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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year
Ended December 31, 2000 Commission file no. 0-16976
ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Portions of the Prospectus of the registrant dated September 16, 1987 and
filed with the Commission pursuant to Rules 424(b) and 424(c) under the
Securities Act of 1933 are incorporated by reference in Part III of this
Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . . . 9
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters . . . . . . . . . 10
Item 6. Selected Financial Data . . . . . . . . . . . . . 11
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . 13
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . . . . 22
Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . . . 23
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . 55
PART III
Item 10. Director and Executive Officers of
the Registrant. . . . . . . . . . . . . . . . . . 55
Item 11. Executive Compensation. . . . . . . . . . . . . . 57
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . . 60
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . . 61
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K. . . . . . . . 62
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 65
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership
was formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of
up to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933 (No. 33-14091). A total of 400,000
Interests were sold to the public (at an offering price of $1,000 per
Interest before discounts) and the holders of 400,000 Interests were
admitted to the Partnership in October 1987. The offering terminated
October 31, 1987. In addition, a holder (an affiliate of the dealer-
manager of the public offering) of 4,000 Interests was admitted to the
Partnership in October 1987. Subsequent to admittance to the Partnership,
no holder of Interests (a "Holder" or "Holder of Interests") has made any
additional capital contribution. The Holders of Interests of the
Partnership generally share in their portion of the benefits of ownership
of the Partnership's real property investments and other assets according
to the number of Interests held.
Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner was to
elect to pursue one of the following courses of action on or before
October 31, 1997: (i) to cause the Interests to be listed on a national
exchange or to be reported by the National Association of Securities
Dealers Automated Quotation System; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase, all of the Interests at their
then appraised fair market value (as determined by an independent
nationally recognized investment banking firm or real estate advisory
company); or (iii) to commence a liquidation phase in which all of the
Partnership's remaining assets will be sold or disposed of by the end of
the fifteenth year from the termination of the offering. On October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option to commence an orderly liquidation of the
Partnership's remaining assets that is to be completed by October 2002.
The assets of the Partnership have consisted principally of interests
in land in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial
properties; accounts receivable; construction, brokerage and other support
businesses; real estate assets held for investment and certain club and
recreational facilities. The Partnership has been principally engaged in
the development of comprehensively planned resort and primary home
Communities containing a diversified product mix designed for the middle
and upper income segments of the various markets in which the Partnership
operates. In addition, the Partnership, directly or through certain
subsidiaries, has provided development and management services to the
homeowners associations within the Communities.
Within the Communities, the Partnership has constructed, or caused
to be constructed, a variety of products, including single-family homes,
townhouses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the state of Florida, with Communities also located
near Atlanta, Georgia and Highlands, North Carolina. Additional
undeveloped properties owned by the Partnership in or near its Communities
have been or are being be developed as retail and/or office properties. The
Partnership has also owned or managed certain club and recreational
facilities within certain of its Communities. Certain assets located in
Florida were acquired by the Partnership by purchasing a 99.9% interest in
a joint venture partnership in which the General Partner acquired the
remaining joint venture partnership interest. In addition, other assets
are or were owned by various partnerships, the interests of which have been
held by certain indirect subsidiaries of the Partnership and by the
Partnership. The Partnership, directly or through certain subsidiaries,
has also provided development and management services to the homeowners
associations within the Communities. In addition, the Partnership has sold
individual residential lots and parcels of partially developed and
undeveloped land. The third-party builders and developers to whom the
Partnership has sold homesites and land parcels are generally smaller local
builders who require project specific financing for their developments and
whose operations have been more susceptible to fluctuations in the
availability and terms of financing.
Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services and the personnel therefor to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. In November 1997, The
St. Joe Company, an unaffiliated third party, completed its acquisition of
a majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"),
which acquired the major assets of Arvida. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would otherwise provide pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employed most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to the sub-
management agreement generally have been provided by the same personnel.
Affiliates of JMB Realty Corporation own a minority interest in St.
Joe/Arvida. The transaction did not involve the sale of any assets of the
Partnership, nor the sale of the General Partner's interest in the
Partnership.
The business of the Partnership is cyclical in nature and certain
aspects of the development of Community projects are to some degree
seasonal. The Partnership does not expect that such seasonality will have
a material impact on its business. A presentation of information about
industry segments, geographic regions or raw materials is not applicable
and would not be material to an understanding of the Partnership's business
taken as a whole.
The remaining Communities are in various stages of development. The
remaining estimated build-out times for the Communities still under
development range from one to two years. Notwithstanding the estimated
duration of the remaining build-outs, the Partnership currently expects to
complete an orderly liquidation of its remaining assets by October 2002,
with winding up and final distribution of any residual funds in 2004. The
Partnership generally has followed the practice with respect to Communities
of (i) developing an overall master plan for the Community, (ii) creating a
unifying architectural theme that is consistent with the Community's master
plan, (iii) offering a variety of recreational facilities, (iv) imposing
architectural standards and other property restrictions on residents and
third-party developers, in order to enhance the long-term value of the
Community, (v) establishing property owners' associations to maintain
compliance with architectural, landscaping and other requirements and to
provide for ownership and maintenance of certain facilities, and/or (vi)
operating and controlling access to golf, tennis and other recreational
facilities.
The Partnership's development approach, individually or by joint
venture, has been intended to enhance the value of real estate in
successive phases. The first step in the development of a property has
been to design a Community master plan that addresses the appropriate land
uses and product mix, including residential, recreational and, where
appropriate, commercial and industrial uses. The Partnership then sought
to obtain the necessary regulatory and environmental approvals for the
development of the Community in accordance with the master plan. This
approval process has been a major factor in determining the viability and
prospects for profitability of the Partnership's development projects.
In addition, prior to or contemporaneously with zoning approval, the
Partnership, if subject to the applicable filing requirements, has been
required to obtain "Development of Regional Impact" ("DRI") approval from
the applicable local governmental agency after review and recommendations
from the appropriate regional planning agency, with oversight by the
Florida State Department of Community Affairs. Receipt of DRI approval was
a prerequisite to obtaining zoning, platting, building permits or other
approvals required to begin development or construction. Obtaining such
approvals can involve substantial periods of time and expense and may
result in the loss of desired densities, and approvals may need to be
resubmitted if there is any subsequent deviation in current approved plans.
The process may also require committing land for public use and payment of
substantial impact fees. In addition, state laws generally provide further
that a parcel of land cannot be subdivided into distinct segments without
having a plat filed and finalized with the local or municipal authority,
which, in general, requires the approval of various local agencies, such as
environmental and public works departments. In addition, the Partnership
must secure the actual permits for development from applicable Federal
(e.g., the Army Corps of Engineers and/or the Environmental Protection
Agency with respect to coastal and wetlands developments, including
dredging of waterways) and state or local agencies, including construction,
dredging, grading, tree removal and water management and drainage district
permits. The Partnership may, in the process of obtaining such permits or
approvals for platting or construction activities, incur delays or
additional expenses; however, such permits and approvals have been
customarily obtained in conjunction with the development process. Failure
to obtain or maintain necessary approvals, or rejection of submitted plans,
would result in an inability to develop the Community as originally planned
and would cause the Partnership to reformulate development plans for
resubmission, which might result in a failure to increase, or a loss of,
market value of the property. The foregoing discussion and the discussion
which follows also have been generally applicable to the Partnership's
commercial and industrial developments.
Upon receipt of all approvals and permits required to be obtained by
the Partnership for a specific Community, other than actual approvals or
permits for final platting and/or construction activities, the Partnership
has applied for the permits and other approvals necessary to undertake the
construction of infrastructure, including roads, water and sewer lines and
amenities such as lakes, clubhouses, golf courses, tennis courts and
swimming pools. These expenditures for infrastructure and amenities have
been generally significant and were usually required early in the
development of a Community project, although the Partnership has attempted,
to the extent feasible, to develop Communities in a phased manner. See
Note 11 for further discussion regarding Tax Increment Financing Entities
and their involvement with infrastructure improvements.
Certain of the Florida Communities have applied for and have been
designated as Planned Unit Development ("PUD") by the local zoning
authority (usually the governing body of the municipality or the county in
which the Community is or will be located). Designation as a PUD generally
establishes permitted densities (i.e., the number of residential units
which may be constructed) with respect to the land covered thereby and,
upon receipt, enables the developer to proceed in an orderly, planned
fashion. Generally, such PUD approvals permit flexibility between single-
unit and multi-unit products since the developer can plan Communities in
either fashion as long as permitted densities are not exceeded. As a
consequence, developments with PUD status are able to meet changing demand
patterns in housing through such flexibility. It should be noted that some
of the Communities, while not having received PUD approval, have obtained
the necessary zoning approvals to create a planned community development
with many of the benefits of PUD approval such as density shifting.
In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership has functioned as a
general contractor although it has also from time to time hired firms for
general contracting work. The Partnership generally has followed the
practice of hiring subcontractors, architects, engineers and other
professionals on a project-by-project basis rather than maintaining in-
house capabilities, principally to be able to select the subcontractors and
consultants it believed were most suitable for a particular development
project and to control fixed overhead costs. Although the General Partner
does not expect the Partnership to be faced with any significant material
or labor shortages, the construction industry in general has on occasion
experienced serious difficulties in obtaining certain construction
materials and in having available a sufficiently large and adequately
trained work force.
The Partnership's strategy has included the ownership and development
of certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contained
acreage zoned for commercial use, although, except for the Weston
Community, such acreage was generally not substantial. On both of such
types of properties, the Partnership, individually or with a joint venture
partner, has built shopping centers, office buildings and other commercial
buildings or sold land to be so developed.
Certain of the Communities and operations have been owned by the
Partnership jointly with third parties. Such investments by the
Partnership were generally in partnerships or ventures which owned and
operated a particular property in which the Partnership or an affiliate
(either alone or with an affiliate of the General Partner) had an interest.
The principal assets in which interests have been acquired by the
Partnership are described in more detail under Item 2 below to which
reference is hereby made for a description of such assets.
The Partnership's real properties are subject to competition from
similar types of properties in the vicinities in which they are located,
including properties owned, advised or managed by affiliates of the General
Partner. The Partnership had no real estate assets located outside of the
United States.
In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 2000 are adequately insured.
The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the
names of certain of its Communities. The Arvida name and the service marks
with respect to the Arvida name were owned by Arvida, subject to the
Partnership's non-exclusive right to use the Arvida name and service marks
under a license agreement with Arvida (and subject to the non-exclusive
rights of certain third parties to the use of the name). As discussed
above, St. Joe/Arvida acquired the major assets of Arvida, including the
Arvida name and service marks with respect to the Arvida name. In
connection with the acquisition of Arvida's assets, St. Joe/Arvida was
assigned Arvida's rights and obligations under the license agreement with
the Partnership.
The Partnership has approximately 547 employees.
The terms of transactions between the Partnership and the General
Partner and its affiliates are set forth in Items 10, 11, 12 and 13 filed
with this annual report to which reference is hereby made for a description
of such terms and transactions.
ITEM 2. PROPERTIES
The principal assets developed or managed by the Partnership,
currently or during the past five years, are described below. The acreage
amounts set forth herein are approximations of the gross acreage of the
Communities or other properties referred to or described and are not
necessarily indicative of the net developable acreage currently owned by
the Partnership or its joint ventures. All of the Partnership's remaining
properties are subject to mortgages to secure the repayment of the
Partnership's indebtedness as discussed in detail in Note 7.
(a) Palm Beach County, Florida
The Partnership owned property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offered a wide range of residential
products built by the Partnership or third-party builders, all of which
were sold and closed as of December 31, 1995. Reference is made to Item 3.
Legal Proceedings for a discussion of the Partnership's assignment of its
remaining equity interests in the Broken Sound Club.
(b) Broward County, Florida
The Partnership owns property in Weston, a 7,500-acre Community which
is in its late-stage of development. The Community offers a complete range
of housing products built by the Partnership or third-party builders, as
well as tennis, swim and fitness facilities and two-18 hole golf courses.
In addition, the Partnership owns commercial land, portions of which are
currently under development, located in the Weston Community. Reference is
made to Note 11 for a discussion of the Partnership's use of certain tax-
exempt financing in connection with the development of the Weston
Community.
(c) Sarasota / Tampa, Florida
The Partnership owned property known as Arvida's Grand Bay on Longboat
Key, which is a barrier island on Florida's west coast, approximately four
miles from downtown Sarasota and seven miles from Sarasota/Bradenton
airport. The property consists of six condominium buildings, all of which
were sold and closed by January 2000. The Partnership also owns property
in a Community in the Tampa area known as River Hills Country Club, which
is a 1,200-acre Community in its final stage of development.
(d) Jacksonville, Florida
The Partnership owned property in two Communities in Ponte Vedra
Beach, Florida, twenty-five miles from downtown Jacksonville, known as
Sawgrass Country Club and The Players Club at Sawgrass. All units in these
Communities were sold and closed as of December 31, 1996. The Partnership
also owned property in a 730-acre Community known as the Jacksonville Golf
& Country Club, which is nearing completion, with only builder units
remaining to be sold.
(e) Atlanta, Georgia
The Partnership owned property in the Atlanta, Georgia area known as
Water's Edge. Reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations for a discussion
of the Partnership's sale of the remaining lot inventory in Water's Edge.
The Partnership also owned property in the Atlanta area known as Dockside.
All of the units in the Dockside Community were sold and closed as of
December 31, 1996.
(f) Highlands, North Carolina
The Partnership owned a 600-acre Community near Highlands, North
Carolina known as The Cullasaja Club. The Partnership sold and closed on
all of the remaining lots at The Cullasaja Club, as well as its remaining
equity memberships in the Cullasaja Club as of December 31, 2000.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion regarding
the sale of the remaining lots and equity memberships at Cullasaja Club.
(g) Other
Through joint venture interests, the Partnership also owns commercial
property in Ocala Florida, which is not located in its residential
Communities.
ITEM 3. LEGAL PROCEEDINGS
(A) The Partnership was named a defendant in a number of homeowner
lawsuits, certain of which purported to be class actions, that allegedly in
part arose out of or related to Hurricane Andrew, which on August 24, 1992
resulted in damage to a former community development known as Country Walk.
The homeowner lawsuits alleged, among other things, that the damage
suffered by the plaintiffs' homes and/or condominiums within Country Walk
was beyond what could have been reasonably expected from the hurricane
and/or was a result of the defendants' alleged defective design,
construction, inspection and/or other improper conduct in connection with
the development, construction and sales of such homes and condominiums,
including alleged building code violations. The various plaintiffs sought
varying and, in some cases, unspecified amounts of compensatory damages and
other relief. In certain of the lawsuits injunctive relief and/or punitive
damages were sought.
Several of these lawsuits alleged that the Partnership was liable,
among other reasons, as a result of its own alleged acts of misconduct or
as a result of the Partnership's alleged assumption of Arvida Corporation's
liabilities in connection with the Partnership's purchase of Arvida
Corporation's assets from The Walt Disney Company ("Disney") in 1987, which
included certain assets related to the Country Walk development. Pursuant
to the agreement to purchase such assets, the Partnership obtained
indemnification by Disney for certain liabilities relating to facts or
circumstances arising or occurring prior to the closing of the
Partnership's purchase of the assets. Over 80% of the Arvida-built homes
in Country Walk were built prior to the Partnership's ownership of the
Community. Where appropriate, the Partnership has tendered each of the
above-described lawsuits to Disney for defense and indemnification in whole
or in part pursuant to the Partnership's indemnification rights. Where
appropriate, the Partnership has also tendered these lawsuits to its
various insurance carriers for defense and coverage. The Partnership is
unable to determine at this time to what extent damages in these lawsuits,
if any, against the Partnership, as well as the Partnership's cost of
investigating and defending the lawsuits, will ultimately be recoverable by
the Partnership either pursuant to its rights of indemnification by Disney
or under contracts of insurance.
One of the Partnership's insurance carriers has been funding
settlements of various litigation related to Hurricane Andrew. In some,
but not all, instances, the insurance carrier has provided the Partnership
with written reservation of rights letters. The aggregate amount of the
settlements funded to date by this carrier is approximately $9.93 million.
The insurance carrier that funded these settlements pursuant to certain
reservations of rights has stated its position that it has done so pursuant
to various non-waiver agreements. The carrier's position was that these
non-waiver agreements permitted the carrier to fund settlements without
barring the carrier from raising insurance coverage issues or waiving such
coverage issues. On May 23, 1995, the insurance carrier rescinded the
various non-waiver agreements currently in effect regarding the remainder
of the Hurricane Andrew litigation, allegedly without waiving any future
coverage defenses, conditions, limitations, or rights. For this and other
reasons, the extent to which the insurance carrier may recover any of these
proceeds from the Partnership is uncertain. Therefore, the accompanying
consolidated financial statements do not reflect any accruals related to
this matter.
Currently, the Partnership is a defendant in one remaining insurance
subrogation matter. On or about May 10, 1996, a subrogation claim entitled
Juarez v. Arvida Corporation et al. was filed in the Circuit Court of the
Eleventh Judicial Circuit in and for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company
("American Reliance"). In this suit, plaintiffs seek to recover damages,
pre-and post-judgment interest, costs and any other relief the Court may
deem just and proper in connection with $3,200,000 American Reliance
allegedly paid on specified claims at Country Walk in the wake of Hurricane
Andrew. Disney is also a defendant in this suit. The Partnership is
advised that the amount of this claim that allegedly relates to units it
sold is approximately $350,000. The Partnership is being defended by one
of its insurance carriers. Due to the uncertainty of the outcome of this
subrogation action, the accompanying consolidated financial statements do
not reflect any accruals related to this matter.
