDRED FIFTY THOUSAND ($9,850,000.00)
DOLLARS (the "Purchase Price"), which Purchase Price shall be paid by Buyer
to Seller as follows:
(a) The sum of FIFTY THOUSAND ($50,000.00) DOLLARS (the "Initial
Deposit") simultaneously with the execution and delivery of this Agreement
and the further sum of ONE HUNDRED FIFTY THOUSAND ($150,000.00) DOLLARS
(the "Second Deposit") on or before May 16, 1996. The Initial Deposit shall
be hereinafter referred to as the "Deposit" and the Second Deposit shall be
included within the definition of the "Deposit". The Deposit shall be
deposited with the Escrow Agent, as hereinafter defined, to be held subject
to the terms and conditions hereinafter set forth, and shall be treated as
payment on account of the Purchase Price if Closing is made for the
Property.
(b) At the time of Closing, as hereinafter provided, the further sum
of NINE MILLION SIX HUNDRED FIFTY THOUSAND ($9,650,000.00) DOLLARS on
account of the Purchase Price by federal funds wire transfer to Seller's
account as designated to Buyer in writing."
5. Paragraph 3 of the Agreement of Sale is hereby amended in its entirety
as follows:
"3. CLOSING: The transactions contemplated by this Agreement shall be
consummated (the "Closing") on or before July 31, 1996 (the "Closing
Date"), at 10:00 o'clock A.M. at the offices of Sherman, Silverstein, Kohl,
Rose & Podolsky, P.A., 4300 Haddonfield Road, Suite 311, Pennsauken, New
Jersey 08109. The said time for Closing as well as all other times for
performance set forth in this agreement are hereby agreed to be of the
essence of this Agreement. Tender of an executed Deed is hereby waived.
Immediately prior to the Closing Date, Buyer shall have the right to close
the loan (the "Purchase Money Mortgage Loan"), if any, which is financing a
portion of the Purchase Price, at a place designated by the lender (the
"Purchase Money Lender") of the Purchase Money Mortgage Loan, if required
as a condition of closing the Purchase Money Mortgage Loan by the Purchase
Money Lender."
6. All references in the Agreement of Sale to the "Extended Closing Date"
are hereby deleted.
7. Subparagraph 6(h) of the Agreement of Sale is hereby deleted.
8. The Feasibility Period referred to in subparagraph 7(a) of the Agreement
of Sale is hereby terminated and the rights granted to the Buyer in subparagraph
7(a), including but not limited to the right to cancel and terminate the
Agreement of Sale, are hereby waived and terminated.
9. The rights granted to the Buyer in subparagraph 7(c) of the Agreement of
Sale, including but not limited to the right to cancel and terminate the
Agreement of Sale, are hereby waived and terminated.
10. Paragraph 9 of the Agreement of Sale is hereby deleted and replaced
with the following Paragraph 9:
"9. CONTINGENCIES: Seller's and Buyer's obligation to close under this
Agreement is subject to and conditioned upon the receipt of any and all
approvals and consents necessary for Seller to consummate the transaction
contemplated by this Agreement. Seller will use its best efforts to
endeavor to obtain said approvals and consents. If all such approvals and
consents necessary for Seller to consummate the transaction contemplated by
this Agreement are not received on or before June 30, 1996, then this
Agreement shall be automatically cancelled and terminated, the Deposit,
together with interest earned thereon, shall be returned to the Buyer, and
neither party shall have any further liability or obligation to the other
hereunder except with respect to the indemnifications contained in
Paragraphs 5(e), 7 and 22."
11. Exhibit F attached to the Agreement of Sale is hereby deleted and all
references in the Agreement of Sale to Exhibit F and/or to any of the properties
listed thereon are hereby deleted.
12. The Agreement of Sale is hereby amended to include the following
additional Paragraph 35:
"35. MORTGAGE CONDITION: (a) Buyer represents that Dorman & Wilson,
Inc./Freddie Mac is Buyer's Purchase Money Lender. The Agreement of Sale is
conditioned upon the Purchase Money Lender issuing, and the Buyer
accepting, in Buyer's sole discretion, a commitment (the "Commitment") for
the Purchase Money Mortgage Loan on or before July 1, 1996.
