ITEM 1. BUSINESS
The Registrant, Dean Witter Realty Yield Plus, L.P. (the "Partnership"), is a limited partnership organized in January 1987 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing in income-producing properties.
The Managing General Partner of the Partnership is Dean Witter Realty Yield Plus Inc. (the "Managing General Partner"), a Delaware corporation which is wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Yield Plus Associates, L.P. (the "Associate General Partner"), a Delaware limited partnership, the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the business of the Partnership. The terms of transactions between the Partnership and its affiliates are set forth in the consolidated financial statements in Item 8 and in Item 13 below.
The Partnership issued 8,909,969 units of limited partnership interest (the "Units") for $178,199,380. The offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make investments in six participating mortgage loans and land leases secured by interests in two retail properties, two office buildings, one residential property, and an office and parking garage complex. Additionally, proceeds were used to make an investment in a short-term loan secured by eleven partnership interests. The Partnership subsequently acquired the real estate securing all but one of the foregoing loans through foreclosure or through transfers of ownership in lieu of foreclosure and sold three properties. The Partnership's properties and investment in participating mortgage loan are described in Item 2
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices.
As of December 31, 1996, the Partnership owned directly or through a partnership interest the following interests in real estate and a real estate loan. Generally, the leases pertaining to the properties provide for pass-throughs to the tenants of their pro- rata share of certain operating expenses. In the opinion of the Managing General Partner, all of the properties are adequately covered by insurance.
1. Acquisition date is date of foreclosure or in-substance foreclosure.
2. Estimated fair value on foreclosure or in-substance foreclosure date, or loan amount.
3. Property is subject to a mortgage loan. See note 7 to the consolidated financial statements in Item 8.
4. The Managing General Partner owns the remaining .01% general partnership interest in the partnership.
5. Dean Witter Realty Yield Plus II, L.P. ("Yield Plus II"), an affiliate of the Partnership owns the remaining 49.19% general partnership interest. The total cost of the property was approximately $71 million.
6. Approximately 190,000 sq. ft. at the property is owned by stores occupying the shopping center.
7. Yield Plus II made the remaining 42% of the loan. The total loan made was $59.2 million.
Each property was built with on-site parking facilities.
An affiliate of Realty is the property manager for Greenway Pointe, 2600 Michelson Drive, Deptford Crossing and, as of April 1, 1996, Genessee Crossing.
Further information relating to the Partnership's properties is included in Item 7 and Notes 4, 5, 6 and 7 to the consolidated financial statements in Item 8 below.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On December 27, 1995, a purported class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. ("DWR") and others as defendants was filed in Superior Court in California. The complaint alleged fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and sought compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants removed the case to the United States District Court for the Southern District of California. Pursuant to an order of the U.S. District Court for the Southern District of California entered May 24, 1996, the Grigsby Action was transferred to the U.S. District Court for the Southern District of New York.
On February 14, 1996, a purported class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co. ("DWD") and DWR as defendants was filed in the Chancery Court of Delaware for New Castle County (the "Delaware Chancery Court"). On February 23, 1996, a purported class action lawsuit (the "Dosky Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants was filed in the Delaware Chancery Court. On February 29, 1996, a purported class action lawsuit (the "Segal Action') naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWR, DWD and others as defendants was filed in the Delaware Chancery Court. On March 13, 1996, a purported class action lawsuit (the "Young Action") naming the partnership, other unidentified limited partnerships, DWD, DWR and others as defendants was filed in the Circuit Court for Baltimore City in Baltimore, Maryland. The defendants removed the Young Action to the United States District Court for the District of Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal Action were consolidated in a single action (the "Consolidated Action") in the Delaware Chancery Court. The Young Action was dismissed without prejudice. The plaintiffs in the Young Action and the Grigsby Action joined the Consolidated Action. The Grigsby Action remains stayed indefinitely subject to being reopened for good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a First Consolidated and Amended Class Action Complaint naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants. This complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in an unspecified amount, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants filed a motion to dismiss this complaint on December 10, 1996.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders.
PART II.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow its limited partners (the "Limited Partners") to transfer their Units, if a suitable buyer can be located.
