ITEM 1. BUSINESS
The Registrant, Dean Witter Realty Growth Properties, L.P. (the "Partnership") is a limited partnership formed in March 1985 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing primarily in income-producing properties.
The Managing General Partner of the Partnership is Dean Witter Realty Growth Properties Inc., a Delaware corporation (the "Managing General Partner"), which is wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Growth Associates, L.P., a Delaware limited partnership (the "Associate General Partner"), the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the Partnership's operations. The terms of transactions between the Partnership and its affiliates are set forth in Item 8 and Item 13 below.
The Partnership issued 78,594 units of limited partnership interest (the "Units") with gross proceeds from the offering of $78,594,000. The offering has been terminated and no additional Units will be sold. The proceeds from the offering were used to make leveraged investments in three office properties (one of which was lost through foreclosure in 1992, one of which was sold in 1996 and one of which was sold in 1997), an industrial park (which was disposed of in 1995 and 1996) and a hotel (which was sold in 1996). The properties have all been sold as of December 31, 1997.
The Partnership Agreement provides that the Partnership shall terminate upon the sale of the Partnership's last investment, and that dissolution shall be effective on the day of such event. Accordingly, the Partnership dissolved upon the sale of its last interest in real estate in October 1997. The Partnership intends to proceed in winding up its affairs and, upon conclusion of liquidation, to terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State.
The Partnership has no employees.
All of the Partnership's business was conducted in the United States.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices.
During the year ended December 31, 1997, the Partnership owned, through partnership interest, the following property interest until its sale in October 1997. See Note 4 to the consolidated financial statements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On December 27, 1995, a purported class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. ("DWR") and others as defendants was filed in Superior Court in California. The complaint alleged fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and sought compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants removed the case to the United States District Court for the Southern District of California. Pursuant to an order of the U.S. District Court for the Southern District of California entered May 24, 1996, the Grigsby Action was transferred to the U.S. District Court for the Southern District of New York. The case was dismissed by stipulation of the parties dated March 6, 1997 and refiled and consolidated with the Consolidated Action (as defined below).
On February 14, 1996, a purported class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co. ("DWD") and DWR as defendants was filed in the Chancery Court of Delaware for New Castle County (the "Delaware Chancery Court"). On February 23, 1996, a purported class action lawsuit (the "Dosky Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants was filed in the Delaware Chancery Court. On February 29, 1996, a purported class action lawsuit (the "Segal Action') naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWR, DWD and others as defendants was filed in the Delaware Chancery Court. On March 13, 1996, a purported class action lawsuit (the "Young Action") naming the partnership, other unidentified limited partnerships, DWD, DWR and others as defendants was filed in the Circuit Court for Baltimore City in Baltimore, Maryland. The defendants removed the Young Action to the United States District Court for the District of Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal Action were consolidated in a single action (the "Consolidated Action") in the Delaware Chancery Court. The Young Action was dismissed without prejudice. The plaintiffs in the Young Action joined the Consolidated Action.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a First Consolidated and Amended Class Action Complaint naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants. This complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in an unspecified amount, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants filed a motion to dismiss this complaint on December 10, 1996.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders.
PART II.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
The Partnership has sold its last real estate investment and is currently winding up its affairs as it proceeds toward termination.
An established public trading market for the Units does not exist, and such a market will not develop before termination of the Partnership. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow its limited partners (the "Limited Partners") to transfer their Units, if a suitable buyer can be located.
As of March 17, 1998 there were 6,129 holders of limited partnership interests.
The Partnership is a limited partnership and, accordingly, does not pay dividends. However, the Partnership Agreement permits distributions of "Distributable Cash", as defined, to its partners. Pursuant to the Partnership Agreement, Distributable Cash is to be paid 96% to the Limited Partners, after the Managing General Partner has received a management fee of 6.25% of Distributable Cash. The Managing General Partner did not receive a management fee in 1997, 1996 or 1995 because the Partnership did not make a cash distribution of Distributable Cash in any of those years.
In January 1997, the Partnership made a distribution to Limited Partners of approximately $10.7 million ($136 per Unit) from the net proceeds from the sale of its joint venture interest in Peninsula Office Park, the sale of land at Braker Center and the remaining proceeds from the sale of the Bayport Plaza Hyatt Hotel. In 1996, the Partnership distributed approximately $29.3 million ($373 per Unit) of proceeds primarily from the sale of the Bayport Hyatt Hotel. In accordance with the Partnership Agreement, these distributions was paid 100% to the Limited Partners.