The Partnership has been named a defendant in a purported class action
entitled Lakes of the Meadow Village Homes, Condominium Nos. One, Two,
Three, Four, Five, Six, Seven, Eight and Nine Maintenance Associates, Inc.,
v. Arvida/JMB Partners, L.P. and Walt Disney World Company, Case No. 95-
23003-CA-08, filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida. The original complaint was filed on or about
November 27, 1995 and an amended complaint, which purports to be a class
action, was filed on or about February 28, 1997. In the case, plaintiffs
seek damages, attorneys' fees and costs on behalf of the 460 building units
they allegedly represent for, among other things, alleged damages
discovered in the course of making Hurricane Andrew repairs. Plaintiffs
allege that Walt Disney World Company is responsible for liabilities that
may arise in connection with approximately 80% of the buildings at the
Lakes of the Meadow Village Homes and that the Partnership is potentially
liable for the approximately 20% remaining amount of the buildings. In the
three count amended complaint, plaintiffs allege breach of building codes
and breach of implied warranties. In addition, plaintiffs seek rescission
and cancellation of various general releases obtained by the Partnership in
the course of the turnover of the community to the residents. Previously,
the trial court had granted the Partnership summary judgment against the
plaintiffs' claims, based on the releases obtained by the Partnership. The
ruling was reversed on appeal, the appellate court finding that there were
issues of material fact, which precluded the entry of judgment for the
Partnership, and the case was remanded to the trial court for further
proceedings. On or about April 9, 1999, plaintiffs supplied a budget
estimate for repairs of the alleged defects and damages based on a limited
survey of nine buildings, only, out of a total of 115 buildings. Based on
this limited survey and assuming that the same alleged defects and damages
show up with the same frequency in the entire 460 buildings, plaintiffs
estimate the total repairs to cost approximately $7.0 million. Based on
the allegations of the amended complaint, it would appear plaintiffs would
seek to hold the Partnership responsible for approximately $1.4 million of
this amount. Discovery in this litigation is in its early stages. The
Partnership has not had an opportunity to examine all of the buildings nor
fully assess the alleged merits of the plaintiffs' report. The Partnership
is currently being defended by counsel for one of its insurance carriers.
The Partnership has agreed in principle to settle the claims brought in
connection with Lakes of the Meadows Village Homes Condominium No. 8
Maintenance Association, Inc. for a payment of $155,000 to be funded by one
of the Partnership's insurance carriers. The Partnership can give no
assurance that the settlement will be consummated. In the event the
settlement is not consummated, the Partnership intends to vigorously defend
itself against the claims of this condominium association, as well as those
made by the other associations, by, among other things, pursuing its
defenses of release.
(B) On or about October 16, 1995, a lawsuit was filed against the
Partnership and others in the Circuit Court of the 15th Judicial Circuit,
in and for Palm Beach County, Florida, entitled Council of Villages, Inc.
et al. v. Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida/JMB
Partners, Ltd., Broken Sound Club, Inc., and Country Club Maintenance
Association, Inc. (the "Council of Villages" case). The multi-count
complaint, as amended, was brought as a class action, and individually, on
behalf of various residents of the Broken Sound Community, and alleged that
defendants engaged in various acts of misconduct in, among other things,
the establishment, operation, management and marketing of the Broken Sound
golf course and recreational facilities, as well as the alleged improper
failure to turn over such facilities to the Broken Sound homeowners on a
timely basis. Plaintiffs sought, through various theories, including but
not limited to breach of ordinances, breach of fiduciary duty (constructive
trust), individual counts for fraudulent inducement, and civil theft,
damages in excess of $45 million, the appointment of a receiver for the
Broken Sound Club, other unspecified compensatory damages, the right to
seek punitive damages, treble damages, prejudgment interest, attorneys'
fees and costs.
On or about July 30, 1996, Savoy v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., Arvida/JMB Partners, Ltd., and Broken Sound Club, Inc. was
filed against the Partnership and others in the Circuit Court of the 15th
Judicial Circuit, in and for Palm Beach County, Florida. The lawsuit was
filed as a three-count complaint for dissolution of the Broken Sound Club,
Inc. ("Club"), and sought, among other things, the appointment of a
custodian or receiver for the Club, a determination that certain acts be
deemed wrongful, the return to the Club of an amount of money in excess of
$2.5 million in alleged "operating profits", an injunction against the
charging of certain dues, an injunction requiring the Club to produce
certain financial statements, and such other relief as the Court deemed
just, fair and proper. This action was consolidated with the Council of
Villages case.
In April 1997, the Court issued an order certifying as a class action
claims respecting the alleged violation of the Boca Raton ordinances. On
appeal, the appellate court approved certification of a class action for
the following counts: breach of ordinances, breach of fiduciary duty,
civil theft (treble damages), and unjust enrichment. The Partnership filed
a third party complaint for indemnification and contribution against Disney
in these consolidated actions in the event the Partnership were held liable
for acts taken by a subsidiary of Disney prior to the Partnership's
involvement in the Club and property.
The parties to the Council of Villages case filed cross motions for
summary judgment and other motions on various matters related to the case.
The Court granted certain of the plaintiffs' and the Partnership's
respective motions for summary judgment. The Court also allowed the
plaintiffs to amend their complaint to seek reimbursement from the
Partnership of legal fees and expenses paid by the Partnership's co-
defendants in this lawsuit. Defendants' fees were split among the Country
Club Maintenance Association, Inc. ("CCMA"), the Club, and the Partnership.
Approximately $6,100,000 in legal fees and expenses were incurred in the
lawsuit as of December 31, 2000.
Among the matters remaining for trial were the following: damages for
breach of the land dedication ordinance; the damages, if any, recoverable
for alleged unjust enrichment, including without limitation the alleged
damages for return of the fees charged for club membership offset by the
value of the club, excessive management fees, and from the planting of
ficus trees; the Partnership's exposure, if any, for the return of a
portion of the attorneys' fees as described above; and the issues arising
from the Partnership's third party complaint against Disney.
On July 13, 2000, the Court gave preliminary approval to a mediated
settlement agreement between the Partnership and the plaintiffs in the
Council of Villages and Savoy cases. Notice of the proposed settlement was
given to the plaintiff class in July 2000. Final Court approval of the
settlement occurred on September 21, 2000. The Court's final approval was
not appealed. Also, on August 3, 2000, the Partnership and Disney entered
into an agreement to settle the Partnership's third party complaint against
Disney that was filed in the Council of Villages case. Closing for the
settlement agreements occurred on November 8, 2000. In accordance with the
two settlement agreements, the following actions, among others, took place:
(1) the Council of Villages case, including the third party complaint
against Disney, and the Savoy case were dismissed with prejudice and
appropriate releases were executed; (2) the Partnership paid approximately
$2.2 million to the Club, approximately $1.1 million to CCMA, and $1.65
million to the Council of Villages; (3) the Partnership continued to manage
the operations of the Club from January 1 through November 8, 2000 for a
management fee of $175,000; (4) the Club and CCMA limited to $500,000 the
amount which they agreed to pay in legal fees and costs for calendar year
2000 in defense of the Council of Villages and Savoy cases and the
Partnership agreed to pay any fees and costs in excess of $500,000, which
amount the Partnership does not expect to be substantial; (5) the
Partnership forgave certain indebtedness in the approximate amount of $1.6
million owed by the Club; (6) the Partnership assigned to the Club 207
unsold Club memberships which the Partnership had held for sale; (7) Disney
paid $900,000 to the Partnership; and (8) the Partnership provided an
interest-free line of credit for the Club's working capital needs, which
has been repaid to the Partnership. Pursuant to the settlement, management
of the Club was turned over to the members at closing of the settlement
agreements.
Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1999 and 2000.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 2000, there were 16,935 record Holders of the
404,000 Interests outstanding in the Partnership. There is no public
market for Interests, and it is not anticipated that a public market for
Interests will develop. Upon request, the General Partner may provide
information relating to a prospective transfer of Interests to an investor
desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspects of the transaction, will
be subject to negotiation by the investor. However, there are restrictions
governing the transferability of these Interests as described in
"Transferability of Partnership Interests" on pages A-31 to A-33 of the
Partnership Agreement and limitations on the rights of assignees of Holders
of Interests as described in Sections 3 and 4 of the Assignment Agreement,
which are hereby incorporated by reference to Exhibit 99.1 to this report.
No transfer will be effective until the first day of the next succeeding
calendar quarter after the requisite transfer form satisfactory to the
General Partner has been received by the General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses of the Partnership for a
calendar year in which a transfer occurs will, to the extent permitted by
law, be allocated between the transferor and the transferee based upon the
number of quarterly periods for which each was recognized as the Holder of
the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee. Cash
distributions to a Holder of Interests will be distributed to the person
recognized as the Holder of the Interests as of the last day of the
quarterly period preceding the quarter in which such distribution is made.
Reference is made to Item 1. Business for a discussion of the election
made on October 23, 1997 by the General Partner with respect to commencing
an orderly liquidation of all of the Partnership's assets that is to be
completed by October 2002.
Reference is made to Item 6. Selected Financial Data for a discussion
of cash distributions made to the Holders of Interests. For a description
of the provisions of the Partnership Agreement relating to cash
distributions, see Note 13.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of
unsolicited tender offers from unaffiliated third parties.
ITEM 6. SELECTED FINANCIAL DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 2000, 1999, 1998, 1997 AND 1996
(NOT COVERED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT)
2000 1999 1998 1997 1996
------------- ------------- ----------- ------------ ------------
Total revenues . . . . . . $394,311,794 373,650,257 351,125,675 355,904,056 342,813,269
============ ============ ============ ============ ============
Net operating
income. . . . . . . . . . $ 61,178,599 71,663,297 64,437,327 47,146,182 29,301,748
============ ============ ============ ============ ============
Extraordinary item:
Gain on extinguish-
ment of debt . . . . . $ 6,205,044 -- -- -- --
============ ============ ============ ============ ============
Equity in earnings
(losses) of uncon-
solidated ventures. . . . $ 275,580 1,083,804 335,893 211,217 (177,864)
============ ============ ============ ============ ============
Net income . . . . . . . . $ 70,031,711 73,998,442 65,862,245 46,558,308 28,011,424
============ ============ ============ ============ ============
Net income per
Interest (a). . . . . . . $ 142.13 147.73 148.02 105.30 67.47
============ ============ ============ ============ ============
Total assets (b) . . . . . $276,955,390 310,502,805 316,367,480 326,622,856 340,640,143
============ ============ ============ ============ ============
Total liabilities (b). . . $ 77,988,040 101,395,480 106,596,954 129,384,146 90,988,318
============ ============ ============ ============ ============
Cash distributions
per Interest (c). . . . . $ 144.76 175.08 125.06 235.04 25.85
============ ============ ============ ============ ============
The above selected consolidated financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.
(a) The net income per Interest is based upon the average number of
Interests outstanding during each period.
(b) The Partnership does not present a classified balance sheet as a
matter of industry practice, and as such, does not distinguish between
current and non-current assets and liabilities.
(c) Cash distributions from the Partnership are generally not
equivalent to Partnership income as determined for Federal income tax
purposes or as determined under generally accepted accounting principles.
Cash distributions to the Holders of Interests reflect distributions paid
during the calendar year, a portion of which represents a return of capital
for Federal income tax purposes. During January 2001, the Partnership made
a distribution for 2000 of $40,400,000 to its Holders of Interests ($100.00
per Interest). During February 2000, the Partnership made a distribution
for 1999 of $48,361,056 to its Holders of Interests ($119.71 per Interest).
During August 2000, the Partnership made a distribution of $10,100,000 to
its Holders of Interests ($25.00 per Interest). In addition, during 2000,
distributions totaling $18,864 (approximately $.05 per Interest) were
deemed to be paid to the Holders of Interest, all of which was remitted to
North Carolina tax authorities on their behalf for the 1999 non-resident
withholding tax. During February 1999, the Partnership made a distribution
for 1998 of $58,580,000 to its Holders of Interests ($145.00 per Interest).
During August 1999, the Partnership made a distribution of $12,120,000 to
its Holders of Interests ($30.00 per Interest). In addition, during 1999,
distributions totaling $30,645 (approximately $.08 per Interest) were
deemed to be paid to the Holders of Interests, all of which was remitted to
North Carolina tax authorities on their behalf for the 1998 non-resident
withholding tax. During February 1998, the Partnership made a distribution
for 1997 of $30,300,000 to its Holders of Interests ($75.00 per Interest).
During September 1998, the Partnership made a distribution of $20,200,000
to its Holders of Interests ($50.00 per Interest). In addition, during
1998, distributions totaling $22,705 (approximately $.06 per Interest) were
deemed to be paid to the Holders of Interests, all of which was remitted to
North Carolina tax authorities on their behalf for the 1997 non-resident
withholding tax. During February 1997, the Partnership made a distribution
for 1996 of $24,240,000 to its Holders of Interests ($60.00 per Interest).
During August 1997, the Partnership made a distribution of $70,700,000 to
its Holders of Interests ($175.00 per Interest). In addition, during 1997
distributions totaling $15,457 (approximately $.04 per Interest) were
deemed to be paid to the Holders of Interests, $15,372 of which was
remitted to North Carolina tax authorities on their behalf for the 1996
non-resident withholding tax. During March 1996, the Partnership made a
distribution for 1995 of $10,419,160 to its Holders of Interests ($25.79
per Interest). In addition, during 1996, the Partnership remitted each
Holder of Interests' share of a North Carolina non-resident withholding tax
on behalf of each Holder of Interests. Such payments, which totaled
$25,476 (approximately $.06 per Interest), were deemed distributions to the
Holders of Interests.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to Section 5.5J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5J(i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that is to be completed by October
2002.
At December 31, 2000 and 1999, the Partnership had unrestricted cash
and cash equivalents of approximately $68,979,000 and $71,965,000,
respectively. At February 28, 2001, the Partnership had unrestricted cash
and cash equivalents of approximately $32,192,000. Cash and cash
equivalents were available for future debt service, working capital
requirements and distributions to partners and Holders of Interests. The
source of both short-term and long-term future liquidity is expected to be
derived primarily from the sale of housing units and land parcels, and, to
a limited extent, through certain project financing as discussed below.
The Partnership was able to generate significant cash flow before debt
service during each of the five years ended December 31, 2000. The
Partnership utilized this cash flow to pay off its term loan, make
distributions to its partners and Holders of Interests, and maintain its
cash reserves. During January 2001, the Partnership made a distribution
for 2000 of $40,400,000 to its Holders of Interests ($100.00 per Interest)
and $4,488,889 to its General Partners and Associate Limited Partners,
collectively. During August 2000, the Partnership made a distribution of
$10,100,000 to its Holders of Interests ($25.00 per Interest) and
$8,029,766 to its General Partners and Associate Limited Partners,
collectively. During February 2000, the Partnership made a distribution
for 1999 of $48,361,056 to its Holders of Interests ($119.71 per Interest)
and $13,638,944 to its General Partner and Associate Limited Partners,
collectively. In addition, during 2000, distributions totaling $18,864
(approximately $.05 per Interest) were deemed to be paid to the Holders of
Interest, all of which was remitted to North Carolina tax authorities on
their behalf for the 1999 non-resident withholding tax, and a distribution
of approximately $23,100 was also paid or deemed to be paid to the General
Partner and Associate Limited Partners collectively. During August 1999,
the Partnership made a distribution for 1999 of $12,120,000 to its Holders
of Interests ($30.00 per Interest) and $673,326 to its General Partner and
Associate Limited Partners, collectively. In addition, during 1999,
distributions totaling $30,645 (approximately $.08 per Interest) were
deemed to be paid to the Holders of Interests, all of which was remitted to
North Carolina tax authorities on their behalf for the 1998 non-resident
withholding tax. Distributions totaling $3,265 were also paid or deemed to
be paid during 1999 to the General Partner and Associate Limited Partners,
collectively, all of which was also remitted to the North Carolina tax
authorities on their behalf. During March 1999, the Partnership made a
distribution for 1998 of $58,580,000 to its Holders of Interests ($145.00
per Interest) and $3,254,407 to its General Partner and Associate Limited
Partners, collectively. During September 1998, the Partnership made a
distribution of $20,200,000 to its Holders of Interest ($50.00 per
Interest) and $1,122,209 to its General Partner and Associate Limited
Partners, collectively. During February 1998, the Partnership made a
distribution for 1997 of $30,300,000 to its Holders of Interests ($75.00
per Interest) and $1,683,314 to the General Partner and Associate Limited
Partners, collectively. In addition, during 1998, distributions totaling
$22,705 (approximately $.06 per Interest) were deemed to be paid to the
Holders of Interests, all of which was remitted to North Carolina tax
authorities on their behalf for the 1997 non-resident withholding tax.
Distributions totaling $2,201 were also paid or deemed to be paid during
1998 to the General Partner and Associate Limited Partners, collectively,
all of which was also remitted to the North Carolina tax authorities on
their behalf.
In accordance with the Partnership Agreement, until the Holders of
Interests received aggregate distributions equal to their Capital
Investments (i.e., $1,000 per Interest), the General Partner and Associate
Limited Partners deferred a portion of their distributions of net cash flow
from the Partnership totaling approximately $12,541,000 through
December 31, 1999. In addition, in connection with the settlement of
certain litigation, the General Partner and the Associate Limited Partners
deferred approximately $1,259,000 of their share of the August 1997
distribution which was otherwise distributable to them, and such deferred
distribution amount was used by the Partnership to pay a portion of the
legal fees and expenses in such litigation. The General Partner and
Associate Limited Partners were entitled to receive such deferred amount
after the Holders of Interests received a specified amount of distributions
from the Partnership after July 1, 1996, the remaining amount of which was
received by the Holders of Interest as part of their distribution in
February 2000. With the distribution made in February 2000, Holders of
Interests had received aggregate distributions in excess of their Capital
Investments. The distribution made in February 2000 to the General Partner
and Associate Limited Partners included the $1,259,000 amount of their
August 1997 distribution that was previously deferred as well as $6,305,844
of the approximately $12,541,500 of net cash flow distributions to the
General Partner and Associate Limited Partners previously deferred pursuant
to the terms of the Partnership Agreement. In April and May 2000,
distributions of approximately $23,100 were paid or deemed paid to the
General Partner and Associate Limited Partners, including approximately
$18,900 of net cash flow distributions that had previously been deferred
pursuant to the terms of the Partnership Agreement. The August 2000
distribution of approximately $8,030,000 made to the General Partner and
Associate Limited Partners included the remaining amount of net cash flow
distributions that had previously been deferred of approximately
$6,216,000.
On July 31, 1997, the Partnership obtained a new credit facility from
certain banks, with Barnett Bank, N.A. ("Barnett") being the primary agent
on the facility. The credit facility consisted of a $75 million term loan,
a $20 million revolving line of credit and a $5 million letter of credit
facility, all of which mature on July 31, 2001. The remaining balance on
the term loan was paid off in December 2000. Prior to September 1, 1998,
interest on the facility was based, at the Partnership's option, on the
relevant LIBOR plus 2.25% per annum or Barnett's prime rate. Loan
origination fees totaling 1% of the total facility were paid by the
Partnership upon the closing of the loan. Such fees have been capitalized
and have been amortized to interest expense over the life of the loan. The
amounts outstanding under the revolving line of credit and letter of credit
facility are secured by recorded mortgages on the real property of the
Partnership (including certain of its consolidated ventures) and pledges of
certain other assets. The credit facility also required that certain
financial covenants such as loan-to-value, net worth and debt ratios be
maintained throughout the loan term. All of the loans under this facility
were cross-collateralized and cross-defaulted.
