ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes.
The registrant, Carlyle Real Estate Limited Partnership - XI (the "Partnership"), is a limited partnership formed in 1981 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $137,500,000 in Limited Partnership Interests (the "Interests") to the public at $1,000 per Interest commencing on May 8, 1981 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-70724). The offering closed on May 5, 1982. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's real property investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate no later than December 31, 2031. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio as quickly as practicable and to wind up its affairs not later than December 31, 1999 barring any unforeseen economic developments.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investments are subject to competition from similar types of properties (including, in certain areas, properties owned by affiliates of the General Partners or properties owned by certain of the joint venture partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth on a quarterly basis in the table set forth in Item 2
Item 2 below to which reference is hereby made. The Partnership maintains the suitability and competitiveness of its properties in its markets primarily on the basis of effective rents, tenant mix, tenant allowances and service provided to tenants. In the opinion of the Corporate General Partner of the Partnership, all of the investment properties held at December 31, 1996 are adequately insured.
On July 23, 1996, the Partnership sold the El Dorado View Apartments. In addition, on November 1, 1996, the Partnership sold the Scotland Yard Apartments, Phase I and II. Reference is made to the Notes for a further description of these sales.
Reference is made to the Notes for a schedule of minimum lease payments to be received in each of the next five years, and in the aggregate thereafter, under leases in effect at the Partnership's properties as of December 31, 1996.
The Partnership has no employees other than personnel performing on- site duties at some of the Partnership's properties, none of whom are officers or directors of the Corporate General Partner of the Partnership.
The terms of transactions between the Partnership, the General Partners and their affiliates are set forth in Item 11 below to which reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations carried on in and approximate occupancy levels by quarter during fiscal years 1996 and 1995 for the Partnership's investment properties owned during 1996:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal proceedings, other than ordinary litigation incidental to the business of the Partnership.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 1996 and 1995.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were 14,521 record holders of the 137,420 Interests outstanding of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Corporate General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Corporate General Partner, which may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Corporate General Partner has been received by the Corporate General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of Interests, without regard to the results of Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which distribution is made.
Reference is made to Item 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item 1, the Partnership had approximately $121,936,000 (after deducting selling expenses and other offering costs) with which to make investments in income-producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such investments and to satisfy working capital requirements. Portions of the proceeds were utilized to acquire the properties described in Item 1 above.
During 1996, some of the Limited Partners in the Partnership received from an unaffiliated third party unsolicited tender offers to purchase up to 6,637 Interests in the Partnership at between $25 and $35 per Interest. The Partnership recommended against acceptance of this offer on the basis that, among other things, the offer price was inadequate. In June such offer expired. As of the date of this report, the Partnership is aware that 3,060.34 Interests have been purchased by such unaffiliated third parties either pursuant to such tender offers or through negotiated purchases. In addition, the Partnership has recently received requests from another unaffiliated third party for the list of Holders of Interests.
It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any other third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn. The board of directors of JMB Realty Corporation ("JMB") the corporate general partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offers. The Special Committee has retained independent counsel to advise it in connection with any potential tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to any additional potential tender offers for Interests.
At December 31, 1996, the Partnership and its consolidated ventures had cash and cash equivalents of approximately $3,697,000. Such funds are available for working capital requirements including the Partnership's portion of the anticipated net cash flow deficits at the Mall of Memphis and 767 Third Avenue office building and its share of potential leasing costs at the Mall of Memphis, 767 Third Avenue office building and National City Center Office Building. The Partnership and its consolidated ventures have currently budgeted in 1997 approximately $5,368,000 for tenant improvements and other capital expenditures. The Partnership's share of such items and its share of such similar items for its unconsolidated ventures in 1997 is currently budgeted to be approximately $2,538,000. Actual amounts expended in 1997 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. Certain of the Partnership's investment properties and properties in which the Partnership has an equity interest currently operate in overbuilt markets which are characterized by lower than normal occupancies and/or reduced rent levels. Such competitive conditions will contribute to the anticipated net cash flow deficits described above. The sources of capital for such items and for future short-term and long-term liquidity and distributions to partners are expected to be through the sale of the Partnership's investment properties. In such regard, reference is made to the Partnership's property specific discussions below and also the Partnership's disclosure of certain property lease expirations in Item 6. The Partnership does not consider the mortgage notes receivable arising from the previous sale of the Pavillion Towers investment property to be a source of future liquidity as collection of any additional past due or future payments on the Partnership's notes is considered unlikely. Reference is made to the Notes. The Partnership's and its Ventures' mortgage obligations are separate non-recourse loans secured individually
by the investment properties and are not obligations of the entire investment portfolio, and the Partnership and its Ventures are not personally liable for the payment of the mortgage indebtedness.
The Partnership currently has adequate cash and cash equivalents to maintain the operations of the Partnership. However, based upon estimated operations of certain of the Partnership's investment properties, the Partnership decided to suspend distributions to the Limited and General Partners effective as of the second quarter of 1991. In addition, the Partnership has deferred cash distributions and partnership management fees related to the first quarter of 1991 as discussed in the Notes.
Based upon current market conditions, the Partnership may not commit any significant additional amounts to any of the properties which are incurring, or in the future do incur, unanticipated operating deficits or deficits to underlying mortgage holders. This would result in the Partnership no longer having an ownership (or security) interest in such properties. Such decisions will be made on a property-by-property basis and may result in a gain to the Partnership for financial reporting and Federal income tax purposes, with no corresponding distributable proceeds.
767 Third Avenue Office Building
Occupancy at the property is 96% at December 31, 1996. During 1997, expiration of tenant leases will be approximately 11%. There is no assurance that the expiring tenants can be retained. The Partnership is obligated to fund its share of the net cash flow deficits resulting from costs associated with any leasing activity at the property.
Vacancy rates in Midtown Manhattan (the sub-market for this property) remain high and the increased competition for tenants has resulted in reduced effective rental rates. The adverse market conditions and the negative impact of the reduced effective rental rates are expected to impact a number of tenants and continue through 1998.
The 767 Third Avenue Venture has a loan which matures in May 1998 and bears interest at 10%. The venture is currently discussing obtaining replacement financing to extend the term of the loan as well as reduce the interest rate. In conjunction with such discussions, the Partnership is having preliminary discussions with the venture partner regarding a sale of the Partnership's interest to the venture partner. There can be no assurance that any refinancing or sale will be finalized. Accordingly, the property has been considered held for sale or disposition as of December 31, 1996, and therefore, will no longer be subject to continued depreciation.
Riverfront Office Building
Keystone Investors, occupying approximately 20% of Riverfront's net rentable area, vacated upon its scheduled lease expiration in September 1996. As of the date of this report, the venture has tenant commitments and anticipates occupancy of all of this space by July 1997. In addition, Blue Cross Blue Shield, occupying approximately 88,000 square feet, had notified the venture that it would be vacating the premises upon its lease expiration, originally set for March 1998. As a result, the venture entered into a termination agreement with Blue Cross Blue Shield whereby the tenant would vacate certain spaces by certain dates before its lease expiration date for a set payment. This agreement allows the venture to maximize the cash flow of the property. Although the venture will incur substantial lease-up costs as a result of the Keystone and Blue Cross Blue Shield lease expirations, the venture anticipates that it can fulfill future debt service requirements of the restructured loan. However, if future operating shortfalls are greater than expected and funding of deficits becomes necessary, the venture would seek additional debt service relief from the lender. If the venture was unable to obtain relief from the lender it would likely decide not to commit any additional amounts to the property. This would likely result in the Partnership no longer having
an ownership interest in the property, and would result in a gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds.