As of March 17, 1997, there were 16,230 holders of limited partnership interests.
The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make quarterly distributions of cash to its partners. Pursuant to the Partnership Agreement, distributable cash, as defined, is paid 90% to the Limited Partners and 10% to the general partners (the "General Partners"). Pursuant to the agreement, $1,239,345 of the General Partner's share of such net cash flow distributable to them through December 31, 1990, was deferred subject to receipt by the Limited Partners of an 8% annual return on their invested capital through that date.
During the year ended December 31, 1996, the Partnership paid cash distributions aggregating $1.26 per Unit (including approximately $.72 (a total of $6,414,961) of proceeds from the sale of certain retail properties sold (the "Shopping Centers Sold") in December 1995). Total distributions were $11,760,832, with $11,226,245 distributed to the Limited Partners and $534,587 to the General Partners. The distribution of proceeds from the Shopping Centers Sold was paid 100% to the Limited Partners; the General Partners deferred receipt of any proceeds. During the year ended December 31, 1995, the Partnership paid quarterly cash distributions aggregating $.60 per Unit. The total distributions amounted to $5,939,976, with $5,345,980 distributed to the Limited Partners and $593,996 distributed to the General Partners.
On January 30, 1997, the Partnership paid a cash distribution of $.13 per Unit. The distribution was $1,286,996, with $1,158,296 distributed to Limited Partners and $128,700 distributed to the General Partners.
The Partnership anticipates making regular distributions to its partners in the future.
Sale or financing proceeds will be distributed, to the extent available: first, 97% to the Limited Partners and 3% to the General Partners until each Limited Partner has received a return of their invested capital plus an amount sufficient to provide a 10% cumulative annual return thereon; second, 100% to the General Partners until they have received the amount of any net cash flow previously deferred and not distributed; and third, 85% to the Limited Partners and 15% to the General Partners. During the year ended December 31, 1995, the Partnership did not distribute any sale or financing proceeds.
Taxable income (subject to certain adjustments) will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds, as the case may be (or 90% to the Limited Partners and 10% to the General Partners if there is no distributable cash or sale or financing proceeds). Tax losses, if any, will be allocated 90% to the Limited Partners and 10% to the General Partners.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the Partnership:
1. Revenues and loss include reserves of $0.7 million on accrued but unpaid interest on the participating mortgage loan, and loss also includes $1.0 million impairment loss on the participating mortgage loan. See Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Partnership raised $178,199,380 through a public offering which terminated in 1987. The Partnership has no plans to raise additional capital.
The Partnership originally invested in seven loans or land leases. Due to the past weakness in real estate markets, most of the properties did not generate sufficient cash flow to fully service their debt. As a result, prior to December 31, 1994, the Partnership acquired all but one of the properties in which it originally invested. No additional investments are planned.
In many regions of the country, continued restraint of new office construction and steady leasing have reduced office supply in office markets and, in certain areas, property values and rental rates are rising. Generally, suburban office markets are faring better than downtown markets in major cities. Generally, new construction remains low by historic standards, and is primarily on a build-to- suit basis. Currently, the office vacancy level in Boston (the location of One Congress Street) is approximately 9%. The relative absence of office construction and growth in demand from high technology and professional service firms has recently resulted in an absorption of office space and an increase in rental rates in the class A office market in Orange County, CA (the location of 2600 Michelson Drive). Vacancies at many office/research and development properties, such as Greenway Pointe, are declining as communications, computer and software companies demand additional space. In the retail sector, continued construction remains brisk but is primarily limited to bigger "super" stores. A changing tenant base caused by the domination of certain power center tenants coupled with bankruptcies and major restructurings of other tenants and reduced consumer spending is resulting in higher vacancies and stagnant rents.
