ITEM 1. BUSINESS
The Registrant, Dean Witter Realty Yield Plus, L.P. (the "Partnership"), is a limited partnership organized in January 1987 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing in income-producing properties.
The Managing General Partner of the Partnership is Dean Witter Realty Yield Plus Inc. (the "Managing General Partner"), a Delaware corporation which is wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Yield Plus Associates, L.P. (the "Associate General Partner"), a Delaware limited partnership, the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the business of the Partnership. The terms of transactions between the Partnership and its affiliates are set forth in the consolidated financial statements in Item 8 and in Item 13 below.
The Partnership issued 8,909,969 units of limited partnership interest (the "Units") for $178,199,380. The offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make investments in six participating mortgage loans and land leases secured by interests in real property. Additionally, proceeds were used to make an investment in a short-term loan secured by eleven partnership interests. The Partnership subsequently acquired equity interests in the real estate securing all of the loans through foreclosure or through transfers of ownership in lieu of foreclosure. All property interests but three were sold to unaffiliated purchasers or lost through foreclosure prior to December 31, 1998. The Partnership's remaining property interests are described in Item 2
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices.
As of December 31, 1998, the Partnership owned the following interests in real estate. Generally, the leases pertaining to the properties provide for pass-throughs to the tenants of their pro-rata share of certain operating expenses. In the opinion of the Managing General Partner, all of the properties are adequately covered by insurance.
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1. Acquisition date is date of foreclosure or in-substance foreclosure.
2. The lower of estimated fair value of property or net carrying value of loan at acquisition date.
3. Property is subject to a mortgage loan. In 1997, the Partnership acquired an equity interest in the property. See Note 6 to the consolidated financial statements.
4. Dean Witter Realty Yield Plus II, L.P., an affiliate, owns the remaining 42% general partnership interest. The total net carrying value of the general partnership interest at the acquisition date was approximately $33.4 million.
In 1998, the Partnership sold the 401 East Ontario Street residential building, located in Chicago, Illinois, and the unimproved land (known as Pine Ridge) in Flint, Michigan. Also, in 1998, the Michelson joint venture (which is owned 50.81% by the Partnership and 49.19% by Dean Witter Realty Yield Plus II, L.P., an affiliate) sold its three office buildings, located in Irvine, California.
Each property, except the unimproved land, was built with on-site parking facilities.
An affiliate of Realty was the property manager for the Michelson and Deptford Crossing properties in 1998.
Further information relating to the Partnership's properties is included in Item 7 and Notes 4, 5, 6, 7 and 8 to the consolidated financial statements in Item 8 below.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On December 27, 1995, a purported class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. ("DWR") and others as defendants was filed in Superior Court in California. The complaint alleged fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and sought compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants removed the case to the United States District Court for the Southern District of California. Pursuant to an order of the U.S. District Court for the Southern District of California entered May 24, 1996, the Grigsby Action was transferred to the U.S. District Court for the Southern District of New York.
On February 14, 1996, a purported class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co. (now known as Morgan Stanley Dean Witter & Co., "MWD") 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, MWD, 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, MWD 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, MWD, DWR and others as defendants was filed in the Circuit Court for Baltimore City in Baltimore, Maryland. The defendants removed the Young Action to the United States District Court for the District of Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal Action were consolidated in a single action (the "Consolidated Action") in the Delaware Chancery Court. The Young Action was dismissed without prejudice. The plaintiffs in the Young Action and the Grigsby Action
joined the Consolidated Action. The Grigsby Action remains stayed indefinitely subject to being reopened for good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a First Consolidated and Amended Class Action Complaint naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, MWD, 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.
On July 17, 1998, the Delaware Chancery Court granted the defendants' motion to dismiss the complaint in the Consolidated Action. The plaintiffs filed a notice of appeal from the Chancery Court's order on August 14, 1998. Oral argument on the appeal was heard by the Delaware Supreme Court on January 5, 1999. The Delaware Supreme Court affirmed the Chancery Court's dismissal of the Consolidated Action on January 6,1999.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders.
PART II.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow its limited partners (the "Limited Partners") to transfer their Units, if a suitable buyer can be located.
As of February 28, 1999, there were 14,971 holders of limited partnership interests.
The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make distributions of cash to its partners. Pursuant to the Partnership Agreement, distributable cash, as defined, is paid 90% to the Limited Partners and 10% to the general partners (the "General Partners"). Pursuant to the Partnership Agreement, $1,239,345 of the General Partner's share of such net cash flow distributable to them through December 31, 1990, was deferred subject to receipt by the Limited Partners of an 8% annual return on their invested capital through that date.
During the year ended December 31, 1998, the Partnership paid cash distributions aggregating $10.97 per Unit (including approximately $10.58 per Unit from proceeds from the sales of the Michelson and 401 East Ontario properties, which were paid 100% to the Limited Partners). The total distributions amounted to $98,173,009, with $97,777,999 distributed to the Limited Partners and $395,010 distributed to the General Partners. During the year ended December 31, 1997, the Partnership paid cash distributions aggregating $1.71 per Unit (including a distribution of approximately $1.19 from proceeds from the sale of the Greenway Pointe property, which was paid 100% to the Limited Partners.). Total distributions were $15,750,550, with $15,235,751 distributed to the Limited Partners and $514,799 to the General Partners.
The Partnership has not made a regular distribution of distributable cash since the 1998 first quarter distribution (paid in April) and does not anticipate making regular distributions to its partners in the future. Generally, future cash distributions will be paid from proceeds received from the sales of the One Congress Street and Deptford Crossing properties and cash reserves.
Sale or financing proceeds will be distributed, to the extent available: first, 97% to the Limited Partners and 3% to the General Partners until the Limited Partners receive a return of their invested capital plus an amount sufficient to provide a 10% cumulative annual return thereon; second, 100% to the General Partners until they have received the amount of any net cash flow previously deferred and not distributed; and third, 85% to the Limited Partners and 15% to the General Partners.
