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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 Act of 1934
For the fiscal year
ended December 31, 2000 Commission File Number 0-13545
JMB/245 PARK AVENUE ASSOCIATES, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3265541
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1960
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
(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.
Documents Incorporated by Reference: Portions of the Private Placement
Memorandum of the Registrant dated May 7, 1984 are incorporated by
reference in Part I of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . 3
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 3
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . 3
Item 6. Selected Financial Data. . . . . . . . . . . 4
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 6
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 9
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 10
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 35
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 35
Item 11. Executive Compensation . . . . . . . . . . . 37
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 39
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 40
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 40
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 43
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements of JMB/245 Park Avenue Associates, Ltd.
contained in this report. Capitalized terms used herein, but not defined,
have the same meanings as used in the Notes.
The registrant, JMB/245 Park Avenue Associates, Ltd. (the
"Partnership"), is a limited partnership formed in 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois for the original purpose of acquiring and owning an approximate
48.25% interest in 245 Park Avenue Company, a New York general partnership,
("245 Park" or the "Joint Venture") which owned and operated an office
building located at 245 Park Avenue, New York, New York. The Partnership
was admitted to the Joint Venture through the purchase of one of the
existing unaffiliated joint venture partner's interests. The unaffiliated
venture partners (the "O&Y partners") were affiliates of Olympia & York
Developments, Ltd. ("O&Y"). On May 7, 1984, the Partnership commenced a
private offering of $124,300,000 in Limited Partnership Interests (the
"Interests") pursuant to a Private Placement Memorandum (the "Private
Placement Memorandum") in accordance with Rules 501-503 and 506 of
Regulation D of the Securities Act of 1933. A total of 1,000 Interests
were sold at $124,300 per Interest (except for twenty interests which were
sold net of any selling commission) of which $10,500 per Interest was due
upon admission, with the remaining purchase price paid in annual
installments from 1985 through 1990. The offering closed on June 28, 1984.
The holders of Interests (herein after "Holders" or "Holders of Interests")
in the Partnership share in their portion of the benefits of ownership of
the Partnership's real property investment according to the number of
Interests held.
As a result of the financial difficulties of the O&Y partners, in
October 1995 each of the O&Y partners and certain other O&Y affiliates (but
not the Joint Venture) filed for bankruptcy protection from creditors under
Chapter 11 of the United States Bankruptcy Code. During 1996, the O&Y
partners and these certain other O&Y affiliates restructured their
ownership interest in various office buildings, including their interest in
the 245 Park Avenue office building. In connection with such
restructuring, the Joint Venture filed for bankruptcy under Chapter 11 of
the United States Bankruptcy Code in April 1996 seeking approval of a plan
of reorganization by its creditors and the partners of the Joint Venture,
including the Partnership, and in August 1996, the Third Amended Joint Plan
of Reorganization and Disclosure Statement (the "Plan") was filed with the
Bankruptcy Court. The Plan was accepted by the various classes of claims
and equity holders and confirmed by the Court on September 20, 1996. The
Plan became effective on November 21, 1996 ("Effective Date") upon
completion of several additional steps. The conditions to the Plan
included, but were not limited to, the completion of significant
refinancing and capital transactions regarding 245 Park Avenue as well as
other properties. Pursuant to the terms of the Plan, the Partnership owns
(through a limited liability company of which the Partnership is a 99%
member) an approximate 5% general partner interest (slightly diluted from
the original ownership percentage by notes converted to equity) in
Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World
Financial Properties, L.P. ("WFP, LP"). The managing general partner of
BFP, LP is an entity affiliated with certain O&Y creditors and the
proponents of the Plan governing the restructuring and, subject to the
partnership agreement of BFP, LP and the JMB Transaction Agreement
(discussed below), has full authority to manage its affairs. BFP, LP's
principal assets are majority and controlling interests in the following
seven office buildings:
PROPERTY AND LOCATION NET RENTABLE AREA
One World Financial Center 1,504,000 square feet
New York, New York
Two World Financial Center 2,575,600 square feet
New York, New York
Four World Financial Center 1,810,500 square feet
New York, New York
One Liberty Plaza 2,124,500 square feet
New York, New York
245 Park Avenue 1,622,700 square feet
New York, New York
53 State Street 1,120,100 square feet
Boston, Massachusetts
75 State Street 767,100 square feet
Boston, Massachusetts
(acquired 9/15/98)
The One, Two and Four World Financial Center and 53 State Street
office buildings are owned subject to ground leases of the underlying land.
BFP, LP is currently developing a 31-story office building at 300
Madison Avenue in New York, New York. The property is currently scheduled
to be completed in 2003.
