ITEM 1 - BUSINESS
ORGANIZATION
First Wilkow Venture (the "Registrant") is a limited partnership composed of 416 limited partners and two general partners who are Marc R. Wilkow and Clifton J. Wilkow.
Marc R. Wilkow and Clifton J. Wilkow have been engaged in real estate activities for over 20 years as officers of M&J Wilkow, Ltd., a closely held corporation, and certain affiliated companies which have been involved (through their predecessors in interest) in the acquisition, sale, development, leasing, operation, brokerage and management of real estate since 1939.
Marc R. Wilkow is also president and sole director and stockholder of the law firm of Wilkow & Wilkow, P.C., which is the general counsel for the Registrant.
All of the above entities, including the Registrant, have their principal offices at 180 North Michigan Avenue in Chicago, Illinois 60601.
M & J Wilkow, Ltd. and its affiliated companies have a combined administrative staff of 43 and ancillary clerical, office and maintenance staff of approximately 117.
The Registrant employs approximately five people who are management and maintenance personnel in connection with the operation of certain wholly owned properties.
DESCRIPTION OF BUSINESS
The Registrant owns outright or otherwise has participatory ownership interests in real property for investment purposes. At December 31, 1997, there are 31 properties in which the Registrant has interests, divided among residential, commercial and industrial buildings, shopping centers, and undeveloped land. Twenty-six of the properties are neither owned nor leased by the Registrant directly, but are owned by the Registrant in participation with other partnerships, some of which the Registrant has contracted for a priority position with respect to the receipt of cash distributions. These properties break down into the following categories: three are residential projects; fourteen are shopping centers; six are office buildings; one is a real estate investment trust; one is undeveloped land; and one is a hotel.
The remaining five properties are owned and operated by the Registrant. Two are office buildings, and three are shopping centers.
CHANGES IN PROPERTIES
During the calendar year ended December 31, 1997, certain of the property investments held by the Registrant underwent the changes described below:
(a) Purchases:
On August 26, 1997, the Registrant invested $70,000 in M&J/Mid Oak Limited Partnership, which has a 9% interest in Mid Oak Plaza LLC, which acquired a 77,942 square foot shopping center in Midlothian, Illinois.
On October 8, 1997, the Registrant invested $200,000 in M&J/Hotel Investors Limited Partnership, which acquired a 164-room hotel in the greater Orlando area, three miles from the main entrance at Walt Disney World.
(b) Sales:
On January 16, 1997, the property known as 2221 Camden Court Office Building was sold for $11,750,000, resulting in repayment of Registrant loans and an equity distribution of $690,360 to the Partnership. A provision for loss in book value of $154,000, equal to the ultimate loss to the Registrant on the disposition of the investment, was recognized in 1996.
On February 12, 1997, Sun Pointe Place Limited Partnership sold a 140-unit apartment complex it developed and owned in Largo, Florida, for $2,600,000. M&J/Largo Limited Partnership, which owns a 91.12% interest, exercised its option to withdraw as a limited partner of Sun Pointe Place Limited Partnership simultaneously with the sale of the property, entitling it to all the available sale proceeds. The Registrant received an equity distribution from M&J/Largo Limited Partnership of $615,384, resulting in a loss on disposition of $78,843. A provision for loss in book value equal to the estimated loss on the transaction of $119,000 was recognized in 1996, and a gain of $40,157 was recognized in 1997.
The Registrant on April 15, 1997, converted 25,000 units in Duke Realty Limited Partnership to 25,000 shares of common stock of Duke Realty Investments, Inc. The stock was sold in two blocks of 12,500 shares on June 12, 1997, and July 21, 1997, for total proceeds of $1,028,212, resulting in a gain of $794,962.
(c) Proposed Purchases and Sales:
None
(d) Declined Purchases:
None
COMPETITIVE POSITION
In general, none of the Registrant's properties are immune from the pressures of competition. There are competing properties serving the geographical areas in which each of the Registrant's properties are located. The amount of revenue generated annually from these properties is very much dependent upon national economic conditions generally and upon local economic conditions specifically, among the latter of which are the availability and demand for office space, commercial space and apartment units, as the case may be. In general, the Registrant may incur substantial costs, from time to time, at its commercial properties, in connection with either the renewal of existing leases or the marketing of vacant space to new tenants. These costs may include the costs of improving and upgrading space to be competitive, as well as the payment of brokerage commissions.
ITEM 2
ITEM 2 - PROPERTIES
The Registrant has an ownership interest in the following properties as of December 31, 1997:
PROPERTIES INVOLVING NET LEASES
23 EAST FLAGLER, MIAMI, FLORIDA
The property is a three-story commercial building located in downtown Miami, Florida, which was net leased to McCrory Corporation for a term of 25 years, with four five-year options. The property is unencumbered by any mortgage debt. The scheduled net rent through January 31, 2000, is $61,425 per year. Prior to May 2, 1996, McCrory Corporation filed a petition for relief under Chapter 11 of the United States Bankruptcy Code. In response to a motion filed on behalf of the Registrant to either (i) compel McCrory Corporation to comply with its obligations under the lease or (ii) reject the lease, a settlement was reached which, as subsequently amended, would allow McCrory Corporation to reject the lease and yet retain possession through April 30, 1997, to complete an inventory liquidation process. The Registrant has retained CB Commercial to assist the Registrant in connection with its efforts to either lease or sell the property.
Per the terms of the settlement, the Registrant received $45,645, representing rent for the months of February, March and April 1997 at $8,000 per month and real estate taxes on the premises for January, February, March and April 1997 based on an annual real estate tax bill of $64,935 ($5,411 per month). In August 1997, McCrory Corporation reimbursed the Registrant $72,306 towards repairs and improvements to the building while it was an occupant.
47TH & HALSTED, CHICAGO, ILLINOIS
This property is a 148,469 square foot commercial complex acquired in 1968 at a cost of $1,994,842. The property was leased on a 25-year net lease, expiring on April 30, 1993, to Community Discount Centers, Inc. In addition, the tenant has three five-year options at a rental during each option of $205,264 per annum. The first and second five-year options have been exercised. On January 16, 1981, the lease was assigned to the Zayre Corp., to be operated as a Zayre Department Store. As a result of the acquisition of Zayre Corp. by Ames Department Stores, Inc., the latter succeeded to the tenant's position under the lease. On April 25, 1990, Ames filed a petition for relief under the United States Bankruptcy Code and on December 21, 1990, elected to accept the lease. Subsequently, on January 15, 1991, the Zayre Corp. assigned its interest in the
lease to Fairplay, Inc. The tenant is directly responsible for all taxes and common area maintenance expenses.
The property is encumbered by a mortgage securing two promissory notes in the original principal amounts of $1,800,000 and $600,000, maturing December 31, 2003, and December 31, 2002, respectively, and bearing interest at 7% and 4.96%, respectively, per annum.
PROPERTIES INVOLVING PARTICIPATIONS
FIRST RON VENTURE (APOLLO APARTMENTS)
The Apollo Apartments consist of 256 units (128 one-bedroom and 128 two-bedroom) built on 10 acres of land on Britton Road in Oklahoma City, Oklahoma. The project is owned by Apollo Associates, a limited partnership of which First Ron Venture, a joint venture, owns 38%. The Registrant has a one-third interest in First Ron Venture. The Registrant paid $260,000 for its interest in May 1978. The limited partners are entitled to a cash flow priority of 9% per annum. The Registrant also acquired 10 limited partnership units (3.831% interest) in First Apollo Associates, which has a one-third interest in First Ron Venture.
The property was acquired with a $2,150,000 first mortgage bearing interest at 8-3/4% per annum. In December 1987, the mortgage was purchased by McKinley Associates, an affiliate of the general partner of Apollo Associates. The old mortgage was replaced with a $2,135,000 first mortgage bearing interest at 9.9% per annum but payable on a current basis only to the extent of cash flow. Any unpaid interest accrues and compounds at 13% per annum. In addition to minimum interest, the lender is entitled to additional interest based upon generation of cash flow and net sale and/or refinancing proceeds in excess of certain specified levels.
HAWDEL LIMITED PARTNERSHIP I AND III (2221 CAMDEN COURT OFFICE BUILDING)
The Registrant had invested a total of $1,320,000 representing an 18.03% interest in Hawdel Limited Partnership I and III, which owned the 2221 Camden Court Office Building located in Oak Brook, Illinois. The property contains 100,796 net rentable square feet of prime office space.
On January 16, 1997, the property was sold for $11,750,000, resulting in full payment of the first mortgage and the partner loans. In addition, the Registrant received an equity distribution of $690,360, resulting in a loss on disposition of $154,000. A provision for loss in book value equal to the estimate of $154,000 was recognized in 1996.
M&J/LARGO LIMITED PARTNERSHIP (SUN POINTE PLACE APARTMENTS)
The Registrant invested a total of $694,227 to acquire 756 limited partnership units (a 25.1% interest) in M&J/Largo Limited Partnership. M&J/Largo Limited Partnership owned 91.12% of Sun Pointe Place Limited Partnership, which developed and owned a 140 furnished one-bedroom unit apartment complex.