Taxable income generally will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds, as the case may be (or 90% to the Limited Partners and 10% to the General
Partners if there is no distributable cash or sale or financing proceeds). At a minimum, the General Partners must be allocated at least 1% of the taxable income from a sale or financing. Tax losses, if any, will be allocated 90% to the Limited Partners and 10% to the General Partners.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the Partnership:
DEAN WITTER REALTY YIELD PLUS, L.P.
1. Total revenues include gains on the sales of the Michelson property ($25.2 million), the 401 East Ontario property ($39.8 million) and the Pine Ridge land ($0.4 million). Net income includes these gains, reduced by the minority interest share of the gain on Michelson ($12.7 million).
2. Total revenues, income before extraordinary item and net income include reserves of $1.6 million of accrued but unpaid interest on the One Congress Street participating mortgage loan, and $5.2 million gain on sale of the Greenway Pointe property.
3. Total revenues and net loss include reserves of $0.7 million of accrued but unpaid interest on the One Congress Street participating mortgage loan, and net loss also includes a $1.0 million impairment loss on principal of the One Congress Street participating mortgage loan.
4. Total revenues and net income include a $3.3 million gain on sale of three shopping centers and net income is net of a $6.9 million loss on impairment of real estate.
5. Income before extraordinary item and net income are net of a $1.7 million impairment loss on the principal of the One Congress Street participating mortgage loan.
6. Represents gain on extinguishment of debt through foreclosure.
7. Represents gain on refinancing of debt.
8. Distributions paid to Limited Partners for the year ended December 31, 1998 included a return of capital of $7.14 per Unit, calculated as the excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed. All distributions paid to Limited Partners in 1994 - 1997 represent returns of capital.
9. Includes approximately $10.58 per Unit of proceeds from the sales of the Michelson and 401 East Ontario properties.
10. Includes approximately $1.19 per Unit of proceeds from sale of the Greenway Pointe property.
11. Includes approximately $0.72 per Unit of proceeds from the December 1995 sale of three shopping centers.
The above financial data should be read in conjunction with the consolidated financial statements and the related notes in Item 8.
DEAN WITTER REALTY YIELD PLUS, L.P.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership completed a $178,199,380 public offering in 1987. The Partnership has no plans to raise additional capital.
The Partnership originally invested in seven loans or land leases. Due to the past weakness in real estate markets, the properties securing the loans did not generate sufficient cash flow to fully service their debt. As a result, the Partnership acquired equity interests in all of the properties in which it originally invested, through foreclosure or transfers of ownership in lieu of foreclosure. No additional investments are planned.
In November 1997, the Partnership sold the Greenway Pointe property, and, in August 1997, the Partnerhsip lost the Genessee Crossing property through foreclosure by the lender of the first mortgage loan secured by the property. The Michelson, 401 East Ontario Street and Pine Ridge properties were sold in April 1998, July 1998 and November 1998, respectively. See Note 5 to the consolidated financial statements.
As a result of the sales and loss of properties in 1997 and 1998, Partnership cash flow from operations decreased during the year ended December 31, 1998 compared to 1997.
The Managing General Partner is currently marketing for sale the Deptford Crossing property and the unimproved land. The partnership which owns the One Congress Street property ("GCGA") began to market its property for sale during the fourth quarter of 1998. There can be no assurance that these properties will be sold.
The Partnership will not dissolve until the litigation with respect to the 401 East Ontario property, described in Note 4 to the consolidated financial statements, is resolved.
The retail market in Deptford, New Jersey, the location of Deptford Crossing, currently has a vacancy rate of 5%. During 1998, average
occupancy at the property was 79%, and, at December 31, 1998, occupancy was 81% as compared to 77% at the prior year-end. Tenants occupying 10% or more of the property's space include T.J. Maxx (16%), Marshalls (14%), Office Max (13%) and Petsmart (10%); their leases expire in 2001, 2002, 2002 and 2003, respectively. The property is leased to eleven other tenants. No significant amount of leases expire before 2001.
Currently, the vacancy rate in the downtown Boston office market, the location of One Congress Street, is approximately 7% and rental rates in this market are stable. There is no significant new construction in this market. In 1998, GCGA and the Government Services Administration ("GSA") amended their lease to increase office space at the property from 70% to 82% starting October 1998. The GSA lease, as amended, is scheduled to expire no earlier than August 1, 2003. Also, in 1998, the remaining vacant office space at the property was leased to the Commonwealth of Massachusetts for a five year period beginning in January 1999. The lease for 100% of the parking lot space at the property with Kinney Systems, Inc. expires in 2003. GSA also leased a small portion of retail space in 1998. However, the retail space, which is not a significant portion of the overall space, remained substantially vacant.
As part of the amended lease between GCGA and GSA, GCGA will fund tenant improvements of up to $2,580,000; $1,300,000 of this amount (plus interest at 8%) will be repaid by GSA in monthly installments over five years. In addition, GCGA is required to fund leasing commissions of up to $1,409,000. The maximum amount of the Partnership's share of the above-mentioned tenant-related expenditures (58%) is approximately $2,315,000 (of which $754,000 would be repaid by GSA, as described above). The Partnership has paid approximately $1,306,000 of the expenditures through December 31, 1998.
As of December 31, 1998, the Partnership is also required to fund approximately $300,000, its share of the remaining costs of tenant improvements and leasing commissions per the new lease between the Commonwealth of Massachusetts and GCGA.
During the year ended December 31, 1998, all of the Partnership's remaining property interests generated positive cash flow from operations, and it is anticipated that the Deptford Crossing and One Congress Street properties will continue to do so in 1999.
During the year ended December 31, 1998, the Partnership incurred capital costs of approximately $657,000, primarily for tenant-related capital expenditures at the Michelson (net of contributions by the minority interest) and Deptford Crossing properties.