The Partnership's liquidity depends upon the cash flow from operations of its real estate investments, interest received on its participating mortgage loan and expenditures for building improvements and tenant improvements and leasing commissions in connection with the leasing of space. During the year ended December 31, 1996, all of the Partnership's properties, except for 401 East Ontario Street, generated positive cash flow from operations, and it is anticipated that they will continue to do so in 1997. Significant repair costs at 401 East Ontario Street caused property operating expenses there to exceed rental income by approximately $2.7 million (see Note 4 to the consolidated financial statements). Also, as described below and in Note 6 to the consolidated financial statements, the borrower on the One Congress Street property is in Chapter 11 bankruptcy proceedings and did not pay approximately $660,000 of its minimum debt service in the fourth quarter of 1996.
The Partnership's liquidity also has been and will continue to be affected by the sale of Partnership properties; as properties are sold, Partnership cash from operations available for distribution decreases. Because the Partnership sold three shopping centers (the "Shopping Centers Sold") in December 1995, the Partnership's aggregate cash flow from operations was reduced by approximately $2.9 million during the year ended December 31, 1996. The Partnership accordingly adjusted the quarterly distribution rate to $.13 per Unit, a 3% annual return on the gross offering proceeds attributable to the Partnership's remaining investments, beginning with the first quarter distribution paid in April 1996.
During the year ended December 31, 1996, the Partnership incurred approximately $1,950,000 (net of contributions by the minority interest) primarily for tenant-related capital expenditures at 2600 Michelson Drive ($980,000) and Greenway Pointe ($300,000), and $383,000 for building improvements at 401 East Ontario Street.
Also, in 1996, the Partnership incurred approximately $4.0 million for repairs on the exterior concrete at 401 East Ontario Street. As of December 31, 1996, this repair program had been substantially completed at a total cost of approximately $5.7 million. During the third quarter of 1996, the Partnership commenced work to repair the fire and life safety systems at the property; the total cost of this project is expected to be approximately $3.9 million, of which approximately $850,000 has been incurred to date. The Partnership has also incurred approximately $425,000 in legal costs in 1996 in connection with its lawsuits to recover its repair costs. In 1997, the Partnership expects to expend approximately $3.1 million for the remaining repairs. See Note 4 to the consolidated financial statements.
As of December 31, 1996, the Partnership has commitments to contribute approximately $390,000, primarily for lease-related capital expenditures at the Greenway Pointe ($178,000) and Michelson ($175,000, net of minority interest share) properties.
The Partnership's participating mortgage loan is secured by the One Congress Street property. The General Services Administration ("GSA"), the sole tenant of the office space at the property, vacated approximately 30% of the space at the property in August 1996, and the lease on its remaining space expires in August 1997. On October 15, 1996, the owner/borrower filed a voluntary petition under Chapter 11 of the U.S. bankruptcy code. During the fourth quarter of 1996, the owner/borrower failed to pay interest on the loan of approximately $660,000. See Note 6 to the consolidated financial statements.
The cash flow generated from the lease of the garage at the One Congress street property is projected to be sufficient to pay the debt service due under the first mortgage loan on the property. However, current market rental rates in Boston are significantly less than in the early 1990's when the GSA lease was entered into. Therefore, the Partnership believes that the rent to be received by the owner/borrower after re-leasing the office space at the property and, as a result, the Partnership's cash flow from the property, will significantly decrease. In addition, there may be a significant amount of time before a new tenant is found for this space, and substantial funds may be required to re-lease the space.
The Partnership believes that during the period of the bankruptcy it will be unable to collect its interest on the loan in full and that the bankruptcy may adversely impact future leasing at the property. Accordingly, the Partnership has determined that its loan is impaired and has recorded an additional valuation allowance of $979,000 to reduce the carrying value of the loan to its estimated fair value.
The Partnership's note payable secured by the Genessee Crossing shopping center for $8,590,000 matures in May 1997, and the note payable secured by the Deptford Crossing shopping center, for approximately $11,400,000, matures in September 1997. The Partnership is currently discussing refinancing alternatives on these properties with the lenders. If the Partnership is unable to refinance one or both of these loans, the Partnership may lose the property(ies) through foreclosure.