The project, located on Bay Drive in Largo, Florida, was sold on February 12, 1997, for $2,600,000. A portion of the sale proceeds were used to pay the balance of a $200,000 mortgage obtained on October 13, 1994. The remainder of the net sale proceeds were paid to M&J/Largo Limited Partnership when it exercised its option to withdraw as a limited partner of Sun Pointe Place Limited Partnership, simultaneous with the sale of the property. The Registrant received a final equity distribution from M&J/Largo Limited Partnership of $615,384, resulting in a loss on disposition of $78,843. A provision for loss in book value equal to the estimated loss on the transaction of $119,000 was recognized in 1996, and a gain of $40,157 was recognized in 1997.
DUKE REALTY LIMITED PARTNERSHIP
On December 2, 1994, the Registrant's interests in three partnerships were redeemed for 50,251 partnership units in Duke Realty Limited Partnership, the operating partnership ("UPREIT") of more than 100 properties. The UPREIT's sole general partner is Duke Realty Investments, Inc., a real estate investment trust ("REIT") listed on the New York Stock Exchange. The partnership units in the UPREIT will eventually be convertible, on a one-for-one basis, to shares of common stock to the REIT. As part of the issuance of partnership units in the UPREIT, the REIT also completed an offering to the public of 13,167,500 additional shares of common stock, which generated proceeds of approximately $312.7 million.
The Registrant on April 15, 1997, converted 25,000 units in Duke Realty Limited Partnership to 25,000 shares of common stock of Duke Realty Investments, Inc. The stock was sold in two blocks of 12,500 shares on June 12, 1997, and July 21, 1997, for total proceeds of $1,028,212, resulting in a gain of $794,962.
On August 18, 1997, a 2-for-1 stock and unit split occurred, resulting in an additional 25,251 units of Duke Realty Limited Partnership being issued to the Registrant. The Registrant thus held 50,502 units in Duke Realty Limited Partnership at December 31, 1997.
ROSEMONT 28 LIMITED PARTNERSHIP (UNIMPROVED LAND IN ORLANDO, FLORIDA)
In June 1985, the Registrant invested $275,000 to obtain a 22.92% interest in Rosemont 28 Limited Partnership, which owns 11.25 acres of unimproved land held for development in Orlando, Florida. Additional investments of $467,786 have been funded to cover the Registrant's pro rata share of the costs of carrying the property and paying off the mortgage loan in full. Net cash flow and residual proceeds are required to be distributed in accordance with the partners' respective interests.
XXI OFFICE PLAZA ASSOCIATES (CENTURY XXI OFFICE BUILDING)
Century XXI Office Plaza is an office complex built in 1971-1973, which is located in Germantown, Maryland, a suburb of Washington, D.C. The property consists of three separate office buildings and a connecting five-level parking deck, on a site in excess of six acres. The office buildings have a total leasable area of 179,385 square feet. The property has two 30-year mortgages from Teachers Insurance and Annuity Association of America in the combined original principal amount of $5,500,000. During December 1996, one of the mortgages was repaid. The mortgagee, in addition to the regular monthly payments due under the mortgage, participates in 25% of the gross income over $1,160,000. The Registrant owns a 13.907% limited partnership interest in XXI Office Plaza Associates, the partnership that was formed to acquire the subject property. In addition, the Registrant owns 50 units (an 8.28% interest) in 21st M&J Venture, which has a 16% interest in XXI Office Plaza Associates and 35 units (a 7.59% interest) in Orhow Associates, which has a 12.2% interest in XXI Office Plaza Associates.
During September 1994, the Registrant made an unsecured loan for $27,814 representing the Registrant's share of the $200,000 in partner loans needed for capital improvements. The notes bear interest at prime and will be due December 31, 1999.
M&J/GROVE LIMITED PARTNERSHIP (THE GROVE OFFICE PARK)
The Grove Office Park consists of three two-story office buildings lying on six acres of land located in Wheaton, Illinois. The complex contains 105,454 square feet of prime office space with parking available for 343 cars.
Through December 31, 1995, the Registrant had invested a total of $931,000 to acquire 981 limited partnership units (a 23.08% interest) in M&J/Grove Limited Partnership ("M&J/Grove"), the partnership that was formed to acquire the subject property. In addition, the Registrant owns seven units (a 3.02% interest) in Wilkow/Grove Partners L.P., which has a 5.87% interest in M&J/Grove. As a Class A Limited Partner, the Registrant is entitled to an 8% cumulative priority claim.
On July 1, 1996, the Registrant invested an additional $98,100 in M&J/Grove in connection with the purchase of 981 Call Units, increasing its interest in the investment to 28.03%. The Call Unit holders are entitled to a cumulative cash flow priority of 12% per annum. Upon sale or refinancing, the Call Unit holders will receive the first $367,500 of available proceeds pro rata. Any proceeds remaining thereafter will be split 25% to the holders of the Call Units and 75% to the General and Class A Limited Partners. The proceeds of the M&J/Grove capital call were primarily used for a mortgage debt restructuring of the Grove Office Park. The original $8,000,000 mortgage was paid off at a discounted amount of $5,600,000 and replaced with a new first mortgage loan in the amount of $5,500,000, bearing interest at the fixed rate of 8.55% per annum for five years. A limited guaranty covering 28.41%, or $1,562,500, of the mortgage loan was made by third parties on behalf of M&J/Grove. The Registrant guaranteed $520,833, an amount which approximates 28.41% of its ownership interest in M&J/Grove, exclusive of subordinated equity interests which have no value. The property is also encumbered by unsecured debentures of $1,000,000, which mature on May 1, 2001, and bear interest at 9% per annum, payable quarterly.
L-C OFFICE PARTNERSHIP IV (LAKE COOK OFFICE CENTRE - BUILDING IV)
The Registrant holds a 74.69% interest in L-C Office Partnership IV, which has a 94% interest in Lake Cook Office Development - Building Four Limited Partnership ("Lake Cook Development"), which has a 57.915% interest in DFA Limited Partnership, which has a 99% interest in M&J/Dover Limited Partnership, which owns Dover Farms Apartments, a 300 unfurnished one- and two-bedroom apartment complex located on a hilly, landscaped setting in North Royalton, Ohio. During 1997, the Registrant contributed an additional $175,097 to maintain its 74.69% interest in L-C Office Partnership IV. Each apartment has a washer and dryer, as well as either a patio or terrace. Many apartments also include fireplaces, dens and lofts. In terms of common areas, the complex includes a clubhouse, pool and deck area, Jacuzzi and racquetball court.
In addition, the Registrant owns limited partnership interests in the partnerships scheduled below whose sole asset is represented by an interest in Lake Cook Development. The following is a recap of these interests:
222 FEE ASSOCIATES
The Registrant owns a 3.18% interest (58 units) in 222 Fee Associates, which holds multiple partnership and debenture investments.
5601 N. SHERIDAN ASSOCIATES
The Registrant owns a 13.04% interest (36 units) in 5601 N. Sheridan Associates, which holds partnership interests in XXI Office Plaza Associates and M&J/Crossroads Limited Partnership (see Page 13, "M&J/Retail Limited Partnership") and an investment in Tango Bay Suites (see Page 13) debentures.
FIRST CANDLEWICK ASSOCIATES
The Registrant owns an 11.96% interest (55 units) in First Candlewick Associates, which holds multiple partnership and debenture investments.
SECOND WILKOW VENTURE
The Registrant owns a 4.89% interest (197 units) in Second Wilkow Venture, which holds multiple partnership and debenture investments.
209 WEST JACKSON
On August 24, 1995, the Registrant acquired a 59.44% undivided interest in 209 West Jackson, a 142,996 square foot office building located in downtown Chicago, in exchange for its 57.67% undivided interest in Tango Bay Suites. As part of this transaction, Tango Bay Suites remains liable to the Registrant for loans advanced to fund operating deficits. The 209 West Jackson building is subject to a first mortgage of $10,000,000 and an additional $5,661,000 note secured by the first mortgage, both interest only at General Electric Capital Corporation's commercial paper rate plus 3.25% per annum. The Registrant posted a letter of credit for $150,000 as a part of this transaction. Due to the character of the investment, the Registrant is using the equity method to account for its interest in the 209 West Jackson building.
M&J/HOTEL INVESTORS LIMITED PARTNERSHIP
On October 8, 1997, the Registrant invested $200,000 to obtain a 14.81% interest in M&J/Hotel Investors Limited Partnership, which owns a 164-room hotel in Kissimmee, Florida. The property is located three miles from the main entrance to Walt Disney World. At the time of purchase, the property was operating as the EconoLodge Maingate Central Hotel, but immediately following the closing, the property was converted to a Howard Johnson franchise.
The property was acquired with a three-year first mortgage of $4,550,000 bearing interest at 8.5% per annum. The property is currently undergoing a renovation of all rooms.