(b) In the event the Purchase Money Lender does not issue, and the
Buyer does not accept, in Buyer's sole discretion, the Commitment on or
before July 1, 1996, then the Agreement of Sale shall be cancelled and
terminated and the Deposit, together with interest earned thereon, shall be
returned to the Buyer and neither party hereunder shall have any further
liability or obligation to the other hereunder except with respect to the
indemnifications contained in Paragraphs 5(e), 7 and 22.
(c) In the event the Purchase Money Lender issues, and the Buyer
accepts, in Buyer's sole discretion, the Commitment on or before July 1,
1996, then the condition contained in this Paragraph 35 shall automatically
lapse, terminate and become null and void and Closing shall be completed in
accordance with the terms of the Agreement of Sale.
(d) Buyer shall lock-in the interest rate on the Purchase Money
Mortgage Loan on or before July 10, 1996; and Buyer's failure to do so
shall be deemed a default by Buyer under the Agreement of Sale and the
Deposit shall be immediately delivered to the Seller who shall retain same
as liquidated damages for said default and the Agreement of Sale shall be
cancelled and terminated; the foregoing merely supplements the provisions
of Paragraph 18 of the Agreement of Sale and is not intended to supercede,
diminish or otherwise alter in any way the rights, remedies and other
provisions contained in Paragraph 18 of the Agreement of Sale.
(e) If the Buyer locks-in the interest rate on the Purchase Money
Mortgage Loan on or before July 10, 1996 then Closing shall be completed in
accordance with the terms of the Agreement of Sale; provided, however, if
the Purchase Money Lender fails to fund the Purchase Money Mortgage Loan
due solely to Buyer's inability to comply with a condition in the
Commitment, compliance of which is beyond Buyer's control, after Buyer
utilizes its best efforts as set forth below, then Closing shall be
extended for a period of ninety (90) days during which time the Buyer shall
proceed with due diligence and in good faith, utilizing its best efforts as
set forth below, to comply with and/or otherwise satisfy such condition. If
such condition is complied with and/or otherwise satisfied within said
ninety (90) day period, then Closing shall be completed in accordance with
the terms of the Agreement of Sale on the expiration of the ninety (90) day
period. If such condition can not be complied with and/or otherwise
satisfied within said ninety (90) day period, then the Agreement of Sale
shall be cancelled and terminated and the Deposit, together with interest
earned thereon, shall be returned to the Buyer and neither party hereunder
shall have any further liability or obligation to the other hereunder
except with respect to the indemnifications contained in Paragraphs 5(e)
and 22. Buyer shall use its best efforts, including, but not limited to,
taking all necessary actions, to comply with all conditions in the
Commitment."
13. Except as specifically set forth herein, the Agreement of Sale remains
effective in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Third Amendment to Agreement of Sale to be signed the
day and year first above written.
SIGNED, SEALED AND DELIVERED WILLOWBROOK JOINT VENTURE
IN THE PRESENCE OF: A New Jersey Joint Venture
BY: Clover Income Properties, L.P.,
--------------------------------
A New Jersey Limited Partnership
Joint Venturer
BY: C.I.P. Management Corporation,
--------------------------------
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
--------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties II, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: C.I.P. II Management
Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND
--------------------------------
Steven Zalkind, Vice President
BY: Clover Income Properties III, L.P.,
A New Jersey Limited Partnership
Joint Venturer
By: Crown Management Corporation,
A New Jersey Corporation,
General Partner
BY: /s/ STEVEN ZALKIND,
--------------------------------
Steven Zalkind, Vice President
BERWIND PROPERTY GROUP, INC.,
A Pennsylvania Corporation
BY: /s/ LORETTA M. KELLY
----------------------------------
Loretta M. Kelly, Vice President
FIRST MONTGOMERY PROPERTIES, LTD.,
A Pennsylvania Corporation
BY: /s/ MITCHELL C. MORGAN
----------------------------------
Mitchell C. Morgan, President
<TABLE> <S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 122,873
<SECURITIES> 1,395,454
<RECEIVABLES> 0
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0
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