The loan secured by the building and improvements was restructured in 1995 and requires that net cash flow after debt service and capital be paid into an escrow account controlled by the lender to be used for future operating shortfalls, principal payments and costs associated with additional leasing as approved by the lender. The agreement further prohibits the venture owning the property from distributing excess cash flow after full funding of the escrow accounts. Such excess funds are to be retained for operating shortfalls, principal payments and costs associated with additional leasing as approved by the lender prior to withdrawing escrow deposits. Accordingly, the Partnership does not consider the Riverfront investment property to be a significant source of short or long-term liquidity.
In addition, as a condition of the loan restructure discussed above, the ground lease was amended to provide for the deferral of any and all ground lease payments from February 1993 until the earlier of any future mortgage loan prepayment date (resulting from a sale or refinancing of the property) or December 31, 2007. The ground lessor is a general partner of the venture partner. At December 31, 1996, the total amount of deferred and accrued ground lease expense is approximately $684,000.
The property has been considered held for sale or disposition as of December 31, 1996, and therefore, will no longer be subject to continued depreciation.
Mall of Memphis
Occupancy of the property is 75% at December 31, 1996. The Mall of Memphis trade area population consists primarily of lower to moderate income residents, and the income level has been decreasing over the last several years. The mall has also suffered from a number of store closings many prior to lease expiration primarily as a result of tenants filing for bankruptcy and liquidation. In addition, the property has been subjected to increased competition for shoppers and tenants from strip centers and big box users. Although certain tenants continue to perform well, overall tenant sales at the property have gradually declined over the last several years. Due to recent poor sales performances, many tenants are electing not to renew their leases or are renewing at lower rates. Several other tenants whose leases are not due to expire in the near term have approached the Partnership seeking rent relief. The Partnership has granted rent relief to certain tenants that could demonstrate that without a reduction in their rent, they would no longer be able to remain in business at the mall. As a result of these market and property conditions, the property's cash flow declined in 1996 and may continue to decline.
In response, the Partnership is exploring measures to increase occupancy and the cash flow of the property. Any decision to commit additional funds to this investment property for any purpose will be based on, among other things, the likelihood of the return of such additional investment plus a reasonable profit thereon. In addition, the Partnership is contemplating approaching the lender regarding a loan modification.
In August 1995, the Partnership purchased the venture partner's 36.94% interest in Mall of Memphis and concurrently admitted the General Partner of the Partnership to the venture with a .1% interest. Accordingly, the Partnership has accounted for its investment in Mall of Memphis as wholly- owned as of August 1995. The purchase price was approximately $5,500,000, of which $500,000 (plus certain closing costs) was paid in cash at closing with the balance represented by a $5,000,000 promissory note. Pursuant to the terms of the note payable to the former venture partner, the Partnership guaranteed a portion of the debt service payments payable on June 1, 1996 and June 1, 1997 in the amount of $300,000 for each payment. Due to the increase in vacancies discussed above and other property operating considerations, the Partnership did not make the June 1996 guaranteed payment until December 1996.
Scotland Yard - Phase I and II Apartments
On November 1, 1996, the Partnership sold the Scotland Yard Apartments Phase I and II for $23,200,000 (before selling costs). Reference is made to the Notes for a further description of such sale.
El Dorado View Apartments
On July 23, 1996, the Partnership sold the El Dorado View Apartments for $6,600,000 (before selling costs). Reference is made to the Notes for a further description of such sale.
Yerba Buena Office Building
In June 1992, title to the Yerba Buena Office Building in San Francisco, California was transferred to the lender by the joint venture (a partnership comprised of the Partnership, two other limited partnerships sponsored by the Partnership's Corporate General Partner and four unaffiliated limited partners). In return for a smooth transaction of title and management of the property, the joint venture was able to negotiate the right to share in future sales or refinancing proceeds, if any, above certain specified levels. In addition, the joint venture has a right of first opportunity to purchase the property during the time frame of June 1995 through May 1998 should the lender wish to market the property for sale. The joint venture has recently learned that the lender has sold the property without having given the joint venture its right of first opportunity to purchase it. The joint venture is analyzing its legal remedies for the lender's breach of its obligation. There are no assurances that the joint venture would recover any amounts in the event it should pursue its legal remedies.
General
There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partner(s) in an investment might become unable or unwilling to fulfill its (their) financial or other obligations, or that such joint venture partner(s) may have economic or business interests or goals that are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the Partnership continues to conserve its working capital. All expenditures are carefully analyzed and certain capital projects are deferred when appropriate. The Partnership has also sought or may seek additional loan modifications where appropriate. By conserving working capital, the Partnership will be in a better position to meet the future needs of its properties since outside sources of capital may be limited given the portfolio's current debt levels. Due to these factors, the Partnership has held certain of its investment properties longer than originally anticipated in an effort to maximize the return to the Limited Partners. Although the Partnership expects to distribute sale proceeds from the disposition of certain of the Partnership's remaining assets, the Limited Partners are expected to receive significantly less than their full original investment from all sources. However, after reviewing the remaining properties and the marketplace in which they operate, the General Partners of the Partnership expect to be able to conduct an orderly liquidation of the remaining investment portfolio as quickly as practicable. In such regard, the Partnership has classified during 1996 certain of its investment properties as held for sale or disposition, as discussed above. Therefore, the affairs of the Partnership are expected to be wound up no later than December 31, 1999 (sooner if the properties are sold in the nearer term), barring unforeseen economic developments.
RESULTS OF OPERATIONS
Various fluctuations in the consolidated financial statements at and for the year ended December 31, 1996, as compared to December 31, 1995 are primarily due to the sale of three apartment complexes, El Dorado View on July 23, 1996 and Scotland Yard - Phase I and II on November 1, 1996.
The decrease in rents and other receivables at December 31, 1996 as compared to December 31, 1995 was primarily due to the timing of receipts of rental income at certain of the Partnership's investment properties.
The increase in escrow deposits and restricted funds at December 31, 1996 as compared to December 31, 1995 is primarily due to the terms of the Riverfront loan modification agreement which requires the partnership to escrow cash flow after debt service to fund future operating short-falls, principal payments and costs associated with additional leasing as approved by the lender.
The decreases in mortgage notes receivable and deferred gain on sale of investment property at December 31, 1996 as compared to December 31, 1995 are due to a $200,000 collection in 1996 of a portion of the past due amounts on notes receivable related to the 1986 sale of Pavillion Towers.
The properties held for sale or disposition at December 31, 1996 represents the reclassification of the net book value of the Partnership's investment properties, excluding Mall of Memphis, from land and leasehold interests, buildings and improvements and the related accumulated depreciation.
The decrease in venture partner's deficit in venture at December 31, 1996 as compared to December 31, 1995 is due to the $8,500,000 provision for unrealizable venture partner's deficit recorded in 1996 relating to the Riverfront office building.
The increase in accounts payable at December 31, 1996 as compared to December 31, 1995 is primarily due to the timing of the payment of certain costs associated with additional leasing at the Riverfront office building.
The decrease in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to: 1) the sales of Scotland Yard I & II apartments and El Dorado View apartments on November 1, 1996 and July 23, 1996, respectively; 2) the receipt in 1995 of approximately $672,000 as consideration for the early termination of a tenant's lease at 767 Third Avenue; 3) a lower average occupancy rate at Riverfront office building primarily as a result of the scheduled expiration in September 1996 of a lease for a tenant which occupied approximately 20% of the building and 4) reduced occupancy in 1996 at the Mall of Memphis. The decrease in rental income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 was primarily due to the lender realizing upon its security in the 824 market Street office building in December 1994, partially offset by increased average occupancy at Riverfront and 767 Third Avenue office buildings in 1995.