As part of the restructuring, the Partnership received certain limited
rights with respect to BFP, LP, pursuant to a separate agreement ("JMB
Transaction Agreement") with BFP, LP. These include, among other things,
the right to receive one-third of the property management fees earned at
the 245 Park Avenue property through December 2001, subject to certain
limitations, and the right, except under certain circumstances, to prohibit
(i) the sale of the 245 Park Avenue property prior to January 2, 2000 (such
right has expired) and (ii) a reduction of the indebtedness secured by the
245 Park Avenue property below a certain level prior to January 2, 2003.
BFP, LP and the Partnership each have a substantial amount of
indebtedness remaining. If any of the buildings are sold, any proceeds
would be first applied to repayment of the mortgage and other indebtedness
of BFP, LP. In any event, any net proceeds obtained by the Partnership
would then be used to satisfy notes payable and deferred interest
(aggregating $83,315,899 at December 31, 2000) to JMB Realty Corporation
("JMB"). Only after such applications would any remaining proceeds be
available to be distributed to the Holders of Interests. As a result, it
is unlikely that the Holders of Interests ever will receive any significant
portion of their original investment. However, over the remaining term of
the Partnership, as a result of sale or other disposition (including a
transfer to the lenders) of the properties or of the Partnership's interest
in BFP, LP, or a decrease in the Partnership's indebtedness for Federal
income tax purposes, the Holders of Interests will be allocated substantial
gain for Federal income tax purposes (corresponding at a minimum to all or
most of their deficit capital accounts for tax purposes) without a
significant amount of proceeds from such sale or disposition. Such gain
may be offset by suspended losses from prior years (if any) that have been
allocated to the Holders of Interests. The actual tax liability of each
Holder of Interests will depend on such Holder's own tax situation.
The Partnership has no employees.
The terms of transactions between the Partnership and the General
Partners and their affiliates are set forth in Item 11 below and in the
Notes, to which reference is hereby made for a description of such
transactions.
ITEM 2. PROPERTIES
The Partnership owns an indirect interest in the properties referred
to under Item 1 above to which reference is hereby made for a description
of said properties. Reference is also made to Note 3 of the Notes to the
Consolidated Financial Statements of Brookfield Financial Properties, L.P.
included with this Report for a further description of the properties.
BFP, LP has mortgage loans secured by its properties. The Partnership's
interest in BFP, LP is pledged as collateral for certain notes payable with
deferred interest (aggregating $83,315,899 at December 31, 2000) to JMB.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
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 879 record holders of the 995
outstanding Interests of the Partnership. There is no public market for
Interests and it is not anticipated that a public market for Interests will
develop. The Interests have not been registered under the Securities Act
of 1933, as amended, or (with certain exceptions) under state securities
laws. Transfers of the Interests must be made in compliance with
applicable federal and state securities laws and are subject to the
restrictions on transfers set forth in Article 14 (pages 15-17) of the
Amended and Restated Agreement of Limited Partnership of the Partnership,
which is incorporated herein by reference to Exhibit 99.1 to this annual
report.
The Partnership has not made any distributions since 1989. The
Partnership's interest in BFP, LP is pledged as collateral for certain
notes payable with deferred interest (aggregating $83,315,899 at
December 31, 2000) to JMB, which require mandatory payment of principal and
interest out of any distributions received from BFP, L.P. Reference is
made to the Notes and Item 7 for a discussion of the restrictions on the
distributions (if any) to the Partnership from BFP, LP.
ITEM 6. SELECTED FINANCIAL DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
DECEMBER 31, 2000, 1999, 1998, 1997 AND 1996
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
2000 1999 1998 1997 1996
------------ ------------ ----------- ----------- -----------
Total income. . . . . . . $ 529,584 515,284 496,426 483,445 47,854
============ ============ =========== =========== ===========
Earnings (loss)
before extraordinary
item . . . . . . . . . . $ (4,357,119) 6,171,054 2,906,029 2,617,872 (2,827,164)
Extraordinary item:
Partnership's share of
gain on forgiveness of
indebtedness . . . . . . -- -- -- -- 9,486,508
------------ ------------ ----------- ----------- -----------
Net earnings (loss) . . . $ (4,357,119) 6,171,054 2,906,029 2,617,872 6,659,344
============ ============ =========== =========== ===========
Net earnings (loss)
per Interest (b):
Earnings (loss)
before extraordinary
item . . . . . . . . . $ (4,116) 5,818 2,734 2,461 (2,657)
Extraordinary item. . . -- -- -- -- 8,917
------------ ------------ ----------- ----------- -----------
Net earnings
(loss). . . . . . $ (4,116) 5,818 2,734 2,461 6,260
============ ============ =========== =========== ===========
Total assets. . . . . . . $ 567,272 207,090 734,338 372,955 156,838
============ ============ =========== =========== ===========
Bank obligations
and notes payable -
long-term. . . . . . . . $ 43,236,631 -- (c) -- (c) -- (c) 43,236,631
============ ============ =========== =========== ===========
- ----------
(a) The above financial information should be read in conjunction with the consolidated financial
statements of the Partnership and the related Notes appearing elsewhere in this report.
(b) The net earnings (loss) per Interest are based upon the number of Interests outstanding at the end of
each period.
(c) Such loans were classified as a current liability at December 31, 1999, 1998 and 1997 due to their
scheduled maturity in December 1998. Effective January 3, 2001, the Partnership and JMB reached an agreement to
extend the maturity date of the term loan notes to January 2, 2006. Reference is made to the Notes and Item 7 for
a discussion of such agreement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Capitalized terms used but not defined in this Item 7 have the same
meanings as used in Item 1. Business or in the Notes.