On March 13, 1998 the Partnership made a distribution of $3,861,078 ($49.13 per Unit), representing a portion of the proceeds from the sale of the Bayport Plaza Office Building. The distribution was paid 100% to Limited Partners.
The Partnership anticipates making final distributions to its partners in 1998 because the Partnership's last property has been sold.
Taxable income and tax loss generally are allocated to the partners in proportion to the distribution of Distributable Cash (after payment of the Managing General Partner's management fee) or sale or financing proceeds (or 96% to the Limited Partners and 4% to the General Partners if there is no Distributable Cash).
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the Partnership:
________________ 1.Revenues and income include gain on sale of real estate of approximately $8.6 million. 2.Revenues and income include gains on sale of real estate and partnership interests totaling approximately $58 million. 3.Revenues and losses include a loss on sale of real estate of approximately $1.2 million. 4. Includes a $334,988 loss on the sale of real estate. 5. Gain on extinguishment of debt due to foreclosure of a property. 6. All of the cash distributions represent returns of capital.
Note: The above financial data should be read in conjunction with the consolidated financial statements and the related notes in Item 8.
ITEM 7.
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Partnership raised $78,594,000 in a public offering which terminated in 1986. The Partnership has no plans to raise additional capital.
The Partnership used the proceeds from the offering to make leveraged investments in five properties. One of the properties was lost through foreclosure in 1992; all of the remaining properties were sold prior to December 31, 1997. No additional investments are planned.
TWC Ten, Ltd., in which the Partnership owns a 45.79% indirect general partnership interest, sold the Bayport Plaza Office Building on October 20, 1997, for approximately $45.7 million. The purchase price was received in cash at closing. Approximately $20,000,000 of the sales proceeds were used to repay the existing mortgage loan encumbering the property, including accrued interest thereon and prepayment premium. The remaining cash proceeds, net of closing costs, were allocated to the Partnership (approximately $7,438,000) and to an unaffiliated partner (approximately $17,172,000) pursuant to the provisions of the Joint Venture agreement.
Prior to the sale, the Partnership realized no cash flow from its investment in the Bayport Plaza Office Building, as available cash flow was distributed 100% to another partner, in accordance with the provisions of the Joint Venture agreement.
The Bayport Plaza Office Building was the Partnership's last remaining investment. The Partnership Agreement provides that the Partnership shall terminate upon the sale of the Partnership's last investment, and that dissolution shall be effective on the day on which the event arises giving rise to the dissolution. Accordingly, the Partnership dissolved, pursuant to the terms of its Partnership Agreement, effective October 20, 1997. The Partnership intends to proceed in winding up its affairs and, upon conclusion of liquidation, to terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State.
The total cash distributed to the Limited Partners will be less than the capital contributed by the Limited Partners.
In January 1997, the Partnership collected the remaining sale proceeds receivable from the sale of its joint venture interest in Peninsula Office Park and made a distribution to Limited Partners of approximately $10.7 million ($136 per Unit) from such proceeds, the sale of land at Braker Center and the remaining proceeds from the sale of the Hotel.
On March 13, 1998 the Partnership made a distributon of $3,861,078 ($49.13 per unit), representing a portion of the proceeds from the sale of the Bayport Plaza Office Building. The distribution was paid 100% to limited partners.
Except as discussed herein and in the consolidated financial statements, the Managing General Partner is not aware of any trends, or events, commitments or uncertainties that may have a material impact on liquidity.
Operations
Fluctuations in the Partnership's operating results for the year ended December 31, 1997 compared to 1996 and 1996 compared to 1995 are primarily attributable to the following:
Hotel revenues and expenses, interest expense, depreciation and amortization decreased in 1997 because of the sale of the Bayport Plaza Hyatt Hotel in the third quarter of 1996. Hotel operating revenues and expenses decreased in 1996 compared to 1995 for the same reason.
Equity in earnings of partnerships in 1997 consists of the Partnership's share of the gain on the sale of the Bayport Plaza Office Building. Equity in net losses of partnerships decreased in 1996 compared to 1995 primarily because of higher rents on new leases in 1996 at Peninsula Office Park.
Rental income and property operating expenses decreased in 1996 compared to 1995 because of the disposition of the Partnership's interests in the properties at Braker Center in 1995. There was no rental income in 1997 and 1996, and only minor property operating expenses in 1996.