In July 1998, the Partnership used approximately $10.6 million of the proceeds it received from the sale of the 401 East Ontario Street property to repay its mortgage note payable (see Note 7 to the consolidated financial statements).
During the year ended December 31, 1998, the Partnership made cash distributions of cash flow from operations and proceeds from sales of properties. See Item 5.
During the year ended December 31, 1998, distributions to investors (excluding the distribution of sale proceeds), capital expenditures, contributions to GCGA and distributions to the minority interest (excluding the distribution of sale proceeds) exceeded cash flow from operations of real estate (net of minority interest share), distributions from GCGA and contributions from the minority interest. This deficiency was funded with Partnership cash reserves.
In addition to its commitment to contribute funds to GCGA in 1999, the Partnership had a commitment to fund $125,000 of capital expenditures at the Deptford Crossing property as of December 31, 1998.
The Managing General Partner believed that the Partnership did not have sufficient cash reserves to fully fund its potential liability for its share of capital expenditures and leasing commissions at the One Congress Street property and other Partnership cash requirements. Therefore, in order to increase cash reserves, the Partnership stopped paying its quarterly cash distributions after the 1998 first quarter distribution was paid in April 1998, and withheld approximately $900,000 from the distribution of proceeds from the sale of the 401 East Ontario Street property to Limited Partners. Also, the Partnership did not distribute any of the net sales proceeds (approximately $515,000) from the sale of the Pine Ridge land parcel. Generally, future cash distributions will be paid from proceeds received from the sales of the Deptford Crossing and One Congress Street properties and cash reserves.
Net deferred expenses, other assets and accounts payable and other liabilities decreased in 1998 primarily as a result of the sales of the Michelson and 401 East Ontario Street properties.
Except as discussed above 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, 1998 compared to 1997 and 1997 compared to 1996 are primarily attributable to the following:
Rental revenues, property operating expenses, depreciation and amortization expenses, and general and administrative expenses decreased in 1998 compared to 1997 as a result of the sales of the Greenway Pointe, Michelson and 401 East Ontario Street properties and the loss through foreclosure of the Genesee Crossing property.
The 1998 decrease in rental revenue was partially offset by an increase in rental revenue at the 401 East Ontario Street property in the months preceding its sale. This increase resulted from higher occupancy and rental rates at the property in 1998 and the discontinuance of rental concessions and free rent. In 1997, rental revenue at the 401 East Ontario Street property increased as compared to 1996 by approximately $932,000 because of the discontinuance of rental concessions and free rent granted to tenants while repairs were being performed at the property, and because rental rates for certain apartment types at the property were raised during the year. The increased rental revenue at 401 East Ontario Street was partially offset by the loss of approximately $599,000 of rental income from the Genessee Crossing Shopping Center after it was foreclosed upon in August 1997.
In 1998, the gains on sales of real estate resulted from the sales of the Michelson, 401 East Ontario Street and Pine Ridge properties in April, July and November, respectively. In 1997, the gain on sale of real estate resulted from the sale of the Greenway Pointe property in November.
Because the Partnership began recognizing its share of income from the GCGA property using the equity method of accounting as of October 27, 1997
(see Note 6 to the consolidated financial statements), equity in earnings of unconsolidated partnership increased in 1998 compared to 1997, and no interest was recorded on the participating mortgage loan to GCGA in 1998. Interest on this loan decreased in 1997 compared to 1996 because $1,560,000 of reserves of uncollected interest was recognized from January 1, 1997 to October 27, 1997 (when the Partnership obtained control of the property) compared to $660,000 in 1996.
In 1998, interest on cash and cash equivalents increased because interest earned on the proceeds from the 1998 property sales (before such proceeds were distributed to Limited Partners) exceeded interest earned on sales proceeds in 1997. Interest income on cash and cash equivalents decreased in 1997 compared to 1996 because the Partnership funded a significant portion of capital expenditures and the repairs at the 401 East Ontario Street property from cash reserves and, accordingly, had less cash available for investment in 1997.
Property operating expenses also decreased in 1998 at the 401 East Ontario Street property due to the absence of expenditures for repairs (such costs totaled $2,750,000 in 1997) and due to the 1998 receipt of a $1.2 million settlement for litigation concerning repairs made at the property during 1995 through 1997 (see Note 4 to the consolidated financial statements). Property operating expenses decreased in 1997 compared to 1996 primarily because expenditures for the above-described repairs at 401 East Ontario Street were approximately $2,750,000 in 1997, compared to $4,850,000 in 1996. This decrease was partially offset by an increase in real estate taxes at the Michelson property in 1997 caused by the absence of real estate tax refunds (the Partnership received $508,000 of such refunds in 1996).
Interest expense decreased in 1998 compared to 1997 due to the extinguishment through foreclosure of the debt secured by the Genesee Crossing property in 1997 and the repayment of the debt secured by the 401 East Ontario property in 1998. Interest expense decreased by $314,000 in 1997 compared to 1996 because of the foreclosure on the Genessee Crossing shopping center in August 1997. This decrease was partially offset by an increase in the interest rate on the Deptford Crossing mortgage loan between the September 15, 1997 maturity date of the note and the December 30, 1997 repayment of the note.
General and administrative expenses decreased in 1997 compared to 1996 primarily due to additional costs incurred during the first quarter of 1996 related to the December 1995 sale of three shopping centers.
The extraordinary gain in 1997 resulted from the extinguishment of the mortgage note payable secured by the Genesee Crossing property.
There were no other individually significant factors which caused changes to revenues or expenses.
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 YIELD PLUS, L.P.
INDEX
(a) Financial statements
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Independent Auditors' Report Consolidated Balance Sheets at December 31, 1998 and 1997 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Partners' Capital for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements
(b) Financial statement schedule
Real Estate and Accumulated Depreciation III
- ---------- All schedules other than those indicated above have been omitted because either the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto.