As of the date of this filing, there were no balances outstanding on
the term loan or the revolving line of credit. The letter of credit
facility had an outstanding balance of approximately $287,300. The
Partnership also has approximately $2.3 million of letters of credit
outstanding with a previous lender, all of which are cash collateralized.
The Partnership has interest rate swap agreements that are still in effect
with respect to approximately $19.2 million, which includes the portion of
the term loan that has been prepaid. The interest rate swap agreements
fixed the interest rates under the term loan at 8.02% and 7.84% with
respect to $12,500,000 and $6,666,667 of the term loan, respectively, and
amortize in conjunction with the scheduled loan repayments. These
agreements expire on July 31, 2001. For the year ended December 31, 2000,
the combined effective interest rate for the Partnership's credit
facilities, including the amortization of loan origination fees and the
effect of the interest rate swap agreements was approximately 9.8% per
annum.
In May 2000, the Partnership closed on a $20 million loan with First
Union National Bank for the development and construction of The Shoppes of
Town Center in Weston, a mixed use retail/office plaza consisting of
approximately 158,000 net leasable square feet. The loan was made to an
indirect, majority-owned subsidiary of the Partnership, and the Partnership
has guaranteed the obligations of the borrower, subject to a reduction in
the guarantee upon the satisfaction of certain conditions. At December 31,
2000, the balance outstanding on the loan was approximately $11,357,000.
Interest on the loan is payable monthly based on the relevant LIBOR rate
plus 1.8% per annum during the first year of the loan. Thereafter, subject
to the satisfaction of certain conditions, including, among other things,
the lien-free completion of construction of the retail/office plaza by
June 1, 2001, the maturity date for the loan would be extended for two
years and payments of principal and interest would be due on the loan based
upon a 25-year loan amortization schedule. The loan may be prepaid in
whole or in part at any time, provided that the borrower pays any costs or
expenses of the lender incurred as a result of a prepayment on a date other
than the last day of a LIBOR interest period. Construction of The Shoppes
of Town Center in Weston began in March 2000 and is the primary cause for
the increase in Property and equipment on the accompanying consolidated
balance sheets at December 31, 2000 as compared to December 31, 1999, as
well as the increase in Additions to property and equipment on the
accompanying consolidated statement of cash flows for the year ended
December 31, 2000 as compared to 1999 and 1998. Construction is expected
to be completed in the fourth quarter of 2001. The Partnership has
requested modification to the loan for an extension of the one year period
for completion of construction currently required under the loan, and the
lender has requested that certain conditions be satisfied before agreeing
to such modification. The Partnership expects the loan will be modified.
In the absence of such modification, the Partnership would be required to
repay the loan on June 1, 2001 with cash and cash equivalents on hand.
Currently, the property is approximately 79% pre-leased to tenants.
On March 6, 2000, the Partnership entered into a contract with an
unaffiliated third party builder for the bulk sale of the remaining lot
inventory, consisting of approximately 103 developed and undeveloped lots,
and the sales center at its Water's Edge Community for a sale price of
approximately $3.2 million. The contract provided for the lots to be
purchased in three phases. The closing of the first phase of 29 lots was
completed in March 2000 for approximately $0.7 million. The closing of the
second phase of 51 lots and the sales center was completed in September
2000 for approximately $1.6 million. The closing of the third phase of 23
lots was completed in December 2000 for approximately $0.9 million. These
sales are reflected in Homesite revenues and cost of revenues on the
accompanying consolidated statements of operations as of December 31, 2000.
The Partnership recorded a write-down of its related inventory as of
December 31, 1999 to reduce the carrying value of Water's Edge to its
estimated fair value less selling costs at that date. Accordingly, these
transactions resulted in no gain or loss for financial reporting purposes
in 2000 and an approximate $3.2 million loss for Federal income tax
reporting purposes in 2000.
In March 2000, the Partnership closed on the sale of the remaining
lots at its Cullasaja Club Community, as well as its remaining equity
memberships in the Cullasaja Club (the "Club"), to the Cullasaja Club, Inc.
and Cullasaja Realty Development, Inc., for a total sales price of
approximately $3.0 million. In addition, indebtedness owed to the
unaffiliated third party lenders, as well as related accrued interest, was
extinguished in conjunction with this sale, as the payment of principal and
interest was contingent upon net cash flows generated from the Cullasaja
Community. Such cash flows were not achieved, and as a result, the
Partnership recorded an extraordinary gain related to the extinguishment of
debt and accrued interest of approximately $6.2 million, as reflected on
the accompanying consolidated statement of operations at December 31, 2000.
The sale of the lot inventory and equity memberships resulted in a gain for
financial reporting purposes and a loss for Federal income tax reporting
purposes, and also contributed to the decrease in Equity memberships,
Accrued expenses and other liabilities, and Notes and mortgages payable on
the accompanying consolidated balance sheets at December 31, 2000 as
compared to December 31, 1999.
In June 1999, the Partnership closed on the sale of its resale
brokerage operations in Weston, Sawgrass and Boca Raton, Florida to an
affiliate of The St. Joe Company for a sale price of $3.2 million. The
Partnership still retains limited commercial brokerage as well as new home
sale brokerage operations. During 1999, the Partnership also closed on the
sale of several one story commercial office buildings in Weston to
unaffiliated third party purchasers for a total sales price of
approximately $2.5 million, the country club in its River Hills community
in Tampa, Florida to an unaffiliated third party purchaser for a sales
price of approximately $7.5 million, as well as its 50% interest in the
Arvida Corporate Park Associates Joint Venture to its venture partner for a
sales price of $3.7 million. All of these sales generated a profit for
financial reporting and Federal income tax purposes.
In January 1998, the Partnership sold its approximate 33% interest in
the H.A.E. Joint Venture to one of its joint venture partners for a sale
price of approximately $1.7 million. In May 1998, the Partnership sold its
remaining Sawgrass Country Club memberships to the Sawgrass Country Club,
Inc. for a total sales price of approximately $2.4 million. In October
1998, the Partnership closed on the sale of its cable operation in Weston
for a sale price of $31.2 million to an unaffiliated third party. All of
these sales generated profits for financial reporting and Federal income
tax purposes.
All of the above mentioned sales are reflected in Land and property
revenues and cost of revenues on the accompanying consolidated statements
of operations for the years ended December 31, 1998, 1999 and 2000.
Reference is made to Results of Operations below for a further discussion
of land and property transactions.
The General Partner had established a special committee (the "Special
Committee") consisting of certain directors of the General Partner to
review and respond to unsolicited tender offers for Interests. In February
2000, First Commercial Guaranty ("FCG") commenced an offer for up to
approximately 16,300 (approximately 4.0%) of the outstanding Interests for
a purchase price of $350 per Interest, which was to be reduced by the
$119.70 per Interest distribution made in February 2000 for an adjusted
offer price of $230.30 per Interest. This offer expired in March 2000. The
Special Committee determined that this offer was inadequate and not in the
best interests of the Holders of Interests. Accordingly, the Special
Committee recommended that Holders of Interests reject this offer and not
tender their Interests pursuant to the offer.
Other offers for Interests were made by unaffiliated third parties,
including FCG, at various prices during 2000, in each case for less than 5%
of the outstanding Interests. In each case, the Special Committee or the
General Partner, on behalf of the Partnership, determined that the offer
was inadequate and not in the best interests of the Holders of Interests.
Accordingly, a recommendation was made that Holders of Interests reject
each such offer and not tender their Interests pursuant to such offer.
During February and March 2001, offers were made by: (i) Smithtown
Bay, LLC ("Smithtown") to purchase up to 5,300 (approximately 1.3%) of the
Interests for $350 per Interest; (ii) CMG Partners, LLC ("CMG") to purchase
up to 4.9% (approximately 19,800) of the Interests for $230 per Interest;
(iii) Peachtree Partners ("Peachtree") to purchase up to 4.9% of the
Interests for $225 per Interest; and (iv) FCG to purchase up to 14,667
(approximately 3.6%) of the Interests for $200 per Interest. The General
Partner, on behalf of the Partnership, determined that each of the CMG
offer, the Peachtree offer and the FCG offer was inadequate and not in the
best interests of the Holders of Interests. Accordingly, the General
Partner recommended that Holders of Interests reject each such offer and
not tender their Interests pursuant to such offer. In addition, with
respect to Holders of Interests who have a current need or desire for
liquidity and who do not expect to retain their Interests through an
orderly liquidation of the Partnership, the General Partner recommended
that such Holders of Interests accept the Smithtown offer and tender their
Interests to Smithtown. With respect to all other Holders of Interests,
the General Partner expressed no opinion and remained neutral in regard to
the Smithtown offer. These offers are scheduled to expire in either March
or April 2001, subject to earlier termination or to extension.
The Partnership was recently notified that CMG intends to amend the
CMG offer to increase its purchase price to $275 per Interest, although
there is no assurance that such amended offer will be made. The General
Partner will make its recommendation, if any, with respect to the amended
CMG offer after it is made.
RESULTS OF OPERATIONS
The results of operations for the years ended December 31, 2000, 1999
and 1998 are primarily attributable to the development and sale or
operation of the Partnership's assets. See Note 1 for a discussion
regarding the recognition of profit from sales of real estate.
For the year ended December 31, 2000, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 1,555 housing units, 97 homesites,
five commercial office buildings in Weston Town Center, several one-story
commercial office buildings in Weston, approximately five acres of
developed land tracts in Weston, the remaining lots and equity memberships
at The Cullasaja Club Community, a commercial office building in Boca
Raton, Florida, the sales office and a commercial parcel in its River Hills
community, and the bulk sale of 105 developed and undeveloped lots and the
sales center at its Water's Edge Community. This compares to closings in
1999 of 1,348 housing units, 122 homesites, approximately 53 acres of
developed and undeveloped residential or commercial/industrial land tracts,
as well as the sale of the Partnership's resale brokerage operations in
Weston, Sawgrass and Boca Raton, Florida, the sale of several one story
commercial office buildings in Weston, the sale of the country club in the
River Hills Community, and the Partnership's 50% interest in the Arvida
Corporate Park Associates Joint Venture. Closings in 1998 were for 1,086
housing units, 137 homesites, approximately 78 acres of developed and
undeveloped residential or commercial/industrial land tracts, as well as
the remaining Sawgrass Country Club memberships owned by the Partnership,
the Partnership's cable operation in Weston, and the Partnership's
approximate 33% interest in the H.A.E. Joint Venture. Outstanding
contracts ("backlog"), as of December 31, 2000 were for 1,063 housing
units, 7 homesites and approximately 2 acres of developed and undeveloped
land tracts. This compares to a backlog as of December 31, 1999 of 850
housing units, 30 homesites and approximately 2 acres of developed and
undeveloped land tracts. The backlog as of December 31, 1998 was for 756
housing units, 14 homesites and approximately 26 acres of developed and
undeveloped land tracts.
The Partnership's remaining Communities are in various stages of
development, with estimated remaining build-outs ranging from one to two
years. Notwithstanding the estimated duration of the build-outs, the
Partnership currently expects to complete an orderly liquidation of its
remaining assets by October 2002 with a winding up and final distribution
of any residual funds in 2004. The Weston Community, located in Broward
County, Florida, is the Partnership's largest Community and is in its late-
stage of development. As discussed above, in 2000, the remaining lots and
equity club memberships at the Cullasaja Club were sold and the Partnership
closed the sale of the remaining lots and the sales center at the Water's
Edge Community. The Partnership's condominium project on Longboat Key,
Florida, known as Arvida's Grand Bay was completed in 1999, and all units
were sold and closed by January 2000. The Jacksonville Golf & Country Club
and the River Hills Country Club Communities in Florida are in their final
stages of development. Only builder units remain to be sold at
Jacksonville Golf & Country Club at December 31, 2000. All of the
remaining units in the Partnership's Sawgrass Country Club, The Players
Club at Sawgrass and Dockside Communities in Jacksonville, Florida and
Atlanta, Georgia were sold and closed as of December 31, 1996. In
addition, the Broken Sound Community, located in Boca Raton, Florida, had
its final closings in 1995, and during 2000, the Partnership assigned all
of its remaining equity interests in the Broken Sound Club back to the club
and terminated its interest in this project in connection with the
settlement of certain litigation. Future revenues will be impacted to the
extent there are lower levels of inventories available for sale as the
Partnership's remaining Communities are sold or undertake their final
phases.
Revenues from housing and homesite activities are recognized upon the
closing of homes built by the Partnership and developed lots, respectively,
within the Partnership's Communities. Historically, a substantial portion
of the Partnership's housing revenues during the first six months of a
given year are generated from the closing of units contracted in the prior
year. Land and property revenues are generated from the closing of
developed and undeveloped residential and/or commercial land tracts, the
sale of operating properties, as well as gross revenues earned from the
sale of equity memberships in the clubs within the Partnership's
Communities.
Cost of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest,
real estate taxes and marketing, as well as disposition costs. The costs
related to the Partnership's homesite sales reflect the cost of the
acquired assets, related development expenditures, certain capitalized
overhead costs, capitalized interest and real estate taxes, as well as
disposition costs. Land and property costs reflect the cost of the
acquired assets, certain development and construction costs and related
disposition costs, as well as the cost associated with the sale of equity
memberships.
Housing revenues increased for 2000 as compared to 1999 and 1998 due
primarily to an increase in the number of units closed as well as a change
in the mix and an increase in the average prices of units closed at the
Partnership's Weston Community. Revenues generated from the closings of
units in Weston account for approximately 96%, 79% and 69% of the housing
revenues recognized for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase in housing revenues in 2000 as compared to 1999
was partially offset by decreased revenues at Arvida's Grand Bay due to the
completion of this condominium project in 1999. As of December 31, 1999,
the Partnership had recognized substantially all of the revenues for the
remaining units at Arvida's Grand Bay under the percentage-of-completion
method of accounting. The subsequent closings of these units by January
2000 is the primary cause for the decrease in Trade and other accounts
receivable on the accompanying consolidated balance sheets at December 31,
2000 as compared to December 31, 1999. Revenues also decreased at the
Partnership's River Hills community due to a decrease in the number of
units closed. This decrease is due to a lower amount of inventory
available for sale as the Community completes its final phase.
The Partnership's plan for the Weston Community included an increase
in its home building operations, which resulted in a reduced number of lots
available for sale to third-party builders. As of December 31, 1999, the
Partnership had no remaining lot inventory to be sold in Weston. The sale
of homesites in 1999 contributed to the higher gross operating profit
recognized in previous years, and the sell out of these properties in 1999
is the primary cause for the decrease in gross operating profit margins in
2000 as compared to 1999 and 1998. It is also the primary cause for the
decrease in homesite revenues for the year ended December 31, 2000 as
compared to the same periods in 1999 and 1998. In March 2000, the
Partnership entered into a contract with an unaffiliated third party
builder for the bulk sale of the remaining lot inventory, consisting of
approximately 103 developed and undeveloped lots, and the sales center at
its Water's Edge Community, for a sale price of approximately $3.2 million.
The contract provided for the lots to be sold in three phases. The closing
of the first phase of 29 lots was completed in March 2000 for approximately
$0.7 million. The closing of the second phase of 51 lots and the sales
center was completed in September 2000 for approximately $1.6 million. The
closing of the final phase of 23 lots was completed in December 2000 for
approximately $0.9 million. Revenues generated from the closing of these
phases, as well as an increase in the number of lots closed in the River
Hills Community, partially offset the decrease in homesite revenues in 2000
as compared to 1999. Despite an increase in the number of lots closed for
the year ended December 31, 2000 as compared to 1999, homesite revenues
decreased due to less expensive lots closing in 2000.
Land and property revenues for 2000 were generated primarily from the
sale of five commercial office buildings in Weston Town Center, several
one-story commercial office buildings in Weston, approximately five acres
of developed land tracts in Weston, the remaining lots and equity
memberships at The Cullasaja Club Community, a commercial office building
in Boca Raton, Florida, the sales office and a commercial parcel in the
Partnership's River Hills community, and the recognition of profits from
land sales closed in prior years which had been deferred until the
accounting criteria for profit recognition had been met. Land and property
revenues for 1999 were generated primarily from the sale of the
Partnership's country club in River Hills, its 50% interest in the Arvida
Corporate Park Joint Venture to its venture partner, several one-story
commercial office buildings in Weston, the Partnership's resale brokerage
operations in Weston, Sawgrass and Boca Raton, Florida to an affiliate of
The St. Joe Company, and approximately 22 acres of developed commercial
property in Weston. This compares to closings in 1998 of the Partnership's
cable operation in Weston, approximately 29 acres of undeveloped commercial
property owned by the Metrodrama Joint Venture, the sale of the
Partnership's remaining Sawgrass Country Club memberships, approximately 49
acres of developed and undeveloped land tracts in Weston, and the sale of
the Partnership's approximate 33% interest in the H.A.E. Joint Venture to
one of its venture partners. The sale of the River Hills Country Club in
August 1999 contributed to the decrease in the gross operating profit
margin for the year ended December 31, 2000 as compared to the same period
in 1999.
Operating properties represents activity from the Partnership's club
operations, commercial properties and certain other operating assets. Due
to prior years' sales of several of the Partnership's clubs and operating
properties, revenues from operating properties during the year ended
December 31, 2000 were generated solely from club activities in Weston.
The loss of revenues from the sale of the River Hills Country Club in
August 1999 was partially offset by an increase in increased membership
fees and dues at the Weston Hills Country Club for the year ended
December 31, 2000 as compared to the same period in 1999. The decrease in
revenues and related costs of revenues from operating properties for 1999
as compared to 1998 is due primarily to the sale of the Partnership's cable
operations in Weston in the fourth quarter of 1998, as well as the August
1999 sale of the River Hills Country Club.