The gain on sale of real estate in 1996 resulted from the sale of the Hotel. The loss on sale of real estate in 1995 resulted from sales of properties at Braker Center. See Note 4 to the consolidated financial statements.
The gain on sale of partnership interest in 1996 resulted from the sale of the joint venture interest in Peninsula Office Park. See Note 5 to the consolidated financial statements.
Interest expense, depreciation and amortization decreased in 1996 compared to 1995 as a result of sales of real estate and repayment of loans. See Notes 4 and 6 to the consolidated financial statements.
Inflation
Inflation has been consistently low during the periods presented in the financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
DEAN WITTER REALTY GROWTH PROPERTIES L.P.
INDEX
Page
(a) Financial Statements Independent Auditors' Report 11 Consolidated Balance Sheets at December 31, 1997 and 1996 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995 13 Consolidated Statements of Partners' Capital (Deficiency) for the years ended December 31, 1997, 1996 and 1995 14 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 15-16 Notes to Consolidated Financial Statements 17-26
_____________________________ All schedules have been omitted because either the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto. Independent Auditors' Report
To the Partners of Dean Witter Realty Growth Properties, L.P.:
We have audited the accompanying consolidated balance sheets of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships (the "Partnership") as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' capital (deficiency) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP /s/Deloitte & Touche LLP
New York, New York March 24, 1998
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
1. The Partnership and Basis of Presentation
Dean Witter Realty Growth Properties, L.P. (the "Partnership") is a limited partnership formed in 1985 under the laws of the State of Delaware to invest primarily in income-producing properties. The Managing General Partner of the Partnership is Dean Witter Realty Growth Properties Inc., which is wholly-owned by Dean Witter Realty Inc. ("Realty").
In 1986, the Partnership issued 78,594 units of limited partnership interest (the "Units") for $78,594,000. No additional Units will be sold.
In October 1997, the Parntership sold its last real estate investment interest (see Note 5). Pursuant to the Partnership Agreement, the sale effectuated the dissolution of the Partnership and, accordingly, the Partnership is in the process of winding up its affairs
2. Summary of Significant Accounting Policies
The financial statements include the accounts of the Partnership and, prior to 1997, Bayport Ltd.'s investment in the Bayport hotel, and Braker Associates on a consolidated basis. The Partnership's interest in Bayport Ltd's investment in the Bayport office building and, prior to 1997, in Peninsula/DW Associates, were accounted for on the equity method.
The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. 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.
The carrying value of real estate included the purchase price paid by the Partnership and acquisition fees and expenses. Costs of improvements to the properties were capitalized, and repairs were expensed. Depreciation was recorded on the straight-line method.
Cash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less.
Deferred expenses consisted of deferred asset supervisory fees, which were amortized over the terms of the related agreements, deferred commitment fees, which were amortized over the related commitment periods, and deferred leasing commissions, which were amortized over the applicable lease terms.
Rental income was accrued on a straight-line basis over the terms of the leases. Accruals in excess of amounts payable by tenants pursuant to their leases (resulting from rent concessions or rents which periodically increase over the term of a lease) were recorded as receivables and included in other assets.
Net income (loss) per Unit amounts are calculated by dividing net income (loss) allocated to Limited Partners, in accordance with the Partnership Agreement, by the weighted average number of Units outstanding.
No provision for income taxes has been made in the financial statements, since the liability for such taxes is that of the partners rather than the Partnership.
The accounting policies used for tax reporting purposes differ from those used for financial reporting as follows: (a) depreciation is calculated using accelerated methods and (b) losses on impairment of real estate are not deductible until realized. In addition, offering costs are treated differently for tax and financial reporting purposes. The tax basis of the Partnership's assets and liabilities is approximately $8.8 million higher than the amounts reported for financial statement purposes.
The Financial Accounting Standards Board ("FASB") has recently issued several new accounting pronouncements. Statement No. 130, "Reporting Comprehensive Income," establishes standards for reporting and display of comprehensive income and its components. Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosure about products and services, geographic areas, and major customers. These two standards are effective for the Partnership's 1998 financial statements. The Partnership does not believe that these new standards will have any effect on the Partnership's computation or presentation of net income or other disclosures.