Independent Auditors' Report
The Partners Dean Witter Realty Yield Plus, L.P.:
We have audited the accompanying consolidated balance sheets of Dean Witter Realty Yield Plus, L.P. and consolidated partnerships (the "Partnership") as of December 31, 1998 and 1997, and the related consolidated statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included financial statement schedule III. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 Yield Plus, L.P. as of December 31, 1998 and 1997, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
Deloitte & Touche LLP /s/Deloitte & Touche LLP
New York, New York March 18, 1999
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
December 31, 1998 and 1997
See accompanying notes to consolidated financial statements.
DEAN WITTER REALTY YIELD PLUS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years and December 31, 1998, 1997 and 1996
See accompanying notes to consolidated financial statements.
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Partners' Capital
Years ended December 31, 1998, 1997 and 1996
See accompanying notes to consolidated financial statements.
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(continued)
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996 (continued)
See accompanying notes to consolidated financial statements.
DEAN WITTER REALTY YIELD PLUS, L.P.
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
1. The Partnership
Dean Witter Realty Yield Plus, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of Delaware in 1987 to invest in participating mortgage loans collateralized by income-producing properties. The Managing General Partner of the Partnership is Dean Witter Realty Yield Plus Inc., which is wholly-owned by Dean Witter Realty Inc. ("Realty").
The Partnership issued 8,909,969 units of limited partnership interests (the "Units") for $178,199,380. No additional Units will be sold.
The Partnership expects to sell its remaining real estate investments in 1999. Pursuant to the Partnership Agreement, the sale of the Partnership's last such investment will cause the dissolution of the Partnership. Thereafter, the Partnership will wind up its affairs, make a final cash distribution, and terminate. However, the Partnership will not dissolve until the litigation with respect to the 401 East Ontario property described in Note 4 is resolved.
2. Summary of Significant Accounting Policies
The financial statements include the accounts of the Partnership, DW Columbia Gateway Associates, DW Michelson Associates ("DMA"), DW Lakeshore Associates, Deptford Crossing Associates, DW Community Centers Limited Partnership, DW Maplewood Inc. and Hampton Crossing Associates (inactive in 1998 and 1997) on a consolidated basis.
Effective October 27, 1997, the Partnership acquired a 58% general partnership interest in GCGA Limited Partnership ("GCGA"), the owner/borrower of the One Congress Street property, and began accounting for this investment using the equity method. See Note 6.
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.
Real estate and the investment in unconsolidated partnership, all of which were acquired in settlement of loans, were recorded at the lower of the carrying value of the original loan or the estimated fair value of the real estate investment acquired at the date of foreclosure or in-substance foreclosure. Costs of improvements to real estate are capitalized and repairs are expensed. Depreciation is 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.
At least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate and any related assets, including the real estate and related assets owned by the unconsolidated partnership. As part of this evaluation, the Partnership assesses, among other things, whether there has been a significant decrease in the market value of any of its properties. If events or circumstances indicate that the net carrying value of a property may not be recoverable, the expected future net cash flows from the property are estimated for a period of approximately five years (or a shorter period if the Partnership expects that the property may be disposed of sooner), along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value as determined (in some cases with the assistance of outside real estate consultants) based on discounted cash flows, and a loss on impairment recognized by a charge to earnings.
The Partnership also periodically evaluated the collectibility of both interest and principal of the investment it held in the participating mortgage loan to determine whether it was impaired. The mortgage loan was considered to be impaired when, based on then-current information and events, it was probable that the Partnership would be unable to collect all amounts due according to the existing contractual terms of the loan.
When the mortgage loan was considered to be impaired, the Partnership established a valuation allowance which was equal to the difference between a) the carrying value of the loan, and b) the present value of the expected cash flows from the loan at its effective interest rate, or, for practical purposes, at the estimated fair value of the real estate collateralizing the loan.
Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 1998. The cash flows used to evaluate the recoverability of the assets and to determine fair value are based on good faith estimates and assumptions developed by the Managing General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs, which could be material, in subsequent years if real estate markets or local economic conditions change.
Deferred expenses consist of leasing commissions and, prior to October 27, 1997, origination fees in connection with the participating mortgage loan. Leasing commissions are amortized over the applicable lease terms. Origination fees were amortized over the loan term, which approximated the effective yield method.
Rental income is 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) are 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 purposes. For tax purposes, the Partnership's subsidiaries are not consolidated, and properties acquired by the subsidiaries are not treated as real estate owned by the Partnership. The Partnership recognizes its share of the subsidiaries' taxable income (which is net of interest expense on the participating mortgage loans which are still outstanding). For tax purposes, the Partnership also continues to recognize taxable interest income on its loans. The policies used by the subsidiaries to account for property operations for tax reporting purposes differ from those used by the Partnership for financial reporting purposes as follows: (a) depreciation is calculated using accelerated methods, (b) rental income is recognized based on the payment terms in the applicable leases, and (c) write-downs for impairments of real estate and the participating mortgage loan are not deductible. In addition, the Partnership's offering costs are treated differently for tax and financial reporting purposes. The tax basis of the Partnership's assets and liabilities is approximately $44.5 million higher than the amounts reported for financial statement purposes at December 31, 1998.
The implementation in 1998 of the Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income," and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," effective for the Partnership's 1998 year-end financial statements, did not have any impact on the Partnership's financial statements.
3. Partnership Agreement
The Partnership Agreement provides that net cash flow, as defined, will be paid 90% to the Limited Partners and 10% to the General Partners. Pursuant to the Agreement, $1,239,345 of the General Partners' share of such net cash flow distributable to them through December 31, 1990 was deferred, subject to receipt by the Limited Partners of an 8% annual return on their invested capital.