The increase in interest income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to an increase in the average balance of U.S. Government obligations during 1995.
The decreases in mortgage and other interest expense as well as property operating expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 are primarily due to the sales of Scotland Yard I & II apartments and El Dorado View apartments in 1996. Contributing to the decrease in mortgage and other interest expense were lower mortgage interest at Riverfront office building, as a result of the restructured loan, and lower contingent interest expense at the Mall of Memphis, as a result of lower rental income. The decrease in mortgage and other interest expense was partially offset by additional interest on the $5,000,000 promissory note secured by the Partnership's additional interest in the Mall of Memphis, purchased in August 1995. The decrease in mortgage
and other interest expense for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994 as well as the reduction of interest associated with the non- recourse mortgage loan secured by the Riverfront office building as a result of the 1995 loan restructuring.
The decrease in depreciation expense for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the Scotland Yard I & II apartments (sold November 1, 1996) and El Dorado View apartments (sold July 23, 1996) being classified as of April 1, 1996 as held for sale and, therefore, were not subject to continued depreciation. The decrease in depreciation expense for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to the lender realizing upon its security in the 824 Market Street office building during 1994, partially offset by depreciation expense related to the Partnership's purchase of the venture partner's interest in the Mall of Memphis in August 1995.
The decrease in amortization of deferred expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 as well as the increase for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to the write off of deferred mortgage expenses in 1995 as a result of the 1995 loan restructuring at Riverfront office building. In addition, the increase for the year ended December 31, 1995 was impacted by an increase in amortization related to capitalized leasing costs, primarily at 767 Third Avenue Office Building.
The increase in general and administrative expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to an increase in reimbursable costs to affiliates of the General Partners in 1995 and the recognition of certain additional prior year reimbursable costs to such affiliates.
The decrease in venture partner's share of venture operations for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the termination as of January 1, 1996 of the allocation of any additional venture losses to the venture partner as a result of the uncertainty of the Partnership recovering the deficit capital account from further operations and ultimate sale of the Riverfront office building. Such uncertainty was also the cause of the provision for uncollectible venture partner deficit for 1996.
The gain on sale or disposition of investment properties for the year ended December 31, 1996 is due to the sale of El Dorado View apartments on July 23, 1996, the Scotland Yard I & II apartments on November 1, 1996 and $200,000 of deferred gain recognition as a result of the receipt in April 1996 of a portion of the past due amounts on the notes receivable related to the 1986 sale of Pavillion Towers, discussed above. The gain from sale or disposition of investment properties for the year ended December 31, 1994 resulted from the lender realizing upon its security in the 824 Market Street office building.
The extraordinary gain on forgiveness of indebtedness for the year ended December 31, 1996 was due to the forgiveness of a portion of the deferred accrued interest associated with the mortgage loans secured by Scotland Yard I & II apartments as a result of sale of the properties.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's commercial properties have escalation clauses covering increases in the cost of operating and maintaining the properties as well as real estate taxes. Therefore, there should be little effect on operating earnings if the property remains substantially occupied. In addition, substantially all of the leases at the Partnership's shopping center investment contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Partners' Capital Accounts (Deficit), years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Schedule --------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI:
We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - XI (a limited partnership) and consolidated ventures as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlyle Real Estate Limited Partnership - XI and consolidated ventures at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in the Notes to the consolidated financial statements, in 1996, the Partnership and its consolidated ventures changed their method of accounting for long-lived assets and long-lived assets to be disposed of to conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois March 21, 1997
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (either directly or through joint ventures) an equity investment portfolio of United States real estate. Business activities consist of rentals to a variety of commercial and retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio and wind up its affairs not later than December 31, 1999.
The accompanying consolidated financial statements include the accounts of the Partnership and its consolidated ventures Mall of Memphis Associates ("Mall of Memphis") (until purchase of the venture partner's interest in 1995), 767 Third Avenue Associates ("767 Third Avenue"), Riverfront Office Park Joint Venture ("Riverfront") and Excelsior Associates, LP ("824 Market Street") (property transferred to lender in December 1994) in which the Partnership has certain preferential claims and rights, as discussed below. The effect of all transactions between the Partnership and the consolidated ventures has been eliminated. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's interest in Carlyle/National City Associates ("Carlyle/National City"). Accordingly, the accompanying consolidated financial statements do not include the accounts of Carlyle/National City.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to reflect the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 1996 and 1995 is summarized as follows:
The net earnings (loss) per limited partnership interest is based upon the Limited Partnership Interests outstanding at the end of each period. Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial reporting and Federal income tax purposes.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from unconsolidated ventures are considered cash flow from operating activities only to the extent of the Partnership's cumulative share of net earnings. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($3,045,929 at December 31, 1996 and $553,117 at December 31, 1995) as cash equivalents, which includes investments in an institutional mutual fund which holds U.S. Government obligations, with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of leasing and financing fees incurred in connection with the acquisition and operation of the properties. Deferred leasing fees are amortized using the straight-line method over the terms stipulated in the related agreements. Deferred financing fees are amortized over the related commitment periods.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due, the Partnership accrues rental income over the full period of occupancy on a straight-line basis.
Certain reclassifications have been made to the 1995 and 1994 consolidated financial statements to conform with the 1996 presentation.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial Instruments" (as amended), requires certain entities to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. The remaining debt, with a carrying balance of $130,575,653, has been calculated to have a SFAS 107 value of $122,619,763 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment and the inability to obtain comparable financing due to previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such calculated debt amounts reported. The Partnership has no other significant financial instruments.
No provision for Federal or state income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain instances, the Partnership has been required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners.
The Partnership acquired, either directly or through joint ventures, ten apartment complexes, eight office buildings, and an enclosed shopping mall. During 1984, the Partnership sold its Arlington, Texas and its Red Bank, Tennessee apartment complexes. During 1986, the Partnership sold its interest in Am-Car Real Estate Partnership-I joint venture ("AM-CAR"), which had ownership interests in the Pavillion Towers office complex located in Aurora, Colorado and the Coast Federal Office Building located in Pasadena, California. During 1988, the Partnership (through Somerset Lake Associates) sold its Indianapolis, Indiana apartment complex. During 1991, the Partnership disposed of its interest in the Gatehall Plaza office building located in Parsippany, New Jersey. During 1992, the Partnership sold its interest in the Wood Forest Glen Apartments, the Meadowcrest Apartments and the Bitter Creek Apartments. In addition, during 1992, the lender realized upon its security and took title to the Yerba Buena West Office Building. During 1993, the Partnership sold its interest in the South Point Apartments. During 1994, the lender realized upon its security and took title to the 824 Market Street Office Building. During 1996, the Partnership sold its interest in the Scotland Yard Phase I and II Apartments, and the El Dorado View Apartments. All of the properties owned at December 31, 1996 were operating. The cost of the investment properties represents the total cost to the Partnership or its ventures plus miscellaneous acquisition costs.