On May 7, 1984, the Partnership commenced a private offering of
$124,300,000 in Limited Partnership Interests pursuant to a Private
Placement Memorandum. A total of 1,000 Interests were sold at $124,300 per
Interest (except for twenty Interests which were sold net of any selling
commission) of which $10,500 per Interest was due upon admission, with the
remaining purchase price paid in annual installments from 1985 through 1990
(all of which have been received). The purchase price installments have
been utilized primarily for the payment of the Partnership's bank
borrowings and related interest.
Since the Partnership had not been receiving operating cash flow
distributions from its original investment property, the Partnership
initially utilized its cash reserves to make the payments on the
Partnership's bank obligations. Effective with the first quarter of 1990,
the Partnership suspended cash distributions to the partners and retained
funds for its cash requirements. These reserves were exhausted, and
consequently, the Partnership was not able to pay the interest payment due
on the bank obligations for September 1993 in the approximate amount of
$223,000. In addition, the Partnership did not have adequate reserves to
pay a lump sum interest swap payment due February 1, 1994 in the amount of
$2,194,631. The Partnership and its bank lender reached a modification and
extension agreement regarding the $50,000,000 term loans that matured in
October 1993. These term loans were secured by the Partnership's interest
in its real estate investment, and a guaranty by JMB Realty Corporation
("JMB"), an affiliate of the Corporate General Partner, of $25,000,000 of
the term loans. The terms of the modification and extension generally
provided for (i) an extension period through December 1998; (ii) interest
payable currently on one-half of the principal amount of the term loans at
a rate related to the London Interbank Offer Rate (LIBOR) while interest on
the balance of the term loans accrued at an annual rate of 2%; (iii) one-
half of the original principal amount of the term loans bearing interest at
a rate related to LIBOR (the "LIBOR Note") were subject to periodic
amortization through payment of quarterly installments of principal
(principal in the amount of $2,500,000 per annum in 1994 and $2,707,000 in
1995); and (iv) the past due lump sum interest swap payment in the amount
of $2,194,631 converted to a note payable which was due December 1998 with
interest accruing at an annual rate of 2%.
In December 1993, approximately $5,647,000 was paid to the lenders
under the term loans (all of which was advanced on behalf of the
Partnership by JMB), which included a $5,000,000 principal paydown of the
LIBOR Note and the interest payable for the period September through
December 1993. During the year ended December 31, 1994, an additional
amount of approximately $2,479,000 was paid to the lenders under the term
loans which included a $1,251,000 principal paydown of the LIBOR Note and
the interest payable for the period January through December 1994. An
additional $1,249,000 and two payments of $729,000 each were paid in
January through June 1995, respectively. All payments of principal and
interest made by JMB under its guaranty of the $25,000,000 portion of the
Partnership's term loans had been treated as advances to the Partnership.
As of December 31, 2000, JMB has advanced approximately $12,376,000,
evidenced by a demand note, which reflects the principal and interest
payments made related to the loan modification discussed above and advances
to pay operating costs of the Partnership. Interest accrued on these
advances at the annual rate of prime plus 1% (10.50% at December 31, 2000
and 9.50% at December 31, 1999). The demand note payable to JMB, which
allows a maximum principal sum of a specified amount, had been subordinate
to payment of the LIBOR Note but is no longer subordinated and is now
secured by the Partnership's interest in BFP, LP. In the fourth quarter of
1999, the Partnership made an interest payment to JMB of $850,000 related
to this demand note. Reference is made to the Notes for further
information concerning borrowings incurred by the Partnership.
In July 1995, JMB purchased from the lenders the term loans (including
the note representing the interest swap payment) and their security
interests in the related collateral, including the JMB guarantee, which was
terminated. JMB continued to hold the notes for these loans generally
under the same terms and conditions that were in effect prior to the
purchase. However, no scheduled principal payments were required prior to
the scheduled maturity of the LIBOR Note. Interest on the LIBOR Note was
payable monthly at a floating rate which, at the option of the Partnership,
was related to either LIBOR or the prime rate of Bank of America. Through
December 31, 2000, no payments of interest on the LIBOR Note had been made
subsequent to July 31, 1995, and unpaid interest at the applicable interest
rate (including the default interest rate for the period from December 31,
1998, as discussed below) has accrued and compounded monthly. The
scheduled maturity of the term loans was December 31, 1998. However, JMB
did not pursue its remedies under these notes as a result of the non-
payment of interest under the LIBOR Note or the maturity of these notes.