M&J/MID OAK LIMITED PARTNERSHIP
On August 26, 1997, the Registrant invested $70,000 to obtain a 35% interest in M&J/Mid Oak Limited Partnership, which has a 9% interest in Mid Oak Plaza LLC, which owns Mid Oak Plaza Shopping Center located in Midlothian, Illinois. The property contains 77,942 net rentable square feet of retail space. There
is an outparcel at the property consisting of 30,000 square feet, which is occupied by White Castle pursuant to a ground lease. The tenant owns its own building.
The property was acquired with a $4,558,000 mortgage bearing interest at 8.04% per annum. The term of the loan is seven years. Net cash flow and residual proceeds are required to be distributed in accordance with the limited liability company agreement.
PROPERTIES INVOLVING PROMISSORY NOTES
TANGO BAY SUITES, ORLANDO, FLORIDA
At December 31, 1997, the Registrant has a loan receivable in the principal amount of $731,124 from Tango Bay Suites, a 158-unit all-suites hotel located on Westwood Drive in Orlando, Florida.
PROPERTIES OWNED AND OPERATED BY REGISTRANT OR CONSOLIDATED SUBSIDIARIES
180 NORTH MICHIGAN, CHICAGO, ILLINOIS
The leasehold estate to this commercial office building on Chicago's prestigious Michigan Avenue was acquired in 1968 at a price of $6,550,000, of which $5,250,000 comprised mortgage financing. The property was constructed in 1926 and completely renovated in 1967 at a cost in excess of $3,000,000, which included changeover to fully automatic passenger elevators, redesigned interiors and a marble exterior facade. In 1973, the Registrant acquired the fee simple estate of 18,649 square feet of land for $1,600,000. In November 1986, the leasehold and fee simple estates were merged and the property was refinanced with an $8,700,000 first mortgage loan. This loan, which was scheduled to mature on November 1, 1996, was restructured during September 1994. In conjunction with the restructuring, the mortgage holder agreed to a $500,000 forgiveness of debt in return for a principal payment of $500,000 for a total principal reduction of $1,000,000. The new mortgage loan with a principal balance of $6,733,888 bears interest at 8.50% per annum and is due on September 1, 2001.
M&J/RETAIL LIMITED PARTNERSHIP (TEN STRIP SHOPPING CENTERS)
The Registrant originally invested a total of $3,995,000 to obtain a 56.97% interest in M&J/Retail Limited Partnership ("M&J/Retail"). The Registrant also owns three limited partnership units (.75% interest) in Wilkow/Retail Partners L.P., which has a 5.63% interest in M&J/Retail. On July 1, 1995, the Registrant sold 300 Class A units of M&J/Retail for a total of $314,800, resulting in a gain of $137,245 and reducing its
ownership in this partnership from 56.97% to 52.75%.
On July 28, 1995, M&J/Retail acquired a majority interest in Northlake Tower Limited Partnership ("Tower") by contributing $1,112,677 of initial capital. Additional contributions through December 31, 1997, of $116,837 increased the total capital investment to $1,229,514. Tower owns a 17.08% share of BSRT/M&J Northlake Limited Partnership ("BSRT/M&J"), which purchased a leasehold interest in the Northlake Tower Festival Shopping Center for $16,989,000 on July 28, 1995. The purchase of this property was made subject to a $10,350,000 first mortgage loan bearing interest only at the fixed rate of 8.5% per annum for ten years. On November 18, 1997, this loan was refinanced with a first mortgage of $17,600,000 with principal and interest payments based on a 30-year amortization and an interest rate of 7.64%. A portion of the refinancing proceeds were used to make distributions to the partners of BSRT/M&J, with M&J/Retail ultimately receiving a distribution of $1,166,745. The shopping center, consisting of 303,956 square feet of improvements and five outlots, is located in Atlanta, Georgia. In a related transaction, M&J/Retail loaned $83,212 to Northlake Tower Corporation ("Tower Corporation"), a General Partner of both Tower and BSRT/M&J. At December 31, 1997, the amount outstanding was $4,420. The loan is secured by Tower Corporation's partnership interests in Tower and BSRT/M&J, and interest thereon will be paid from Tower Corporation's share of net cash flow. Tower Corporation was organized to act as general partner, as aforesaid, in order to insulate M&J/Retail from personal liability.
On October 27, 1995, M&J/Retail invested a total of $297,000 to acquire a 46.41% interest in M&J/Crossroads Limited Partnership ("M&J/Crossroads"). M&J/Crossroads purchased a 330,505 square foot shopping center known as Crossroads of Roseville for $19,250,000, subject to a $19,550,000 first mortgage loan (which included a reserve for anticipated capital improvements). The center is located on 19.9 acres of land in Roseville, Minnesota. As a result of a refinancing of the first mortgage loan on December 31, 1997, M&J/Retail received a distribution on January 10, 1998, of $501,065.
A summary of the properties in which M&J/Retail owns a majority interest is as follows:
The Registrant is entitled to a cumulative cash flow priority in the amount of 9% per annum on its investment.
M&J/SHERIDAN LIMITED PARTNERSHIP (HIGHLAND PARK PROFESSIONAL BUILDING)
In April 1988, the Registrant invested $2,500,000 to obtain an 89.286% interest in M&J/Sheridan Limited Partnership, which owns a 22,523 square foot office building located at 1893 Sheridan Road in Highland Park, Illinois. The property is a three-story building situated on a quarter acre of land. On October 10, 1990, the property was encumbered with a $1,600,000 first mortgage loan bearing interest at the rate of 10.25% per annum which matured on October 1, 1996. On September 30, 1996, M&J/Sheridan Limited Partnership paid off the existing mortgage loan and refinanced the property. The term of the new loan, with a principal amount of $1,425,000, is five years. Debt service reflects an interest rate of 8.88% per annum and amortization based on 20 years.
NAPERVILLE OFFICE COURT, NAPERVILLE, ILLINOIS
In August 1986, pursuant to the terms of an exchange agreement, the Registrant acquired the Naperville Office Court for $4,830,000.
On April 6, 1988, the Registrant procured a $3,000,000 first mortgage loan on the property which bears interest at the rate of 9.75% per annum and is due in May 1998. During 1993, the Registrant exercised an option to adjust the interest rate to 8.875%.
Naperville Office Court is located at 1801 - 1813 Mill Street in Naperville, Illinois. Consisting of four single-story office buildings, the property rests on 5.5 acres, contains 66,405 net rentable square feet and provides parking space for 300 automobiles.
WATERFALL PLAZA, ORLAND PARK, ILLINOIS
In March 1993, the Registrant acquired 100% ownership in the Waterfall Plaza in exchange for its interest in the 2101 Commercial Office Building.
The project is subject to a $2,268,444 first mortgage loan with interest at 9.65% per annum and is due in September 1999.
Waterfall Plaza is a retail center located in Orland Park, Illinois. Consisting of one single-story building, the property rests on 1.5 acres and contains 21,893 net rentable square feet.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
Legal proceedings pending involve either suits which have been instituted by the Registrant or its agents against tenants who are in default of their lease obligations or the defense of alleged personal injury claims incidental to the operation of properties accessible to the general public. All of the personal injury claims are covered by insurance. It is not anticipated that the outcome of any of these proceedings, if unfavorable to the Registrant, will have a materially adverse impact on the Registrant.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5
ITEM 5 - MARKET FOR REGISTRANT'S CAPITAL UNITS AND RELATED SECURITY HOLDER MATTERS
The number of holders of record of equity securities of the Registrant as of December 31, 1997, was approximately:
The Registrant's units of limited partnership interest are not actively traded in a regulated market. The restrictions on the sale, transfer, assignment or pledge of partnership units are described in the Agreement of Limited Partnership of the Registrant as amended.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
ITEM 7
ITEM 7 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - 1997 COMPARED TO 1996
For the year ended December 31, 1997, income from partnerships was $1,823,771 compared to $136,843 for the comparative period of 1996. The increase in 1997 is primarily due to gains on the disposition of M&J/Largo Limited Partnership and Duke Realty Investments, Inc. and income recognized on the distribution from Northlake Tower Limited Partnership.
For the year ended December 31, 1997, the Registrant loaned to investment partnerships in which it has substantial equity interests the following amounts:
The Northlake Tower Corporation unsecured promissory note bears interest at prime and is due on demand.
On January 10, 1997, the Registrant made a distribution in the amount of $357,944, or $2 per unit.
On January 16, 1997, the property known as 2221 Camden Court Office Building was sold for $11,750,000, resulting in repayment of Registrant loans and an equity distribution of $690,360 to the Registrant. A provision for loss in book value of $154,000, equal to the estimated loss to the Registrant on the disposition of the investment, was recognized in 1996.