Depreciation on the operating properties has been provided over estimated useful lives of the various components as follows:
YEARS -----
Building and improvements -- straight-line. . . . . . . . 30 Personal property -- straight-line. . . . . . . . 5 ==
All investment properties are pledged as security for the long-term debt, for which there is generally no recourse to the Partnership. The Partnership continues to make payments on its existing mortgage indebtedness related to its remaining investment properties.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
Statement of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" was issued in March 1995. The Partnership adopted SFAS 121 as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its properties to be held for investment whenever their carrying value cannot be fully recovered through estimated undiscounted future cash flows from their operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell or dispose of such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements of the property thus allowing the lender to realize upon its security. In accordance with SFAS 121, any properties identified as "held for sale or disposition" are no longer depreciated. Adjustments for impairment loss for such properties (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or fair value less costs to sell. In certain situations, such estimated fair value could be less than the existing non-recourse debt
which is secured by the property. There can be no assurance that any estimated fair value of these properties would ultimately be obtained by the Partnership in any future sale or disposition transaction.
Under the prior accounting policy, provisions for value impairment were recorded with respect to investment properties whenever the estimated future cash flows from a property's operations and projected sale were less than the property's carrying value. The amount of any such impairment loss recognized by the Partnership was limited to the excess, if any, of the property's carrying value over the outstanding balance of the property's non-recourse indebtedness. An impairment loss under SFAS 121 is determined without regard to the nature or the balance of such non-recourse indebtedness. Upon the disposition of a property with the related extinguishment of the long-term debt for which an impairment loss has been recognized under SFAS 121, the Partnership would recognize, at a minimum, a net gain (comprised of gain on extinguishment of debt and gain or loss on sale or disposition of property) for financial reporting purposes to the extent of any excess of the then outstanding balance of the property's non- recourse indebtedness over the then carrying value of the property, including the effect of any reduction for impairment loss under SFAS 121.
In addition, upon the disposition of an impaired property, the Partnership will generally recognize more gain for financial reporting purposes under SFAS 121 than it would have under the Partnership's prior impairment policy, without regard to the amount, if any, of cash proceeds received by the Partnership in connection with the disposition. Although implementation of this accounting statement could significantly impact the Partnership's reported earnings, there would be no impact on cash flows. Further, any such impairment loss is not recognized for Federal income tax purposes.
The net results of operations for consolidated properties classified as held for sale or disposition as of December 31, 1996 or sold or disposed of during the past three years were $14,775,311, $6,640,231 and $13,806,479, respectively, for the years ended December 31, 1996, 1995 and 1994. In addition, the accompanying consolidated financial statements include $80,894, $67,570 and $33,808, respectively, of the Partnership's share of total property operations of $589,373, $492,296, and $246,315 of National City Center which is held for sale or disposition as of December 31, 1996.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1996 is a party to three operating joint venture agreements. Pursuant to such venture agreements, the Partnership made initial capital contributions of approximately $34,284,000 before legal and other acquisition costs and its share of operating deficits as discussed below. In general, the Partnership's joint venture partners, who are either the sellers (or their affiliates) of the property investments being acquired or parties which have contributed an interest in the property being developed, or were subsequently admitted to the ventures, make no cash contributions to the ventures but their retention of an interest in the property, through the joint venture, is taken into account in determining the purchase price of the Partnership's interest, which is determined by arm's-length negotiations. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash contributions to the ventures.
The Partnership has acquired, through the above ventures, three office buildings. The venture properties have been financed under various long- term debt arrangements as described in the notes.
In general, operating profits and losses are shared in the same ratio as net cash receipts; however, if there are no net cash receipts, profits or losses are allocated to the partners based upon their respective economic interests.
There are certain risks associated with the Partnership's investments made through joint ventures, including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership.
INVESTMENT PROPERTIES
NATIONAL CITY CENTER
In July 1983, the Partnership acquired, through Carlyle/National City (a joint venture with Carlyle-XII), an interest in an office building in Cleveland, Ohio.
The Partnership made an initial contribution of $5,445,257 to Carlyle/National City. The terms of the Carlyle/National City venture agreement provide that the capital contributions, annual cash flow, net proceeds from sale or refinancing and profit or loss will be allocated or distributed 13.7255% to the Partnership. The Partnership's net cash investment in the property was $3,341,583 after distributions resulting from the increase in the first mortgage loan.
Carlyle/National City reached an agreement with the current mortgage lender to refinance the existing mortgage effective April 28, 1994. The loan will be amortized over 22 years with a balloon payment due on April 10, 2001. Carlyle/National City paid a refundable loan commitment fee of $1,163,524 in 1993 in conjunction with the refinancing. The fee was applied to accrued interest and the prepayment penalty of $580,586 based on the outstanding mortgage balance at the time of refinancing, with the balance of $238,215 refunded to Carlyle/National City in 1994. In addition, the lender required an escrow account of $612,000 to be established at the inception of the refinancing for certain specific future tenant improvement costs at the property. The escrowed funds are to be released to the venture upon lender approval of such costs. The lender also required an escrow of the tenant improvement costs related to the extension of the Baker & Hostetler lease. The Venture was required to escrow approximately $313,000 per year in 1994 through 1996 and to escrow approximately $229,000 per year in 1997 and 1998. As of December 31, 1996, approximately $92,000 has been received from the tenant improvement escrow.
Additionally, in January 1997 approximately $820,000 was received from the tenant improvement escrow. As the Partnership has committed to a plan to sell the property, the property has been classified as held for sale or disposition as of December 31, 1996, and therefore, will no longer be subject to continued depreciation.
767 THIRD AVENUE OFFICE BUILDING
Occupancy at the property is 96% at December 31, 1996. During 1997, expiration of tenant leases will be approximately 11%. There is no assurance that the expiring tenants can be retained. The Partnership is obligated to fund its share of the net cash flow deficits resulting from costs associated with any leasing activity at the property.
The 767 Third Avenue Venture has a loan which matures in May 1998 and bears interest at 10%. The venture is currently discussing obtaining replacement financing to extend the term of the loan as well as reduce the interest rate. In conjunction with such discussions, the Partnership is having preliminary discussions with the venture partner regarding a sale of the Partnership's interest to the venture partner. There can be no assurance that any refinancing or sale will be finalized.
As the Partnership has committed to a plan to sell the property, the property has been classified as held for sale or disposition as of December 31, 1996, and therefore, will no longer be subject to continued depreciation.
824 MARKET STREET OFFICE BUILDING
Competition had risen significantly for the 824 Market Street Venture primarily due to new office building development in the area and the contraction of tenants in the financial services industry, resulting in lower effective rental rates. In order to reduce debt service payments, the venture negotiated with the first mortgage lender for a possible modification to the mortgage note. Such negotiations were unsuccessful and the first mortgage lender realized upon its security in 1994. As a result of the disposition of the property, the Partnership recognized a gain in 1994 for financial reporting purposes and Federal income tax purposes of $3,689,195 and $6,805,134, respectively, with no corresponding distributable proceeds.
RIVERFRONT OFFICE BUILDING
The property had been operating at a deficit while the lender under the four existing mortgage notes had accepted payments of partial debt service. In order to reduce debt service payments, the joint venture initiated discussions with the lender to negotiate modifications to the mortgage notes. Effective November 1995, the joint venture entered into a Loan Repayment Agreement with the existing lender. The terms of the agreement generally provide for a loan restructure that retroactively reduces the interest rate payable on the loans and adjusts the terms of the loans from their present maturity. The loans (which previously accrued interest at rates ranging from 10% to 14% per annum) accrue interest at 6% per annum for the period January 1, 1993 through December 31, 1997. Thereafter, the interest rate per annum shall be the greater of the rate derived using the "Coverage Formula" (as defined) or 7% from January 1, 1998 to December 31, 1999; 8.25% from January 1, 2000 to December 31, 2002; and 9% from January 1, 2003 to December 31, 2007. In addition, as participating interest and taking into account the annual interest payable as set forth above, the lender is entitled to earn a minimum internal rate of return ranging from 9% to 10.5% per annum calculated over the restructured loan term and a Residual Amount (as defined) upon repayment.