During 1997, the Partnership expects that operating cash flow from its real estate owned (net of minority interest share), except for repair costs at 401 East Ontario Street, will exceed distributions to investors (other than distributions from proceeds from properties sold). The Partnership expects to pay for capital expenditures and the 401 East Ontario Street repair costs from cash reserves. Also, the extent to which Partnership cash flow from the One Congress Street property will be reduced in 1997 can not be determined at this time. It is possible that the cash from One Congress Street along with Partnership cash flow from operations will be insufficient to fund Partnership cash needs. If this were to occur, the Partnership might need to fund a portion of distributions to investors, capital expenditures and contributions to its joint ventures from cash reserves, or to reduce cash distributions.
Except as discussed above and in the consolidated financial statements in Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DEAN WITTER REALTY YIELD PLUS, L.P.
INDEX
(a) Financial statements Page
Independent Auditors' Report Consolidated Balance Sheets at December 31, 1996 and 1995 18 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 19 Consolidated Statements of Partners' Capital for the years ended December 31, 1996, 1995 and 1994 20 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 21-22 Notes to Consolidated Financial Statements 23-33
(b) Financial statement schedule
Real Estate and Accumulated Depreciation III 40-42
All schedules other than those indicated above have been omitted because either the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto.
Independent Auditors' Report
To the Partners of Dean Witter Realty Yield Plus, L.P.:
We have audited the accompanying consolidated balance sheets of Dean Witter Realty Yield Plus, L.P. and consolidated partnerships (the "Partnership") as of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included financial statement schedule III. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and the 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dean Witter Realty Yield Plus, L.P. and consolidated partnerships as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, financial statement schedule III, 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.
Deloitte & Touche LLP /s/Deloitte & Touche LLP New York, New York March 26, 1997
5. Real Estate Sold
On October 19, 1995, the Partnership and certain of its subsidiaries entered into an agreement with New Plan Realty, to sell the land and buildings which comprise the Hampton Village Centre, Midway Crossing, Farmington Crossroads and Genessee Crossing shopping centers (which are described in more detail below). The agreement was subsequently amended to, among other things, eliminate the sale of the Genessee Crossing shopping center.
The closing of the sale of the Hampton Village Centre, Midway Crossing and Farmington Crossroads shopping centers, for a negotiated sales price of approximately $58,250,000, took place on December 11, 1995.
At closing, a portion of the sales proceeds were used to prepay the existing mortgages encumbering Hampton Village Centre and Farmington Crossroads, secured borrowings under two bank lines of credit and the loan from an affiliate. After reserves relating to the cost of repairs of the 401 East Ontario Street property, the Partnership distributed approximately $6.4 million to the Limited Partners in January 1996. See Notes 7 and 10.
The aggregate net income and cash flow from operations from the shopping centers sold for the year ended December 31, 1995 was approximately $1,870,000 and $2,550,000, respectively. Interest expense relating to the loans secured by the shopping centers was approximately $3,600,000.
Hampton Village Centre, Rochester Hills, Michigan
The Partnership had made three participating mortgage loans totaling approximately $13,300,000 to Hampton Village Centre (the "Center"). The Partnership's borrower had also obtained a first mortgage loan of $29,000,000, secured by Phase I of the Center, on which interest- only was payable monthly through May 1997 at 9.375%.
Prior to 1994, the Partnership obtained effective control of the entity which owned the Center, and began accounting for it as if the Center were owned. During the first quarter of 1994, the Partnership indirectly acquired all of the partnership interests of Hampton Crossing Associates not previously owned by it.
Contractors who worked on the property had brought claims of about $2,000,000 against the borrower and had filed liens against the Center. During 1994, the Partnership settled all but one of these claims for approximately $300,000. Settlement of the remaining claim in 1995 did not have a material impact on the financial statements.
An affiliate of Realty managed the property.
Shopping Centers Investments, Michigan, Ohio, and Tennessee
In 1990, the Partnership loaned $6,000,000 to the partners of the developer of eleven community shopping centers and the Hampton Crossing and Deptford Crossing properties. The loan was secured by interests in eleven partnerships which owned the eleven community shopping centers and undeveloped land, all of which were encumbered by mortgages. Three of the Centers were sold during the second quarter of 1991. The borrower defaulted on the loan in August 1991. The Partnership reserved the loan in full as of December 31, 1992.