On February 12, 1997, Sun Pointe Place Limited Partnership sold a 140-unit apartment complex it developed and owned in Largo, Florida, for $2,600,000. M&J/Largo Limited Partnership, which owns a 91.12% interest, exercised its option to withdraw as a limited partner of Sun Pointe Place Limited Partnership simultaneously with the sale of the property, entitling it to all the available sale proceeds. The Registrant received an equity distribution from M&J/Largo Limited Partnership of $615,384. A gain of $40,157 was recognized as a result of the equity distribution for the disposition of the investment and included in net income from partnership investments.
On April 10, 1997, the Registrant made a distribution in the amount of $44,743, or $.25 per unit.
The Registrant on April 15, 1997, converted 25,000 units in Duke Realty Limited Partnership to 25,000 shares of common stock of Duke Realty Investments, Inc.
On June 12, 1997, the Registrant sold 12,500 shares of Duke Realty Investments, Inc. for $500,044. This transaction resulted in a gain of $383,419, which was included in net income from partnership investments.
On July 10, 1997, the Registrant made a distribution in the amount of $44,743, or $.25 per unit.
On July 21, 1997, the Registrant sold an additional 12,500 shares of Duke Realty Investments, Inc. for $528,168. This transaction resulted in a gain of $411,543, which was included in net income from partnership investments.
On August 26, 1997, the Registrant invested $70,000 to obtain a 35% interest in M&J/Mid Oak Limited Partnership, which has a 9% interest in Mid Oak Plaza LLC, which acquired a 77,942 square foot shopping center in Midlothian, Illinois.
On September 26, 1997, the Registrant invested $175,097 to maintain its 74.69% interest in L-C office Partnership IV.
On October 8, 1997, the Registrant invested $200,000 in M&J/Hotel Investors Limited Partnership, which acquired a 164-room hotel in the greater Orlando area, three miles from the main entrance at Walt Disney World.
On October 10, 1997, 8,056 limited partnership units owned by 52 partners (out of a total of 470 partners) were redeemed as of October 1, 1997, at the redemption rate of $40 per unit. The redemption price paid by the Registrant was $322,240. As a result of the redemption, there are now 170,916 units outstanding owned by 428 partners. Also on this date, the Registrant made a distribution in the amount of $44,743, or $.25 per unit, based on 178,972 units outstanding at September 30, 1997.
On November 11, 1997, M&J/Retail received $1,166,745 from Northlake Tower Limited Partnership relating to Northlake's refinancing.
RESULTS OF OPERATIONS - 1996 COMPARED TO 1995
For the year ended December 31, 1996, income from partnerships was $136,843 compared to $382,248 for the comparative period of 1995. The decrease in 1996 is primarily due to estimated losses on the disposition of Hawdel Limited Partnership and M&J/Largo Limited Partnership.
For the year ended December 31, 1996, the Registrant loaned to investment partnerships in which it has substantial equity interests the following amounts:
The Northlake Tower Corporation unsecured promissory note bears interest at prime and is due on demand. The Lake Cook notes bear interest at prime plus 2% and are due on demand.
On January 18, 1996, Freeport Office Partners Limited sold the 8505 Freeport Office Building for $8,503,150, resulting in full repayment of the $5,185,580 first mortgage and the $2,000,000 subordinated debenture. The Registrant received approximately $600,000 as repayment of previous operating deficit loans. A provision for loss in book value of $1,400,000, equal to the estimated loss to the Registrant on the disposition of the property, was recognized in 1995. An additional loss of $12,800 is included in 1996.
On July 1, 1996, the Registrant invested an additional $98,100 in M&J/Grove Limited Partnership in connection with the purchase of 981 Call Units, increasing its interest in the investment to 28.03%. The Call Unit holders are entitled to a cumulative cash flow priority of 12% per annum. Upon sale or refinancing, the Call Unit holders will receive the first $367,500 of available proceeds. Any proceeds remaining thereafter will be split 25% to the holders of the Call Units and 75% to the General and Class A Limited Partners. The proceeds of the M&J/Grove Limited Partnership capital call were primarily used for a mortgage debt restructuring of the Grove Office Park. The original $8,000,000 mortgage was paid off at a discounted amount of $5,600,000 and replaced with a new first mortgage loan in the amount of $5,500,000, bearing interest at the fixed rate of 8.55% per annum for five years. A Limited Guaranty covering 28.41%, or $1,562,500, of the mortgage loan was made by third parties on behalf of M&J/Grove Limited Partnership. The Registrant guaranteed $520,833, an amount which approximates 28.41% of its ownership interest in M&J/Grove Limited Partnership, exclusive of subordinated equity interests which have no value.
On September 30, 1996, M&J/Sheridan Limited Partnership refinanced the Highland Park Professional Center located at 1893 Sheridan Road in Highland Park, Illinois. The term of the new loan, with a principal amount of $1,425,000, is five years. Debt service reflects an interest rate of 8.88% per annum and amortization based on 20 years.
On December 24, 1996, the Registrant sold 6.1 acres of land at Metro Parkway/Colonial Boulevard in Fort Myers, Florida, for gross proceeds of $1,329,830 and a gain of $150,200.
RESULTS OF OPERATIONS - 1995 COMPARED TO 1994
For the year ended December 31, 1995, income from partnerships was $382,248 compared to loss of $1,099,073 for the comparative period of 1994. The increase is primarily due to gains on the partial disposition of M&J/Retail Limited Partnership interest and the entire disposition of the First MW Associates, S & S Venture and Second Chase Venture interests. The prior year loss was due primarily to the loss on disposition of the North LaSalle Street Limited Partnership interest.
For the year ended December 31, 1995, the Registrant loaned to investment partnerships in which it has substantial equity interests and to a property in which it held a co-tenancy ownership interest through June 30, 1995, the following amounts:
The Second Wilkow Venture, First Candlewick Associates, 222 Fee Associates, 5601 N. Sheridan Associates and Crossroads of Roseville Corporation unsecured promissory notes bear interest at prime and are due on demand. These loans were repaid during March 1996.
On January 20, 1995, the Registrant entered into a revolving credit facility with the LaSalle National Bank. The facility, due September 1, 1996, pays interest at the prime rate per annum. Maximum borrowing under the facility agreement is the lesser of $800,000 or 80% of the fair market value of the Registrant's investment in Duke Realty Limited Partnership. As of December 31, 1995, the amount outstanding under this facility was $580,000, consisting of cash draws of $350,000 and letters of credit of $230,000. Borrowings under the facility are secured by the partnership units of Duke Realty Limited Partnership owned by the Registrant.
S & S Venture acquired a property in Des Plaines, Illinois, on July 26, 1975, which was sold on March 15, 1995. The Registrant received proceeds of $100,008 related to the sale of the property and has included a $34,290 gain on the disposition of its 6.667% partnership in S & S Venture.
On July 1, 1995, the Registrant sold 300 Class A units of M&J/Retail Limited Partnership ("M&J/Retail") for a total of $314,800, resulting in a gain of $137,245 and reducing its ownership in this partnership from 56.97% to 52.75%.
On July 28, 1995, Freeport Office Partners Limited extended the $5,200,000 loan held by Confederation Life for five years effective August 1, 1995. The Registrant sold the Freeport Office building in January of 1996. A provision for loss in book value of $1,400,000 equal to the estimated loss to the Registrant on the disposition of the property is recognized in 1995.
On July 28, 1995, M&J/Retail, owned 52.75% by the Registrant, acquired a majority interest in Northlake Tower Limited Partnership ("Tower"), contributing $1,124,109 of a total initial capital requirement of $1,251,000, with, potentially, an additional capital requirement of $124,000 to cover unanticipated contingencies. Additional contributions of $25,532 made through December 31, 1995, increased the total capital investment to $1,149,641. Tower owns a 17.08% share of BSRT/M&J Northlake Limited Partnership ("BSRT/M&J"), which purchased a leasehold interest in the Northlake Tower Festival Shopping Center for $16,989,000 on July 28, 1995. The purchase of this property was made subject to a $10,350,000 first mortgage loan bearing interest only at the fixed rate of 8.5% per annum for ten years. The shopping center, consisting of 303,956 square feet of improvements and five outlots, is located in Atlanta, Georgia. In a related transaction, M&J/Retail loaned $80,951 to Northlake Tower Corporation ("Tower Corporation"), a General Partner of both Tower and BSRT/M&J. The loan is secured by Tower Corporation's partnership interests in Tower and BSRT/M&J, and interest thereon will be paid from Tower Corporation's share of net cash flow.
On July 28, 1995, M&J/Retail refinanced a retail center located at Broadway and Berwyn in Chicago, Illinois. The term of the new loan, with a principal amount of $2,750,000, is five years. Debt service reflects an interest rate of 8.20% per annum and amortization based on 25 years.
On August 24, 1995, the Registrant acquired a 59.44% undivided interest in the 209 W. Jackson building, a 144,608 square foot office building located in downtown Chicago, in exchange for its 57.66% undivided interest in Tango Bay Suites, a 260-unit all-suites hotel in Orlando, Florida. As part of this transaction, Tango Bay Suites remains liable to the Registrant for loans advanced to fund operating deficits. The 209 W. Jackson building is subject to a first mortgage of $10,000,000 and an additional $4,213,875 note secured by the first mortgage, both bearing interest only at General Electric Capital Corporation's commercial paper rate plus 3.25% per annum. The Registrant posted a letter of credit of $150,000 as a part of this transaction. Due to the character of the investment, the Registrant is using the equity method to account for its investment in 209 W. Jackson.