For financial reporting purposes, the principal amount of the loan and accrued interest as of the effective date of the restructuring have been classified as long-term debt. In addition, notwithstanding the payments specified above, interest accrues at the effective rate of approximately 9.7% based upon the future cash payments specified by the terms of the Repayment Agreement. This additional accrued interest is classified as long-term debt.
The loan restructure also requires that net cash flow after debt service and capital be paid into an escrow account controlled by the lender to be used for future operating shortfalls, principal payments and costs associated with additional leasing as approved by the lender. The agreement further prohibits distributions of excess cash flow after full funding of the escrow accounts. Such excess funds are to be retained and utilized prior to withdrawing escrow deposits for operating shortfalls, principal payments and costs associated with additional leasing as approved by the lender.
In addition, the property operates under a ground lease and the joint venture has not made the scheduled ground lease payments since February 1993. The ground lessor is a general partner of the venture partner. At December 31, 1996, the total amount of ground lease payments in arrears is approximately $684,000. In this regard, as a condition of the loan restructure discussed above, the ground lease was amended to provide for the deferral of any and all ground lease payments since February 1993 until the earlier of any future mortgage loan prepayment date (resulting from a sale or refinancing of the property) or December 31, 2007. Pursuant to this amendment, such unpaid ground rent accrues at the lesser of (a) interest at the amended loan terms or (b) 14% after repayment of the loan (net of any management fees received by the lessor). However, the loan restructure also provides that if, during calendar year 1997, projections of gross rental revenue approved by the lender during the year are not less
than $9 million per year for each of the next five calendar years, annual payments of ground rent would resume, but at a reduced amount (as defined).
As a result of the adoption of SFAS 121, the Partnership recorded a provision for unrealizable venture partner deficit of $8,500,000 as a result of the uncertainty of the Partnership recovering the deficit capital account from future operations and ultimate sale of the property. Such provision was recorded in 1996 to reduce the venture partner's deficit capital account to its then estimated recoverable amount. In addition, no additional venture losses have been allocated to the venture partner for 1996. Riverfront is not considered a source of future liquidity to the Partnership. As the Partnership has committed to a plan to sell or dispose of the property, the property has been classified as held for sale or disposition as of December 31, 1996, and therefore, will no longer be subject to continued depreciation.
MALL OF MEMPHIS
In March 1993, the venture finalized, in the form of a third mortgage loan from the lender for its other mortgage loans, additional financing of $7,600,000 for ten years at a rate of 10% per annum. The Partnership's share of the funding in 1993 was $4,719,095 (net of closing costs). Of the amount funded, the Partnership was required to deposit $1,000,000 in an escrow account as security against any currently undiscovered environmental issues.
In August 1995, the Partnership purchased the venture partner's 36.94% interest in Mall of Memphis and concurrently admitted the General Partner of the Partnership to the venture with a .1% interest. Accordingly, the Partnership has accounted for its investment in Mall of Memphis as wholly- owned as of August 1995. The purchase price was approximately $5,500,000, of which $500,000 (plus certain closing costs) was paid in cash at closing with the balance represented by a $5,000,000 promissory note. The purchase price exceeded the venture partner's capital account balance for financial reporting purposes by $9,402,453. This difference was accounted for as additional basis in the investment property for financial reporting purposes. Correspondingly, the venture partner's deficit in ventures was reduced by $3,857,980. Interest accrues on the unpaid balance of the promissory note at a rate of 8.0% per annum from the acquisition date and is payable June 1 of each year solely to the extent of 36.94% of the venture's annual cash flow (as defined) for the preceding calendar year, with any unpaid interest also accruing interest at 8.0% per annum. The note is non-recourse and is secured only by the purchased venture partner's interest. However, the Partnership has guaranteed the venture partner (seller), on a recourse basis, that the interest payment to be paid on June 1, 1996 shall be no less than $300,000 and that the interest payment to be paid on June 1, 1997 shall be no less than $600,000 less the amount actually paid by the Partnership on June 1, 1996. Due to the increase in vacancies and other property operating considerations, the Partnership did not make the June 1996 guaranteed payment until December 1996. Any amounts required to be paid in excess of the interest accrued to date is applied to the outstanding principal balance of the note. The promissory note requires repayment of principal and all accrued interest at maturity (subject to reduction under certain circumstances related to the property's market value) which is the earlier of August 2002 (lender has two five-year options to extend) or upon sale of the property. The venture partner has a right of first opportunity (as defined) to purchase the property.
In May 1994, an affiliate of the General Partners had assumed management of the property. Such affiliate had agreed at such time to pay the former manager (an affiliate of the venture partner) an annual fee of $50,000 as compensation for the assumption of the management contract. In conjunction with the August 1995 transfer of the venture partner's interest, the venture partner's rights to this annual management contract assumption fee were assigned to the Partnership and settled for $250,000 by such affiliate (subject to ratable refund by the Partnership should the management agreement be terminated prior to January 1, 2001).
SCOTLAND YARD - PHASE I AND II APARTMENTS AND EL DORADO VIEW APARTMENTS
In December 1990, the Partnership obtained replacement mortgage loans from an institutional lender to retire the existing long-term mortgage notes secured by the Scotland Yard - Phase I and II and El Dorado View apartment complexes. The loans provided for payment of contingent interest equal to 35% of the amount by which gross receipts attributable to a calendar year (all as defined) exceed a base amount. For the fiscal years ended 1996, 1995 and 1994, contingent interest was approximately $230,000, $282,000 and $257,000, respectively. In the event that these properties were sold 90 days or earlier before the maturity date of the loan, the lender was entitled to a prepayment penalty of 6% of the mortgage principal and, in general, the higher of 65% of the sale proceeds or ten times the highest contingent interest amount in any of the three full calendar years preceding the sale (all as defined). The lender was also entitled to additional contingent interest if such prepayment penalty, as calculated above, was less than certain internal rates of return (13.25%-14.00%) as defined in the note. The Partnership recorded an accrual for such additional contingent interest of $4,239,104 as deferred accrued interest included in the balance of such debt in the accompanying consolidated financial statements at December 31, 1995. The lender had the right (with 120 days prior notification) to call the remaining loans (at par) at any time after January 1, 1996.
Due to the rights of the lender as described above, the Partnership had classified the loans, including accrued additional contingent interest, (with an outstanding balance of $27,749,104) as current liabilities in the accompanying consolidated balance sheet at December 31, 1995. In addition, the properties were classified as held for sale as of April 1, 1996, and therefore, have not been subject to continued depreciation.
On November 1, 1996, the Partnership sold the Scotland Yard Apartments Phase I and II located in Houston, Texas for $23,200,000 (before closing costs and prorations). A major portion of the sale proceeds was utilized to retire the mortgage loans totaling $18,815,000. The Partnership received approximately $3,787,000 in connection with the sale after all fees and closing costs. Of this amount, the lender received an additional amount of approximately $2,329,000 as participation in the sale proceeds, as required by the mortgage note, as discussed above. Therefore, the Partnership received a net amount of cash of approximately $1,458,000. As a result of the sale, the Partnership recognized a gain of $10,582,373 and an extraordinary gain of $1,180,286, due to the retirement of deferred accrued interest related to the mortgage note, for financial reporting purposes. In addition, the Partnership recognized a gain of $17,772,687 for Federal income tax purposes in 1996.