Sale or financing proceeds will be distributed, to the extent available: first, 97% to the Limited Partners and 3% to the General Partners until the Limited Partners receive a return of their invested capital plus an amount sufficient to provide a 10% cumulative annual return thereon; second, 100% to the General Partners until they have received the amount
of any net cash flow previously deferred and not distributed; and third, 85% to the Limited Partners and 15% to the General Partners.
Taxable income generally will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds, as the case may be (or 90% to the Limited Partners and 10% to the General Partners if there is no distributable cash or sale or financing proceeds). At a minimum, the General Partners must be allocated at least 1% of the taxable income from a sale or financing. Tax losses, if any, are allocated 90% to the Limited Partners and 10% to the General Partners.
Distributions paid to Limited Partners in 1998 included a return of capital of $7.14 per Unit, calculated as the excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed. All distributions paid to Limited Partners in 1997 and 1996 represent returns of capital.
4. Real Estate
The locations, years of acquisition through foreclosure or in-substance foreclosure and net carrying values of the Partnership's properties are as follows:
Year of December 31, Property Acquisition 1998 1997 - -------------------------------------------------------------------------------
Deptford Crossing, Deptford, NJ 1992 $10,395,171 $10,406,611
Military Crossing (land), Norfolk, VA 1994 300,000 300,000
401 East Ontario Street, Chicago, IL 1992 -- 33,651,449
Pine Ridge (land), Flint, MI 1994 -- 134,747 - -------------------------------------------------------------------------------
$10,695,171 $44,492,807 ===============================================================================
The Deptford Crossing property was subject to a first mortgage loan, which was repaid in December 1997 with funds obtained through a revolving credit facility secured by the 401 East Ontario Street property. All amounts due under the revolving credit facility were repaid in July 1998 with a portion of the proceeds from the sale of the 401 East Ontario Street property (see Note 7).
In February 1995, the Partnership discovered cracks and spalling on certain portions of the concrete exterior of the 401 East Ontario Street building. Reports by three independent engineering firms in 1995 confirmed that cracking and spalling of this nature were highly unusual for a building of this age, and attributed the problems to both defective design and construction of the building. Permanent repair work began in 1995 and was completed in 1996. In 1996, the Partnership's costs for this repair work approximated $4.0 million; total repair costs were approximately $5.7 million. The building's primary insurance carrier, which denied that these repairs were covered by the Partnership's policy, paid $125,000 to the Partnership during 1996 in settlement of this matter.
In 1996, the Partnership discovered that certain of the interior walls of the building did not meet the City of Chicago's fire code requirements. The Partnership retained the services of nationally recognized consultants to review the building's fire and life safety systems and determine how to fix the problems they identified with those systems. The City of Chicago agreed with the proposed corrections and the Partnership commenced repair work in 1996. The Partnership completed such repairs in 1997. The cost of these measures was approximately $3.6 million, of which approximately $2.75 million and $0.85 million were incurred in 1997 and 1996, respectively. In addition, free rent and rent concessions were offered to the residents in order to maintain occupancy during the period in 1997 when repairs were being performed. The building's insurance carriers were notified of the repairs to the fire and life safety systems.
The Partnership initiated litigation against all parties it deemed responsible for defects in the design and construction of the 401 East Ontario Street building. In March 1998, the Partnership received $1.2 million pursuant to a settlement with the architect and the engineer of the property. In March 1999, the Partnership negotiated a $740,000 settlement with the property's testing agency. The Partnership incurred legal fees of approximately $222,000, $425,000 and $425,000 in 1998, 1997 and 1996, respectively, in connection with the litigation. The Partnership is continuing its litigation against the general contractor and others.
5. Disposition of Real Estate
Genessee Crossing
The Partnership's mortgage note payable secured by the Genessee Crossing shopping center matured in May 1997. The Partnership determined not to refinance the loan without making an additional equity investment in the property, and determined that in light of its estimate of the property's market value such an additional investment would not be in the Partnership's best interest. As a result, the property was foreclosed upon in August 1997, and in March 1998, the lender took final possession of the property. Since the amount of the mortgage note payable ($8,590,000) exceeded the net book value of the property (approximately $8,040,000), the Partnership recognized an extraordinary gain on the extinguishment of debt of approximately $550,000 in 1997.
Greenway Pointe, Columbia, Maryland
In November 1997, the Partnership sold the Greenway Pointe property to an unaffiliated party for a negotiated sale price of $11,050,000. The proceeds from the sale, net of closing costs, were approximately $10.6 million, and were distributed 100% to the Limited Partners in December 1997. The Partnership recognized a gain on this sale of approximately $5.2 million, which was allocated 100% to Limited Partners in accordance with the Partnership Agreement.
Michelson, Irvine, California
The Michelson property, which consists of three office buildings, is owned by Michelson Company Limited Partnership (the "Company"). The 90% general partner of the Company was DMA, a general partnership which is owned 50.81% by the Partnership and 49.19% by Dean Witter Realty Yield Plus II, L.P. ("Yield Plus II"), an affiliated partnership. The 10% limited partner of the Company is SC Enterprises ("SCE"), an affiliate of the property's developer.
In April 1998, DMA sold its 90% general partnership interest in the Company to SCE along with two promissory notes due from SCE (totaling approximately $1.2 million) for a negotiated aggregate sale price of $64 million. SCE assigned its right to purchase the interest in the Company to Spieker Properties, L.P., which is not affiliated with the Partnership, its affiliated partnerships or SCE.
The sale price was received in cash at closing on April 3, 1998. On April 28, 1998, the Partnership distributed approximately $32.4 million ($3.635 per Unit), its share of the proceeds from the sale (net of closing costs), 100% to the Limited Partners. DMA recognized a gain on sale of this property of $25.2 million. The Partnership's share of this gain was approximately $12.6 million; such gain was allocated 100% to the Limited Partners in accordance with the Partnership Agreement.