On October 27, 1995, M&J/Retail invested a total of $297,000 to acquire a 46.41% Class A interest in M&J/Crossroads Limited Partnership. The balance of $303,000 of the total $600,000 required capital for Class A investors was also financed by M&J/Retail, resulting in a receivable from the other investors for their respective share of capital contributions. These loans were repaid to M&J/Retail during March 1996.
LIQUIDITY AND CAPITAL RESOURCES
On January 20, 1995, the Registrant entered into a revolving credit facility with the LaSalle National Bank. The facility, due September 1, 1998, pays interest at the prime rate. Maximum borrowings under the facility agreement are the lesser of $675,000 or 80% of the fair market value of the Registrant's investment in Duke Realty Limited Partnership (see Item 2). Borrowings under the facility agreement are secured by the partnership units of Duke Realty Limited Partnership owned by the Registrant.
As of December 31, 1997, the amounts outstanding under this facility are as follows:
The liquid assets of the Registrant increased as of December 31, 1997, when compared to December 31, 1996, due to proceeds from sale of partnership investments.
The General Partners currently believe that the amount of working capital reserves, when considered with the Registrant's projected cash flows from operations in 1998 and borrowings under the revolving credit facility, will be sufficient to cover any normal cash or liquidity requirements which may be reasonably foreseen.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
To the Partners First Wilkow Venture
We have audited the consolidated financial statements of First Wilkow Venture listed in the index to the consolidated financial statements set forth on Page 27. Our audits also included the financial statement schedules listed in the index at Item 14 on Page 68. These financial statements and financial statement schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Wilkow Venture and its subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
PHILIP ROOTBERG & COMPANY, LLP Chicago, Illinois February 19, 1998
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) CONSOLIDATED BALANCE SHEET
See accompanying notes to consolidated financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENT OF OPERATIONS
See accompanying notes to consolidated financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
See accompanying notes to consolidated financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENT OF CASH FLOWS
See accompanying notes to consolidated financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENT OF CASH FLOWS - Continued
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During 1995, the Partnership exchanged its undivided interest in a property with total assets of $8,480,741 and total liabilities of $8,257,513 for an undivided interest in a replacement property.
See accompanying notes to consolidated financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the principal accounting policies followed by First Wilkow Venture (the "Partnership") is set forth as follows:
The financial statements include the accounts of all entities in which the Partnership owns fifty percent or more and maintains effective control. The Partnership had a 57.67% undivided interest in a hotel which was accounted for using the proportionate consolidation method. The interest in the hotel was exchanged in 1995 for an interest in a commercial property which is being reported under the equity method of accounting. Investments in entities in which ownership interests are less than fifty percent and the Partnership exercises significant influence over operating and financial policies are accounted for on the equity method. Other investments are accounted for on the cost method. Intercompany accounts and transactions between consolidated entities have been eliminated in consolidation.
For purposes of the consolidated statement of cash flows, the Partnership considers certificates of deposit with a maturity of three months or less to be cash equivalents. Certain Partnership deposits at LaSalle National Bank are in excess of the amount insured by the Federal Deposit Insurance Corporation and are, therefore, considered a concentration of credit risk.
Rental income is derived from leasing to lessees (under operating leases) various types of real estate owned by the Partnership.
Investments in real estate partnerships are reported using either the cost or equity methods of accounting. Under the equity method, the cost of these investments is reduced by a pro rata share of net losses and drawings and increased by a pro rata share of net income of the investee. Under the cost method, income is reported as draws are received.
Land, buildings and improvements are carried at cost. Major additions and betterments are charged to the property accounts; maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense as incurred. When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is recognized.
Depreciation on buildings, improvements, furniture and equipment is computed using the straight-line and accelerated methods based on the estimated useful lives of the assets.
Deferred charges represent real estate acquisition costs, deferred broker commissions and mortgage financing costs. These costs are being amortized using the straight-line method over lives ranging from 1 to 40 years.
There is no provision for federal income taxes as the partners report their share of the Partnership's net income or loss in their individual income tax returns.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Deferred state income taxes are provided on certain real estate sales that are taxable to the Partnership which are being reported on an installment or tax free exchange basis for income tax purposes.
Debt forgiveness income is being amortized as a reduction of interest expense over the remaining term of the related loan using the effective interest method.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2 - DEPRECIATION
Depreciation is based on the method and estimated useful life of the respective assets as follows:
* The Freeport Office Building was sold in 1996.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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3 - INVESTMENTS IN PARTNERSHIPS
A summary of the income or loss from partnership investments included in the accompanying consolidated statement of operations on the equity method of accounting, unless otherwise indicated, is as follows:
(a) Income recognized under the cost method.
(b) Includes loss on disposition of investment.
(c) Includes gain on disposition of investment.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The following is a summary of financial position and results of operations of the properties in which the Partnership has a partnership interest. The following schedule has been prepared from financial information provided by these partnerships as of their calendar year ends.
YEAR ENDED DECEMBER 31, 1997:
(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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YEAR ENDED DECEMBER 31, 1996:
(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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YEAR ENDED DECEMBER 31, 1995:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(a) Based upon unaudited financial statements.
(b) Based upon audited financial statements.
(c) Investment is stated at zero.
(d) Information not available at time of report.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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First Ron Venture
In April 1978, the Partnership invested $260,000 to obtain a one-third interest in First Ron Venture, which has a 38% interest in Apollo Associates, which owns an apartment complex in Oklahoma City, Oklahoma. Although First Ron Venture is entitled to a cumulative annual priority distribution of cash flow of which the Partnership's share is $23,490, the property has not generated sufficient cash flow for the past several years to make distributions. The investment is being carried at zero. On December 31, 1993, the Partnership acquired a 3.831% interest in First Apollo Associates, which holds a one-third interest in First Ron Venture.
Hawdel Limited Partnership I and III
To date, the Partnership has invested $1,320,000 to obtain 18.03% interests in Hawdel Limited Partnership I and III, which own the 2221 Camden Court Office Building located in Oak Brook, Illinois. In addition to the investment, the Partnership had a note receivable of $295,161 from Hawdel Limited Partnership I and III as of December 31, 1996 (see Note 4).
On January 16, 1997, the property was sold, resulting in full payment of the first mortgage and Partnership loans, and an equity distribution of $690,360 was received by the Partnership (see Note 4). A provision for loss in book value of $154,000, equal to the estimated loss to the Partnership on the disposition of the investment, was recognized in 1996.
M&J/Largo Limited Partnership
The Partnership invested a total of $694,227 to acquire a 25.1% interest in M&J/Largo Limited Partnership, which owns 91.12% of Sun Pointe Place Limited Partnership, which developed and owned a 140 one-bedroom unit apartment complex located in Largo, Florida. The property was sold on February 12, 1997, for $2,600,000. Simultaneous with the sale, M&J/Largo Limited Partnership exercised its put to Sun Pointe Place Limited Partnership, resulting in all net sale proceeds being allocated to M&J/Largo Limited Partnership. The Partnership received a final equity distribution from M&J/Largo Limited Partnership of $615,384, resulting in a gain on disposition of $40,157. A provision for loss in book value of $119,000, equal to the estimated loss to the Partnership on the disposition of the investment, was recognized in 1996.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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M&J/Quorum Associates
The Partnership has invested a total of $2,295,000 to obtain a 64.35% interest in M&J/Quorum Associates, which is a 66.29% limited partner in the Quorum Limited Partnership, which is a 50% general partner in Crow-Commerce Park North Retail, Ltd., which developed a shopping center in Houston, Texas. The Partnership is entitled to a 9% cumulative cash flow priority on invested capital. In addition to the partnership investment, the Partnership has a loan receivable of $113,663 which was written off at December 31, 1995, as a result of the mortgage lien being foreclosed during April 1995 (see Notes 4 and 11). During 1996, the Partnership received $46,490 based on a settlement with the unrelated General Partner. During 1997, the Partnership received $19,142 as an additional cash payment on the loan which was previously written off. The investment was disposed of in 1997 with no additional gain or loss to the partnership.
M&J/Westwood Limited Partnership
In December 1986, the Partnership invested $517,000 to obtain an 18.52% interest in M&J/Westwood Limited Partnership, which owns 48% of The Villas at Monterey Limited Partnership, which owns a 260- unit all suites hotel and corporate rental project in Orlando, Florida, known as Tango Bay Suites Resort. On December 31, 1993, the Partnership acquired an additional 2.19% interest in M&J/Westwood.