JMB's term loans to the Partnership have had a maturity date of
December 31, 1998. On January 3, 2001, the Partnership and JMB agreed to
extend the maturity date of the term notes to January 2, 2006 and otherwise
to follow literally the various terms of the notes. As a result, the
parties agreed that the Partnership would now be required to pay default
interest on each of the three term loan notes (at prime plus 3%) for the
period from the maturity date of December 31, 1998 to January 3, 2001, the
effective date on which JMB and the Partnership agreed to extend each of
the notes. Accordingly, incremental interest cost relating to the default
interest rate aggregating approximately $7.7 million has been recorded as
expense in the year ended December 31, 2000. Under the extended notes,
interest accrues under the same terms as applicable to the term loan notes
prior to December 31, 1998. Interest is due and payable monthly on the
LIBOR Note with the outstanding principal due and payable on January 2,
2006. All principal and interest on the other term loan notes (including
the note representing the interest rate swap payment) are due and payable
on January 2, 2006. Further, all outstanding interest as of January 3,
2001 on the LIBOR Note (approximately $10.8 million) is due and payable
immediately. It is currently anticipated that JMB will advance the
necessary funds to make such payment through a new demand note bearing
interest at prime plus 1% with interest compounding quarterly.
Prior to November 1996, the Partnership was partner with certain
affiliates of Olympia & York Developments, Ltd. ("O&Y") in 245 Park, which
owned the 245 Park Avenue office building in New York, New York. As a
result of a 1996 bankruptcy reorganization of 245 Park, the Partnership
owns (through a limited liability company of which the Partnership is a 99%
member) an approximate 5% general partner interest (slightly diluted from
the original ownership percentage by notes convertible to equity) in
Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World
Financial Properties, L.P. ("WFP, LP"). The managing general partner of
BFP, LP is an entity affiliated with certain O&Y creditors and the
proponents of the Plan governing the restructuring and, subject to the
partnership agreement of BFP, LP and the JMB Transaction Agreement, has
full authority to manage its affairs. BFP, LP's principal assets are
majority and controlling interests in the seven office buildings located in
New York, New York and Boston, Massachusetts.
In December 1999, BFP, LP executed an option agreement pursuant to
which a third party agreed to an option to purchase a 49% limited
partnership interest in the entities that own the 53 State Street and 75
State Street office buildings. The transaction closed on April 2, 2001.
Net proceeds were applied to the mortgage or other indebtedness of BFP, LP.
BFP, LP is currently developing a 31-story office building at 300
Madison Avenue in New York, New York. The property is currently scheduled
to be completed in 2003.
BFP, LP and the Partnership each have a substantial amount of
indebtedness remaining. If any of the buildings (or interests therein) are
sold, any proceeds would be first applied to repayment of the mortgage or
other indebtedness of BFP, LP. In any event, any net proceeds obtained by
the Partnership would then be required to be used to satisfy notes payable
and deferred interest (aggregating $83,315,899 at December 31, 2000) to
JMB. Only after such applications would any remaining proceeds be
available to be distributed to the Holders of Interests. As a result, it
is unlikely that the Holders of Interests ever will receive any significant
portion of their original investment. However, over the remaining term of
the Partnership, as a result of sale or other disposition (including a
transfer to the lenders) of the properties, or of the Partnership's
interest in BFP, LP, or a decrease in the Partnership's indebtedness for
Federal income tax purposes, the Holders of Interests will be allocated
substantial gain for Federal income tax purposes (corresponding at a
minimum to all or most of their deficit capital accounts for tax purposes)
without a significant amount of proceeds from such sale or disposition.
Such gain may be offset by suspended losses from prior years (if any) that
have been allocated to the Holders of Interests. The actual tax liability
of each Holder of Interests will depend on such Holder's own tax situation.
Pursuant to the terms of the JMB Transaction Agreement dated
November 21, 1996, the Partnership is entitled to receive one third of the
monthly management fees earned at the 245 Park Avenue property through
December 2001. Amounts received may not be less than $400,000 or exceed
$600,000 for any twelve month period and may not be less than $2,300,000
over the term of the agreement. In addition, pursuant to the JMB
Transaction Agreement, the Partnership has the right, except under certain
circumstances, to prohibit (i) a sale of the 245 Park Avenue property prior
to January 2, 2000 (such right has expired), and (ii) a reduction of the
indebtedness secured by the 245 Park Avenue property below a certain level
prior to January 2, 2003.
The Partnership's liquidity and ability to continue as a going concern
are dependent upon the receipt of one-third of the property management fees
earned at the 245 Park Avenue property, which, pursuant to the terms of the
JMB Transaction Agreement continues through December 2001, and additional
advances from JMB under the demand loans.
RESULTS OF OPERATIONS
The increase in cash at December 31, 2000 as compared to December 31,
1999 is primarily due to a fourth quarter 1999 interest payment of $850,000
on the demand note payable to JMB.
The increase in other receivables at December 31, 2000 as compared to
December 31, 1999 is primarily due to the timing of receipt of certain
property management fees from 245 Park Avenue.
The increase in interest payable to an affiliate as of December 31,
2000 as compared to December 31, 1999 is due to the interest accruals on
the term loans and the demand note payable to JMB (including default
interest on the term loans for the two years ended December 31, 2000).
Interest and other income for the years ended December 31, 2000, 1999
and 1998 primarily consists of the Partnership's share of the property
management fees from the 245 Park Avenue property pursuant to the terms of
the JMB Transaction Agreement described above.
The increase in interest expense for the year ended December 31, 2000
as compared to the year ended December 31, 1999 is primarily due to default
interest being recorded on the term loans for the two years ended
December 31, 2000.