On December 31, 1997, the Partnership reclassified the net carrying value of the Michelson property to real estate held for sale.
401 East Ontario Street
In July 1998, the Partnership sold the 401 East Ontario Street property to Streeterville Development Associates, LLC ("SDA") for a negotiated sale price of $74.5 million. The Partnership used a portion of the sale proceeds to repay the mortgage note payable to which the property was subject (see Note 7). SDA is an unaffiliated party; however, Draper and Kramer Inc., which owns 37.5% of SDA, was the manager of the property while it was owned by the Partnership.
The Partnership received sale proceeds, net of the mortgage note repayment, closing costs and other deductions, of approximately $62.7 million. On July 31, 1998, the Partnership distributed approximately $61.8 million of such proceeds 100% to Limited Partners ($6.94 per Unit) and added the remaining proceeds to the Partnership's cash reserves. The Partnership recognized a gain on this sale of approximately $39.8 million, which was allocated 100% to the Limited Partners in accordance with the Partnership Agreement.
Pine Ridge
In November 1998, the Partnership sold the Pine Ridge unimproved land parcel to an unaffiliated purchaser for a negotiated sale price of $550,000. The proceeds from the sale, net of closing costs, of approximately $515,000 were added to cash reserves. The Partnership recognized a gain on this sale of approximately $372,000, which was allocated 100% to the Limited Partners in accordance with the Partnership Agreement.
6. Investment in Unconsolidated Partnership and Participating Mortgage
Loan
One Congress Street, Boston, Massachusetts
The Partnership and Yield Plus II (collectively the "Lender") made a $59.2 million participating second mortgage loan on the One Congress Street building (the "Loan") to GCGA. The Loan is due in 2001. Base interest was originally payable at 8% and the first $250,000 of net revenues in any calendar year from the property was payable as additional interest. The Lender also owned a 58% interest in adjusted net revenue and capital proceeds generated by the property. The property is subject to a first mortgage loan.
In October 1996, GCGA defaulted on the Loan by failing to pay timely its debt service. Thereafter, the Lender accelerated the Loan and attempted to take possession of the property. On October 15, 1996, GCGA filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. On October 27, 1997, the Lender entered into a settlement agreement with GCGA (the "Agreement"). As part of the Agreement, a new corporation, which is jointly owned by the Partnership (58%) and Yield Plus II (42%) became the sole general partner of GCGA (the "New General Partner"), with an aggregate 19.81% ownership interest in the property. The Partnership and Yield Plus II have agreed to make all decisions concerning the property jointly. The Lender has retained an affiliate of GCGA`s original general partner as property manager.
The Agreement also provides the following:
(a) as a result of their interests in the New General Partner, the Partnership and Yield Plus II are required to make additional loans, if needed, to fund future tenant improvements and leasing commissions at the property (the "New Loans") in proportion to their ownership of the New General Partner. Any New Loans will bear interest at 12%, payable monthly from available cash flow generated by the property after payment of debt service on the first mortgage loan and certain operating escrows;
(b) the interest rate on the principal of the Loan and past due interest thereon (aggregating approximately $12.3 million at the date of the agreement) has been increased to 10%, payable monthly
from available cash flow generated by the property after payment of debt service on the New Loans;
(c) any future unpaid debt service will accrue interest at 10%; and
(d) the Partnership's and Yield Plus II's interest in adjusted net revenue and capital proceeds generated by the property was increased to 80%.
The Agreement effectively changed the Lender from a participating lender to GCGA into the general partner in a partnership which owns the One Congress Street property. The Partnership, through the New General Partner, owns an 11.5% partnership interest in GCGA and, accordingly, at October 27, 1997, the Partnership recorded its investment at an amount equal to the net carrying value of its investment in the participating mortgage loan and related assets (which carrying value was less than the estimated fair value of the property at that date). The Partnership began, effective October 27, 1997, to account for its investment on the equity method (and stopped recognizing interest income from its participating mortgage loan). Because the Partnership and Yield Plus II control GCGA and are entitled to receive substantially all the cash flow and other economic benefits from the property, the Partnership and Yield Plus II recognize all of GCGA's profit and losses in proportion to their ownership of the New General Partner.
The Partnership believed that during the period of the bankruptcy it would be unable to collect its interest on the Loan in full and that the bankruptcy could adversely impact future leasing at the property. Accordingly, in 1996, the Partnership determined that the Loan was impaired and recorded an additional valuation allowance of $979,000 to reduce the carrying value of the Loan to its estimated fair value. The Partnership had previously recognized impairment allowances of $1.7 million in 1994 and $12.9 million in 1993.
In 1997 (prior to the Agreement) and 1996, the Partnership reserved accrued but unpaid interest on the Loan of $1,560,000 and $660,000, respectively. At October 27, 1997, the Partnership's total reserves against accrued but unpaid interest approximated $2,220,000.
Summarized financial information of GCGA is as follows:
STATEMENTS OF OPERATIONS
GCGA's second mortgage loan consists of the Loan. The accounting policies of GCGA are consistent with those of the Partnership.
7. Mortgage Notes Payable
The Partnership's properties were subject to first mortgage notes as follows:
1998 1997 - --------------------------------------------------------------------------------
$11,500,000 Revolving Credit Facility due December 31, 1999; secured by the 401 East Ontario property: Interest-only payable monthly at Partnership's election of Prime Rate or LIBOR plus 1.15% per annum. $ -- $10,566,268 ================================================================================
The fair value of the mortgage note payable at December 31, 1997 was approximately equal to its carrying value. The fair value was estimated by discounting future principal and interest payments using current lending rates and market conditions for instruments with similar maturities and credit quality.
A mortgage note securing the Deptford Crossing property was scheduled to mature in September 1997. Interest on this mortgage note (bearing a rate at the Partnership's election of LIBOR plus 0.375%, the bank's quoted variable rate plus 1.375% or the bank's fixed rate) and principal payments of $15,000 were payable monthly, and additional principal payments equal to excess cash (as defined) were payable quarterly.