In March 1993, the Partnership acquired a 63.64% undivided interest in Tango Bay Suites pursuant to an exchange for an ownership interest in a similar property. The Villas at Monterey Limited Partnership retained the remaining 36.36% interest. In November 1993, the Partnership sold a 5.98% undivided interest in Tango Bay Suites to an unrelated party for a relative proportion of the debt, recognizing a gain of $53,231 on the disposition. The Partnership exchanged its interest in Tango Bay Suites for an undivided interest in the 209 W. Jackson building effective June 30, 1995. The Partnership also has a loan receivable of $731,124 at December 31, 1997, from Tango Bay Suites (see Note 4).
Duke Realty Limited Partnership
Prior to October 1993, the Partnership owned a 69.42% interest in Park 100 Equity Investors Limited Partnership and a 55.07% limited partnership interest in Park 100 Mortgage Investors Limited Partnership. Both of these limited partnerships held indirect ownership interests in Park 100, an industrial park in Indianapolis, Indiana, which was developed by Duke Associates. Duke Associates also maintained a significant ownership interest in the property. On October 4, 1993, Park 100 was conveyed to an operating partnership, Duke Realty Limited Partnership (the "UPREIT"), the sole general partner of which is Duke Realty Investments, Inc., a real estate investment trust ("REIT") listed on the New York Stock Exchange, together with more than 100 other properties, in return for the issuance of units of partnership interest in the operating partnership which, eventually, will be convertible, on a one-for-one basis, to shares of common stock to the REIT. As part of this transaction, the REIT also completed an offering to the public of 13,167,500 additional shares of common stock, which generated proceeds of approximately $312.7 million.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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On December 31, 1993, the Partnership acquired an additional 1.77% interest in Park 100 Equity Investors Limited Partnership and an additional 6.78% interest in Park 100 Mortgage Investors Limited Partnership. The Partnership also acquired a 5.52% interest in M&J/Two Market Associates, which also holds an indirect interest in the REIT.
On December 2, 1994, the Partnership redeemed its interest in the above three partnerships for a direct ownership in the UPREIT. The redemption resulted in the Partnership owning 50,251 partnership units in the UPREIT, which are convertible on a one-for-one basis to shares of common stock of the REIT. The Partnership's limited partner units are currently pledged as collateral for a revolving credit facility with LaSalle National Bank (see Note 10).
On April 15, 1997, the Partnership converted 25,000 units in Duke Realty Limited Partnership to 25,000 shares of common stock of Duke Realty Investments, Inc. On June 12, 1997, 12,500 shares were sold for $500,044, resulting in a gain of $383,419. On July 21, 1997, the remaining 12,500 shares were sold for $528,168, resulting in a gain of $411,543.
On August 18, 1997, a 2-for-1 stock and unit split occurred, resulting in an additional 25,251 units of Duke Realty Limited Partnership being issued to the Partnership. The Partnership thus held 50,502 units in Duke Realty Limited Partnership at December 31, 1997.
Rosemont 28 Limited Partnership
The Partnership has invested a total of $742,786 to obtain a 22.92% interest in Rosemont 28 Limited Partnership, which owns 11.25 acres of land held for development in Orlando, Florida. Net cash flow and residual proceeds are distributed in accordance with the partners' respective interests.
S & S Venture
On December 31, 1993, the Partnership acquired a 6.67% interest in S & S Venture, which owned a 51,000 square foot industrial building in Lincoln, Rhode Island. On March 15, 1995, S & S Venture closed a transaction which coupled the sale of its property with a settlement of the obligations of the tenant under its lease and resulted in a gain to the Partnership of $34,290.
XXI Office Plaza Associates
In February 1981, the Partnership invested $525,000 to obtain a 13.91% interest in XXI Office Plaza Associates, which owns an office plaza in Germantown, Maryland. As a "Class A" limited partner, the Partnership is entitled, on a noncumulative basis, to a priority distribution from available cash flow of $41,580. On December 31, 1993, the Partnership acquired an 8.28% interest in 21st M&J Venture, which has a 16% interest in XXI Office Plaza Associates. The Partnership also acquired a 7.59% interest in Orhow Associates, which has a 12.2% interest in XXI Office Plaza Associates. In addition to the investment, the Partnership has a note receivable of $27,814 from XXI Office Plaza Associates (see Note 4).
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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M&J/Grove Limited Partnership
The Partnership had invested a total of $931,000 to obtain a 21.91% interest in M&J/Grove Limited Partnership ("M&J/Grove"), which owns an office complex in Wheaton, Illinois. As a "Class A" limited partner, the Partnership is entitled to cumulative cash priority of 8%. On December 31, 1993, the Partnership acquired an additional 1.17% interest in M&J/Grove.
On July 1, 1996, the Partnership invested an additional $98,100 in M&J/Grove in connection with the purchase of 981 Call Units, increasing its interest in this investment to 28.03%. The Call Unit holders are entitled to a cumulative cash flow priority of 12% per annum. Upon sale or refinancing, the Call Unit holders will receive the first $367,500 of available proceeds. Any proceeds remaining thereafter will be split 25% to the holders of the Call Units and 75% to the General and Class A Limited Partners. The proceeds of the M&J/Grove capital call were primarily used for a mortgage debt restructuring of the Grove Office Park. The original $8,000,000 mortgage was paid off at a discounted amount of $5,600,000 and replaced with a new first mortgage loan in the amount of $5,500,000, bearing interest at the fixed rate of 8.55% per annum for five years. A Limited Guaranty covering 28.41%, or $1,562,500, of the mortgage loan was made by third parties on behalf of M&J/Grove. The Partnership guaranteed $520,833, an amount which approximates 28.41% of its ownership interest in M&J/Grove, exclusive of subordinated equity interests which have no value. The property is also encumbered by unsecured debentures of $1,000,000, which mature on May 1, 2001, and bear interest at 9% per annum, payable quarterly.
L-C Office Partnership IV
Prior to December 31, 1993, the Partnership had a 73.34% ownership interest in L-C Office Partnership IV Limited Partnership ("L-C Office Partnership IV"), which holds a 94% interest in Lake Cook Office Development - Building Four Limited Partnership ("Lake-Cook IV"), which has a 57.915% interest in DFA Limited Partnership, which has a 99% interest in M&J/Dover Limited Partnership, which owns Dover Farms Apartments, a 300-unit apartment complex located in a suburb of Cleveland, Ohio. In 1996, under the terms of the co-tenancy agreement, Lake-Cook IV made advances to the property totaling $102,375. As of December 31, 1995, the Partnership had a loan payable of $50,000 to Dover Farms Apartments bearing interest at prime and payable on demand. The loan and related interest were paid in full during 1996.
On December 31, 1993, the Partnership acquired an additional 1.35% interest in L-C Office Partnership IV. On January 1, 1994, the Partnership acquired a 0.4906% interest in Lake Cook Office Development Building Four Limited Partnership. In addition to the investment, the Partnership has notes receivable of $15,091 and $71,872 from Lake Cook Office Development - Building Four Limited Partnership and L-C Office Partnership IV, respectively. During 1997, the Partnership contributed an additional $175,097 to maintain its 74.69% interest in L-C Office Partnership IV.
M&J/Hotel Investors Limited Partnership
On October 8, 1997, the Partnership invested $200,000 to obtain a 14.81% interest in M&J/Hotel Investors Limited Partnership, which owns a 164-room hotel in Kissimmee, Florida. At the time of purchase, the property was operating as the EconoLodge Maingate Central Hotel, but immediately following the closing, the property was converted to a Howard Johnson franchise.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The property was acquired with a three-year first mortgage of $4,550,000 bearing interest at 8.5% per annum. The property is currently undergoing a renovation of all rooms.
M&J/Mid Oak Limited Partnership
On August 26, 1997, the Partnership invested $70,000 to obtain a 35% interest in M&J/Mid Oak Limited Partnership, which has a 9% interest in Mid Oak Plaza LLC, which owns Mid Oak Plaza Shopping Center located in Midlothian, Illinois. The property contains 77,942 net rentable square feet of retail space. There is an outparcel at the property consisting of 30,000 square feet, which is occupied by White Castle pursuant to a ground lease. The tenant owns its own building.
The property was acquired with a $4,558,000 mortgage bearing interest at 8.04% per annum. The term of the loan is seven years. Net cash flow and residual proceeds are required to be distributed in accordance with the limited liability company agreement.
CONSOLIDATED PARTNERSHIPS
M&J/Sheridan Limited Partnership
During 1988, the Partnership invested $2,500,000 to obtain an 89.29% interest in the M&J/Sheridan Limited Partnership, which owns a 22,523 square foot office building in Highland Park, Illinois. The financial position and results of operations at December 31, 1997, are included in the accompanying consolidated financial statements. In addition to the investment, the Partnership has a note receivable of $492,000 at December 31, 1997, from M&J/Sheridan Limited Partnership. On September 30, 1996, M&J/Sheridan Limited Partnership refinanced the Highland Park Professional Center. The term of the new loan, with a principal amount of $1,425,000, is five years. Debt service reflects an interest rate of 8.88% per annum and amortization based on 20 years.