In April 1994, the Partnership obtained sole control of the partnerships which own the Hickory Ridge Crossing, Midway Crossing and Genessee Crossing community shopping centers and joint control of the partnership which owns the Farmington Crossroads Center. At that date, the Partnership consolidated these partnerships and recorded their assets and liabilities at estimated fair values. The Partnership also retained two parcels of land not subject to mortgages.
During 1994, the mortgagees foreclosed on five of the properties, including the Hickory Ridge Crossing center, which was encumbered by a $4,150,000 mortgage.
6. Investment in Participating Mortgage
One Congress Street, Boston, Massachusetts
The Partnership and Yield Plus II made a $59.2 million participating second mortgage loan on the One Congress Street property, which consists of an office building and parking garage. Base interest on the loan is payable at 8% and the first $250,000 of net revenues in any calendar year from the property is payable as additional interest. The Partnership and Yield Plus II also own a 58% interest in adjusted net revenue and capital proceeds generated by the property. The loan is due in 1999.
The Partnership and Yield Plus II have fully funded their loan commitments of $34.35 and $24.85 million, respectively.
In August 1996, the General Services Administration ("GSA"), which leased all of the office space at the property, vacated approximately 70,000 square feet (approximately 30% of the office space) pursuant to its one-time cancellation option on a portion of its space. The GSA's annual rent for this space approximated $2.5 million. The lease on GSA's remaining space at the property expires in August 1997. The owner/borrower has a pending claim against the GSA relating to the original construction of its space.
In 1993, the Partnership concluded that the value of the One Congress Street property and the Partnership's related loan were impaired. Accordingly, as of December 31, 1993, the Partnership established an allowance of approximately $12.9 million against the loan. The $1.7 million loss on impairment in 1994 represents approximately $1.3 million funded and reserved in 1994 and approximately $0.4 million reserved in 1994 and funded in early 1995.
In 1991, one of the general partners of the general partner of the owner/borrower of the One Congress Street property filed a voluntary petition under Chapter 11 of the Bankruptcy Code. In 1996, as part of the reorganization, control over this general partner's interest in the property was transferred to a trustee in bankruptcy.
In October 1996, the owner/borrower defaulted on the participating mortgage loan by failing to timely pay its debt service. Thereafter, the Partnership and Yield Plus II accelerated the loan and attempted to take possession of the property. On October 15, 1996, the owner/borrower filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The Partnership is currently attempting to negotiate a settlement agreement with the owner/borrower. The ultimate outcome of these negotiations and their effect on the financial statements cannot be determined at this time. The owner/borrower remains current on its debt service payments to its first mortgage lender and the property's real estate taxes have been paid.
The Partnership believes that during the bankrtupcy period it will be unable to collect its interest on the loan in full and that the bankruptcy may adversely impact future leasing at the property. Accordingly, the Partnership has determined that the loan is impaired and has recorded an additional valuation allowance of $979,000 to reduce the carrying value of the loan to its estimated fair value, and has reserved accrued but unpaid interest of approximately $660,000 as of December 31, 1996.
7. Mortgage Notes Payable
The Partnership's properties are subject to first mortgage notes as follows:
The fair value of the mortgage notes payable are approximately equal to their carrying values. The fair value is estimated by discounting future principal and interest payments using current lending rates and market conditions for instruments with similar maturities and credit quality.
The mortgage note securing the Deptford Crossing property, originally maturing in March 1996, was modified in November 1995. As part of the modification, the maturity of the note was extended until March 1997, with an option, which has been exercised, to extend to September 1997, and the semiannual principal payments of $53,910 were revised to monthly principal payments of $15,000, plus additional quarterly principal payments equal to excess cash (as defined in the refinancing agreement). The Partnership had provided a $5 million letter of credit, secured by Partnership cash reserves, to the lender to secure repayment. As part of the restructuring, $4.5 million of the cash reserves were used to repay principal and $500,000 was used to establish an escrow account. Approximately $132,000 of the escrow account was released to the Partnership to fund capital expenditures at the property in 1996. At December 31, 1996, the interest rate was 6.97% on the loan.