Brokerage and other operations represents activity from the sale of
unaffiliated third-party builders' homes within the Partnership's
communities, activity from resale of real estate inside and outside the
Partnership's communities, proceeds from the Partnership's property
management activities, and fees earned from various management agreements
with joint ventures. Revenues from brokerage and other operations
decreased in 2000 as compared to 1999 and in 1999 as compared to 1998 due
primarily to the sale of the Partnership's resale brokerage operations in
June 1999 as mentioned above, as well as a decrease in new home sale
brokerage commissions earned in Weston resulting from a decrease in the
number of units closed by third party builders within the Community. The
Partnership does not expect to earn any significant new home sale brokerage
commissions in Weston after 2000 since the Partnership has no remaining lot
inventory in Weston for sale to third party builders.
Selling, general and administrative expenses include all marketing
costs, with the exception of those costs capitalized in conjunction with
the construction of housing units, as well as project and general
administrative costs. These expenses are net of the marketing fees
received from third party builders. Selling, general and administrative
expenses increased for 2000 as compared with 1999 due primarily to the
settlement in the Council of Villages and Savoy lawsuits in the aggregate
amount of approximately $6.6 million, of which $4.6 million was previously
accrued in prior periods, as well as a legal settlement of $435,000 paid in
connection with certain litigation involving River Hills. Selling,
general, and administrative expenses decreased for 1999 as compared to 1998
due primarily to certain non-recurring payments made in 1998 which
increased the expenses in that year. Such payments included approximately
$2,047,000 to Raleigh Capital Associates, L.P. ("Raleigh") pursuant to a
settlement and release agreement between the Partnership, the General
Partner and Raleigh to resolve, among other things, a claim made by Raleigh
for attorneys' fees and expenses. In addition, during 1998, the
Partnership incurred fees to engage Lehman Brothers, Inc. as a financial
advisor to assist in evaluating and responding to the various tender offers
for Partnership Interests made during 1998 and related matters.
In December 1999, the Partnership recorded an inventory impairment of
$1 million to the carrying value of its Water's Edge Community. This loss
was recorded based upon an analysis of expected future net cash flows from
the sale of the assets in Water's Edge as compared to the future estimated
carrying value of the assets at disposition.
On May 28, 1999, the Partnership entered into an agreement with Disney
which resolved all the claims and counterclaims raised in certain
litigation related to the Partnership's acquisition of assets from a
subsidiary of Disney. Under the terms of the settlement agreement, Disney,
among other things, paid the Partnership $9.0 million, which is reflected
as Legal Settlement on the accompanying consolidated statements of
operations for the year ended December 31, 1999, and released any claims
relating to the claims pool. The lawsuit was dismissed on June 3, 1999,
pursuant to the terms of the settlement agreement.
During the first quarter of 1999, the Partnership received an
approximate $0.6 million distribution from the Tampa 301 Associates Joint
Venture. The amount distributed was in excess of the Partnership's
carrying value of its investment in this joint venture. The recognition of
income related to this excess distribution is the primary cause for the
increase in Equity in earnings of unconsolidated ventures in 1999 as
compared to 1998 and the decrease in equity in earnings of unconsolidated
ventures for 2000 as compared to 1999.
The decrease in real estate taxes for 2000 as compared to 1999 is due
primarily to an increase in the amount of real estate taxes eligible for
capitalization to real estate inventories. The decrease in real estate
taxes for 1999 as compared to 1998 is due to the Partnership receiving a
credit from the Indian Trace Development District (the "District") towards
its 1999 tax assessment resulting from interest earned by the District on
construction reserves related to the District's improvement of land owned
by the Partnership.
INFLATION
Although the relatively low rates of inflation in recent years
generally have not had a material effect on the Community development
business, inflation in future periods can adversely affect the development
of Communities generally because of its impact on interest rates. High
interest rates not only increase the cost of borrowed funds to developers,
but also have a significant effect on the affordability of permanent
mortgage financing to prospective purchasers. Any increased costs of
materials and labor resulting from high rates of inflation may, in certain
circumstances, be passed through to purchasers of real properties through
increases in sales prices, although such increases may reduce sales volume.
To the extent such cost increases are not passed through to purchasers,
there would be a negative impact on the ultimate margins realized by the
Partnership.
GENERAL PARTNER
The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation. All of its outstanding shares of stock are owned by
JMB Investment Holdings-I, Inc., a Delaware corporation. Substantially all
of the outstanding stock of JMB Investment Holdings-I, Inc. is owned
indirectly by JMB Realty Corporation, a Delaware corporation ("JMB").
Substantially all of the shares of JMB are owned by certain of its
officers, directors, members of their families and their affiliates.
Arvida/JMB Managers, Inc. became the general partner of the Partnership as
a result of a merger on March 30, 1990 of an affiliated corporation that
was the then general partner of the Partnership into Arvida/JMB Managers,
Inc., which, as the surviving corporation of such merger, continues as
General Partner. On July 1, 2000, a $1,000,000 note receivable from
Northbrook Corporation ("Northbrook"), an affiliate of JMB that had
previously been an indirect parent corporation of the General Partner, to
Arvida/JMB Managers, Inc. was assigned and distributed to AF Investors,
LLC. The General Partner has responsibility for all aspects of the
Partnership's operations. The condensed balance sheet of Arvida/JMB
Managers, Inc. as of December 31, 2000 is as follows:
Assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . . .$ 1,528,741
Investment in partnerships. . . . . . . . . . . . . . . 1,483,856
Other assets. . . . . . . . . . . . . . . . . . . . . . 39,867
-----------
$ 3,052,464
===========
Liabilities
Other liabilities . . . . . . . . . . . . . . . . . . .$ 1,592,482
===========
Owner's equity
Capital stock . . . . . . . . . . . . . . . . . . . . .$ 1,000
Additional paid-in capital. . . . . . . . . . . . . . . 30,150,000
Net of retained deficit . . . . . . . . . . . . . . . .(28,691,018)
-----------
$ 3,052,464
===========
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has interest rate swap agreements with respect to
amounts borrowed under its term loan in order to minimize the interest rate
risk associated with the variable rate debt. The interest rate swap
agreements expire in July 2001 which coincides with the original scheduled
maturity of the term loan. The Partnership has also entered into a
construction and short-term mortgage loan in the principal amount of
$20,000,000 with a variable rate of interest to finance construction of a
retail project in Weston in 2000. In the event the Partnership's effective
borrowing rates were to increase by 100 or 150 basis points, there would be
no expected material impact to the Partnership's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Report of Independent Certified Public Accountants
Consolidated Balance Sheets, December 31, 2000 and 1999
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information is
inapplicable or immaterial, or the information is presented in the
consolidated financial statements or related notes.
REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
ARVIDA/JMB PARTNERS, L.P.
We have audited the accompanying consolidated balance sheets of
Arvida/JMB Partners, L.P. and Consolidated Ventures as of December 31, 2000
and 1999, and the related consolidated statements of operations, changes in
partners' capital accounts, and cash flows for each of the three years in
the period ended December 31, 2000. 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 auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Arvida/JMB Partners, L.P. and Consolidated Ventures at
December 31, 2000 and 1999, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
Miami, Florida
February 14, 2001, except for note 9
as to which is March 9, 2001
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
------
2000 1999
------------ -----------
Cash and cash equivalents (note 3) . . . . . . . . . . . . . . . . . . . $ 68,979,280 71,965,185
Restricted cash (note 3) . . . . . . . . . . . . . . . . . . . . . . . . 23,045,284 13,800,070
Trade and other accounts receivable (net of allowance
for doubtful accounts of $445,793 and $189,983
at December 31, 2000 and 1999, respectively) . . . . . . . . . . . . . 3,963,461 27,405,788
Real estate inventories (notes 4 and 7). . . . . . . . . . . . . . . . . 129,728,708 160,011,715
Property and equipment, net (notes 5 and 7). . . . . . . . . . . . . . . 41,620,336 28,306,211
Investments in and advances to joint ventures, net (note 6). . . . . . . 415,838 460,805
Equity memberships (note 8). . . . . . . . . . . . . . . . . . . . . . . 20,000 1,687,120
Amounts due from affiliates, net (note 9). . . . . . . . . . . . . . . . 485,056 650,163
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . 8,697,427 6,215,748
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $276,955,390 310,502,805
============ ===========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
2000 1999
------------ -----------
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,024,568 21,692,034
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,096,243 29,704,627
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . 13,510,444 19,434,618
Notes and mortgages payable (note 7) . . . . . . . . . . . . . . . . . 11,356,785 30,564,201
------------ -----------
Commitments and contingencies
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . 77,988,040 101,395,480
------------ -----------
Partners' capital accounts (note 13)
General Partner and Associate Limited Partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . 72,754,546 60,143,692
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (66,938,738) (45,246,973)
------------ -----------
5,835,808 14,916,719
------------ -----------
Holders of Interests (404,000 Interests):
Initial Holder of Interests:
Capital contributions, net of offering costs. . . . . . . . . . . . 364,841,815 364,841,815
Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . 255,517,863 198,097,006
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (427,228,136) (368,748,215)
------------ -----------
193,131,542 194,190,606
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . . . 198,967,350 209,107,325
------------ -----------
Total liabilities and partners' capital accounts . . . . . . . $276,955,390 310,502,805
============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
Revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . $348,401,377 307,000,615 231,511,130
Homesites. . . . . . . . . . . . . . . . . . . . . . 6,398,196 10,520,143 13,654,463
Land and property. . . . . . . . . . . . . . . . . . 18,613,031 22,050,649 56,943,569
Operating properties . . . . . . . . . . . . . . . . 16,324,223 16,641,088 19,865,338
Brokerage and other operations . . . . . . . . . . . 4,574,967 17,437,762 29,151,175
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . . 394,311,794 373,650,257 351,125,675
------------ ------------ ------------
Cost of revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . 273,051,251 240,728,879 186,604,676
Homesites. . . . . . . . . . . . . . . . . . . . . . 5,158,012 6,803,661 9,091,986
Land and property. . . . . . . . . . . . . . . . . . 13,253,841 11,523,280 23,927,979
Operating properties . . . . . . . . . . . . . . . . 15,459,749 16,141,031 18,596,429
Brokerage and other operations . . . . . . . . . . . 4,023,716 15,638,155 24,942,325
------------ ------------ ------------
Total cost of revenues . . . . . . . . . . . 310,946,569 290,835,006 263,163,395
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
2000 1999 1998
------------ ------------ ------------
Gross operating profit . . . . . . . . . . . . . . . . 83,365,225 82,815,251 87,962,280
Selling, general and administrative expenses . . . . . (22,186,626) (19,151,954) (23,524,953)
Inventory impairment (note 14) . . . . . . . . . . . . -- (1,000,000) --
Legal Settlement . . . . . . . . . . . . . . . . . . . -- 9,000,000 --
------------ ------------ ------------
Net operating income . . . . . . . . . . . . 61,178,599 71,663,297 64,437,327
Interest income. . . . . . . . . . . . . . . . . . . . 3,377,144 2,712,017 3,583,937
Equity in earnings of unconsolidated ventures
(notes 1 and 6). . . . . . . . . . . . . . . . . . . 275,580 1,083,804 335,893
Interest and real estate taxes, net of amounts
capitalized (note 1) . . . . . . . . . . . . . . . . (1,004,656) (1,460,676) (2,494,912)
------------ ------------ ------------
Net income before extraordinary item . . . . . . . . . 63,826,667 73,998,442 65,862,245
Extraordinary item:
Gain on extinguishment of debt . . . . . . . . . . . 6,205,044 -- --
------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . . $ 70,031,711 73,998,442 65,862,245
============ ============ ============
Allocation of net income:
General Partner and
Associate Limited Partners . . . . . . . $ 12,610,854 14,315,535 6,062,130
Limited Partners . . . . . . . . . . . . . 57,420,857 59,682,907 59,800,115
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . $ 70,031,711 73,998,442 65,862,245
============ ============ ============
Net income before extraordinary item
per Limited Partner Interest . . . . . . . $ 126.92 147.73 148.02
Extraordinary item per Limited Partnership
Interest . . . . . . . . . . . . . . . . . 15.21 -- --
------------ ------------ ------------
Net income per Limited Partner Interest. . . $ 142.13 147.73 148.02
============ ============ ============
Cash distribution per Limited
Partner Interest . . . . . . . . . . . . . $ 144.76 175.08 125.06
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS HOLDERS OF INTERESTS (404,000 INTERESTS)
--------------------------------------------------- -------------------------------------------------------
CONTRIBU- NET NET
TIONS INCOME DISTRIBUTIONS TOTAL CONTRIBUTIONS INCOME DISTRIBUTIONS TOTAL
--------- --------- ------------- ----------- ------------- ----------- ------------- -------------
Balance
Decem-
ber 31,
1997. . . .$20,000 39,766,027 (38,508,251) 1,277,776 364,841,815 78,613,984 (247,494,865) 195,960,934
1998 act-
ivity
(note 13) . -- 6,062,130 (2,807,724) 3,254,406 -- 59,800,115 (50,522,705) 9,277,410
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1998. . . . 20,000 45,828,157 (41,315,975) 4,532,182 364,841,815 138,414,099 (298,017,570) 205,238,344
1999 act-
ivity
(note 13) . -- 14,315,535 (3,930,998) 10,384,537 -- 59,682,907 (70,730,645) (11,047,738)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1999. . . . 20,000 60,143,692 (45,246,973) 14,916,719 364,841,815 198,097,006 (368,748,215) 194,190,606
2000 act-
ivity
(note 13) . -- 12,610,854 (21,691,765) (9,080,911) -- 57,420,857 (58,479,921) (1,059,064)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
2000. . . .$20,000 72,754,546 (66,938,738) 5,835,808 364,841,815 255,517,863 (427,228,136) 193,131,542
======= ========== =========== =========== =========== =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 70,031,711 73,998,442 65,862,245
Charges (credits) to net income not
requiring (providing) cash:
Depreciation and amortization. . . . . . . . . . . 3,189,586 3,390,613 3,709,561
Equity in earnings of unconsolidated ventures. . . (275,580) (1,083,804) (335,893)
Provision for doubtful accounts. . . . . . . . . . 44,512 21,109 32,536
Gain on sale of joint venture interest . . . . . . -- (3,161,725) (450,546)
Gain on sale of operating properties and
of property and equipment. . . . . . . . . . . . (182,702) (5,991,038) (22,298,796)
Inventory impairment (note 14) . . . . . . . . . . -- 1,000,000 --
Extraordinary gain on extinguishment of debt . . . (6,205,044) -- --
Changes in:
Restricted cash. . . . . . . . . . . . . . . . . . (9,245,214) (462,899) (893,155)
Trade and other accounts receivable. . . . . . . . 23,397,815 (13,437,804) 425,322
Real estate inventories:
Additions to real estate inventories . . . . . . (236,745,158) (233,948,741) (196,086,427)
Cost of revenues . . . . . . . . . . . . . . . . 272,002,613 239,424,771 207,240,063
Capitalized interest . . . . . . . . . . . . . . (2,092,739) (3,663,552) (6,020,204)
Capitalized real estate taxes. . . . . . . . . . (2,881,709) (1,901,589) (2,632,163)
Equity memberships . . . . . . . . . . . . . . . . 1,667,120 488,390 2,005,223
Amounts due from affiliates, net . . . . . . . . . 165,107 788,527 (773,556)
Prepaid expenses and other assets. . . . . . . . . (3,215,119) 341,696 23,412
Accounts payable, accrued expenses and
other liabilities. . . . . . . . . . . . . . . . (5,449,475) 8,612,560 3,313,431
Deposits . . . . . . . . . . . . . . . . . . . . . 4,391,616 2,049,060 5,725,292
------------ ------------ ------------
Net cash provided by operating activities. . 108,597,340 66,464,016 58,846,345
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
2000 1999 1998
------------ ------------ ------------
Investing activities:
Acquisitions of property and equipment and
construction in progress . . . . . . . . . . . . . (17,149,614) (1,525,360) (3,049,364)
Proceeds from sales of property and equipment. . . . 1,562,045 10,445,656 30,330,922
Joint venture distributions (contributions),
net. . . . . . . . . . . . . . . . . . . . . . . . 319,225 1,216,560 167,931
Proceeds from the sale of joint venture
interests. . . . . . . . . . . . . . . . . . . . . -- 3,700,000 1,521,162
------------ ------------ ------------
Net cash (used in) provided by
investing activities . . . . . . . . . . . (15,268,344) 13,836,856 28,970,651
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings . . . . 11,356,785 2,327,684 8,834,318
Repayments of notes and long-term borrowings . . . . (27,500,000) (18,105,287) (40,628,521)
Distributions to General Partner and
Associate Limited Partners . . . . . . . . . . . . (21,691,765) (3,930,998) (2,807,724)
Distributions to Holders of Interests. . . . . . . . (58,479,921) (70,730,645) (50,522,705)
------------ ------------ ------------
Net cash used in financing
activities . . . . . . . . . . . . . . . . (96,314,901) (90,439,246) (85,124,632)
------------ ------------ ------------
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . (2,985,905) (10,138,374) 2,692,364
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . 71,965,185 82,103,559 79,411,195
------------ ------------ ------------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . $ 68,979,280 71,965,185 82,103,559
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS AND BASIS OF ACCOUNTING
Operations
The assets of Arvida/JMB Partners, L.P. (the "Partnership") have
consisted principally of interests in land in the process of being
developed into master-planned residential communities (the "Communities")
and, to a lesser extent, commercial properties; accounts receivable;
construction, brokerage and other support businesses; real estate assets
held for investment and certain club and recreational facilities. The
Partnership's Communities have contained a diversified product mix with
both resort and primary homes designed for the middle and upper income
segments of the various markets in which the Partnership operates.
Within the Communities, the Partnership has constructed, or caused to
be constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the State of Florida, with Communities also located
near Atlanta, Georgia; and Highlands, North Carolina. Additional
properties owned by the Partnership in or near its Communities have been or
are being developed as retail and/or office properties. The Partnership
has also owned or managed certain club and recreational facilities within
certain of its Communities. In addition, the Partnership has sold
individual residential lots and parcels of partially developed and
undeveloped land. The third-party builders and developers to whom the
Partnership has sold homesites and land parcels are generally smaller local
builders who require project specific financing for their developments and
whose operations have been more susceptible to fluctuations in the
availability and terms of financing.
Pursuant to Section 5.5J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5J(i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that is to be completed by October
2002.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and its consolidated ventures. All material intercompany
balances and transactions have been eliminated in consolidation. The
equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to those investments where
the Partnership's ownership interest is 50% or less.