M&J/Freeport Limited Partnership
The Partnership had invested a total of $5,139,000 to obtain a 68.85% limited partnership interest in M&J/Freeport Limited Partnership, which is a 94.05% limited partner in Freeport Office Partners Limited, which owns an office building in Dallas, Texas. The property was sold on January 18, 1996. A provision for loss in book value of $1,400,000 equal to the estimated loss to the Partnership on the disposition of the property was recognized in 1995 (see Note 11). An additional loss of $12,800 was recognized in 1996.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
M&J/Retail Limited Partnership
The Partnership has invested a total of $3,995,000 to obtain a 56.27% limited partnership interest in M&J/Retail Limited Partnership ("M&J/Retail"), which owns a majority interest in ten strip shopping centers in the metropolitan Chicago area and two partnership interests. The Partnership is entitled to a 9% cumulative cash flow priority on invested capital. On December 31, 1993, the Partnership acquired an additional 0.70% interest in M&J/Retail. On July 1, 1995, the Partnership sold 4.22% of its limited partnership interest in M&J/Retail to an unrelated party for $314,800 and recognized a gain of $137,245.
During 1988, the Partnership invested $3,110,000 to obtain a 99% interest in M&J/Harlem Mortgage Limited Partnership, which owns Harlem North Shopping Plaza located in Oak Park, Illinois. On December 30, 1993, M&J/Harlem Mortgage Limited Partnership financed the property with a first mortgage of $2,362,500, bearing interest at 7.85% per annum. The mortgage matures January 1, 1999. On December 31, 1993, the Partnership sold its 99% interest in M&J/Harlem Mortgage Limited Partnership to M&J/Retail for $3,150,000.
On July 28, 1995, M&J/Retail acquired a majority interest in Northlake Tower Limited Partnership ("Tower"), contributing $1,112,667 of initial capital. Additional contributions of $116,837 were made through December 31, 1997, increasing the total capital investment to $1,229,514. Tower owns a 17.08% share of BSRT/M&J Northlake Limited Partnership ("BSRT/M&J"), which purchased a leasehold interest in the Northlake Tower Festival Shopping Center for $16,989,000 on July 28, 1995. The purchase of this property was made subject to a $10,350,000 first mortgage loan bearing interest only at the fixed rate of 8.5% per annum for ten years. On November 18, 1997, this loan was refinanced with a first mortgage of $17,600,000 with principal and interest payments based on a 30-year amortization and an interest rate of 7.64%. A portion of the refinancing proceeds were used to make distributions to the partners of BSRT/ M&J, with M&J/Retail ultimately receiving a distribution of $1,166,745. The shopping center, consisting of 303,956 square feet of improvements and five outlots, is located in Atlanta, Georgia. In a related transaction, M&J/Retail loaned $83,212 to Northlake Tower Corporation ("Tower Corporation"), a General Partner of both Tower and BSRT/M&J (see Note 4). The loan is secured by Tower Corporation's partnership interests in Tower and BSRT/M&J, and interest thereon will be paid from Tower Corporation's share of net cash flow.
On October 27, 1995, M&J/Retail invested a total of $297,000 to acquire a 46.41% Class A interest in M&J/Crossroads Limited Partnership. The balance of $303,000 of the total $600,000 required capital for Class A investors was also financed by M&J/Retail, resulting in a receivable from the other investors for their respective share of capital contributions as of December 31, 1995 (see Note 4). These receivables were repaid in full during 1996. As a result of a refinancing of the first mortgage loan on December 31, 1997, M&J/Retail received a distribution on January 10, 1998, of $501,065.
The financial position and results of operations at December 31, 1997, are included in the accompanying consolidated financial statements.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
The following is a summary of the financial position and results of operations of the entities included in consolidation at December 31, 1997:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
The following is a summary of the financial position and results of operations of the entities included in consolidation at December 31, 1996:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
The following is a summary of the financial position and results of operations of the entities included in consolidation at December 31, 1995:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
4 - LOANS RECEIVABLE - OTHER
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
5 - CERTIFICATES OF DEPOSIT
Certificates of deposit include maturities through January 8, 1998, with interest rates up to 5.80%, and represent temporary investments.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
6 - MORTGAGES PAYABLE
The mortgages payable at December 31, 1997, consist of:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
(a) A balloon payment of $6,475,755 will be due September 1, 2001. Loan is interest only through September 30, 1998, at which time a principal amortization schedule based on 25 years will commence. Debt forgiveness income of $500,000 is being amortized over the remaining term of the loan using the effective interest method.
(b) A balloon payment of $2,698,352 will be due May 1, 1998.
(c) A balloon payment of $1,265,467 will be due October 1, 2001.
(d) A balloon payment of $2,579,344 will be due June 1, 1998.
(e) A balloon payment of $795,188 will be due June 1, 1998.
(f) A balloon payment of $2,420,449 will be due July 31, 2000.
(g) A balloon payment of $1,316,725 will be due May 1, 1998.
(h) A balloon payment of $1,135,099 will be due May 1, 1998.
(i) A balloon payment of $1,997,870 will be due May 1, 1998.
(j) A balloon payment of $1,805,684 will be due April 1, 1999.
(k) A balloon payment of $542,784 will be due May 1, 1999.
(l) A balloon payment of $465,494 will be due May 1, 1999.
(m) A balloon payment of $2,063,428 will be due January 1, 1999.
(n) A balloon payment of $2,268,443 will be due September 30, 1999. The balance of the loan reflected in the Partnership's financial statements was adjusted to the fair market value of the property at time of acquisition.
(o) Monthly interest payments and fixed principal payments of $5,000 from February 1, 1994, to January 1, 1999, and $8,000 from February 1, 1999, to December 1, 2003, are to be made with the balance of $1,028,000 due on December 31, 2003.
(p) A balloon payment will be due on December 31, 2002.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
7 - RELATED PARTY TRANSACTIONS
Management and Other Fees
Management, leasing and consulting fees paid to M&J Wilkow, Ltd. and M&J Wilkow Brokerage Corp. (companies whose principal shareholders are general partners of the Partnership) for the years ended December 31, 1997, 1996 and 1995, were $853,890, $907,244 and $994,776, respectively.
At December 31, 1997 and 1996, $39,785 and $98,371, respectively, are owed to M&J Wilkow, Ltd. for management, leasing and consulting fees.
Professional Fees
Professional fees paid during the years ended December 31, 1997, 1996 and 1995, to Wilkow & Wilkow, P.C. (a company owned by a general partner of the Partnership) for services in the ordinary course of business were $32,787, $37,901 and $37,170, respectively. For the years ended December 31, 1997, 1996 and 1995, $84,731, $62,792 and $59,388, respectively, were paid to M&J Wilkow, Ltd. for services rendered in connection with legal, tax and accounting matters.
Investments in Partnerships
The general partners and/or entities controlled or managed by one or more of such partners have ownership interests in a majority of the real estate projects in which the Partnership also has ownership interests.
Loans Payable
Loans payable to a general partner and certain limited partners in the amount of $410,000 bear interest at the prime rate and are due December 31, 1999.
The Partnership has received loans from a company partially owned by the general partners. The loan in the amount of $425,000 bore interest at the prime rate. The loan was repaid on January 25, 1996, with interest accruing through the date of repayment.
The Partnership also has a loan payable in the amount of $44,488 to a real estate project held in a cotenancy arrangement by various entities in which the general partners of the Partnership are also partners. The note bears interest at the prime rate and is due on demand.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
Debentures
Freeport Office Partners had issued $1,674,000 of a total available issue of $2,000,000 of subordinated debentures to the general partners, certain limited partners and other related parties. The debentures earned interest of 11% (per annum) and an additional 3% (per annum) to be accrued over five years. The debentures were due September 1, 1995. Nine percent interest was accrued and paid on the outstanding debentures until the date of repayment along with the principal amount on January 18, 1996, from the proceeds of the sale of the building.
At December 31, 1994, the Partnership had a nonrecourse liability of $1,747,833 in connection with the issuance of $3,260,000 of unsecured, subordinated debentures by The Villas at Monterey Limited Partnership, one of the cotenants of the Tango Bay Suites property (see Note 3 - M&J/Westwood Limited Partnership). The debentures are payable to the general partners, certain limited partners, and other related parties. The debentures bear interest at 10% and are due November 24, 1999. In addition, the debenture holders are entitled to contingent interest equal to 50% of "net cash flow" as defined in the agreement. The Partnership was relieved of its liability in connection with the debentures upon disposal of its interest in Tango Bay Suites effective June 30, 1995.
Rental Income
Rental income received from M&J Wilkow, Ltd. (a company whose principal shareholders are partners of the Partnership) was $172,280, $172,279 and $162,528 for the years ended December 31, 1997, 1996 and 1995, respectively, under a lease for office space.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
8 - RENTALS RECEIVABLE UNDER OPERATING LEASES
Minimum future rentals receivable by the Partnership on noncancelable operating leases as of December 31, 1997, are as follows:
9 - PARTNERS' CAPITAL
On October 10, 1997, 8,056 limited partnership units owned by 52 partners (out of a total of 470 partners) were redeemed as of October 1, 1997, at the redemption rate of $40 per unit. The redemption price paid by the Partnership was $322,240. As a result of the redemption, there are now 170,916 units outstanding owned by 418 partners.