The implementation in 1997 of FASB Statement No. 128, "Earnings per Share," and Statement No. 129, "Disclosure of Information about Capital Structure," effective for the Partnership's 1997 year-end, did not have any impact on the Partnership's financial statements.
3. Partnership Agreement
The Partnership agreement provides that the Limited Partners will receive 96% of distributable cash (as defined) remaining after the Managing General Partner has received a management fee of 6.25% of distributable cash.
Sale or refinancing proceeds will generally be distributed (i) to the Limited Partners until they have received a return of their capital contributions; (ii) to the General Partners until the General Partners have received 1.01% of the amount distributed to the Limited Partners; (iii) 99% of any remaining amounts to the Limited Partnerss and 1% to the General Partners until the Limited Partners have received cumulative distributions sufficient to provide a 6% cumulative annual return on their adjusted capital contributions; and (iv) 85% to the Limited Partners and 15% to the General Partners after the Managing General Partner receives a brokerage fee, if earned, not in excess of 3% of the aggregate gross sales prices of all properties.
Taxable income (loss) generally will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds (or 96% to the Limited Partners and 4% to the General Partners if there is no distributable cash).
The Partnership did not make a distribution of distributable cash to the Partners in 1997, 1996 or 1995. In 1996, the Partnership distributed approximately $29.3 million ($373 per Unit) of proceeds from the sale of the Bayport Hyatt hotel. In January 1997, the Partnership distributed approximately $10.7 million ($136 per Unit) of proceeds from the sale of the Partnership's investment in Peninsula Office Park, the land sold at Braker Center and additional proceeds from the sale of the Bayport Hyatt hotel. On March 13, 1998 the Partnership made a distribution of $3,861,078 ($49.13 per Unit), representing a portion of the proceeds form the sale of the Bayport Office Building. The distribution was paid 100% to limited partners. All of these distributions were returns of capital paid 100% to the Limited Partners.
4. Investments in Real Estate
Bayport Plaza Hyatt Hotel, Tampa, Florida
Bayport Plaza is a mixed-use development consisting of an office building and a Hyatt hotel (the "Hotel"). The Partnership owned a 99% general partnership interest in Bayport, Ltd.; a partnership consisting of current and former officers of Realty held the remaining 1% interest. Bayport, Ltd. owned (after a preferential return as described below) a 91.6% partnership interest in the partnership which owned the hotel (the "Hotel Partnership"); affiliates of the developer of Bayport Plaza (the "Developer") owned the remaining 8.4%. Bayport Ltd. also owned a 46.25% interest in a partnership which owned the office building (the "Office Partnership") (see Note 5).
In May 1995, the Partnership and Hyatt Hotel Corporation ("Hyatt") modified the management agreement for the Hotel. Under the terms of the modified agreement, Hyatt was entitled to an annual fee equal to a percentage of the hotel's net revenues in excess of annual debt service, not to exceed an overall percentage cap, and Hyatt agreed to certain expense reductions that increased the Hotel's cash flow. During the second quarter of 1995, the Partnership prepaid $3 million of the hotel mortgage loan from restricted cash reserves.
In July 1996, the Hotel Partnership sold the Hotel, for $72.2 million, to Hyatt, pursuant to Hyatt's right of first offer contained in the management agreement. The purchase price was paid in cash at closing. A portion of the sales proceeds was used to repay the $42 million mortgage note (which bore interest at 9%) encumbering the Hotel and certain balances due to affiliates (see Note 6). The remaining proceeds were allocated 100% to Bayport Ltd.
An affiliate of Realty had provided a partial loan principal and operating deficit guarantee to the first mortgage lender on the Hotel. See Note 6.
Braker Center, Austin, Texas
The Partnership owned a 99% general partnership interest in L.S. Braker Associates ("Braker Associates"); a partnership consisting of current and former officers of Realty held the remaining 1% interest.
At December 31, 1994, Braker Associates owned a warehouse, six parcels of undeveloped land, and a 50% interest in the partnership (the "Office/R&D Building Partnership") which owned four office/R&D buildings.
In 1995, the Partnership agreed to sell to Hill Partners, Inc., an unaffiliated party, the warehouse and land for approximately $8.2 million. The sale resulted in a loss of approximately $1.2 million. The closings of the sale of the warehouse and four parcels of land, for a net purchase price of approximately $6.6 million took place in September and November 1995. At the September closing, the Partnership repaid the $3.7 million mortgage debt encumbering the property. (Earlier in 1995, the Partnership paid a fee of approximately $165,000 (included in interest expense) for an extension of the maturity of the loan.) The remaining proceeds were used to repay borrowings from an affiliate of Realty and for reserves. The closings of the sales of the remaining parcels of land, for an aggregate purchase price of approximately $1.4 million occurred in April and November 1996.