Recognition of Profit from Sales of Real Estate
For sales of real estate, profit is recognized in full when the
collectability of the sales price is reasonably assured and the earnings
process is virtually complete. When the sale does not meet the require-
ments for recognition of income, profit is deferred until such requirements
are met. In certain circumstances, contracts for sales of real estate
contain provisions which allow the Partnership to repurchase the real
estate in the event certain conditions are not met. Profits generated from
sales subject to these provisions are generally deferred until the
Partnership no longer has any repurchase rights. For sales of residential
units, profit is recognized at the time of closing or if certain criteria
are met, on the percentage-of-completion method.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the amounts reported or disclosed in
the financial statements and accompanying notes. Actual results could
differ from those estimates.
Real Estate Inventories and Cost of Real Estate Revenues
Real estate inventories are carried at cost, including capitalized
interest and property taxes. The total cost of land, land development and
common costs are apportioned among the projects on the relative sales value
method. Costs pertaining to the Partnership's housing, homesite, and land
and property revenues reflect the cost of the acquired assets as well as
development costs, construction costs, capitalized interest, capitalized
real estate taxes and capitalized overhead. Certain marketing costs
relating to housing projects, including exhibits and displays, and certain
planning and other pre-development activities, excluding normal period
expenses, are capitalized and charged to housing cost of revenues as
related units are closed. Provisions for value impairment are recorded
whenever the estimated future undiscounted cash flows from operations and
projected net sales proceeds are less than the net carrying value plus
estimated costs to complete development, as discussed in note 14. A
warranty reserve is provided as residential units are closed. This reserve
is reduced by the cost of subsequent work performed.
Capitalized Interest and Real Estate Taxes
Interest and real estate taxes are capitalized to qualifying assets,
principally real estate inventories. Such capitalized interest and real
estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $2,092,739, $3,663,552 and $6,020,204 was incurred for the years
ended December 31, 2000, 1999 and 1998, respectively, all of which was
capitalized. The decrease in interest incurred for the year ended December
31, 2000 as compared to 1999 is due to the decrease in the average
outstanding debt balance. Interest payments, including amounts
capitalized, of $1,970,443, $3,162,866 and $5,589,418 were made for the
years ended December 31, 2000, 1999 and 1998, respectively.
Real estate taxes of $3,886,365, $3,362,265 and $5,127,075 were
incurred for the years ended December 31, 2000, 1999 and 1998,
respectively, of which $2,881,709, $1,901,589 and $2,632,163 were
capitalized for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in real estate taxes incurred during 1999 as
compared to 1998 is due to the Partnership receiving a credit from the
Indian Trace Community Development District (the "District") towards its
1999 tax assessment resulting from interest earned by the District on
construction reserves related to the District's improvement of land owned
by the Partnership. Real estate tax payments of $3,908,090, $3,685,853 and
$5,691,066 were made for the years ended December 31, 2000, 1999 and 1998,
respectively. In addition, real estate tax reimbursements totaling
$111,858, $278,139 and $543,796 were received from the Partnership's escrow
agent during 2000, 1999 and 1998, respectively. The preceding analysis of
real estate taxes does not include real estate taxes incurred or paid with
respect to the Partnership's club facilities and other operating
properties, as these taxes are included in cost of revenues for operating
properties.
Property and Equipment and Other Assets
Property and equipment are carried at cost less accumulated
depreciation and are depreciated on the straight-line method over the
estimated useful lives of the assets, which range from two to twenty-five
years. Expenditures for maintenance and repairs are charged to expense as
incurred. Costs of major renewals and improvements which extend useful
lives are capitalized.
Other assets are amortized on the straight-line method, which
approximates the interest method, over the useful lives of the assets,
which range from one to five years. Amortization of other assets,
excluding loan origination fees, of approximately $450,000, $444,000 and
$394,000 was recorded for the years ended December 31, 2000, 1999 and 1998,
respectively. Amortization of loan origination fees, which is included in
interest expense, of approximately $283,000, $366,000 and $351,000 was
recorded for the years ended December 31, 2000, 1999 and 1998,
respectively.
Investments in and Advances to Joint Ventures, Net
In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those joint
venture investments for which the Partnership does not have majority
control and where the Partnership's ownership interest is 50% or less.
Investments in the remaining joint ventures are carried at the
Partnership's proportionate share of the ventures' assets, net of their
related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ
from the recorded cost of the Partnership's proportionate share of the
joint ventures' net assets.
The Partnership periodically advances funds to the joint ventures in
which it holds ownership interests when deemed necessary and economically
justifiable. Such advances are generally interest bearing and are
repayable to the Partnership from amounts earned through joint venture
operations.
Equity Memberships
The amenities within certain of the Partnership's Communities are
conveyed to the respective homeowners through the sale of equity
memberships. Equity membership revenues and related cost of revenues are
included in land and property in the accompanying consolidated statements
of operations.
Interest Rate Swaps
The Partnership has entered into interest rate swap agreements to
manage its exposure to market risks related to changes in interest rates
associated with its variable rate debt under its credit facility. The
interest-rate swap agreements are in effect with respect to approximately
$19.2 million, which includes the portion of the term loan that has been
prepaid. The swap agreements are amortized annually through the scheduled
maturity of the term loan. These agreements involve the exchange of
amounts based on fixed interest rates for amounts based on variable
interest rates over the life of the loan without an exchange of the
notional amount upon which the payments are based. The differential to be
paid or received as interest rates change is calculated and paid monthly by
the appropriate party. Such payments or receipts are recorded as
adjustments to interest expense in the periods in which they are incurred.
Partnership Records
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect
the Partnership's accounts in accordance with GAAP and to consolidate the
accounts of the ventures as described above. Such GAAP and consolidation
adjustments are not reflected on the records of the Partnership. The net
effect of these items is summarized as follows:
2000 1999
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
Total assets . . . . . . . . . . . . $276,955,390 502,967,319 310,502,805 467,320,587
Partners' capital accounts:
General Partner and
Associate Limited Partners. . . 5,835,808 5,017,735 14,916,719 14,168,689
Holders of Interests . . . . . . 193,131,542 256,215,180 194,190,606 275,612,610
Net income:
General Partner and
Associate Limited Partners. . . 12,610,854 12,540,812 14,315,535 14,313,304
Holders of Interests . . . . . . 57,420,857 39,082,490 59,682,907 45,914,581
Net income per Interest . . . . . . 142.13 96.74 147.73 113.65
=========== =========== ============= =============
Reference is made to note 13 for further discussion of the allocation
of profits and losses to the General Partner, Associate Limited Partners
and Holders of Interests.
The net income per Interest is based upon the average number of
Interests outstanding during each period.
Reclassifications
Certain reclassifications have been made to the 1999 and 1998
financial statements to conform to the 2000 presentation.
Income Taxes
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable state law to remit directly to the state tax
authorities amounts representing withholding on applicable taxable income
allocated to the General Partner, Associate Limited Partners and Holders of
Interests. Such payments on behalf of the Holders of Interests are deemed
distributions to them. The cash distributions per Interest made during the
years ended December 31, 2000, 1999 and 1998 include $.05, $.08 and $.06,
respectively, which represent each Holder of Interests' share of a North
Carolina non-resident withholding tax paid directly to the state tax
authorities on behalf of the Holders of Interests for the 2000, 1999 and
1998 tax years, respectively.
(2) INVESTMENT PROPERTIES
The Partnership's Communities still under development are in various
stages, with estimated remaining build-outs ranging from one to two years.
Notwithstanding the estimated duration of the remaining build-outs, the
Partnership currently expects to complete an orderly liquidation of its
remaining assets by October 2002 with a winding up and final distribution
of any residual funds in 2004. The Weston Community, located in Broward
County, Florida is the Partnership's largest Community and is in its late-
stage of development. The Water's Edge Community in Atlanta, Georgia and
the Cullasaja Club near Highlands, North Carolina were sold out and closed
during 2000. The Partnership assigned its remaining interest in the equity
club memberships for the Broken Sound Club back to the club in 2000, and
terminated its interest in this project in connection with the settlement
of certain litigation. The Partnership's condominium project on Longboat
Key, Florida known as Arvida's Grand Bay was completed in 1999, and all
units were sold and closed by January 2000. The Jacksonville Golf &
Country Club and the River Hills Country Club Communities in Florida are in
their final stages of development. Only builder units remain to be sold at
Jacksonville Golf & Country Club at December 31, 2000.
Reference is made to Note 7 for a discussion regarding the sale of the
Partnership's assets in the Cullasaja Club Community. Reference is made to
Note 14 for a discussion regarding the sale of the Partnership's assets in
the Water's Edge Community. Reference is made to Item 3. Legal Proceedings
for a discussion of the Partnership's assignment of its remaining interest
in the Broken Sound Club in connection with the settlement of certain
litigation.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents may consist of U.S. Government obligations
with original maturities of three months or less, money market demand
accounts and repurchase agreements, the cost of which approximated market
value. At December 31, 2000, 1999 and 1998, no funds were invested in
treasury bills. Included in Restricted cash are amounts restricted under
various escrow agreements as well as cash which collateralizes letters of
credit as discussed in note 7. Credit risk associated with cash, cash
equivalents and restricted cash is considered low due to the high quality
of the financial institutions in which these assets are held.
(4) REAL ESTATE INVENTORIES
Real estate inventories at December 31, 2000 and 1999 are summarized
as follows:
2000 1999
------------ -----------
Land held for future development
or sale. . . . . . . . . . . . . . $ 3,027,934 3,439,317
Community development inventory:
Work in progress and
land improvements. . . . . . . . 114,543,221 144,873,522
Completed inventory. . . . . . . . 12,157,553 11,698,876
------------ -----------
Real estate inventories . . . . $129,728,708 160,011,715
============ ===========
Reference is made to note 14 for a discussion regarding the impairment
of long-lived assets.
(5) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2000 and 1999 are summarized as
follows:
2000 1999
----------- ----------
Land . . . . . . . . . . . . . . . . . $ 1,162,331 1,162,331
Land improvements. . . . . . . . . . . 20,867,037 21,279,599
Buildings. . . . . . . . . . . . . . . 18,411,216 18,787,366
Equipment and furniture. . . . . . . . 12,919,026 12,262,289
Construction in progress . . . . . . . 14,559,952 831,379
----------- ------------
Total . . . . . . . . . . . . . . 67,919,562 54,322,964
Accumulated depreciation. . . . . (26,299,226) (26,016,753)
----------- ------------
Property and equipment, net . . . $41,620,336 28,306,211
=========== ============
Depreciation expense of approximately $2,456,000, $2,581,000 and
$2,965,000 was incurred for the years ended December 31, 2000, 1999 and
1998, respectively.
The increase in Construction in progress at December 31, 2000 as
compared to 1999 is due primarily to the ongoing construction of The
Shoppes of Town Center in Weston (see related discussion in Note 7).
(6) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET
The Partnership has or had investments in real estate joint ventures
with ownership interests ranging from 40% to 50%. The Partnership's joint
venture interests accounted for under the equity method in the accompanying
consolidated financial statements are as follows:
LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------
A&D Title, L.P. 50 Florida
Arvida Pompano Associates
Joint Venture 50 Florida
Mizner Court Associates
Joint Venture 50 Florida
Mizner Tower Associates
Joint Venture 50 Florida
Ocala 202 Joint Venture 50 Florida
Tampa 301 Associates
Joint Venture 50 Florida
Arvida/RBG I Joint Venture 40 Florida
Arvida/RBG II Joint Venture 40 Florida
The following is combined unaudited summary financial information of
joint ventures accounted for under the equity method.
ASSETS
------
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Real estate inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,450 1,176,350
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338,768 820,590
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 443,218 1,996,940
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable, deposits and other liabilities . . . . . . . . . . . . . . $ 204,738 147,760
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 204,738 147,760
Venture partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . 119,240 924,590
Partnership's capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,240 924,590
----------- -----------
Total liabilities and partners' capital. . . . . . . . . . . . . . $ 443,218 1,996,940
=========== ===========
COMBINED RESULTS OF OPERATIONS
------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------ ------------ -------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,585,299 8,082,612 1,501,217
=========== ============ ============
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 163,855 1,176,245 601,117
=========== ============ ============
Partnership's proportionate share of
net income . . . . . . . . . . . . . . . . . . . . . . . $ 81,927 588,123 300,559
=========== ============ ============
Partnership's equity in earnings
of unconsolidated ventures . . . . . . . . . . . . . . . $ 275,580 1,083,804 335,893
=========== ============ ============
The following is a reconciliation of the Partnership's capital accounts within the joint ventures
to its investments in and advances to joint ventures as reflected on the accompanying consolidated balance
sheets:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
Partnership's capital, equity method . . . . . . . . . . . $ 119,240 924,590
Basis difference . . . . . . . . . . . . . . . . . . . . . 286,207 (474,176)
----------- ------------
Investments in joint ventures. . . . . . . . . . . . . . . 405,447 450,414
Advances to joint ventures, net. . . . . . . . . . . . . . 10,391 10,391
----------- ------------
Investments in and advances to
joint ventures, net . . . . . . . . . . . . . . . . $ 415,838 460,805
=========== ============
The Partnership's share of net income is based upon its ownership
interest in investments in joint ventures which are accounted for in
accordance with the equity method of accounting. Equity in earnings of
unconsolidated ventures represents the Partnership's share of each
venture's net income, and may reflect a component of purchase price
adjustments included in the Partnership's basis. Such adjustments are
generally amortized to income in relation to the cost of revenue of the
underlying real estate assets. These factors contribute to the
differential in the Partnership's proportionate share of the net income or
loss of the joint ventures and its Equity in earnings of unconsolidated
ventures as well as to the basis differential between the Partnership's
investments in joint ventures and its equity in underlying net assets, as
shown above.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership. In addition, under
certain circumstances, either pursuant to the joint venture agreements or
due to the Partnership's obligations as a general partner, the Partnership
may be required to make additional cash advances or contributions to
certain of the ventures.
In December 1999, the Partnership sold its interest in the Arvida
Corporate Park joint venture to its venture partner for approximately $3.7
million. This sale is reflected in Land and property revenues and cost of
revenues on the accompanying consolidated statements of operations for
1999.
During the second quarter of 2000, the Partnership received an
approximate $0.1 million distribution from the Tampa 301 Associates Joint
Venture. The amount distributed was in excess of the Partnership's
carrying value of its investment in this joint venture, and was therefore
recorded directly to Equity in earnings of unconsolidated ventures as of
December 31, 2000.
During the first quarter of 1999, the Partnership received an
approximate $0.6 million distribution from the Tampa 301 Associates Joint
Venture. The amount distributed was in excess of the Partnership's
carrying value of its investment in this joint venture. The recognition of
income related to this excess distribution is the primary cause for the
increase in equity in earnings of unconsolidated ventures in 1999 as
compared to 1998 and the decrease in equity in earnings of unconsolidated
ventures for 2000 as compared to 1999.
In March 1999, the Arvida Pompano Associates Joint Venture closed on
the sale of its commercial/industrial property on an "as is" basis to an
unaffiliated third party for a sales price of $2.9 million. The net
closing proceeds totalling approximately $2.7 million were disbursed to the
joint venture's lender in full satisfaction of the remaining balance
outstanding on the mortgage loan encumbering the property. As a result of
the property's sale, the joint venture and the Partnership have no further
obligation to the purchaser to fund costs related to the environmental
clean-up of this property. With respect to the environmental issues, the
clean-up, which began in July 1994, is in a "monitoring only" phase
pursuant to an informal arrangement with state environmental officials.
There are no assurances that further clean-up will not be required. If
further action is required and the previous owner is unable to fulfill all
its obligations as they relate to this environmental matter, the joint
venture and ultimately the Partnership may be obligated to the State of
Florida for such costs. Should this occur, the Partnership does not
anticipate the cost of this clean-up to be material to its operations.
In January 1998, the Partnership sold its interest in the H.A.E. Joint
Venture to one of its venture partners for a sale price of approximately
$1.7 million. This sale is reflected in Land and property revenues and
cost of revenues on the accompanying consolidated statements of operations
for 1998.
(7) NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable at December 31, 2000 and 1999 are
summarized as follows:
2000 1999
----------- -----------
Term loan credit facility of
$75,000,000 bearing interest
at approximately 8.0% at
December 31, 1999(A). . . . . . . . . . $ -- 27,500,000
Revolving line of credit of
$20,000,000 (A) . . . . . . . . . . . . -- --
Other notes and mortgages
payable (B). . . . . . . . . . . . . . -- 3,064,201
Construction loan of $20,000,000
bearing interest at approximately
8.6% at December 31, 2000 (C). . . . . 11,356,785 --
----------- -----------
Total. . . . . . . . . . . . . $11,356,785 30,564,201
=========== ===========
(A) On July 31, 1997, the Partnership obtained a new credit facility
from certain banks with Barnett Bank, N.A. ("Barnett") being the primary
agent on the facility. The credit facility consisted of a $75 million term
loan, a $20 million revolving line of credit and a $5 million letter of
credit facility and matures on July 31, 2001. The remaining balance on the
term loan was paid off in December 2000. Prior to September 1, 1998,
interest on the facility was based, at the Partnership's option, on the
relevant LIBOR plus 2.25% per annum or Barnett's prime rate. Loan
origination fees totaling 1% of the total facility were paid by the
Partnership upon the closing of the loan. Such fees have been capitalized
and have been amortized to interest expense over the life of the loan. The
amounts outstanding under the revolving line of credit and letter of credit
facility are secured by recorded mortgages on the real property of the
Partnership (including certain of its consolidated ventures) and pledges of
certain other assets. The credit facility also required that certain
financial covenants such as loan-to-value, net worth and debt ratios be
maintained throughout the loan term. All of the loans under this facility
were cross-collateralized and cross-defaulted.
The Partnership has interest rate swap agreements that are still in
effect with respect to approximately $19.2 million of the term loan. The
interest rate swap agreements fixed the interest rates under the term loan
at 8.02% and 7.84% with respect to $12,500,000 and $6,666,667 of the term
loan, respectively, and amortize in conjunction with the scheduled loan
repayments. These agreements expire on July 31, 2001. The letter of
credit facility has an outstanding balance of approximately $287,300. The
Partnership also has approximately $2.3 million of letters of credit
outstanding with a previous lender, all of which are cash collateralized.
For the year ended December 31, 2000, the combined effective interest rate
for the Partnership's credit facilities, including the amortization of loan
origination fees, and the effect of the interest rate swap agreements was
approximately 9.78% per annum.