At December 31, 1997, general partner units totaled 7,550 units and the general partners also beneficially owned 3,388 limited partner units.
At December 31, 1996, general partner units totaled 7,174 units and the general partners also beneficially owned 2,923 limited partner units.
10 - COMMITMENTS AND CONTINGENCIES
As of December 31, 1997, the Partnership has a revolving credit facility with LaSalle National Bank which is secured by the Partnership's limited partnership units in Duke Realty Limited Partnership (see Note 3). The facility, due September 1, 1998, pays interest at the prime rate. Maximum borrowings under the agreement are the lesser of $675,000 or 80% of the fair market value of the Partnership's 50,502 units in Duke Realty Limited Partnership (see Note 3). As of December 31, 1997, the amount outstanding under this facility is $625,000, consisting of three unsecured letters of credit for $80,000, $150,000 and $280,000 with General Electric Capital Corporation as beneficiary and one for $115,000 with the City of Arlington as beneficiary.
As of December 31, 1997, the Partnership, through its investment in M&J/Retail Limited Partnership, has an installment note due to LaSalle National Bank. The note, due October 1, 2000, pays interest at the prime rate plus 1% per annum. As of December 31, 1997, the amount outstanding under this note is $218,487 and is included in loans payable in the accompanying consolidated balance sheet. The note was subsequently repaid in full in February 1998.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
11 - PROVISION FOR LOSS IN BOOK VALUE OF REAL ESTATE
During the fourth quarter of 1996, the Partnership recognized write-downs of $154,000 and $119,000 on its investments in Hawdel Limited Partnership I and III and M&J/Largo Limited Partnership, respectively. The amounts of the write-downs were based on estimated final cash distributions from the proceeds of the sale of the underlying real properties in 1997.
During the fourth quarter of 1995, the Partnership recognized a $1,400,000 write-down on the Freeport Office building.
These provisions were based upon market conditions and estimated future cash flows.
12 - SUBSEQUENT EVENT
In January 1998, the Partnership made a distribution in the amount of $42,729, or $.25 per unit.
ITEM 9
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information with respect to each general partner of the Registrant:
Name Position ---- --------
Marc R. Wilkow General Partner and General Counsel Clifton J. Wilkow General Partner
Marc R. Wilkow has been in the real estate management and investment business since 1977. He is also a lawyer and the sole shareholder of the law firm of Wilkow & Wilkow, P.C. Clifton J. Wilkow has been involved in the business of the Registrant since 1976. Also see "ITEM 1: Business Organization" for further information.
There have been no proceedings of any kind involving bankruptcy, criminality or restraint in the area of financial dealings against or otherwise affecting any general partner during the last ten years.
The executive officers of the Registrant are its general partners. Their names, ages, positions and relationships are listed below:
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
The general partners do not receive any remuneration or other special benefit directly from the Registrant; however, Marc R. and Clifton J. Wilkow are owners and shareholders of M&J Wilkow, Ltd., which receives management, leasing, consulting and brokerage fees from each of the operating properties and/or partnerships. In addition, the Registrant pays M&J Wilkow, Ltd. an asset management fee. M&J Wilkow, Ltd. receives accounting and tax return preparation fees based upon hourly service. Wilkow & Wilkow, P.C. also receives a retainer for services rendered as general counsel to the Registrant and legal fees on an hourly rate basis for professional services rendered beyond the scope of the services contemplated by the retainer fee. Also see "ITEM 1: Business Organization" for further information.
Options Granted to Management to Purchase Securities
There have been no options granted to management to purchase securities from the Registrant.
Interest of Management and Others in Certain Transactions
For transactions to date, and those anticipated, reference is made to "ITEM 1: Business."
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No general partner holds 5% or more of any of the securities. The following limited partners hold 5% or more of the Registrant's total units:
(b) The following table sets forth the equity securities of the Registrant beneficially owned directly or indirectly by the general partners and their spouses as a group (three persons) at December 31, 1997:
(c) There are no contractual arrangements known to the Registrant including any pledge of securities of the Registrant, the operation of the terms of which may at a subsequent date result in a change of control of the Registrant. Wilkow & Wilkow, P.C., a professional corporation owned by one of the general partners, acting in its capacity as attorney and general counsel for the Registrant, was involved with the Registrant in certain transactions.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management, leasing and consulting fees paid to M&J Wilkow, Ltd. and M&J Wilkow Brokerage Corp. (companies whose principal shareholders are general partners of the Registrant) for the years ended December 31, 1997, 1996 and 1995, were $853,890, $907,244 and $994,776, respectively (see Note 7 to Consolidated Financial Statements).
Professional fees paid during the years ended December 31, 1997, 1996 and 1995, to Wilkow & Wilkow, P.C. for services in the ordinary course of business were $32,787, $37,901 and $37,170, respectively.
Legal, tax and accounting services rendered in the years ended December 31, 1997, 1996 and 1995, by M&J Wilkow, Ltd. were $84,731, $62,792 and $59,388, respectively.
The general partners and/or entities controlled or managed by one or more of such partners have ownership interests in a majority of the real estate projects in which the Registrant also has ownership interests.
PART IV
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Schedules other than those listed above have been omitted since they are either not applicable or not required or the information is included elsewhere herein.
3. Exhibits: See Index to Exhibits on Page 98
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the year ended December 31, 1997.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- -------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE X - SUPPLEMENTARY PROFIT AND LOSS INFORMATION
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
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YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
See Notes 1, 2 and 3 accompanying Schedule XI.
(A) Owned by M&J/Sheridan Limited Partnership; 89% owned subsidiary of First Wilkow Venture.
(B) Owned by M&J/Retail Limited Partnership; 53% owned subsidiary of First Wilkow Venture.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEAR ENDED DECEMBER 31, 1997 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
1 - RECONCILIATION OF COSTS OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
1 - RECONCILIATION OF COSTS OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - Continued
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
1 - RECONCILIATION OF COSTS OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - Continued
See accompanying notes to financial statements
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
(A) Reflects the write-down of the building based on estimated loss on 1996 disposition (see Note 11 of the financial statements).
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
2 - RECONCILIATIONS OF ACCUMULATED DEPRECIATION OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
2 - RECONCILIATIONS OF ACCUMULATED DEPRECIATION OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
2 - RECONCILIATIONS OF ACCUMULATED DEPRECIATION OF REAL ESTATE DURING EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - Continued
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
3 - BASIS OF REAL ESTATE FOR FEDERAL INCOME TAX PURPOSES
(A) Net of accumulated depreciation
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997:
(A) Investment is owned by M&J/Retail Limited Partnership, which is consolidated with the Registrant.
(B) Additional investment.
(C) Includes gain on disposition of investment.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996:
(A) Additional investment.
(B) Investment is owned by M&J/Retail Limited Partnership, which is consolidated with the Registrant.
(C) Includes estimated loss on the 1997 disposition of the investment.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
(A) Investment is owned by M&J/Retail Limited Partnership, which is consolidated with the Registrant.
(B) Additional investment.
(C) Represents estimated loss on the 1997 disposition of the investment.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
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YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995:
(A) Additional investment.
(B) Investment was disposed of in 1995.
(C) Investment is owned by M&J/Retail Limited Partnership, which is consolidated with the Registrant.
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995:
FIRST WILKOW VENTURE (A LIMITED PARTNERSHIP) SCHEDULE XIII - INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DRAWINGS RECEIVED FROM AFFILIATES AND OTHER PERSONS - Continued
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995:
(A) Investment is owned by M&J/Retail Limited Partnership, which is consolidated with the Registrant.
(B) Additional investment.
(C) Investment was disposed of in 1995.
(D) Distribution of assets from the liquidation of First MW Associates.
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.
FIRST WILKOW VENTURE
By: Marc R. Wilkow ----------------------------------- Marc R. Wilkow, General Partner and President of M&J Wilkow, Ltd., its Managing Agent
DATED:
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, in the capacities indicated, on ................. 1998.
Clifton J. Wilkow --------------------------------------- Clifton J. Wilkow, General Partner and Executive Vice President of M&J Wilkow, Ltd.
Thomas Harrigan --------------------------------------- Thomas Harrigan, Vice President of M&J Wilkow, Ltd.
INDEX TO EXHIBITS
Exhibit No. Description
(A) Agreement of Limited Partnership of First Wilkow Venture (filed as Exhibit A or Prospectus for Exchange Offer of First Wilkow Venture dated July 2, 1973).
(B) Amendments to Certificate of Limited Partnership filed as an Exhibit to Annual Report on Form 10-K for 1983 which is hereby incorporated by reference.
(C) Proxy Statement issued October 20, 1986, filed as Exhibit D to the Annual Report on 10-K for 1986 which is hereby incorporated by reference.