The buildings owned by the Office/R&D Building Partnership were encumbered by a mortgage loan which was cross- collateralized and cross-defaulted with loans on approximately 94 projects owned by the Partnership's joint venture partner. Because certain of the projects failed to make scheduled principal payments, in December 1994, the lender declared a default. In January 1995, the Partnership's joint venture partner placed 46 of its properties, including the Office/R&D Partnership, under bankruptcy protection. The Partnership did not consent to the bankruptcy filing. The joint venture partner subsequently submitted a plan of reorganization which was approved by the bankruptcy court in November. The reorganization plan required the Partnership to contribute additional equity to the joint venture in order to retain its interest in the Office/R&D Building Partnership. The Managing General Partner believed that several terms of the plan of reorganization were not favorable to the Partnership and that additional investment was not justified and, accordingly did not contribute additional equity. As a result, the Partnership lost its interest in the buildings and the Office/R&D Building Partnership in 1995. The mortgage loan (which was non-recourse to the Partnership) on the four office/R&D buildings exceeded their carrying value. Accordingly, the loss of the buildings resulted in a non- cash gain of $1,938,645, which was reported as an extraordinary item.
5. Investments in and Advances to Partnerships
Bayport Plaza Office Building, Tampa, Florida
The Office Partnership is owned 46.25% by Bayport, Ltd., 3.75% by affiliates of the Developer and 50% by a third- party investor (the "Investor"). Bayport, Ltd. is the managing general partner of the Office Partnership.
On October 20, 1997, the Office Partnership sold the office building to an unaffiliated party for $45,700,000. The purchase price was received in cash at closing. Approximately $20,000,000 of the sale proceeds were used to repay the mortgage loan encumbering the property, including accrued interest thereon and prepayment premium. The remaining cash proceeds, net of closing costs, were allocated to the Partnership (approximately $7,438,000) and to the Investor (approximately $17,172,000) pursuant to the provisions of the Joint Venture agreement.
Pursuant to the Office Partnership Agreement, the Partnership was not entitled to any equity in earnings or losses of the Office Partnership in 1997 (other than as a result of the sale of the property), 1996 or 1995.
The assets, liabilities and partners' capital of the Office Partnership are summarized as follows:
The accounting policies of the Office Partnership are consistent with those of the Partnership.
Peninsula Office Park, San Mateo, California
Peninsula/DW Associates, a general partnership owned 98% by the Partnership and 2% by former and current Realty officers and executives, owned a 49.9% general partnership interest in two limited partnerships (the "Joint Venture") which owns Peninsula Office Park, a corporate office park located in San Mateo, California. The remaining 50.1% interest in the Joint Venture was owned by the developer of Peninsula Office Park.
On December 19, 1996, Peninsula/DW Associates sold its interests in the Joint Venture, for approximately $9.4 million, to entities controlled by the developer. The Partnership received $7.7 million in cash at the closing and the remainder in January 1997.
The results of operations of the Joint Venture are summarized as follows:
* Includes $540,000 and $558,000 in 1996 and 1995, respectively, representing depreciation of the excess of the costs of the Partnership's investment in the Joint Venture over the underlying equity in net assets at the date of acquisition.
The accounting policies of the Joint Venture are consistent with those of the Partnership.
Activity in the Excess of Distributions and Losses over Cost of Investments in Partnerships is as follows:
The Partnership was not entitled to any equity in losses of the Office Partnership in 1996 and 1995. Accordingly, equity in losses includes only the Partnership's 49.9% share of the losses of the Joint Venture, adjusted to include 100% of the depreciation of the excess of the cost of the Partnership's investment in the Joint Venture over the underlying equity in net assets at the date of acquisition.
6. Related Party Transactions
Prior to 1991, the Partnership borrowed funds from an affiliate of Realty to fund working capital needs and capital expenditures at certain properties. In May 1996, the Partnership repaid $2,770,000 from the proceeds of the sale of certain of the Braker Center properties. In July 1996, the remaining balance, approximately $400,000, was repaid from the proceeds from the sale of the Hotel. Interest expense, calculated at the prime rate, was $101,927 and $263,976 in 1996 and 1995, respectively.