The increase in professional services for the year ended December 31,
1999 as compared to the year ended December 31, 1998 is primarily due to
legal fees related to the term loan notes payable to JMB which matured on
December 31, 1998.
INFLATION
Due to the low levels of inflation in recent years, inflation
generally has not had a material effect on rental income or property
operating expenses.
However, to the extent that inflation in future periods would have an
adverse impact on property operating expenses, the effect would generally
be offset by amounts recovered from tenants as many of the long-term leases
at the Partnership's commercial properties have escalation clauses covering
increases in the cost of operating the properties as well as real estate
taxes. Therefore, there should be little effect on operating earnings if
the properties remain substantially occupied.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has identified interest rate changes as a potential
market risk. Since the Partnership has certain notes payable that bear
interest at variable rates, an increase in interest rates would increase
the Partnership's cost of borrowings under these notes. Reference is made
to the Notes for further information concerning borrowings incurred by the
Partnership.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 2000 and 1999
Consolidated Statements of Operations, years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows, 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 the information is presented in the consolidated financial
statements or related notes.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
INDEX
Independent Auditors' Report
Consolidated Balance Sheet, December 31, 2000
Consolidated Statement of Operations, for the year ended
December 31, 2000
Consolidated Statement of Partners' Capital Accounts, for the year ended
December 31, 2000
Consolidated Statement of Cash Flows, for the year ended
December 31, 2000
Notes to Consolidated Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB/245 Park Avenue Associates, Ltd.:
We have audited the consolidated financial statements of JMB/245 Park
Avenue Associates, Ltd., a limited partnership (the "Partnership"), and
consolidated venture as listed in the accompanying index. These
consolidated financial statements are the responsibility of the General
Partners of the Partnership. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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 the General Partners of the Partnership, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB/245 Park Avenue Associates, Ltd. and consolidated venture as of
December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that JMB/245 Park Avenue Associates, Ltd. will continue as a going
concern. As described in the notes to the financial statements, the
Partnership is dependent upon the receipt of certain property management
fees and additional advances from JMB under the demand loans. This
uncertainty and the fact that the Partnership has a net capital deficiency
raise substantial doubt about its ability to continue as a going concern.
The General Partners' plans in regard to these matters are also described
in the notes to the financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
KPMG LLP
Chicago, Illinois
April 4, 2001
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
------
2000 1999
------------ -----------
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 470,475 135,664
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . 96,797 71,426
----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . $ 567,272 207,090
=========== ===========
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
2000 1999
------------ -----------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,506 38,290
Interest payable to an affiliate. . . . . . . . . . . . . . . . . . 27,703,677 15,982,169
Demand note payable to affiliate. . . . . . . . . . . . . . . . . . 12,375,591 55,612,222
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . 40,114,774 71,632,681
------------ -----------
Notes payable to an affiliate - long-term . . . . . . . . . . . . . . 43,236,631 --
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 83,351,405 71,632,681
Investment in unconsolidated venture, at equity . . . . . . . . . . . 38,003,539 45,075,682
Venture partner's equity in venture . . . . . . . . . . . . . . . . . 287,750 217,030
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative cash distributions . . . . . . . . . . . . . . . . . (480,000) (480,000)
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . (12,273,568) (12,012,141)
------------ -----------
(12,752,568) (12,491,141)
------------ -----------
Limited partners:
Capital contributions, net of offering costs. . . . . . . . . . 113,057,394 113,057,394
Cumulative cash distributions . . . . . . . . . . . . . . . . . (7,520,000) (7,520,000)
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . (213,860,248) (209,764,556)
------------ -----------
(108,322,854) (104,227,162)
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . (121,075,422) (116,718,303)
------------ -----------
$ 567,272 207,090
============ ===========
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
Income:
Interest and other income . . . . . . . . . . . . $ 529,584 515,284 496,426
------------ ------------ ------------
Expenses:
Interest. . . . . . . . . . . . . . . . . . . . . 11,721,508 3,435,161 3,450,792
Professional services . . . . . . . . . . . . . . 95,974 109,709 62,800
General and administrative. . . . . . . . . . . . 70,644 79,766 79,318
------------ ------------ ------------
11,888,126 3,624,636 3,592,910
------------ ------------ ------------
(11,358,542) (3,109,352) (3,096,484)
Partnership's share of income (loss)
from operations of unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . 7,072,143 9,374,143 6,063,143
Venture partner's share of venture
operations. . . . . . . . . . . . . . . . . . . . (70,720) (93,737) (60,630)