8. Loans Payable
In August 1994, the Partnership increased its existing $3 million bank line of credit to $5 million and borrowed the available amount of approximately $4.1 million. Contemporaneously, the Partnership established an additional $6 million line of credit with the bank and borrowed approximately $4.5 million.
These borrowings were used to repay mortgage loans secured by the Midway Crossing Shopping Center aggregating approximately $8.2 million (after forgiveness of $626,375 of the loan by the mortgagee), and delinquent real estate taxes and closing costs totaling approximately $312,000. The remaining borrowings were used to increase Partnership cash reserves.
Borrowings under both of the bank lines of credit, which bore interest at the prime rate plus one quarter percent and were secured by certain of the Partnership's properties were repaid in December 1995 from the proceeds from the sale of three shopping centers.
9. Leases
Minimum future rentals under noncancellable operating leases as of December 31, 1996 are as follows:
The Partnership has determined that all leases relating to its properties are operating leases. These leases range in term from one to fiften years, and generally provide for fixed minimum rent with rental escalation and/or expense reimbursement clauses.
10. Related Party Transactions
An affiliate of Realty provided property management services for four properties in 1996, 1995 and 1994. The Partnership paid the affiliate property management fees (included in property operating expenses) of $327,000, $327,228 and $316,768 for the years ended December 31, 1996, 1995 and 1994, respectively.
Realty performs administrative functions, and processes certain investor and tax information on behalf of the Partnership. For the years ended December 31, 1996, 1995 and 1994, Realty was reimbursed $387,000, $445,383 and $422,199, respectively (included in general and administrative expenses), for these services.
As of December 31, 1996, Realty and its affiliate were owed $59,000, which is included in accounts payable and other liabilities.
In 1991, the Partnership borrowed funds from an affiliate of Realty to fund investments in participating mortgage loans and capital expenditures. Interest expense, which was calculated using the prime rate, was $154,491 in 1995 and $123,508 in 1994. The loan was repaid in December 1995 out of the proceeds of the sale of the shopping centers (see Note 5).
11. Litigation
Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) are defendants in purported class action lawsuits pending in state and federal courts. The complaints allege a number of claims, including breach of fiduciary duty, fraud and misrepresentation, and seek an accounting of profits, compensatory and other damages in an unspecified amount, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants are vigorously defending these actions. It is impossible to predict the effect, if any, the outcome of these actions might have on the Partnership's financial statements.
12. Subsequent Event
On January 30, 1997, the Partnership paid a cash distribution of $.13 per Unit. The distribution was $1,286,996, with $1,158,296 distributed to the Limited Partners and $128,700 distributed to the General Partners.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and has no directors or officers.
The directors and executive officers of the Managing General Partner are as follows:
Position with the Name Managing General Partner
William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Lawrence Volpe Controller and Director Ronald T. Carman Secretary and Director
All of the directors have been elected to serve until the next annual meeting of the Shareholders of the Managing General Partner or until their successors are elected and qualify. Each of the officers has been elected to serve until his successor is elected and qualifies.
William B. Smith, age 53, is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 47 is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982.
Lawrence Volpe, age 49, is a Director and the Controller of Dean Witter Realty Inc. He is a Senior Vice President and Controller of Dean Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 45, is a Director and the Secretary of Dean Witter Realty Inc. He is a Senior Vice President and Associate General Counsel of Dean Witter, Discover & Co. and Dean Witter Reynolds Inc., which he joined in 1984.
There is no family relationship among any of the foregoing persons.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are in Item 5 above. The General Partners received cash distributions totalling $534,587, $593,996 and $593,997 during the years ended December 31, 1996, 1995 and 1994, respectively. In 1996, the General Partners deferred distribution of their share of the sales proceeds from the December 1995 sale of three shopping centers.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 10 to the consolidated financial statements in Item 8 above.
The directors and executive officers of the Partnership's Managing General Partner received no renumeration from the Partnership.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of more than five percent of the Units.