On July 23, 1996, the Partnership sold the El Dorado View apartment complex located in Houston, Texas for $6,600,000 (before closing costs and prorations). The property was sold together with another apartment property which was owned by a partnership sponsored by an affiliate of the Corporate General Partner. A major portion of the sale proceeds was utilized to retire the related underlying mortgage principal of $4,695,000.
The Partnership received approximately $1,752,000 in connection with the sale after all fees and closing costs. Of this amount, the lender received an additional amount of approximately $1,051,000 as participation in the sale proceeds as required by the mortgage note, as discussed above. Therefore, the Partnership received a net amount of cash of approximately $701,000. As a result of the sale, the Partnership recognized a $2,698,346 gain for financial reporting and recognized a gain of $5,438,130 for Federal income tax purposes in 1996.
PAVILLION TOWERS, AURORA, COLORADO
During April 1986, the Partnership sold its interest in Am-Car Real Estate Partnership-I ("Am-Car") (which owned the Pavillion Towers office complex located in Aurora, Colorado) to its venture partners for $1,000,000 in cash, promissory notes aggregating $3,750,000 and the venture partners' assumption of the Partnership's share of the debt encumbering the property.
The two promissory notes of $3,000,000 and $750,000 bear interest at various rates and were due in April 1996. Beginning in 1991, the Partnership has not received the scheduled interest payments of $15,000 on the $750,000 note and the 1993 or 1994 scheduled interest payments of $60,000 each on the $3,000,000 note. The Partnership received a $200,000 settlement in 1996 with one of the makers of the $3,000,000 note. The other maker of this note remains obligated for the balance. Although these notes are secured by personal guarantees from principals of the venture partner, collection of all past due and future amounts from these notes are considered unlikely; however, the Partnership is evaluating all of its legal options. Due to the uncertainty of collection of all past due and future amounts from these notes, a $527,774 reserve was established at December 31, 1993, which was reduced to $327,774 in 1996 as a result of the $200,000 receipt, to reduce the notes receivable balance to an amount not to exceed the related deferred gain on sale.
The sale was accounted for by the installment method whereby the gain on sale of $3,057,695 (net of discount on the promissory notes receivable of $1,682,305) was recognized as collections of principal were received. Effective January 1, 1990, the Partnership adopted the cost recovery method of accounting. Accordingly, $200,000 of gain was recognized in 1996 and no profit was recognized in 1995 or 1994.
YERBA BUENA OFFICE BUILDING
In June 1992, title to the Yerba Buena Office Building in San Francisco, California was transferred to the lender by the joint venture (a partnership comprised of the Partnership, two other limited partnerships sponsored by the Partnership's Corporate General Partner and four unaffiliated limited partners). In return for a smooth transaction of title and management of the property, the joint venture was able to negotiate the right to share in future sales or refinancing proceeds, if any, above certain specified levels. In addition, the joint venture has a right of first opportunity to purchase the property during the time frame of June 1995 through May 1998 should the lender wish to market the property for sale. The joint venture has recently learned that the lender has sold the property without having given the joint venture its right of first opportunity to purchase it. The joint venture is analyzing its legal remedies for the lender's breach of its obligation. There are no assurances that the joint venture would recover any amounts in the event it should pursue its legal remedies.
Five year maturities of long-term debt are as follows:
1997. . . . . . . . . . $ 517,413 1998. . . . . . . . . . 3,072,891 1999. . . . . . . . . . 38,620,910 2000. . . . . . . . . . 702,538 2001. . . . . . . . . . 778,102 ===========
Long-Term Debt Modifications - General
The Partnership has received mortgage note modifications on certain properties. Upon expiration of such modifications or scheduled maturity of the loans, should the Partnership not seek or be unable to secure new or additional modifications to the loans, based upon current and anticipated future market conditions, the Partnership may not commit any significant additional amounts to these properties. This would likely result in the Partnership no longer having an ownership (or security interest) in such properties. Such decisions will be made on a property-by-property basis and could result in a gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or other disposition of investment properties are allocated first to the General Partners in an amount equal to the greater of the amount distributable to the General Partners from the proceeds of any such sale (as described below) or 1% of the profits from the sale. Losses from the sale or other disposition of investment properties will be allocated 1% to the General Partners. The remaining sale profits and losses will be allocated to the Limited Partners.
The Partnership Agreement also generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event which would cause the deficit balance in absolute amount in the capital account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of profits to the General Partners shall be increased to the extent necessary to cause the deficit balance in the capital account of the General Partners to be no less than their respective shares of the Partnership's indebtedness after such event. In general, the effect of this provision is to allow the deferral of the recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu- tions except under certain limited circumstances upon dissolution and termination of the Partnership. Distributions of "net cash receipts" of the Partnership are allocated 90% to the Limited Partners and 10% to the General Partners (of which 6.25% constitutes a management fee to the Corporate General Partner for services in managing the Partnership).
The Partnership Agreement provides that the Limited Partners shall receive 99% and the General Partners shall receive 1% of the sale or refinancing proceeds of a real property (net after expenses and retained working capital) until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership, and (ii) have received cumulative cash distributions from the Partnership's operations which when combined with sale or refinancing proceeds previously distributed, equal to a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing
with the first fiscal quarter of 1983. After such distributions, the General Partners shall receive (to the extent not previously received) proceeds up to 3% of the aggregate sales price of properties previously sold by the Partnership with any remaining proceeds allocated 85% to the Limited Partners and 15% General Partners. The Limited Partners are not expected to receive cash distributions of sale or refinancing proceeds in an amount equal to their initial capital investment. Therefore, no sale proceeds would currently be distributable to the General Partners pursuant to the distribution levels described above.
Allocations among the partners in the accompanying accrual basis consolidated financial statements have been made in accordance with the provisions of the Partnership Agreement and the venture agreements. The allocation percentages may differ from year to year based on future events.
Differences may therefore result between allocations among the partners on the GAAP basis and the tax basis. Such differences would have no significant effect on total assets, total partners' capital or net loss.
MANAGEMENT AGREEMENTS
In May 1994, an affiliate of the General Partners assumed property management and leasing services at the Mall of Memphis from an affiliate of the venture partner. Leasing commissions at the Mall of Memphis are calculated at a rate, which approximates market, based on the terms of the related lease.
LEASES - AS PROPERTY LESSOR
At December 31, 1996, the Partnership's and its consolidated ventures' principal assets are two office buildings and one enclosed shopping mall. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding the cost of land, is depreciated over their estimated useful lives. Leases with office building and shopping center tenants range in term from one to twenty-four years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide for additional rent based upon percentages of tenant sales volumes. With respect to the Partnership's shopping center investment, a substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector.
Cost of the leased assets net of accumulated depreciation are summarized as follows at December 31, 1996:
Shopping mall: Cost . . . . . . . . . . . . . $ 65,629,315 Accumulated depreciation . . . 23,002,534 ------------ 42,626,781 ------------ Office buildings: Cost . . . . . . . . . . . . . 118,969,702 Accumulated depreciation . . . 52,867,548 ------------ 66,102,154 ------------ Total. . . . . . . . . . . . . . $108,728,935 ============
Minimum lease payments, including amounts representing executory costs (e.g., taxes, maintenance, insurance), and any related profit in excess of specific reimbursements, to be received in the future under the above commercial operating lease agreements, are as follows:
1997 . . . . . . . . . . . . . . $18,159,155 1998 . . . . . . . . . . . . . . 14,837,455 1999 . . . . . . . . . . . . . . 12,636,599 2000 . . . . . . . . . . . . . . 10,671,095 2001 . . . . . . . . . . . . . . 8,896,600 Thereafter . . . . . . . . . . . 29,891,664 ----------- Total. . . . . . . . . . . . . . $95,092,568 ===========
Additional contingent rent (based on sales by property tenants) included in consolidated rental income was as follows for the years ended December 31, 1996, 1995 and 1994:
1994 . . . . . . . . . . . . . . $277,151 1995 . . . . . . . . . . . . . . 354,677 1996 . . . . . . . . . . . . . . 300,141 ========
LEASES - AS PROPERTY LESSEE
The following lease agreement has been determined to be an operating lease.