Additionally, in conjunction with the Hotel mortgage note payable, an affiliate of Realty guaranteed a maximum of $5,350,000 of the first mortgage debt. Advances (all of which were made prior to 1994) by the guarantor to the first mortgage lender under this guaranty (which constituted loans from the guarantor to the Partnership) totaling approximately $3.2 million (including approximately $900,000 of accrued interest) were repaid from the proceeds from the sale of the Hotel. Interest expense, calculated at the prime rate, was $136,723 and $244,619 in 1996 and 1995, respectively.
The Managing General Partner was entitled to receive a management fee based on a percentage of distributable cash (as defined in the Partnership Agreement). Because there was no distributable cash, the Managing General Partner did not receive a fee for the years ended December 31, 1997, 1996 or 1995. Prior to 1996, $422,987 of pre-1991 management fees remained unpaid and the General Partners deferred receipt of pre-1991 cash distributions totalling $262,316. In the third quarter of 1996, the Managing General Partner determined that such amounts should not be paid and the General Partners waived any claims thereto.
Realty performs administrative functions, processes investor transactions and prepares tax information for the Partnership. For 1997, 1996 and 1995, the Partnership incurred fees of approximately $74,000, $179,000 and $204,000, respectively. These amounts are included in general and administrative expense.
7. Litigation
Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) are defendants in a number of class action lawsuits pending in state and federal courts. The complaints allege a variety of claims, including breach of fiduciary duty, fraud, misrepresentation and related claims and seek compensatory and other damages and equitable relief. The defendants intend to vigorously defend the actions. It is impossible to predict the effect, if any, the outcome of these actions might have on the Partnership's financial statements.
8. Distributions after year-end
On March 13, 1998, the Partnership paid a cash distribution of approximately $3.9 million ($49.13 per Unit) with proceeds from the sale of the Bayport Plaza Office Building. The remaining proceeds and any other distributable cash will be distributed when the Partnership has satisfied any outstanding claims and has concluded winding up its affairs.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None. PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership which has no directors or executive officers.
The directors and executive officers of the Managing General Partner are as follows: Position with the Name Managing General Partner
William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Lawrence Volpe Controller and Director Ronald T. Carman Secretary and Director
All of the directors have been elected to serve until the next annual meeting of the Shareholders of the Managing General Partner or until their successors are elected and qualify. Each of the officers has been elected to serve until his successor is elected and qualifies.
William B. Smith, age 54, is a Managing Director of Morgan Stanley and co-head of Morgan Stanley Realty Incorporated since 1997, and a Managing Director of Dean Witter Realty Inc. which he joined in 1982. He is an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 48, has been a Managing Director of Morgan Stanley Asia, Ltd., since 1997, and a Managing Director of Dean Witter Realty Inc, which he joined in 1982.
Lawrence Volpe, age 50, is a Director and the Controller of Dean Witter Realty Inc. He is a Senior Vice President and Controller of Dean Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 46, is an Assistant Secretary of MWD and a Senior Vice President and Associate General Counsel of Dean Witter, Reynolds Inc., which he joined in 1984.
There is no family relationship among any of the foregoing persons. ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are contained in Item 5 above. The General Partners have not received cash distributions for the period 1988 through 1997. Prior to 1997, $422,987 of pre-1991 management fees remained unpaid and the General Partners deferred receipt of pre-1991 cash distributions totalling $262,316. In the third quarter of 1996, the Managing General Partner determined that such amounts should not be paid and the General Partners waived any claims thereto.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements are contained in Note 6 to the Consolidated Financial Statements in Item 8 above.
The directors and executive officers of the Partnership's Managing General Partner received no renumeration from the Partnership.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of more than five percent of the Units.