When the Deptford mortgage note matured in September 1997, the lender agreed to temporarily forebear all rights and remedies provided in the loan agreement if the Partnership would avoid further default provisions in the loan agreement, pay monthly debt service equal to net cash flow from operations of the related property and reimburse the lender for all of its expenses caused by the forbearance. In December 1997, the Partnership borrowed $10,566,268 under the revolving credit facility to repay the Deptford mortgage note.
In July 1998, the Partnership paid in full all amounts due under the revolving credit facility using a portion of the sale proceeds from the sale of the 401 East Ontario Street property (see Note 5).
A mortgage note secured by the Genesee Crossing property, bearing interest at 9.375% per annum, matured in May 1997. The Partnership
determined not to refinance the note and therefore lost the Genesee Crossing property through foreclosure in August 1997 (see Note 5).
8. Leases
Minimum future rentals under noncancellable operating leases at the Deptford Crossing shopping center as of December 31, 1998 are as follows:
Year ending December 31, 1999 $1,474,321 2000 1,458,677 2001 1,410,445 2002 404,651 2003 225,855 Thereafter 94,070 ---------- Total $5,068,019 ==========
The Partnership has determined that all leases relating to the shopping center are operating leases. These leases range in term from one to ten years, and generally provide for fixed minimum rent with expense reimbursement clauses.
9. Related Party Transactions
An affiliate of Realty provided property management services for the Deptford Crossing, Michelson, Genessee Crossing and Greenway Pointe properties. The Partnership paid the affiliate property management fees (included in property operating expenses) of approximately $79,000, $220,000 and 235,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Realty performs administrative functions, and processes certain investor and tax information on behalf of the Partnership. For the years ended December 31, 1998, 1997 and 1996, Realty was reimbursed approximately $275,000, $391,000 and $387,000, respectively, for these services (included in general and administrative expenses).
As of December 31, 1998, Realty and its affiliate were owed $22,000 for these services, which is included in accounts payable and other liabilities.
10. Litigation
Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) were defendants in a class action lawsuit. On July 17, 1998, the Delaware Chancery Court granted the defendants' motion to dismiss the complaint in the lawsuit. On August 14, 1998, the Plaintiffs filed a notice of appeal from the Court's order. On January 6, 1999, the Delaware Supreme Court affirmed the Chancery Court's dismissal of the complaint.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and has no directors or officers.
The directors and executive officers of the Managing General Partner are as follows:
Position with the Name Managing General Partner - ----------------------- -----------------------------------
William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Lawrence Volpe 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 executive officers has been elected to serve until his successor is elected and qualifies.
William B. Smith, age 55, has been a Managing Director of Morgan Stanley and co-head of Morgan Stanley Realty Incorporated since July 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 49, has been a Managing Director of Morgan Stanley Asia, Ltd. since July 1997, and a Managing Director of Dean Witter Realty Inc., which he joined in 1982.
Lawrence Volpe, age 51, is a Senior Vice President of Dean Witter Reynolds Inc., which he joined in 1983. Since June 1998, he has served in an advisory capacity in connection with Dean Witter Realty Inc. and related entities. Prior to June 1998, he was the Controller of Dean Witter Reynolds Inc. and the Managing General Partner, and the Controller and a Director of Dean Witter Realty Inc.
Ronald T. Carman, age 47, is a Director and the Secretary of Dean Witter Realty Inc. He has been an Assistant Secretary of MWD and a Managing Director of Morgan Stanley & Co. Inc., since July 1998. Previously, he was 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 cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are in Item 5 above. The General Partners received cash distributions totaling $395,010, $514,799 and $534,587 during the years ended December 31, 1998, 1997 and 1996, respectively. The General Partners have deferred distribution of their share of all proceeds from property sales to date.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 9 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 February 28, 1999:
(3) Amount and Nature of (1) (2) of Beneficial Title of Class Ownership Name of Beneficial Owner Ownership - -------------------------------------------------------------------------------- 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 shall be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The General Partners' share of cash distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing General Partner are owned by 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 the Managing General Partner. The limited partner of the Associate General Partner is LSYP 87, L.P., a Delaware limited partnership. Realty and certain current and former
officers and directors of the Managing General Partner are partners of LSYP 87, L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above.
The 401 East Ontario Street property was developed by a joint venture between a third party developer and an entity comprised of former and current Realty executives, several of whom are former or current executive officers of the Managing General Partner. In January 1994, the Partnership obtained ownership of the property by deed-in-lieu of foreclosure.
The One Congress Street property was developed by a partnership between a Maryland-based developer and an entity comprised of former Realty executives, some of whom were formerly executive officers of the Managing General Partner. This entity withdrew as a partner of the borrower in September 1993, so the borrower partnership was controlled solely by the Maryland-based developer until control of the borrower was transferred to the Partnership and Yield Plus II in 1997.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 9 to the Consolidated Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33-11648 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988. Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean Witter Realty Yield Plus II, L.P., and Realty Management Services Inc. dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated October 12, 1989 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan Promissory Note dated June 22, 1990 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(k) Supplement and Amendment to Construction Loan Agreement dated October 27, 1997 between Government Center Garage Realty Trust (Borrower) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P. (Lenders) was filed as an Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by reference.
(10)(l) Third Amendment to Notes dated October 27, 1997 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P. (Holder) was filed as an Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by reference.
(10)(m) Purchase and Sale Agreement dated as of December 26, 1997 among DW Michelson Associates as Seller, Michelson Company Limited Partnership as Acquired Partnership and SC Enterprises as Purchaser, First Amendment to Purchase and Sale Agreement dated as of February 3, 1998 and Assignment and Assumption Agreement dated as of April 3, 1998 were
collectively filed as an Exhibit to Form 8-k on April 3, 1998 and is incorporated herein by reference.