------------ ------------ ------------
Net earnings (loss) . . . . . . . . . . . . . . $ (4,357,119) 6,171,054 2,906,029
============ ============ ============
Net earnings (loss) per limited
partnership interest:
Net earnings (loss) . . . . . . . . . . . $ (4,116) 5,818 2,734
============ ============ ============
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ----------- ------------- ----------- ----------- ----------- ------------- ------------
Balance
(deficits)
December 31,
1997 . . . .$1,000 (12,556,766) (480,000) (13,035,766) 113,057,394(218,297,014) (7,520,000) (112,759,620)
Net earnings
(loss) . . . -- 174,362 -- 174,362 -- 2,731,667 -- 2,731,667
------ ----------- --------- ----------- ----------------------- ------------ ------------
Balance
(deficits)
December 31,
1998 . . . .1,000 (12,382,404) (480,000) (12,861,404) 113,057,394 (215,565,347) (7,520,000) (110,027,953)
Net earnings
(loss) . . . -- 370,263 -- 370,263 -- 5,800,791 -- 5,800,791
------ ----------- --------- ----------- ----------- ------------ ------------ ------------
Balance
(deficits)
December 31,
1999 . . . .1,000 (12,012,141) (480,000) (12,491,141) 113,057,394 (209,764,556) (7,520,000) (104,227,162)
Net earnings
(loss) . . . -- (261,427) -- (261,427) -- (4,095,692) -- (4,095,692)
------ ----------- --------- ----------- ----------- ------------ ------------ ------------
Balance
(deficits)
December 31,
2000 . . . .$1,000 (12,273,568) (480,000) (12,752,568) 113,057,394 (213,860,248) (7,520,000) (108,322,854)
====== =========== ========= =========== =========== ============ =========== ============
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------- ----------- -----------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $(4,357,119) 6,171,054 2,906,029
Items not requiring cash or cash equivalents:
Partnership's share of (earnings) loss from
operations of unconsolidated venture . . . . (7,072,143) (9,374,143) (6,063,143)
Venture partner's share of venture
operations . . . . . . . . . . . . . . . . . 70,720 93,737 60,630
Changes in:
Other receivables. . . . . . . . . . . . . . . (25,371) (32,154) 15,578
Accounts payable . . . . . . . . . . . . . . . (2,784) (3,056) 7,075
Interest payable to an affiliate . . . . . . . 11,721,508 2,585,160 3,450,792
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 334,811 (559,402) 376,961
----------- ----------- -----------
Net increase (decrease) in cash . . . . . 334,811 (559,402) 376,961
Cash, beginning of year . . . . . . . . . 135,664 695,066 318,105
----------- ----------- -----------
Cash, end of year . . . . . . . . . . . . $ 470,475 135,664 695,066
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . $ -- 850,000 --
=========== =========== ===========
Non-cash investing and financing activities . . $ -- -- --
=========== =========== ===========
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
As a result of the 1996 restructuring, JMB/245 Park Avenue Associates,
Ltd. (the "Partnership") owns (through a limited liability company of which
the Partnership is a 99% member, described below) an approximate 5% general
partner interest (slightly diluted from the original ownership percentage
by notes converted to equity) in Brookfield Financial Properties, L.P.
("BFP, LP"), formerly known as World Financial Properties, L.P. ("WFP,
LP"), a joint venture that holds an equity investment in commercial office
buildings located in New York, New York and Boston, Massachusetts.
Business activities consist of rentals to a variety of commercial companies
and the ultimate sale or disposition of such real estate. The accompanying
consolidated financial statements include the accounts of the Partnership
and its majority-owned limited liability company, JMB/245 Park Avenue
Holding Company, LLC, ("JMB/245 LLC"), which was formed November 21, 1996
("Effective Date"). Prior to the Effective Date, the Partnership held an
approximate 48.25% interest in 245 Park Avenue Company ("245 Park" or the
"Joint Venture"), which owned the 245 Park Avenue office building in New
York, New York (see "Investment in Unconsolidated Venture" below). The
effect of all transactions between the Partnership and its consolidated
venture has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
approximate 5% interest in BFP, LP subsequent to the Effective Date.
Accordingly, the financial statements do not include the accounts of BFP,
LP.
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 to reflect the Partnership's
accounts in accordance with accounting principles generally accepted in the
United States of America ("GAAP") and to consolidate the accounts of
JMB/245 LLC as described above. Such GAAP and consolidation adjustments
are not recorded on the records of the Partnership. The net effect of
these items for the years ended December 31, 2000 and 1999 is summarized as
follows:
2000 1999
------------------------------ ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------- ------------
Total assets. . . . . . . . . . . . $ 567,272 (112,940,629) 207,090 (117,231,782)
Partners' capital
accounts (deficits):
General partners. . . . . . . . . (12,752,568) (27,428,893) (12,491,141) (27,686,529)
Limited partners. . . . . . . . . (108,322,854) (141,858,999) (104,227,162) (145,895,299)
Net earnings (losses):
General partners. . . . . . . . . (261,427) 257,636 370,263 215,992
Limited partners. . . . . . . . . (4,095,692) 4,036,300 5,800,791 3,383,862
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . (4,116) 4,057 5,818 3,394
============ =========== ============= ============
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of the
period. The above-noted deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and income
tax purposes to the General Partners and Limited Partners.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.
INVESTMENT IN UNCONSOLIDATED VENTURE
The Partnership acquired an interest in 245 Park, which owned a
46-story office building located at 245 Park Avenue, New York, New York.