(b) The executive officers and directors of the Managing General Partner own the following Units as of March 17, 1998:
(3) Amount of (1) (2) Nature of Name Title of Class Owner Beneficial Ownership of Beneficial
Limited Partnership All directors and executive * Interests officers of the Managing General Partner, as a group
*Own, by virtue of ownership of limited partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their being partners of a limited partnership which is the limited partner of the Associate General Partner, certain current and former officers and directors of the Managing General Partner also own indirect general partnership interests in the Partnership. The Partnership Agreement of the Partnership provides that cash distributions and allocations of income and loss to the general partners be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The general partners' share of cash distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing General Partner are owned by Dean Witter Realty Inc. ("Realty"), a Delaware corporation which is a wholly- owned subsidiary of Morgan Stanley Dean Witter & Co. The general partner of the Associate General Partner is Dean Witter Realty Growth Properties Inc., which is a wholly- owned subsidiary of Realty. The limited partner of the Associate General Partner is LSP, L.P., a Delaware limited partnership. Realty and certain current and former officers and directors of the Managing General Partner are partners of LSP, L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. In addition, affiliates of the General Partners have ownership interest in certain properties. Information concerning these transactions is contained in the Notes to Consolidated Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties.
The Managing General Partner is entitled to receive a management fee based on a percentage of distributable cash (as defined in the Partnership Agreement). Because there was no distributable cash, the Managing General Partner did not receive a fee for the years ended December 31, 1997, 1996 or 1995. Prior to 1996, $422,987 and pre-1991 management fees remained unpaid and the General Partners deferred receipt of pre-1991 cash distributions totalling $262,316. In the third quarter of 1996, the Managing General Partner determined that such amounts should not be paid and the General Partners waived any claims thereto. PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
2. Financial Statement Schedule (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
3. Exhibits (3)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2- 96767 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2- 96767 is incorporated herein by reference.
(10)(a) Partnership Agreement of TWC Ten, Ltd. was filed as Exhibit 10(b) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(b) Partnership Agreement of TWC Eleven, Ltd. was filed as Exhibit 10(c) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(c) Amended and Restated Partnership Agreement of Bayport, Ltd. filed as Exhibit b to Registrant's current report on Form 8-K, dated July 15, 1985 (Commission File No. 0-18151), is incorporated herein by reference.
(d) General Partnership Agreement of TWC Eleven, Ltd. dated as of August 29, 1985 filed as Exhibit 10(d) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(e) First Amendment to the General Partnership Agreement of TWC Eleven, Ltd. dated as of June 19, 1987 filed as Exhibit 10(e) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(f) Second Amended and Restated Agreement of Limited Partnership of TWC Ten, Ltd. dated as of July 19, 1993 filed as Exhibit 10(f) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(g) Partnership Agreement of Braker Lane III Associates was filed as Exhibit 10(a) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(h) Amended and Restated Partnership Agreement of L.S. Braker Associates filed as Exhibit b to Registrants current report on Form 8-K dated July 15, 1985 (Commission File No 0-18151) is incorporated herein by reference.
(i) Partnership Agreement of Peninsula/DW Associates dated December 27, 1985 filed as Exhibit c to Registrants' current report on Form 8-K dated December 27, 1985 (Commission File No 0-18151) is incorporated herein by reference.
(j) Amended and Restated Agreement of Limited Partnership of Campus Drive Investment Company, dated as of December 27, 1985 filed as Exhibit 10(j) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(k) Amended and Restated Agreement of Limited Partnership of Peninsula Office Park, dated as of December 27, 1985 filed as Exhibit 10(k) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(l) Agreement of Sale, dated August 3, 1995, with respect to the sale of the warehouse and the undeveloped land at Braker Center filed as Exhibit 2 to the Registrant's current report on Form 8-K dated September 1, 1995 (Commission File No. 0-18151) and is incorporated herein by reference.
(m) Second Amended and Restated Management Agreement, dated January 26, 1995, between TWC Eleven, Ltd. and Hyatt Corporation filed as Exhibit 1 to Registrant's current report on Form 8-K dated July 18, 1996 (Commission File No. 0-18151) and is incorporated herein by reference.
(n) Purchase and Sale Agreement dated as of September 30, 1996 by and among Peninsula/DW Associates, William Wilson III, Peninsula Office Park and Campus Drive Investment Company filed as Exhibit 2 to Registrants current report on Form 8-K dated December 19, 1996 (Commission File No. 0- 18151) and is incorporated herein by reference.
(o) Purchase and Sale Agreement dated September 23, 1997, and Reinstatement and Modification Agreement dated October 10, 1997, between TWC Ten, Ltd. And Aetna Life Insurance Company filed as Exhibits 2(a) and (b), respectively, to Registrant's current report on Form 8-K dated October 20, 1997 (Commission File No. 0-18151) and are incorporated herein by reference.
(21) Subsidiaries: TWC Eleven Limited Partnership, a Florida Limited Partnership.