(B) In March 2000, the Partnership closed on the sale of the
remaining lots at The Cullasaja Club Community, as well as its remaining
equity memberships in the Cullasaja Club to the Cullasaja Club, Inc. and
Cullasaja Realty Development, Inc. for a total sales price of approximately
$3.0 million. In addition, indebtedness owed to unaffiliated third party
lenders, as well as related accrued interest, was extinguished in
conjunction with this sale, as the payment of such principal and interest
was contingent upon net cash flows generated from the Cullasaja Community.
Such cash flows were not achieved, and as a result, the Partnership
recorded an extraordinary gain related to the extinguishment of debt of
approximately $6.2 million, as reflected on the accompanying consolidated
statements of operations. This transaction resulted in a gain for financial
reporting purposes and a loss for Federal income tax reporting purposes and
also contributed to the decrease in Equity Memberships, Accrued expenses
and other liabilities, and Notes and mortgages payable on the accompanying
consolidated balance sheets at December 31, 2000 as compared to 1999.
(C) In May 2000, the Partnership closed on a $20 million loan with
First Union National Bank for the development and construction of The
Shoppes of Town Center in Weston, a mixed use retail/office plaza
consisting of approximately 158,000 net leasable square feet. The loan was
made to an indirect, majority-owned subsidiary of the Partnership, and the
Partnership has guaranteed the obligations of the borrower, subject to a
reduction in the guarantee upon the satisfaction of certain conditions.
Interest on the loan is payable monthly based on the relevant LIBOR rate
plus 1.8% per annum during the first year of the loan. Thereafter, subject
to the satisfaction of certain conditions, including, among other things,
the lien-free completion of construction of the retail/office plaza by
June 1, 2001, the maturity date for the loan would be extended for two
years and payments of principal and interest would be due on the loan based
upon a 25-year loan amortization schedule. The loan may be prepaid in
whole or in part at any time, provided that the borrower pays any costs or
expenses of the lender incurred as a result of a prepayment on a date other
than the last day of a LIBOR interest period. Construction of The Shoppes
of Town Center in Weston began in March 2000 and is the primary cause for
the increase in Property and equipment on the accompanying consolidated
balance sheets at December 31, 2000 as compared to December 31, 1999, as
well as the increase in Additions to property and equipment on the
accompanying consolidated statement of cash flows for the year ended
December 31, 2000 as compared to 1999 and 1998. Construction is expected
to be completed in the fourth quarter of 2001. The Partnership has
requested modification to the loan for an extension of the one year period
for completion of construction currently required under the loan, and the
lender has requested that certain conditions be satisfied before agreeing
to such modification. The Partnership expects the loan will be modified.
In the absence of such modification, the Partnership would be required to
repay the loan on June 1, 2001. Currently, the property is approximately
79% pre-leased to tenants.
(8) EQUITY MEMBERSHIPS
Equity memberships represent the accumulation of costs incurred in
constructing club houses, golf courses, tennis courts and various other
related assets, less amounts allocated to memberships sold. These
amenities are conveyed to homeowners through the sale of equity
memberships.
The decrease in Equity memberships at December 31, 2000 as compared to
December 31, 1999 is primarily due to the sale of The Cullasaja Club
Community equity memberships in March 2000. (See Note 7.)
(9) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses payable by the Partnership to
affiliates of the General Partner for the years ended December 31, 2000,
1999 and 1998 are as follows:
2000 1999 1998
-------- ------- -------
Insurance commissions. . . . . . . . $306,268 249,654 231,451
Reimbursement (at cost) for
accounting services . . . . . . . . 132,147 117,822 134,250
Reimbursement (at cost) for
portfolio management services . . . -- 6,864 44,495
Reimbursement (at cost) for
treasury services . . . . . . . . . 329,097 294,972 408,338
Reimbursement (at cost) for
legal services. . . . . . . . . . . 14,884 64,262 76,806
-------- ------- -------
$782,396 733,574 895,340
======== ======= =======
The Partnership receives reimbursements from or reimburses other
affiliates of the General Partner engaged in real estate activities for
certain general and administrative costs including, and without limitation,
salary and salary-related costs relating to work performed by employees of
the Partnership and certain out-of-pocket expenditures incurred on behalf
of such affiliates. For the year ended December 31, 2000, the amount of
such costs incurred by the Partnership on behalf of these affiliates
totaled approximately $523,700. Approximately $46,700 was outstanding at
December 31, 2000, all of which was received as of March 9, 2001. For the
years ended December 31, 1999 and 1998, the Partnership was entitled to
receive reimbursements of approximately $807,100 and $1,855,000,
respectively.
In November 1997, The St. Joe Company completed its acquisition of a
majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), which
acquired the major assets of Arvida Company ("Arvida"). The transaction
did not involve the sale of any assets of the Partnership, nor the sale of
the General Partner's interest in the Partnership. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would otherwise provide pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employed most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to this sub-
management agreement generally have been provided by the same personnel.
St. Joe/Arvida is reimbursed for such services and personnel on the same
basis as Arvida under the management agreement, and such reimbursements are
made directly by the Partnership. Affiliates of JMB Realty Corporation own
a minority interest in St. Joe/Arvida.
For the years ended December 31, 2000 and 1999, the Partnership
reimbursed St. Joe/Arvida or its affiliates approximately $4,666,000 and
$4,545,000, respectively, for the services provided to the Partnership by
St. Joe/Arvida personnel pursuant to the sub-management agreement discussed
above. In addition, at December 31, 2000, the Partnership owed St.
Joe/Arvida approximately $123,000 for general and administrative costs
pursuant to the sub-management agreement including, and without limitation,
salary and salary-related costs relating to work performed by employees of
St. Joe/Arvida on behalf of the Partnership, all of which was paid as of
March 9, 2001. The Partnership also receives reimbursement from St.
Joe/Arvida for certain general and administrative costs including, and
without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership on behalf of St. Joe/Arvida. For
the years ended December 31, 2000 and 1999, the Partnership received
approximately $1,086,700 and $1,340,800, respectively, from St. Joe/Arvida
or its affiliates. In addition, $449,000 was owed to the Partnership at
December 31, 2000, all of which was received as of March 9, 2001.
The Partnership pays for certain general and administrative costs on
behalf of its clubs, homeowners associations and maintenance associations
(including salary and salary-related costs and legal fees). The
Partnership receives reimbursements from these entities for such costs.
For the year ended December 31, 2000, the Partnership was entitled to
receive approximately $1,001,000 from these entities. At December 31,
2000, approximately $82,500 was owed to the Partnership, of which
approximately $71,500 was received as of March 9, 2001. For the years
ended December 31, 1999 and 1998, the Partnership was entitled to
reimbursements of approximately $1,260,700 and $1,321,000, respectively,
from these entities.
The Partnership, pursuant to certain agreements, provides management
and other personnel and services to certain of its equity clubs and
homeowners associations. Pursuant to these agreements, the Partnership is
entitled to receive management fees for the services provided to these
entities. For the years ended December 31, 2000, 1999 and 1998, the
Partnership was entitled to receive approximately $455,200, $988,200 and
$1,396,600, respectively. At December 31, 2000, approximately $26,600 was
owed to the Partnership, none of which was received as of March 9, 2001.
The Partnership funds operating deficits of its homeowners
associations as required or deemed necessary. The funding of operating
deficits is expensed by the Partnership. For the year ended December 31,
2000, the Partnership was entitled to receive approximately $5,700, of
which approximately $3,200 was owed to the Partnership at December 31,
2000, none of which was received as of March 9, 2001.
In February 2000, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$13,638,944. Such amount included approximately $1,259,000 previously
deferred by the General Partner and Associate Limited Partners,
collectively, out of their share of the August 1997 distribution in
connection with the settlement of certain litigation, as well as
approximately $6,306,000 of the total $12,541,500 that had previously been
deferred pursuant to the terms of the Partnership Agreement. In April and
May 2000, distributions of approximately $23,100 were paid or deemed paid
to the General Partner and Associate Limited Partners, including
approximately $18,900 of net cash flow distributions that had previously
been deferred pursuant to the terms of the Partnership Agreement. In August
2000, a distribution of approximately $8,030,000 was made to the General
Partner and Associate Limited Partners which included the remaining amount
of net cash flow distributions that had previously been deferred of
approximately $6,216,600.
See Note 10 "Commitments and contingencies" for a discussion of the
settlement agreement in the Council of Villages and Savoy cases reached in
July 2000.
(10) COMMITMENTS AND CONTINGENCIES
As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and
bonds for approximately $287,300 and $18,019,600, respectively, at
December 31, 2000. In addition, certain joint ventures in which the
Partnership holds an interest are also contingently liable under bonds for
approximately $311,300 at December 31, 2000.
The Partnership leases certain building space for its management
offices, sales offices and other facilities, as well as certain equipment.
The building and equipment leases expire over the next one to four years.
Minimum future rental commitments under non-cancelable operating leases
having a remaining term in excess of one year as of December 31, 2000 are
as follows:
2001. . . . . . . . . . . . . $1,327,080
2002. . . . . . . . . . . . . 461,614
2003. . . . . . . . . . . . . 132,857
2004. . . . . . . . . . . . . 32,337
2005. . . . . . . . . . . . . --
Thereafter. . . . . . . . . . --
----------
$1,953,888
==========
Rental expense of $1,493,349, $1,698,529 and $2,206,337 was incurred
for the years ended December 31, 2000, 1999 and 1998, respectively. The
decrease in rent expense for 1999 as compared to 1998 is primarily due to
the sale of the Partnership's resale brokerage operations in Weston,
Sawgrass and Boca Raton in June 1999.
The Partnership was named a defendant in a number of homeowner
lawsuits, certain of which purported to be class actions, that allegedly in
part arose out of or related to Hurricane Andrew, which on August 24, 1992
resulted in damage to a former community development known as Country Walk.
The homeowner lawsuits alleged, among other things, that the damage
suffered by the plaintiffs' homes and/or condominiums within Country Walk
was beyond what could have been reasonably expected from the hurricane
and/or was a result of the defendants' alleged defective design,
construction, inspection and/or other improper conduct in connection with
the development, construction and sales of such homes and condominiums,
including alleged building code violations. The various plaintiffs sought
varying and, in some cases, unspecified amounts of compensatory damages and
other relief.
Several of these lawsuits alleged that the Partnership was liable,
among other reasons, as a result of its own alleged acts of misconduct or
as a result of the Partnership's alleged assumption of Arvida Corporation's
liabilities in connection with the Partnership's purchase of Arvida
Corporation's assets from Disney in 1987, which included certain assets
related to the Country Walk development. Pursuant to the agreement to
purchase such assets, the Partnership obtained indemnification by Disney
for certain liabilities relating to facts or circumstances arising or
occurring prior to the closing of the Partnership's purchase of the assets.
Over 80% of the Arvida-built homes in Country Walk were built prior to the
Partnership's ownership of the Community. The Partnership tendered each of
the above-described lawsuits to Disney for defense and indemnification in
whole or in part pursuant to the Partnership's indemnification rights.
Where appropriate, the Partnership also tendered these lawsuits to its
various insurance carriers for defense and coverage. The Partnership is
unable to determine at this time to what extent damages in these lawsuits,
if any, against the Partnership, as well as the Partnership's cost of
investigating and defending the lawsuits, will ultimately be recoverable by
the Partnership either pursuant to its rights of indemnification by Disney
or under contracts of insurance.
One of the Partnership's insurance carriers has been funding
settlements of various litigation related to Hurricane Andrew. In some,
but not all, instances, the insurance carrier has provided the Partnership
with written reservation of rights letters. The aggregate amount of the
settlements funded to date by this carrier is approximately $9.93 million.
The insurance carrier that funded these settlements pursuant to certain
reservations of rights has stated its position that it has done so pursuant
to various non-waiver agreements. The carrier's position was that these
non-waiver agreements permitted the carrier to fund settlements without
preventing the carrier from raising insurance coverage issues or waiving
such coverage issues. On May 23, 1995, the insurance carrier rescinded the
various non-waiver agreements currently in effect regarding the remainder
of the Hurricane Andrew litigation, allegedly without waiving any future
coverage defenses, conditions, limitations, or rights. For this and other
reasons, the extent to which the insurance carrier may recover any of these
proceeds from the Partnership is uncertain. Therefore, the accompanying
consolidated financial statements do not reflect any accrual related to
this matter.
Currently, the Partnership is a defendant in one remaining insurance
subrogation matter. On or about May 10, 1996, a subrogation claim entitled
Juarez v. Arvida Corporation et al. was filed in the Circuit Court of the
Eleventh Judicial Circuit in and for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company
("American Reliance"). In this suit, plaintiffs seek to recover damages,
pre-and post-judgment interest, costs and any other relief the Court may
deem just and proper in connection with $3,200,000 American Reliance
allegedly paid on specified claims at Country Walk in the wake of Hurricane
Andrew. Disney is also a defendant in this suit. The Partnership is
advised that the amount of this claim that allegedly relates to units it
sold is approximately $350,000. The Partnership is being defended by one
of its insurance carriers. Due to the uncertainty of the outcome of this
subrogation action, the accompanying consolidated financial statements do
not reflect any accruals related to this matter.
The Partnership has been named a defendant in a purported class action
entitled Lakes of the Meadow Village Homes, Condominium Nos. One, Two,
Three, Four, Five, Six, Seven, Eight and Nine Maintenance Associates, Inc.,
v. Arvida/JMB Partners, L.P. and Walt Disney World Company, Case No. 95-
23003-CA-08, filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida. The original complaint was filed on or about
November 27, 1995 and an amended complaint, which purports to be a class
action, was filed on or about February 28, 1997. In the case, plaintiffs
seek damages, attorneys' fees and costs on behalf of the 460 building units
they allegedly represent for, among other things, alleged damages
discovered in the course of making Hurricane Andrew repairs. Plaintiffs
allege that Walt Disney World Company is responsible for liabilities that
may arise in connection with approximately 80% of the buildings at the
Lakes of the Meadow Village Homes and that the Partnership is potentially
liable for the approximately 20% remaining amount of the buildings. In the
three count amended complaint, plaintiffs allege breach of building codes
and breach of implied warranties. In addition, plaintiffs seek rescission
and cancellation of various general releases obtained by the Partnership in
the course of the turnover of the Community to the residents. Previously,
the trial court had granted the Partnership summary judgment against the
plaintiffs' claims, based on the releases obtained by the Partnership. The
ruling was reversed on appeal, the appellate court finding that there were
issues of material fact, which precluded the entry of judgment for the
Partnership, and the case was remanded to the trial court for further
proceedings. On or about April 9, 1999, plaintiffs supplied a budget
estimate for repairs of the alleged defects and damages based on a limited
survey of nine buildings, only, out of a total of 115 buildings. Based on
this limited survey and assuming that the same alleged defects and damages
show up with the same frequency in the entire 460 buildings, plaintiffs
estimate the total repairs to cost approximately $7.0 million. Based on
the allegations of the amended complaint, it would appear plaintiffs would
seek to hold the Partnership responsible for approximately $1.4 million of
this amount. Discovery in this litigation is in its early stages. The
Partnership has not had an opportunity to examine all of the buildings nor
fully assess the alleged merits of the plaintiffs' report. The Partnership
is currently being defended by counsel for one of its insurance carriers.
The Partnership has agreed in principle to settle the claims brought in
connection with Lakes of the Meadows Village Homes Condominium No. 8
Maintenance Association, Inc. for a payment of $155,000 to be funded by one
of the Partnership's insurance carriers. The Partnership can give no
assurance that the settlement will be consummated. In the event the
settlement is not consummated, the Partnership intends to vigorously defend
itself against the claims of this condominium association, as well as those
made by the other associations, by, among other things, pursuing its
defenses of release.
In 1994, the Partnership was advised by Merrill Lynch that various
investors sought to compel Merrill Lynch to arbitrate claims brought by
certain investors of the Partnership representing approximately 5% of the
total of approximately 404,000 Interests outstanding. Merrill Lynch asked
the Partnership and its General Partner to confirm an obligation of the
Partnership and its General Partner to indemnify Merrill Lynch in these
claims against all loss, liability, claim, damage and expense, including
without limitation attorneys' fees and expenses, under the terms of a
certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests through Merrill Lynch on
behalf of the Partnership. These claimants sought to arbitrate claims
involving unspecified damages against Merrill Lynch based on Merrill
Lynch's alleged violation of applicable state and/or federal securities
laws and alleged violations of the rules of the National Association of
Securities Dealers, Inc., together with pendent state law claims. The
Partnership believes that Merrill Lynch has resolved some of these claims
through litigation and otherwise, and that Merrill Lynch may be defending
other claims. The Agency Agreement generally provides that the Partnership
and its General Partner shall indemnify Merrill Lynch against losses
occasioned by any actual or alleged misstatements or omissions of material
facts in the Partnership's offering materials used in connection with the
sale of Interests and suffered by Merrill Lynch in performing its duties
under the Agency Agreement, under certain specified conditions. The Agency
Agreement also generally provides, under certain conditions, that Merrill
Lynch shall indemnify the Partnership and its General Partner for losses
suffered by the Partnership and occasioned by certain specified conduct by
Merrill Lynch in the course of Merrill Lynch's solicitation of
subscriptions for, and sale of, Interests. The Partnership is unable to
determine at this time the ultimate investment of investors who have filed
arbitration claims as to which Merrill Lynch might seek indemnification in
the future. At this time, and based upon the information presently
available about the arbitration statements of claims filed by some of these
investors, the Partnership and its General Partner believe that they have
meritorious defenses to demands for indemnification made by Merrill Lynch.
Although there can be no assurance regarding the outcome of the claims for
indemnification, at this time, based on information presently available
about such arbitration statements of claims, the Partnership and its
General Partner do not believe that the demands for indemnification by
Merrill Lynch will have a material adverse effect on the financial
condition of the Partnership.
On or about October 16, 1995, a lawsuit was filed against the
Partnership and others in the Circuit Court of the 15th Judicial Circuit,
in and for Palm Beach County, Florida, entitled Council of Villages, Inc.
et al. v. Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida/JMB
Partners, Ltd., Broken Sound Club, Inc., and Country Club Maintenance
Association, Inc. (the "Council of Villages" case). The multi-count
complaint, as amended, was brought as a class action, and individually, on
behalf of various residents of the Broken Sound Community, and alleged that
defendants engaged in various acts of misconduct in, among other things,
the establishment, operation, management and marketing of the Broken Sound
golf course and recreational facilities, as well as the alleged improper
failure to turn over such facilities to the Broken Sound homeowners on a
timely basis. Plaintiffs sought, through various theories, including but
not limited to breach of ordinances, breach of fiduciary duty (constructive
trust), individual counts for fraudulent inducement, and civil theft,
damages in excess of $45 million, the appointment of a receiver for the
Broken Sound Club, other unspecified compensatory damages, the right to
seek punitive damages, treble damages, prejudgment interest, attorneys'
fees and costs.