The Riverfront venture owns a net leasehold interest which expires in 2061 (subject to a 19-year extension) in the land underlying the Cambridge, Massachusetts office building. The lease provides for annual rent equal to the greater of 2% of gross income from the property or a minimum amount (which increases on a fixed schedule from $132,700 at inception,to $298,575 for the years 2007 through 2080). The joint venture has not made the scheduled ground lease payments since February 1993. At December 31, 1996, the total amount of deferred and accrued ground lease expense is approximately $684,000. Reference is made to the Riverfront venture agreement discussed above regarding the waiver of any and all scheduled ground rent payments due under the lease since February 1993 in conjunction with a loan restructure with the mortgage lender.
Future minimum rental commitments under this lease are as follows:
1997. . . . . . . . . . $ 212,230 1998. . . . . . . . . . 212,230 1999. . . . . . . . . . 212,230 2000. . . . . . . . . . 212,230 2001. . . . . . . . . . 212,230 Thereafter. . . . . . . 17,682,275 -----------
Total . . . . . . . . . $18,743,425 ===========
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Corporate General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's investments. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of and for the years ended December 31, 1996, 1995 and 1994 are as follows:
UNPAID AT DECEMBER 31, 1996 1995 1994 1996 -------- -------- -------- ------------
Property management and leasing fees . . . . $289,483 344,158 381,810 -- Insurance commissions . . 27,639 34,756 32,821 -- Reimbursement (at cost) for accounting services . . . . . . . . 9,141 115,562 110,687 1,021 Reimbursement (at cost) for portfolio manage- ment services. . . . . . 24,234 27,279 8,230 5,659 Reimbursement (at cost) for legal services . . . 5,451 3,130 4,920 1,438 Reimbursement (at cost) for out-of-pocket salary and salary- related to the on-site and other costs for the Partnership and its investment properties . . . . . . . -- 77,031 58,118 -- -------- ------- ------- ----- $355,948 601,916 596,586 8,118 ======== ======= ======= =====
The Corporate General Partner has deferred payment of partnership management fees of $11,936. In addition, distributions to the General Partners of the first quarter 1991 net cash flow of the Partnership aggregating $7,161 have been deferred. The General Partners and their affiliates have also deferred payment of the Partnership's share of property management and leasing fees of approximately $171,000 for the Partnership's unconsolidated venture, which is not included in the consolidated financial statements. These amounts do not bear interest and may be paid in future periods.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during fiscal years 1996 and 1995.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. Substantially all of the outstanding stock of which is owned, directly or indirectly, by certain of its officers, directors, members of their families, and their affiliates. JMB has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, ABPP Associates, L.P. (formerly known as Realty Associates-XI, L.P.). ABPP Associates, L.P., an Illinois limited partnership with JMB as its sole general partner shall be directed by a majority in interest of its limited partners (who are generally officers, directors and affiliates of JMB or its affiliates) as to whether to provide its approval of any sale of real property (or any interest therein) of the Partnership.
The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director and executive and certain other officers of the Corporate General Partner are as follows:
SERVED IN NAME OFFICE OFFICE SINCE ---- ------ ------------
Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 and General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Corporate General Partner to be held on June 7, 1997. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on June 7, 1997. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the Corporate General Partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XII ("Carlyle- XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership- XVII ("Carlyle-XVII), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners- III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing officers and directors are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the Corporate General Partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG"). Most of such directors and officers are also partners of certain partnerships which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-XII, Carlyle-XIII, Carlyle- XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 59) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant.
Neil G. Bluhm (age 59) is an individual general partner of JMB Income- IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a director of USC, Inc. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 58) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 55) has been associated with JMB since July, 1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 50) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is a director of USC, Inc. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investment business. He is also a senior advisor and partner of Blackstone Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also served as a Trustee of Amli Residential Property Trust, a publicly-traded real estate investment trust that invests in multi-family properties. He is also a director of USC, Inc., as well as a director for a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 47) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 49) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Gary Nickele (age 44) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 48) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 61) has been associated with JMB since March, 1973. He is a Certified Public Accountant.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is also made to the Notes for a description of such transactions, distributions and allocations. In 1996, 1995 and 1994, no cash distributions were paid to the General Partners. In 1991, the General Partners deferred distributions of $7,161 and management fees of $11,936.
Urban Retail Properties, Co., an affiliate of the Corporate General Partner, provided property management and leasing services at the Mall of Memphis during 1996. In 1996, such affiliate earned and received property management and leasing fees amounting to $289,483. As set forth in the Prospectus of the Partnership, the Corporate General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area (but in no event at rates greater than 5% of the gross income from a property), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General Partner, earned and received insurance brokerage commissions in 1996 aggregating $27,639 in connection with the provision of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage provided.
The Corporate General Partner of the Partnership and their affiliates may be reimbursed for their salaries, salary-related and direct expenses relating to the administration of the Partnership and the acquisition and operation of the Partnership's real property investments. In 1996, the Corporate General Partner of the Partnership was due reimbursement for such expenses in the amount of $38,826. Cumulative amounts unpaid at December 31, 1996 were $8,118.
The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. The relationship of the Corporate General Partner to its affiliates is set forth above in Item 10.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits.
3-A.*The Prospectus of the Partnership dated May 8, 1981, as supplemented on July 27, 1981, October 9, 1981, November 5, 1981, December 10, 1981, February 19, 1982 and April 23, 1982, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Form 10-K Report for December 31, 1994 filed on March 27, 1995.
3-B.*Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated by reference to Exhibit 3-B to the Partnership's Form 10-K Report for December 31, 1994 filed on March 27, 1995.
4-A. Long-term debt modification relating to the 767 Third Avenue Office Building in New York, New York is hereby incorporated by reference to Exhibit 4-A to the Partnership's Report on Form 10-K (File No. 0-10494) for December 31, 1994 dated on March 27, 1995.
4-B. Mortgage loan documents secured by the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
4-C. First through third mortgage loan documents secured by the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8, 1981.
4-D.*Fourth mortgage loan document secured by the Riverfront Office Building in Cambridge, Massachusetts is hereby incorporated by reference to Exhibit 4-D to the Partnership's Report on Form 10-K for December 31, 1994 dated on March 27, 1995.
4-E. Deed of trust note document dated March 31, 1993 secured by the Mall of Memphis in Memphis, Tennessee is hereby incorporated by reference to Exhibit 4-E to the Partnership's Report on Form 10-K for December 31, 1994 dated on March 27, 1995.
4-F. Loan repayment agreement related to the first through fourth mortgage loan documents secured by the Riverfront Office Building in Cambridge Massachusetts, is filed herewith.