(10)(n) Purchase and Sale Agreement among DW Lakeshore Associates, L.P., a Delaware Limited Partnership, as Seller and Streeterville Development Associates, LLC, an Illinois Limited Liability Company, as Purchaser dated July 17, 1997 was filed as an Exhibit to Form 8-k on July 17, 1998 and is incorporated herein by reference.
(21) Subsidiaries:
Deptford Crossing Associates, a New Jersey limited partnership. Hampton Crossing Associates, a Michigan limited partnership. DW Lakeshore Associates, an Illinois limited partnership. DW Columbia Gateway Associates, a Maryland limited partnership. DW Michelson Associates, a California limited partnership. DW Community Centers Limited Partnership, a Delaware limited partnership. DW Maplewood Inc.
(27) Financial Data Schedule
(d) Financial Statement Schedules
1. Financial Statements of GCGA Limited Partnership, owner of an office building/parking garage located in Boston, Massachusetts.
SCHEDULE III
DEAN WITTER REALTY YIELD PLUS, L.P.
Real Estate and Accmulated Depreciation
December 31, 1998
SCHEDULE III (continued)
Life on which Depreciation in Latest Income Description Date Acquired Statements is Computed - --------------------------------------------------------------------------------
Shopping Center, Deptford, NJ December 1992 40 years
Military Crossing, Norfolk, VA April 1994 -
Notes:
(A) The basis in the properties at acquisition for financial reporting purposes is the lower of net carrying value of the original loan or estimated fair market value of the property. Losses on foreclosure of real estate and real estate impairment losses do not reduce the basis for federal income tax purposes.
SCHEDULE III (continued)
(B) Reconciliation of real estate owned:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS, L.P.
By: Dean Witter Realty Yield Plus Inc. Managing General Partner
By: /s/ E. Davisson Hardman, Jr. Date: March 24, 1999 ---------------------------------- E. Davisson Hardman, Jr. President
By: /s/ Charles M. Charrow Date: March 24, 1999 ---------------------------------- Charles M. Charrow Controller (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
DEAN WITTER REALTY YIELD PLUS INC. Managing General Partner
/s/ William B. Smith Date: March 24, 1999 - --------------------------------- William B. Smith Chairman of the Board of Directors
/s/ E. Davisson Hardman, Jr. Date: March 24, 1999 - ---------------------------------- E. Davisson Hardman, Jr. Director
/s/ Lawrence Volpe Date: March 24, 1999 - ---------------------------------- Lawrence Volpe Director
/s/ Ronald T. Carman Date: March 24, 1999 - ---------------------------------- Ronald T. Carman Director
DEAN WITTER REALTY YIELD PLUS, L.P.
Year Ended December 31, 1998
Exhibit Index
Exhibit No. Description - --------------------------------------------------------------------------------
(3)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33-11648 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(a) Amended and Restated Agreement of Limited Partnership dated as of April 29, 1987 set forth in Exhibit A to the Prospectus included in Registration Statement Number 33-11648 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership dated as of April 29, 1987 incorporated by reference in Registration Statement Number 33-11648 is incorporated herein by reference.
(10)(a) Partnership Agreement for DW Michelson Associates dated March 14, 1988. Incorporated by reference to Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(b) First Mortgage Promissory Note, dated April 26, 1989, between the Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder) was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
E-1
(10)(c) Construction Loan Agreement, dated April 26, 1989, between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(d) Intercreditor Agreement among Dean Witter Realty Yield Plus, L.P., Dean Witter Realty Yield Plus II, L.P., and Realty Management Services Inc. dated as of April 26, 1989 was filed as Exhibit to Amendment No. 2 to Current Report on Form 8-K on April 26, 1989 and is incorporated herein by reference.
(10)(e) First Amendment to Construction Loan Agreement dated October 12, 1989 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(f) Amended and Restated Construction Loan/Office Loan Promissory Note dated October 12, 1989 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(f) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(g) Second Amendment to Construction Loan Agreement dated June 22, 1990 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(h) First Amendment to Amended and Restated Construction Loan/Office Loan Promissory Note dated June 22, 1990 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. (Holder). Incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
E-2
(10)(i) Supplemental Loan Agreement dated September 20, 1993 between Government Center Garage Realty Trust, as Borrower and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., as Lender. Incorporated by reference to Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(j) Second Amendment to Notes dated September 20, 1993 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P., (Holders). Incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995.
(10)(k) Supplement and Amendment to Construction Loan Agreement dated October 27, 1997 between Government Center Garage Realty Trust (Borrower) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P. (Lenders) was filed as an Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by reference.
(10)(l) Third Amendment to Notes dated October 27, 1997 between Government Center Garage Realty Trust (Maker) and Dean Witter Realty Yield Plus, L.P. and Dean Witter Realty Yield Plus II, L.P. (Holder) was filed as an Exhibit to Form 8-K on October 27, 1997 and is incorporated herein by reference.
(10)(m) Purchase and Sale Agreement dated as of December 26, 1997 among DW Michelson Associates as Seller, Michelson Company Limited Partnership as Acquired Partnership and SC Enterprises as Purchaser, First Amendment to Purchase and Sale Agreement dated as of February 13, 1998 and Assignment and Assumption Agreement dated as of April 3, 1998 were collectively filed as an Exhibit to Form 8-K on April 3, 1998 and is incorporated herein by reference.
(10)(n) Purchase and Sale Agreement among DW Lakeshore Associates, L.P., a Deleware Limited Partnership, as Seller and Streeterville Development Associates, LLC, an Illinois Limited Liability Company, as Purchaser dated July 17, 1997 was filed as an Exhibit to Form 8-K on July 17, 1998 and is incorporated herein by reference.
(27) Financial Data Schedule
(99) Financial Statements of GCGA Limited Partnership, owner of an office building/parking garage located in Boston, Massachusetts.
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