(27) Financial Data Schedule.
(c) See 3a. above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
By: Dean Witter Realty Growth Properties Inc. Managing General Partner
By: /s/E. Davisson Hardman, Jr. Date: March 27, E. Davisson Hardman, Jr. President
By: /s/Lawrence Volpe Date: March 27, Lawrence Volpe Controller (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
DEAN WITTER REALTY GROWTH PROPERTIES INC. Managing General Partner
/s/William B. Smith Date: March 27, 1997 William B. Smith Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: March 27, 1997 E. Davisson Hardman, Jr. Director
/s/Lawrence Volpe Date: March 27, 1997 Lawrence Volpe Director
/s/Ronald T. Carman Date: March 27, 1997 Ronald T. Carman Director
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Year Ended December 31, 1996
Exhibit Index Exhibit No. Description
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2-96767 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2-96767 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference.
(10)(a) Partnership Agreement of TWC Ten, Ltd. was filed as Exhibit 10(b) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(b) Partnership Agreement of TWC Eleven, Ltd. was filed as Exhibit 10(c) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(c) Amended and Restated Partnership Agreement of Bayport, Ltd. filed as Exhibit b to Registrant's current report on Form 8-K, dated July 15, 1985 (Commission File No. 0-18151), is incorporated herein by reference.
(d) General Partnership Agreement of TWC Eleven, Ltd. dated as of August 29, 1985 filed as Exhibit 10(d) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference. E-1 DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Year Ended December 31, 1997
Exhibit Index
(continued)
Exhibit No. Description
(e) First Amendment to the General Partnership Agreement of TWC Eleven, Ltd. dated as of June 19, 1987 filed as Exhibit 10(e) to Registrant's Annual Report Form 10- K for the year ended December 31, 1995 is incorporated herein by reference.
(f) Second Amended and Restated Agreement of Limited Partnership of TWC Ten, Ltd. dated as of July 19, 1993 filed as Exhibit 10(f) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(g) Partnership Agreement of Braker Lane III Associates was filed as Exhibit 10(a) to Registration Statement No. 2-96767 and is incorporated herein by reference.
(h) Amended and Restated Partnership Agreement of L.S. Braker Associates filed as Exhibit b to Registrants current report on Form 8-K dated July 15, 1985 (Commission File No 0- 18151) is incorporated herein by reference.
(i) Partnership Agreement of Peninsula/DW Associates dated December 27, 1985 filed as Exhibit c to Registrants' current report on Form 8-K dated December 27, 1985 (Commission File No 0-18151) is incorporated herein by reference.
(j) Amended and Restated Agreement of Limited Partnership of Campus Drive Investment Company, dated as of December 27, 1985 filed as Exhibit 10(j) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
E-2 DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Year Ended December 31, 1997
Exhibit Index
(continued)
Exhibit No. Description
(k) Amended and Restated Agreement of Limited Partnership of Peninsula Office Park, dated as of December 27, 1985 filed as Exhibit 10(k) to Registrant's Annual Report Form 10-K for the year ended December 31, 1995 is incorporated herein by reference.
(l) Agreement of Sale, dated August 3, 1995, with respect to the sale of the warehouse and the undeveloped land at Braker Center filed as Exhibit 2 to the Registrant's current report on Form 8-K dated September 1, 1995 (Commission File No. 0-18151) and is incorporated herein by reference.
(m) Second Amended and Restated Management Agreement, dated January 26, 1995, between TWC Eleven, Ltd. and Hyatt Corporation filed as Exhibit 1 to Registrant's current report on Form 8-K dated July 18, 1996 (Commission File No. 0-18151) and is incorporated herein by reference.
(n) (Purchase and Sale Agreement dated as of September 30, 1996 by and among Peninsula/DW Associates, William Wilson III, Peninsula Office Park and Campus Drive Investment Company filed as Exhibit 2 to Registrants current report on Form 8-K dated December 19, 1996 (Commission File No. 0-18151) and is incorporated herein by reference.
(o) Purchase and Sale Agreement dated September 23, 1997, and Reinstatement and Modification Agreement dated October 10, 1997, between TWC Ten, Ltd. and Aetna Life Insurance Company filed as Exhibits 2(a) and (b), respectively, to Registrants's current report on Form 8-K dated October 20, 1997 (Commission File No. 0-18151) and are incorporated herein by reference.
(27) Financial Data Schedule
E-3