10-A.Acquisition documents relating to the purchase by the Partnership of an interest in the 767 Third Avenue Office Building in New York, New York are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-B.Acquisition Documents relating to the purchase by the Partnership of an interest in the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-C.Acquisition documents relating to the purchase by the Partnership of an interest in the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-D.Amended and Restated Promissory Note, dated April 30, 1994 between Carlyle/National City Associates and New York Life Insurance Company relating to the National City Center Office Building is hereby incorporated by reference to the Partnership's report for June 30, 1994 on Form 10-Q (File No. 0-10494) dated August 12, 1994.
10-E.Acquisition documents relating to the purchase by the Partnership of the venture partner's interest in the Mall of Memphis in Memphis, Tennessee, incorporated by reference to the Partnership's report for September 30, 1995 on Form 10-Q (File No. 0-10494) dated November 9, 1995.
10-F.Purchase Agreement dated July 23, 1996 related to the sale of El Dorado View Apartments in Houston, Texas, by and between Carlyle Real Estate Limited Partnership - XI and Meridian Capital Corporation, is hereby incorporated by reference to the Partnership's report for September 30, 1996 on Form 10-Q (File No. 0-10494) dated November 8, 1996.
10-G.Purchase Agreement dated November 1, 1996 related to the sale of Scotland Yard Apartments - Phase I and II in Houston, Texas, by and between Carlyle Real Estate Limited Partnership-XI and FCS Realty, LLC, is filed herewith.
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule _____________
* Previously filed in Exhibits 3-A, 3-B and 4-D to the Partnership's Report on Form 10-K for December 31, 1992 of the Securities Exchange Act of 1934 (File No. 0-10494) filed on March 19, 1993.
(b) No Reports on Form 8K have been filed since the beginning of the last quarter covered by this report.
No annual report or proxy material for the fiscal year 1996 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 21, 1997
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 21, 1997
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 21, 1997
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 21, 1997
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 21, 1997
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 21, 1997
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 21, 1997
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 21, 1997
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ---- 3-A. The Prospectus of the Partnership dated May 8, 1981 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Mortgage loan documents secured by the 767 Third Avenue Office Building Yes
4-B. Mortgage loan documents secured by the Mall of Memphis Yes
4-C. First through third mortgage loan documents secured by the Riverfront Office Building Yes
4-D. Fourth mortgage loan document secured by the Riverfront Office Building Yes
4-E. Deed of trust note dated March 31, 1993 secured by the Mall of Memphis Yes
4-F. Loan Repayment Agreement secured by the Riverfront Office Building No
10-A. Acquisition documents related to the 767 Third Avenue Office Building Yes
10-B. Acquisition documents related to the Mall of Memphis Yes
10-C. Acquisition documents related to the Riverfront Office Building Yes
10-D. Amended and Restated Promissory Note, between Carlyle/National City Center Office Building Yes
10-E. Acquisition documents relating to the purchase by the Partnership of the venture partner's interest in the Mall of Memphis Yes
10-F. Purchase Agreement related to the Sale of the El Dorado View Apartments Yes
10-G. Purchase Agreement related to the sale of the Scotland Yard Apartments - Phase I and II No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits.
3-A.*The Prospectus of the Partnership dated May 8, 1981, as supplemented on July 27, 1981, October 9, 1981, November 5, 1981, December 10, 1981, February 19, 1982 and April 23, 1982, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Form 10-K Report for December 31, 1994 filed on March 27, 1995.
3-B.*Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated by reference to Exhibit 3-B to the Partnership's Form 10-K Report for December 31, 1994 filed on March 27, 1995.
4-A. Long-term debt modification relating to the 767 Third Avenue Office Building in New York, New York is hereby incorporated by reference to Exhibit 4-A to the Partnership's Report on Form 10-K (File No. 0-10494) for December 31, 1994 dated on March 27, 1995.
4-B. Mortgage loan documents secured by the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
4-C. First through third mortgage loan documents secured by the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8, 1981.
4-D.*Fourth mortgage loan document secured by the Riverfront Office Building in Cambridge, Massachusetts is hereby incorporated by reference to Exhibit 4-D to the Partnership's Report on Form 10-K for December 31, 1994 dated on March 27, 1995.
4-E. Deed of trust note document dated March 31, 1993 secured by the Mall of Memphis in Memphis, Tennessee is hereby incorporated by reference to Exhibit 4-E to the Partnership's Report on Form 10-K for December 31, 1994 dated on March 27, 1995.
4-F. Loan repayment agreement related to the first through fourth mortgage loan documents secured by the Riverfront Office Building in Cambridge Massachusetts, is filed herewith.
10-A.Acquisition documents relating to the purchase by the Partnership of an interest in the 767 Third Avenue Office Building in New York, New York are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-B.Acquisition Documents relating to the purchase by the Partnership of an interest in the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-C.Acquisition documents relating to the purchase by the Partnership of an interest in the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-D.Amended and Restated Promissory Note, dated April 30, 1994 between Carlyle/National City Associates and New York Life Insurance Company relating to the National City Center Office Building is hereby incorporated by reference to the Partnership's report for June 30, 1994 on Form 10-Q (File No. 0-10494) dated August 12, 1994.
10-E.Acquisition documents relating to the purchase by the Partnership of the venture partner's interest in the Mall of Memphis in Memphis, Tennessee, incorporated by reference to the Partnership's report for September 30, 1995 on Form 10-Q (File No. 0-10494) dated November 9, 1995.
10-F.Purchase Agreement dated July 23, 1996 related to the sale of El Dorado View Apartments in Houston, Texas, by and between Carlyle Real Estate Limited Partnership - XI and Meridian Capital Corporation, is hereby incorporated by reference to the Partnership's report for September 30, 1996 on Form 10-Q (File No. 0-10494) dated November 8, 1996.
10-G.Purchase Agreement dated November 1, 1996 related to the sale of Scotland Yard Apartments - Phase I and II in Houston, Texas, by and between Carlyle Real Estate Limited Partnership-XI and FCS Realty, LLC, is filed herewith.
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule _____________
* Previously filed in Exhibits 3-A, 3-B and 4-D to the Partnership's Report on Form 10-K for December 31, 1992 of the Securities Exchange Act of 1934 (File No. 0-10494) filed on March 19, 1993.
(b) No Reports on Form 8K have been filed since the beginning of the last quarter covered by this report.
No annual report or proxy material for the fiscal year 1996 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 21, 1997
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 21, 1997
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 21, 1997
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 21, 1997
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 21, 1997
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 21, 1997
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 21, 1997
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 21, 1997
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ---- 3-A. The Prospectus of the Partnership dated May 8, 1981 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Mortgage loan documents secured by the 767 Third Avenue Office Building Yes
4-B. Mortgage loan documents secured by the Mall of Memphis Yes
4-C. First through third mortgage loan documents secured by the Riverfront Office Building Yes
4-D. Fourth mortgage loan document secured by the Riverfront Office Building Yes
4-E. Deed of trust note dated March 31, 1993 secured by the Mall of Memphis Yes
4-F. Loan Repayment Agreement secured by the Riverfront Office Building No
10-A. Acquisition documents related to the 767 Third Avenue Office Building Yes
10-B. Acquisition documents related to the Mall of Memphis Yes
10-C. Acquisition documents related to the Riverfront Office Building Yes
10-D. Amended and Restated Promissory Note, between Carlyle/National City Center Office Building Yes
10-E. Acquisition documents relating to the purchase by the Partnership of the venture partner's interest in the Mall of Memphis Yes
10-F. Purchase Agreement related to the Sale of the El Dorado View Apartments Yes
10-G. Purchase Agreement related to the sale of the Scotland Yard Apartments - Phase I and II No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No