On or about July 30, 1996, Savoy v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., Arvida/JMB Partners, Ltd., and Broken Sound Club, Inc. was
filed against the Partnership and others in the Circuit Court of the 15th
Judicial Circuit, in and for Palm Beach County, Florida. The lawsuit was
filed as a three-count complaint for dissolution of the Broken Sound Club,
Inc. ("Club"), and sought, among other things, the appointment of a
custodian or receiver for the Club, a determination that certain acts be
deemed wrongful, the return to the Club of an amount of money in excess of
$2.5 million in alleged "operating profits," an injunction against the
charging of certain dues, an injunction requiring the Club to produce
certain financial statements, and such other relief as the Court deemed
just, fair and proper. This action was consolidated with the Council of
Villages case.
In April 1997, the Court issued an order certifying as a class action
claims respecting the alleged violation of the Boca Raton ordinances. On
appeal, the appellate court approved certification of a class action for
the following counts: breach of ordinances, breach of fiduciary duty,
civil theft (treble damages), and unjust enrichment. The Partnership filed
a third party complaint for indemnification and contribution against Disney
in these consolidated actions in the event the Partnership were held liable
for acts taken by a subsidiary of Disney prior to the Partnership's
involvement in the Club and property.
The parties to the Council of Villages case filed cross motions for
summary judgment and other motions on various matters related to the case.
The Court granted certain of the plaintiffs' and the Partnership's
respective motions for summary judgment. The Court also allowed the
plaintiffs to amend their complaint to seek reimbursement from the
Partnership of legal fees and expenses paid by the Partnership's co-
defendants in this lawsuit. Defendants' fees were split among the Country
Club Maintenance Association, Inc. ("CCMA"), the Club, and the Partnership.
Approximately $6,100,000 in legal fees and expenses were incurred in the
lawsuit as of December 31, 2000.
Among the matters remaining for trial were the following: damages for
breach of the land dedication ordinance; the damages, if any, recoverable
for alleged unjust enrichment, including without limitation the alleged
damages for return of the fees charged for club membership offset by the
value of the club, excessive management fees, and from the planting of
ficus trees; the Partnership's exposure, if any, for the return of a
portion of the attorneys' fees as described above; and the issues arising
from the Partnership's third party complaint against Disney.
On July 13, 2000, the Court gave preliminary approval to a mediated
settlement agreement between the Partnership and the plaintiffs in the
Council of Villages and Savoy cases. Notice of the proposed settlement was
given to the plaintiff class in July 2000. Final Court approval of the
settlement occurred on September 21, 2000. The Court's final approval was
not appealed. Also, on August 3, 2000, the Partnership and Disney entered
into an agreement to settle the Partnership's third party complaint against
Disney that was filed in the Council of Villages case. Closing for the
settlement agreements occurred on November 8, 2000. In accordance with the
two settlement agreements, the following actions, among others, took place:
(1) the Council of Villages case, including the third party complaint
against Disney, and the Savoy case were dismissed with prejudice and
appropriate releases were executed; (2) the Partnership paid approximately
$2.2 million to the Club, approximately $1.1 million to CCMA, and $1.65
million to the Council of Villages; (3) the Partnership continued to manage
the operations of the Club from January 1 through November 8, 2000 for a
management fee of $175,000; (4) the Club and CCMA limited to $500,000 the
amount which they agreed to pay in legal fees and costs for calendar year
2000 in defense of the Council of Villages and Savoy cases and the
Partnership agreed to pay any fees and costs in excess of $500,000, which
amount the Partnership does not expect to be substantial; (5) the
Partnership forgave certain indebtedness in the approximate amount of $1.6
million owed by the Club; (6) the Partnership assigned to the Club 207
unsold Club memberships which the Partnership had held for sale; (7) Disney
paid $900,000 to the Partnership; and (8) the Partnership provided an
interest-free line of credit for the Club's working capital needs, which
has been repaid to the Partnership. Pursuant to the settlement, management
of the Club was turned over to the members at closing of the settlement
agreements.
The Partnership is also a defendant in several actions brought against
it arising in the normal course of business. It is the belief of the
General Partner, based on knowledge of facts and advice of counsel, that
the claims made against the Partnership in such actions will not result in
any material adverse effect on the Partnership's consolidated financial
position or results of operations.
The Partnership may be responsible for funding certain other ancillary
activities for related entities in the ordinary course of business which
the Partnership does not currently believe will have any material adverse
effect on its consolidated financial position or results of operations.
(11) TAX INCREMENT FINANCING ENTITIES
In connection with the development of the Partnership's Weston
Community, bond financing is utilized to construct certain on-site and off-
site infrastructure improvements, including major roadways, lakes, other
waterways and pump stations, which the Partnership would otherwise be
obligated to finance and construct as a condition to obtain certain
approvals for the project. This bond financing is obtained by the
District, a local government district operating in accordance with Chapter
190 of the Florida Statutes. Under this program, the Partnership is not
obligated directly to repay the bonds. Rather, the bonds are expected to
be fully serviced by special assessment taxes levied on the property, which
effectively collateralizes the obligation to pay such assessments until
land parcels are sold. At such point, the liability for the assessments
related to parcels sold will be borne by the purchasers through a tax
assessment on their property. These special assessment taxes are designed
to cover debt service on the bonds, including principal and interest
payments, as well as the operating and maintenance budgets of the District.
The use of this type of bond financing is a common practice for major land
developers in South Florida.
Prior to July 1991, the District had issued variable rate bonds
totaling approximately $96 million which were to mature in various years
commencing in May 1991 through May 2011. During 1995, in order to reduce
the exposure of variable rate debt, the District pursued new bond
issuances. As a result, during March and December 1995, the District
issued approximately $99 million and $13.3 million of bonds, respectively,
at fixed rates ranging from 4.0% to 8.25% per annum with maturities
commencing in May 1995 through May 2011. The proceeds from these bond
offerings were used to refund the bonds issued prior to July 1991 described
above, as well as to fund the issuance costs incurred in connection with
the offerings and deposits to certain reserve accounts for future bond debt
service requirements. In July 1997, the District issued another
approximate $41.6 million of fixed rate bonds. These bonds bear interest
ranging from 4.0% to 5.0% (payable in May and November each year until
maturity or prior redemption), with maturities commencing in May 1999
through May 2027 (the "Series 1997 Bonds"). The Series 1997 Bonds were
issued for the purpose of paying costs of certain improvements to the
District's water management system, as well as to fund certain issuance
costs incurred in connection with the offerings, deposit funds into certain
reserve accounts, and pay capitalized interest on these bonds. At
December 31, 2000, the amount of bonds issued and outstanding totaled
approximately $120.1 million. For the years ended December 31, 2000, 1999
and 1998, the Partnership paid special assessments related to the bonds of
approximately $2.8 million, $1.9 million and $3.6 million, respectively.
Reference is made to Note 1 for further discussion regarding these
assessments.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS #107 requires the disclosure of the fair values of all financial
assets and liabilities for which it is practicable to estimate such values.
Value is defined in SFAS #107 as the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The Partnership believes the carrying
amounts of its Cash and cash equivalents, Trade and other accounts
receivable, Investments in and advances to joint ventures and Notes and
mortgages payable approximates their fair values at December 31, 2000 and
1999.
(13) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2F which allocates Profits, as defined, to the General Partner
and Associate Limited Partners), profits or losses of the Partnership will
be allocated as follows: (i) profits will be allocated such that the
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such
fiscal period with the remainder allocated to the Holders of Interests,
except that in all events, the General Partner shall be allocated at least
1% of profits and (ii) losses will be allocated 1% to the General Partner,
1% to the Associate Limited Partners and 98% to the Holders of Interests.
In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such year.
The Holders of Interests will be allocated losses such that the sum of
amounts allocated to the General Partner, Associate Limited Partners, and
Holders of Interests equals the profits for the given year.
For the years ended December 31, 2000, 1999 and 1998, the Partnership
had net income for financial reporting and Federal income tax purposes.
The amount of net income allocated, collectively, to the General and
Associate Limited Partners for financial reporting and tax purposes for the
year ended December 31, 2000 was approximately $12,611,000 and $12,541,000,
respectively. The amount of net income allocated, collectively, to the
General and Associate Limited Partners for financial reporting and tax
purposes for the year ended December 31, 1999 was approximately $14,316,000
and $14,313,000, respectively. The amount of net income allocated,
collectively, to the General and Associated Limited Partners for financial
reporting and tax purposes for the year ended December 31, 1998 was
approximately $6,062,000 and $6,061,000, respectively. These allocations
are based on cash distributions to the General Partner and the Associate
Limited Partners with an allocation of at least 1% of profits to the
General Partner in accordance with Section 4.2A of the Partnership
Agreement.
In general, and subject to certain limitations, the distribution of
Cash Flow (as defined) after the initial admission date is allocated 90% to
the Holders of Interests and 10% to the General Partner and the Associate
Limited Partners (collectively) until the Holders of Interests have
received cumulative distributions of Cash Flow equal to a 10% per annum
return (non-compounded) on their Adjusted Capital Investments (as defined)
plus the return of their Capital Investments; provided, however, that
4.7369% of the 10% amount otherwise distributable to the General Partner
and Associate Limited Partners (collectively) is deferred, and such amount
is paid to the Holders of Interests, until the Holders of Interests have
received Cash Flow distributions equal to their Capital Investments (i.e.,
$1,000 per Interest). Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) are distributable to them out of
Cash Flow to the extent of one-half of Cash Flow otherwise distributable to
the Holders of Interests at such time as the Holders of Interests have
received total distributions of Cash Flow equal to their Capital
Investments. Thereafter, all distributions of Cash Flow will be made 85%
to the Holders of Interests and 15% to the General Partner and the
Associate Limited Partners (collectively); provided, however, that the
General Partner and the Associate Limited Partners (collectively) shall be
entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this
sentence. With the distribution made in February 2000, the Holders of
Interests have received total distributions of Cash Flow in excess of their
Capital Investments (i.e., $1,000 per Interest). Accordingly, during 2000,
the General Partner and Associated Limited Partners (collectively) were
entitled to receive, and did receive, the amount of their deferred
distributions.
Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner was to
elect to pursue one of the following courses of action on or before
October 31, 1997: (i) to cause the Interests to be listed on a national
exchange or to be reported by the National Association of Securities
Dealers Automated Quotation System; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase, all of the Interests at their
then appraised fair market value (as determined by an independent
nationally recognized investment banking firm or real estate advisory
company); or (iii) to commence a liquidation phase in which all of the
Partnership's remaining assets are sold or disposed of by the end of the
fifteenth year from the termination of the offering. On October 23, 1997,
the Board of Directors of the General Partner met and approved a resolution
selecting the option for the Partnership to commence an orderly liquidation
of its remaining assets that is to be completed by October 2002.
(14) IMPAIRMENT OF LONG-LIVED ASSETS
In December 1999, the Partnership recorded an inventory impairment of
$1 million to the carrying value of its Water's Edge Community. This loss
was recorded based upon an analysis of expected future net cash flows from
the sale of the assets in Water's Edge as compared to the future estimated
carrying value of the assets at disposition.
In March 2000, the Partnership entered into a contract with an
unaffiliated third party builder for the bulk sale of the remaining lot
inventory and the sales center at its Water's Edge Community for a sales
price of approximately $3.2 million. The contract provided for the lots to
be purchased in three phases. The closing of the first phase of 29 lots
was completed in March 2000 for approximately $0.7 million. The closing of
the second phase of 51 lots and the sales center was completed in September
2000 for approximately $1.6 million. The closing of the third phase of 23
lots was completed in December 2000 for approximately $0.9 million. These
sales are reflected in Homesite revenues and costs of revenues on the
accompanying consolidated statements of operations as of December 31, 2000.
These transactions resulted in no gain or loss for financial reporting
purposes in 2000 and an approximate $3.2 million loss for Federal income
tax reporting purposes in 2000.
(15) LEGAL SETTLEMENTS
On May 28, 1999, the Partnership entered into an agreement with Disney
which resolved all the claims and counterclaims raised in certain
litigation related to the Partnership's acquisition of assets from a
subsidiary of Disney. Under the terms of the settlement agreement, Disney,
among other things, paid the Partnership $9.0 million, which is reflected
as Legal Settlement on the accompanying consolidated statements of
operations for the year ended December 31, 1999, and released any claims
relating to the claims pool. The lawsuit was dismissed on June 3, 1999,
pursuant to the terms of the settlement agreement.
(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
----------- ---------- ------------- ------------
Total revenues . . . $97,402,569 92,150,983 88,082,652 96,014,053
Gross operating
profit . . . . . . 18,399,724 26,921,826 19,120,027 18,373,674
Net income . . . . . 15,847,979 22,705,194 14,558,680 20,886,589
Net income per
Limited Partner-
ship Interest. . . 38.84 55.63 34.49 18.77
Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
2000 2000 2000 2000
----------- ---------- ------------- ------------
Total revenues . . . $69,571,755 99,650,409 96,458,767 128,630,863
Gross operating
profit . . . . . . 12,910,194 21,704,455 19,677,536 29,073,040
Income before
extraordinary
item . . . . . . . 8,625,756 15,498,233 15,559,521 24,143,157
Net income (1) . . . 14,830,800 15,498,233 15,559,521 24,143,157
Net income per
Limited Partner-
ship Interest
before extra-
ordinary item. . . 21.14 37.93 18.70 49.15
Net income per
Limited Partner-
ship Interest. . . 36.35 37.93 18.70 49.15
(1) The first quarter of 2000 includes an extraordinary gain related to
the extinguishment of debt of approximately $6.2 million.
(17) SUBSEQUENT EVENTS
During January 2001, the Partnership made a distribution for 2000 of
$40,400,000 to its Holders of Interests ($100 per Interest) and $4,488,889
to the General Partner and Associate Limited Partners, collectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, all of the outstanding shares of stock of which are
owned by JMB Investment Holdings-I, Inc., a Delaware corporation.
Substantially all of the outstanding shares of stock of JMB Investment
Holdings-I, Inc. are owned indirectly by JMB Realty Corporation, a Delaware
corporation ("JMB"). Substantially all of the outstanding shares of stock
of JMB are owned by certain of its officers, directors, members of their
families and their affiliates. Arvida/JMB Managers, Inc. was substituted
as general partner of the Partnership as a result of a merger on March 30,
1990 of an affiliated corporation that was the then general partner of the
Partnership into Arvida/JMB Managers, Inc., which, as the surviving
corporation of such merger, continues as General Partner. All references
herein to "General Partner" include Arvida/JMB Managers, Inc. and its
predecessor, as appropriate. The General Partner has responsibility for
all aspects of the Partnership's operations. The Associate Limited
Partners of the Partnership are Arvida/JMB Associates, an Illinois general
partnership, of which JMB and certain of its current and former officers
and directors and their affiliates are, indirectly, partners, and
Arvida/JMB Limited Partnership, an Illinois limited partnership, of which
Arvida/JMB Associates is the general partner. An affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is the limited partner of
Arvida/JMB Limited Partnership. Various relationships of the Partnership
to the General Partner and its affiliates are described under the caption
"Conflicts of Interest" at pages 21-24 of the Prospectus, which description
is hereby incorporated herein by reference to Exhibit 99.1 to this report.
The director and executive officers of the General Partner of the
Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 04/08/87
Neil G. Bluhm President 04/08/87
H. Rigel Barber Vice President 04/08/87
Gailen J. Hull Vice President 04/09/87
Gary Nickele Vice President 04/08/87
and Director 08/08/00
James D. Motta Vice President 04/09/87
At the annual meeting of the General Partner held on August 8, 2000,
Messrs. Judd D. Malkin, Neil G. Bluhm, Burton E. Glazov, Stuart C. Nathan,
A. Lee Sacks and John G. Schreiber were removed as Directors and Gary
Nickele was elected as sole Director of the General Partner. In addition
to being Directors, Messrs. Malkin, Glazov, Nathan, Sacks and Schreiber had
also served as members of the Special Committee of the General Partner's
Board of Directors, which had been established to deal with all matters
relating to tender offers for Interests in the Partnership as well as
certain other matters. Messrs. Malkin and Bluhm remain as Chairman and
President, respectively, of the General Partner. Mr. Nickele previously
served as sole Director of the General Partner from December 1990 until
May 31, 1996.
There is no family relationship among any of the foregoing director or
officers. Mr. Nickele has been elected to serve a one-year term as
director until the annual meeting of the General Partner to be held on
August 14, 2001. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the General Partner to be held on August 14, 2001.
There are no arrangements or understandings between or among any of said
director or officers and any other person pursuant to which the director or
any officer was selected as such.
The foregoing director and most of the officers are also officers
and/or directors of JMB, which is the corporate general partner of Carlyle
Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate
Limited Partnership-XIV ("Carlyle-XIV") and Carlyle Real Estate Limited
Partnership-XV ("Carlyle-XV") and the managing general partner of JMB
Income Properties, Ltd.-V ("JMB Income-V"). JMB is also the sole general
partner of the associate general partner of Carlyle-XIII, Carlyle-XIV, and
Carlyle-XV. Most of the foregoing director and officers are also officers
and/or directors of various affiliated companies of JMB. Certain of the
foregoing officers are partners, indirectly through other partnerships, of
the Associate Limited Partners of the Partnership.
The business experience during the past five years of such director
and officers of the General Partner of the Partnership includes the
following:
Judd D. Malkin (age 63) is Chief Financial Officer, Chairman and a
director of JMB and an officer and/or director of various JMB affiliates.
He is also an individual general partner of JMB Income-V. Mr. Malkin has
been associated with JMB since October, 1969. Mr. Malkin was also a Co-
Chairman of the Board of Directors of Urban Shopping Centers, Inc. from its
inception in 1993 until November 2000. He is also a director of Chisox
Corporation, which is the general partner of a limited partnership that
owns the Chicago White Sox, a Major League Baseball team, and a director of
CBLS, Inc., which is the general partner of the general partner of a
limited partnership that owns the Chicago Bulls, a National Basketball
Association team.