The Partnership acquired its approximate 48.25% ownership interest in 245
Park for approximately $63,927,000 from an affiliate of the joint venture
partners. In addition to the Partnership, the other partners (the "O&Y
partners") of 245 Park included Olympia & York 245 Park Ave. Holding
Company, L.P., Olympia & York Equity Company, L.P., and Olympia & York 245
Corp., all of which were affiliates of Olympia & York Developments, Ltd.
("O&Y").
As a result of the financial difficulties of the O&Y partners, in
October 1995 each of the O&Y partners and certain other O&Y affiliates (but
not the Joint Venture) filed for bankruptcy protection from creditors under
Chapter 11 of the United States Bankruptcy Code. During 1996, the O&Y
partners and these certain other O&Y affiliates restructured their
ownership interests in various office buildings, including their interest
in the 245 Park Avenue office building. In connection with such
restructuring, 245 Park filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code in April 1996 seeking approval of a plan of
reorganization by its creditors and the partners of 245 Park, including the
Partnership, and in August 1996, the Third Amended Joint Plan of
Reorganization and Disclosure Statement (the "Plan") was filed with the
Bankruptcy Court. The Plan was accepted by the various classes of claims
and equity holders and confirmed by the Court on September 20, 1996. The
Plan became effective on November 21, 1996 ("Effective Date") upon
completion of several additional steps. The conditions to the Plan
included, but were not limited to, the completion of significant
refinancing and capital transactions regarding the 245 Park Avenue office
building as well as other properties. Pursuant to the terms of the Plan,
the Partnership owns (through a limited liability company of which the
Partnership is a 99% member) an approximate 5% general partner interest
(slightly diluted from the original ownership percentage by notes converted
to equity) in a newly formed partnership, BFP, LP. The managing general
partner of BFP, LP is an entity affiliated with certain O&Y creditors and
the proponents of the Plan governing the restructuring. BFP, LP's
principal assets are wholly-owned or majority and controlling interests in
seven office buildings (including 245 Park Avenue office building).
BFP, LP and the Partnership each have a substantial amount of
indebtedness remaining. If any of the buildings are sold, any proceeds
would be first applied to repayment of the mortgage and other indebtedness
of BFP, LP. In any event, any net proceeds obtained by the Partnership
would then be used to satisfy notes payable and accrued interest
(aggregating $83,315,899 at December 31, 2000) to JMB Realty Corporation
("JMB"), which are secured by the Partnership's interest in BFP, LP. Only
after such applications would any remaining proceeds be available to be
distributed to the Holders of Interests. As a result, it is unlikely that
the Holders of Interests ever will receive any significant portion of their
original investment.
However, over the remaining term of the Partnership, as a result of
sale or other disposition (including a transfer to the lenders) of the
properties, or of the Partnership's interest in BFP, LP, or a decrease in
the Partnership's indebtedness for Federal income tax purposes the Holders
of Interests will be allocated substantial gain for Federal income tax
purposes (corresponding at a minimum to all or most of their deficit
capital accounts for tax purposes) without a significant amount of proceeds
from such sale or disposition. Such gain may be offset by suspended losses
from prior years (if any) that have been allocated to the Holders of
Interests. The actual tax liability of each Holder of Interests will
depend on such Holder's own tax situation.
The Partnership and its lender had reached a modification and
extension agreement regarding the former $50,000,000 term loans that
matured in October 1993. These term loans (described below) were secured
by the Partnership's interest in its real estate investment, and
$25,000,000 (current principal outstanding balance of $16,042,000 at
December 31, 2000 and 1999) of the term loans required interest only
payments. The terms of the modification and extension generally provided
for (i) an extension period through December 1998; (ii) one-half of the
principal amount of the term loans required interest to be paid currently
at a rate related to either the London Interbank Offer Rate (LIBOR) or the
prime rate while interest on the balance of the term loans accrued at an
annual rate of 2%; (iii) the term loan bearing interest at a rate related
to either LIBOR (the "LIBOR Note") or the prime rate was subject to
periodic amortization; and (iv) the past due lump sum interest swap payment
in the amount of $2,194,631 was converted to a note payable which was due
December 1998 with interest accruing at an annual rate of 2%. Payments of
principal and interest made by JMB under its guaranty of the $25,000,000
portion of the Partnership's term loans were treated as advances to the
Partnership. Interest accrued on these advances (and accrued and deferred
interest thereon) at the annual rate of prime plus 1% (10.50% at
December 31, 2000 and 9.50% at December 31, 1999). As of December 31,
2000, JMB had advanced approximately $12,376,000, evidenced by a demand
note, which included the principal and interest payments made related to
the loan modification discussed above and advances to pay operating costs
of the Partnership. The demand note payable to JMB, which allows a maximum
principal sum of a specified amount, had been subordinate to payment of the
LIBOR Note but is no longer subordinated and is now secured by the
Partnership's interest in BFP, LP. In the fourth quarter of 1999, the
Partnership made an interest payment to JMB of $850,000 on this demand
note.