(b) The executive officers and directors of the Managing General Partner own the following Units as of March 17, 1997:
*Own, by virtue of ownership of limited partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their being partners of a limited partnership which is the limited partner of the Associate General Partner, certain current and former officers and directors of the Managing General Partner also own indirect general partnership interests in the Partnership. The Partnership Agreement of the Partnership provides that cash distributions and allocations of income and loss to the General Partners shall be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The General Partners' share of cash distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing General Partner are owned by Dean Witter Realty Inc., a Delaware corporation which is a wholly-owned subsidiary of Dean Witter, Discover & Co. The general partner of the Associate General Partner is Dean Witter Realty Yield Plus Inc., which is a wholly-owned subsidiary of Dean Witter Realty Inc. The limited partner of the Associate General Partner is LSYP 87, L.P., a Delaware limited partnership. Certain current and former officers and directors of the Managing General Partner are partners of LSYP 87, L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above.
The 401 East Ontario Street property was developed by a joint venture between a third party developer and an entity comprised of former and current Realty executives, several of whom are former or current executive officers of the Managing General Partner. In January 1994, the Partnership obtained ownership of the property by deed-in-lieu of foreclosure.
The Hampton Village Centre property was developed by Hampton Crossing Associates, a joint venture between the Partnership and an entity comprised of former and current Realty executives, several of whom are former or current executive officers of the Managing General Partner. In the first quarter of 1994, the Partnership indirectly obtained ownership of all the partnership interests in Hampton Crossing Associates.
The One Congress Street property was developed by a partnership between a Maryland-based developer and an entity comprised of former Realty executives, some of whom were formerly executive officers of the Managing General Partner. This entity withdrew as a partner of the borrower in September 1993, so the borrower partnership is now controlled solely by the Maryland-based developer.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 10 to the Consolidated Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties.
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 Annual Report:
1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33- 11648 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33- 11648 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988. Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean Witter Realty Yield Plus II, L.P., and Realty Management Services Inc. dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated October 12, 1989 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan Promissory Note dated June 22, 1990 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(21) Subsidiaries: Deptford Crossing Associates, a New Jersey limited partnership. Hampton Crossing Associates, a Michigan limited partnership. DW Lakeshore Associates, an Illinois limited partnership. DW Columbia Gateway Associates, a Maryland limited partnership. DW Michelson Associates, a California limited partnership.
(27) Financial Data Schedule
(d) Financial Statement Schedules
1. Financial Statements of GCGA Limited Partnership, owner of an office building/parking garage located in Boston, Massachusetts. To be filed by 10-K/A when received by GCGA Limited Partnership.
Notes:
(A) The basis in the properties for financial reporting purposes is net realizable value of fair maket value at the date of foreclosure or in-substance foreclosure. The loss in the amount of $26,921,806 on foreclosure of real estate does not reduce the basis for federal income tax purposes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS, L.P.
By: Dean Witter Realty Yield Plus Inc. Managing General Partner
By: /s/E. Davisson Hardman, Jr. Date: March 26, 1997 E. Davisson Hardman, Jr. President
By: /s/Lawrence Volpe Date: March 26, 1997 Lawrence Volpe Controller (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
DEAN WITTER REALTY YIELD PLUS INC. Managing General Partner
/s/William B. Smith Date: March 26, 1997 William B. Smith Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: March 26, 1997 E. Davisson Hardman, Jr. Director
/s/Lawrence Volpe Date: March 26, 1997 Lawrence Volpe Director
/s/Ronald T. Carman Date: March 26, 1997 Ronald T. Carman Director DEAN WITTER REALTY YIELD PLUS, L.P.
Year Ended December 31, 1997
Exhibit Index
Exhibit No. Description
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33- 11648 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33- 11648 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988. Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
E1 DEAN WITTER REALTY YIELD PLUS, L.P.
Year Ended December 31, 1997
Exhibit Index
(continued)
Exhibit No. Description
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean Witter Realty Yield Plus II, L.P., and Realty Management Services Inc. dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated October 12, 1989 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan Promissory Note dated June 22, 1990 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
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DEAN WITTER REALTY YIELD PLUS, L.P.
Year Ended December 31, 1997
Exhibit Index
(continued)
Exhibit No. Description
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(27) Financial Data Schedule
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