Neil G. Bluhm (age 63) is President and a director of JMB and an
officer and/or director of various JMB affiliates. He is also an
individual general partner of JMB Income-V. Mr. Bluhm has been associated
with JMB since August, 1970. Mr. Bluhm is also a principal of Walton
Street Capital, L.L.C., which sponsors real estate investment funds. He
was also Co-Chairman of the Board of Directors of Urban Shopping Centers,
Inc. from its inception in 1993 until November 2000. Mr. Bluhm is a member
of the Bar of the State of Illinois.
H. Rigel Barber (age 52) is Chief Executive Officer and Executive Vice
President of JMB and an officer of various JMB affiliates. Mr. Barber has
been associated with JMB since March, 1982. He received a J.D. degree from
the Northwestern Law School and is a member of the Bar of the State of
Illinois.
Gailen J. Hull (age 52) is Senior Vice President of JMB and an officer
of various JMB affiliates. Mr. Hull has been associated with JMB since
March, 1982. He holds a Masters degree in Business Administration from
Northern Illinois University and is a Certified Public Accountant.
Gary Nickele (age 48) is Executive Vice President and General Counsel
of JMB and an officer and/or director of various JMB affiliates. Mr.
Nickele has been associated with JMB since February, 1984. He holds a J.D.
degree from the University of Michigan Law School and is a member of the
Bar of the State of Illinois.
James D. Motta (age 45) has been President and Chief Executive Officer
of Arvida since April 1995, and President and Chief Executive Officer of
St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), a joint venture among
affiliates of The St. Joe Company and of JMB for real estate development,
ownership and management, since November 1997.
Neil G. Bluhm was Executive Vice President, a director and Vice
Chairman of the Board of Directors of Liberty House, Inc., and Judd D.
Malkin was Executive Vice President, a director and Chairman of the Board
of Directors of Liberty House, Inc. On March 19, 1998, Liberty House, Inc.
filed a voluntary petition under Chapter 11 of the United States Bankruptcy
Code. Liberty House, Inc., which owned and operated department stores in
Hawaii and Guam, filed the Chapter 11 proceeding in part to enable it to
achieve an orderly reorganization of its debt to serviceable levels. In
January 2001, the United States Bankruptcy Court for the District of Hawaii
entered an order confirming a plan of reorganization for Liberty House,
Inc. In connection with the confirmation of the reorganization plan,
Messrs. Bluhm and Malkin resigned as officers and directors of Liberty
House, Inc. in February 2001.
ITEM 11. EXECUTIVE COMPENSATION
The officers and directors of the General Partner receive no direct
remuneration in such capacities from the Partnership. The General Partner
and the Associate Limited Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Holders of
Interests, and a share of profits or losses as described under the caption
"Cash Distributions and Allocations of Profit and Losses" at pages 61 to 64
of the Prospectus and at pages A-9 to A-16 of the Partnership Agreement,
which descriptions are incorporated herein by reference to Exhibit 99.1, to
this report. Reference is also made to Notes 1 and 13 for a description of
such distributions and allocations. The General Partner and the Associate
Limited Partners, collectively, received cash distributions in 2000
totaling $21,691,765 and in January 2001 totaling $4,488,889. The cash
distributions paid during 2000 included amounts previously deferred by the
General Partner and the Associate Limited Partners (totalling approximately
$13,800,000) pursuant to the terms of the Partnership Agreement and in
connection with the settlement of certain litigation. Pursuant to the
Partnership Agreement, the General Partner and Associate Limited Partners
were allocated profits for Federal income tax purposes for 2000 of
approximately $12,541,000. Reference is made to Note 13 for further
discussion of this allocation.
The Partnership is permitted to engage in various transactions
involving the General Partner and its affiliates, as described under the
captions "Management of the Partnership" at pages 56 to 59, "Conflicts of
Interest" at pages 21-24 of the Prospectus and "Rights, Powers and Duties
of the General Partner" at pages A-16 to A-28 of the Partnership Agreement,
which descriptions are hereby incorporated herein by reference to Exhibit
99.1 to this report. Such transactions may involve conflicts of interest
for the General Partner or its affiliates. The relationships of the
General Partner (and its directors and executive officers) and its
affiliates to the Partnership are set forth above in Item 10.
The Partnership and Arvida entered into an information systems sharing
agreement that sets forth (i) the Partnership's and Arvida's mutual
ownership rights with respect to certain proprietary computer software
jointly developed by the Partnership and Arvida, and (ii) the arrangement
for the sharing by Arvida of certain computer hardware and software owned,
leased or licensed by the Partnership and its affiliates and various
related information systems services (collectively, the "Information
Resources"), provided that Arvida pays its allocable share of the costs of
using such Information Resources.
In November 1997, St. Joe/Arvida acquired the major assets of Arvida,
including the Arvida name and service marks with respect to the Arvida
name. Pursuant to a license agreement with Arvida, the Partnership has a
non-exclusive right to use the Arvida name and service marks with respect
to the Arvida name. In connection with the acquisition of Arvida's assets,
St. Joe/Arvida was assigned Arvida's rights and obligations under the
license agreement with the Partnership. In addition, St. Joe/Arvida was
assigned Arvida's rights and obligations under the information systems
sharing agreement discussed above.
St. Joe/Arvida also entered into a sub-management agreement with
Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides a
substantial portion of the development and management supervisory and
advisory services (and the personnel therefor) to the Partnership that
Arvida would otherwise provide pursuant to its management agreement with
the Partnership. Effective January 1, 1998, St. Joe/Arvida employs most of
the personnel previously employed by Arvida, and the services provided to
the Partnership pursuant to the sub-management agreement are provided by
the same personnel. St. Joe/Arvida is reimbursed for such services and
personnel on the same basis as Arvida under its management agreement, and
such reimbursements are made directly to St. Joe/Arvida by the Partnership.
The total of such costs for the year ended December 31, 2000, was
approximately $4,666,000. In addition, approximately $123,000 was
outstanding at December 31, 2000 pursuant to the sub-management agreement,
all of which was paid as of March 9, 2001. The Partnership also receives
reimbursement from St. Joe/Arvida for certain general and administrative
costs including, and without limitation, salary and salary-related costs
relating to work performed by employees of the Partnership on behalf of St.
Joe/Arvida. For the year ended December 31, 2000, the Partnership received
approximately $1,086,700 from St. Joe/Arvida or its affiliates. In
addition, $449,000 was owed to the Partnership at December 31, 2000, all of
which was received as of March 9, 2001. The St. Joe Company owns a
majority interest in St. Joe/Arvida, and affiliates of JMB own a minority
interest in St. Joe/Arvida.
JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 2000 of
approximately $306,300 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which was paid as of
December 31, 2000. Such commissions are at rates set by insurance
companies for the classes of coverage provided. For the years 1999 and
1998, JMB Insurance Agency, Inc. earned and received insurance brokerage
commissions of approximately $249,700 and $231,500, respectively.
The General Partner of the Partnership or its affiliates are entitled
to reimbursement for their direct expenses or out-of-pocket expenses
relating to the administration of the Partnership and the acquisition,
development, ownership, supervision, and operation of the Partnership
assets. In 2000, the General Partner and its affiliates were entitled to
reimbursements for legal, accounting, portfolio management and treasury
services. Such costs for 2000 were approximately $476,100, all of which
were paid as of December 31, 2000. For 1999 and 1998, such costs were
approximately $484,000 and $663,900, respectively.
The Partnership was also entitled to receive reimbursements from
affiliates of the General Partner for certain general and administrative
expenses including, and without limitation, salary and salary-related
expenses relating to work performed by employees of the Partnership and
certain out-of-pocket expenditures incurred on behalf of such affiliates.
For the year ended December 31, 2000, the total of such costs was
approximately $523,700. Approximately $46,700 was outstanding as of
December 31, 2000, all of which was received as of March 9, 2001.
Amounts payable to or by the General Partner or its affiliates do not
bear interest.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) The following have reported beneficial ownership of more than 5%
of the outstanding Interests of the Partnership.
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
Limited Partnership The St. Joe Company 106,200.4399 26.3%
Interests and 1650 Prudential Drive, Interests
Assignee Interests Suite 400 directly (1)
therein Jacksonville, Florida 32207
Limited Partnership Alfred I. duPont 106,200.4399 26.3%
Interests and Testamentary Trust Interests
Assignee Interests indirectly (2)
therein
Limited Partnership The Nemours 106,200.4399 26.3%
Interests and Foundation Interests
Assignee Interests indirectly (2)
therein
Limited Partnership Winfred L. Thornton 106,200.4399 26.3%
Interests and Interests
Assignee Interests indirectly (2)
therein
Limited Partnership Jacob C. Belin 106,200.4399 26.3%
Interests and Interests
Assignee Interests indirectly (2)
therein
Limited Partnership William T. 106,200.4399 26.3%
Interests and Thompson III Interests
Assignee Interests indirectly (2)
therein
Limited Partnership Hugh M. Durden 106,200.4399 26.3%
Interests and Interests
Assignee Interests indirectly (2)
therein
Limited Partnership John F. Porter III 106,200.4399 26.3%
Interests and Interests
Assignee Interests indirectly (2)
therein
Limited Partnership Herbert H. Peyton 106,200.4399 26.3%
Interests and Interests
Assignee Interests indirectly (2)
therein
(1) Reflects beneficial ownership of Interests held directly by The St.
Joe Company for which it has been reported that it has shared voting and
dispositive power.
(2) Reflects indirect beneficial ownership of Interests held directly by
the St. Joe Company. Messrs. Thorton, Belin, Thompson, Durden, Porter and
Peyton are the trustees and directors of the Alfred I. duPont Testamentary
Trust (the "Trust") and The Nemours Foundation (the "Foundation"),
respectively. As a result of the Trust's and the Foundation's respective
direct and beneficial ownerships of outstanding shares of common stock of
The St. Joe Company, the Trust, Foundation and Messrs. Thorton, Belin,
Thompson, Durden, Porter and Peyton are or may be deemed to be indirect
beneficial owners of 106,200.4399 Interests for which they each have or may
be deemed to have shared voting and dispositive power. See note (1) above.
The address for each of the Trust, Foundation and Messrs. Thorton, Belin,
Thompson, Durden, Porter and Peyton is 1650 Prudential Drive, Suite 300,
Jacksonville, Florida 32207.
(b) The General Partner and its executive officers and directors
beneficially own the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
Limited Partnership General Partner None --
Interests and and its executive
Assignee Interests officers and
therein director as
a group
- ---------------
No executive officer or director of the General Partner of the
Partnership possesses a right to acquire beneficial ownership of Interests
of the Partnership.
(c) There exists no arrangement, known to the Partnership, the
operation of which may at a subsequent date result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The transactions and business relationships with the General Partner,
its affiliates and their management are described in Items 10, 11 and 12
above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements. (See Index to Financial
Statements filed with this annual report on Form 10-K).
2. Exhibits.
3.1. Amended and Restated Agreement of Limited
Partnership.**
3.2. Assignment Agreement by and among the General
Partner, the Initial Limited Partner and the Partnership.**
4.1. Credit Agreement dated July 31, 1997 between
Barnett Bank, N.A. and The Other Lenders and Arvida/JMB Partners, L.P. is
hereby incorporated by reference to the Partnership's Report for June 30,
1997 on Form 10-Q (File No. 0-16976) dated August 8, 1997, as amended.
4.2. Amendment to Credit Agreement dated
September 1, 1998 is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-16976)
dated November 11, 1998.
4.3. Absolute Assignment of Mortgages and Other
Documents for $11,250,000 Term Loan Promissory Note, $3,000,000 Line of
Credit Promissory Note, and $750,000 Demand Note Letter of Credit
Promissory Note is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-16976)
dated November 11, 1998.
4.4. Absolute Assignment of Mortgages and Other
Documents for $28,125,000 Term Loan Promissory Note, $7,500,000 Line of
Credit Promissory Note, and $1,875,000 Demand Note Letter of Credit
Promissory Note is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-16976)
dated November 11, 1998.
4.5. Absolute Assignment of Deed to Secure Debt and
Other Documents is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-16976)
dated November 11, 1998.
4.6. Term Loan Promissory Note dated September 1,
1998 Payable to the Order of First Union National Bank is hereby
incorporated herein by reference to the Partnership's Report for September
30, 1998 on Form 10-Q (File No. 0-16976) dated November 11, 1998.
4.7. Line of Credit Promissory Note dated
September 1, 1998 Payable to the Order of First Union National Bank is
hereby incorporated herein by reference to the Partnership's Report for
September 30, 1998 on Form 10-Q (File No. 0-16976) dated November 11, 1998.
4.8. Letter of Credit Line Demand Note dated
September 1, 1998 Payable to the Order of First Union National Bank is
hereby incorporated herein by reference to the Partnership's Report for
September 30, 1998 on Form 10-Q (File No. 0-16976) dated November 11, 1998.
4.9 Bifurcation of Note Agreement of that Certain
Consolidated and Restated Term Loan Promissory Note dated September 1, 1998
is hereby incorporated herein by reference to the Partnership's Report for
September 30, 1998 on From 10-Q (File No. 0-16976) dated November 11, 1998.
4.10. Renewal Term Loan Promissory Note dated
September 1, 1998 is hereby incorporated herein by reference to Exhibit 4.4
to the Partnership's Report for September 30, 1998 on Form 10-Q (File No.
0-16976) dated November 11, 1998.
4.11. Renewal Line of Credit Promissory Note dated
September 1, 1998 is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on From 10-Q (File No. 0-16976)
dated November 11, 1998.
4.12. Renewal Demand Note Letter of Credit Line
dated September 1, 1998 is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1998 on From 10-Q (File No. 0-16976)
dated November 11, 1998.
10.1. Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is hereby incorporated by reference
to Exhibit 10.2 to the Partnership's Registration Statement on Form S-1
(File No. 33-14091) under the Securities Act of 1933 filed on May 7, 1987.
10.2. Management, Advisory and Supervisory Agreement
is hereby incorporated by reference to Exhibit 10.2 to the Partnership's
Form 10-K (File No. 0-16976) dated March 27, 1991.
10.3. Letter Agreement, dated as of September 10,
1987, between the Partnership and The Walt Disney Company, together with
exhibits and related documents.*
10.4. Joint Venture Agreement dated as of September
10, 1987, of Arvida/JMB Partners, a Florida general partnership. *
10.5. Stipulation of Settlement dated April 1, 1997,
filed in the Circuit Court of Cook County, Illinois, Chancery Department.
10.6. Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners, L.P. and Arvida Company is
hereby incorporated herein by reference to Exhibit 10.15 to the
Partnership's Report for December 31, 1997 on Form 10-K (File No. 0-16976)
dated March 25, 1998.
21. Subsidiaries of the Registrant.
99.1. Pages 21-24, 56-59, 61-64, A-9 to A-28, A-31
to A-33, and B-2 of the Partnership's Prospectus dated September 16, 1987
are filed herewith.
* Previously filed with the Securities and Exchange Commission
as Exhibits 10.4 and 10.5, respectively, to the Partnership's Registration
Statement (as amended) on Form S-1 (File NO. 33-14091) under the Securities
Act of 1933 filed on September 11, 1987 and incorporated herein by
reference.
The Partnership agrees to furnish to the Securities and
Exchange Commission upon request a copy of each instrument with respect to
long-term indebtedness of the Partnership and its consolidated
subsidiaries, the authorized principal amount of which is 10% or less than
the total assets of the Partnership and its subsidiaries on a consolidated
basis.
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 2000 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ARVIDA/JMB PARTNERS, L.P.
BY: Arvida/JMB Managers, Inc.
(The General Partner)
GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 23, 2001
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.
JUDD D. MALKIN
By: Judd D. Malkin, Chairman
Chief Executive Officer
and Chief Financial Officer
Date: March 23, 2001
GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
Date: March 23, 2001
GARY NICKELE
By: Gary Nickele, Director
Date: March 23, 2001
ARVIDA/JMB PARTNERS, L.P.
EXHIBIT INDEX
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
3.1. Amended and Restated Agree-
ment of Limited Partnership
of the Partnership. Yes
3.2. Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership Yes
4.1. Credit Agreement dated July 31, 1997
between Barnett Bank, N.A. and The Other
Lenders and Arvida/JMB Partners, L.P. Yes
4.2. Amendment to Credit Agreement dated
September 1, 1998 Yes
4.3. Absolute Assignment of Mortgages and Other
Documents for $11,250,000 Term Loan Promissory
Note, $3,000,000 Line of Credit Promissory Note,
and $750,000 Demand Note Letter of Credit
Promissory Note.
4.4. Absolute Assignment of Mortgages and Other
Documents for $28,125,000 Term Loan Promissory
Note, $7,500,000 Line of Credit Promissory Note,
and $1,875,000 Demand Note Letter of Credit
Promissory Note.
4.5. Absolute Assignment of Deed to Secure Debt and
Other Documents.
Term Loan Promissory Note dated September 1, 1998
Payable to the Order of First Union National bank.
Line of Credit Promissory Note dated September 1, 1998
Payable to the Order of First Union National Bank.
Letter of Credit Line Demand Note dated September 1,
1998 Payable to the Order of First Union National Bank.
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.14. Bifurcation of Note Agreement of that Certain
Consolidated and Restated Term Loan Promissory Note
dated September 1, 1998 Yes
Renewal Term Loan Promissory Note dated September 1, 1998. Yes
Renewal Line of credit Promissory Note dated September 1,
1998.
Renewal Demand Note Letter of Credit Line dated September 1,
1998.
10.1. Agreement between the Partnership and
The Walt Disney Company dated January 29, 1987. Yes
10.2. Management, Advisory and
Supervisory Agreement. Yes
10.3. Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company, together with exhibits
and related documents. Yes
10.4. Joint Venture Agreement
dated as of September 10, 1987,
of Arvida/JMB Partners, a
Florida general partnership. Yes
10.5. Stipulation of Settlement dated
April 1, 1997, filed in the Circuit
Court of Cook County, Illinois,
Chancery Department Yes
10.6. Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners,
L.P. and Arvida Company Yes
21. Subsidiaries of the Registrant No
99.1. Pages 21-24, 56-59, 61-64 and
A-9 to A-28, A-31 to A-33, and B-2 of
the Partnership's Prospectus
dated September 16, 1987 filed
pursuant to Rules 424(b) and
424(c)