In July 1995, JMB purchased from the lenders the term loans (including
the note representing the interest swap payment) and their security
interests in the related collateral, including the JMB guarantee, which was
terminated. JMB continued to hold the notes for these loans generally
under the same terms and conditions that were in effect prior to the
purchase. However, no scheduled principal payments were required prior to
the scheduled maturity of the LIBOR Note. Interest on the LIBOR Note was
payable monthly at a floating rate which, at the option of the Partnership,
was related to either LIBOR or the prime rate of Bank of America. Through
December 31, 2000, no payments of interest on the LIBOR Note had been made
subsequent to July 31, 1995, and unpaid interest at the applicable interest
rate (including the default interest rate for the period from December 31,
1998, as discussed below) has accrued and compounded monthly. The
scheduled maturity of the term loans was December 31, 1998, but the
maturity date has been extended to January 2, 2006, as discussed below.
However, JMB did not pursue any remedies under these notes as a result of
the non-payment of monthly interest under the LIBOR Note or the maturity of
the term loan notes.
JMB's term loans to the Partnership have had a maturity date of
December 31, 1998. On January 3, 2001, the Partnership and JMB agreed to
extend the maturity date of the term notes to January 2, 2006 and otherwise
to follow literally the various terms of the notes. As a result, the
parties agreed that the Partnership would now be required to pay default
interest on each of the three term loan notes (at prime plus 3%) for the
period from the maturity date of December 31, 1998 to January 3, 2001, the
effective date on which JMB and the Partnership agreed to extend each of
the notes. Accordingly, incremental interest cost relating to the default
interest rate aggregating approximately $7.7 million has been recorded as
expense in the year ended December 31, 2000. Under the extended notes,
interest accrues under the same terms as applicable to the term loan notes
prior to December 31, 1998. Interest is due and payable monthly on the
LIBOR Note with the outstanding principal due and payable on January 2,
2006. All principal and interest on the other term loan notes (including
the note representing the interest rate swap payment) are due and payable
on January 2, 2006. Further, all outstanding interest as of January 3,
2001 on the LIBOR Note (approximately $10.8 million) is due and payable
immediately. It is currently anticipated that JMB will advance the
necessary funds to make such payment through a new demand note bearing
interest at prime plus 1% with interest compounding quarterly.
Each of the notes to JMB is cross-defaulted, secured by the
Partnership's interest in BFP, LP and subject to mandatory payment of
principal and interest out of any distributions received by the Partnership
from BFP, LP. It currently appears unlikely, however, that any significant
operating distributions will be received by the Partnership from BFP, LP
due to the level of indebtedness remaining on the properties owned by BFP,
LP. Accordingly, the Partnership's primary sources of capital to pay for
continuing operations are receipt of one-third of the property management
fees earned at the 245 Park Avenue property and additional advances from
JMB under demand loans.
NOTES PAYABLE TO AN AFFILIATE
Notes payable to an affiliate consist of the following at December 31,
2000 and 1999:
2000 1999
----------- -----------
Note payable (term loan) bearing
interest at a variable rate related
to prime plus 3% (12.5% per annum at
December 31, 2000); secured by the
Partnership's interest in BFP, LP;
interest payable monthly with unpaid
interest accruing and compounding
monthly; scheduled maturity was
December 31, 1998; extended,
effective January 3, 2001, to
January 2, 2006. . . . . . . . . . . $16,042,000 16,042,000
Note payable (term loan) bearing
interest at a variable rate related
to prime plus 3% (12.5% at Decem-
ber 31, 2000) secured by the
Partnership's interest in BFP, LP;
no payments until December 1998
when the entire principal amount
and accrued compounded interest
were scheduled to be due (as
discussed above); extended,
effective January 3, 2001, to
January 2, 2006. . . . . . . . . . . 25,000,000 25,000,000
2000 1999
----------- -----------
Note payable (term loan) bearing
interest at a variable rate related
to prime plus 3% (12.5% at Decem-
ber 31, 2000); secured by the
Partnership's interest in BFP, LP;
no payments until December 1998 when
the entire principal amount and
accrued compounded interest were
scheduled to be due (as discussed
above); extended, effective
January 3, 2001, to January 2, 2006. 2,194,631 2,194,631
Demand note payable bearing
interest at prime plus 1%
(10.50% per annum at December 31,
2000); advanced by JMB; maximum
principal sum of a specified
amount secured by the Partner-
ship's interest in BFP, LP . . . . . 12,375,591 12,375,591
----------- -----------
$55,612,222 55,612,222
=========== ===========
In addition, unpaid interest payable was $27,703,677, $15,982,169 and
$13,397,009 as of December 31, 2000, 1999 and 1998, respectively.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are generally allocated 94% to
the Holders and 6% to the General Partners. Profits from the sale or other
disposition of all or substantially all of the Partnership's interest in
BFP, LP or of all or substantially all of the 245 Park Avenue office
building or other real property owned by BFP, LP will be allocated to the
General Partners in an amount equal to the greater of 1% of such profits or
any cash from the proceeds of such sale or other disposition distributed to
the General Partners, plus an additional amount of such profits to
eliminate deficits, if any, in the General Partners' capital accounts. The
remainder of such profits will be allocated to the Holders. All losses
from the sale of all or substantially all of the Partnership's interest in
BFP, LP or of all or substantially all of the 245 Park Avenue office
building or other real property owned by BFP, LP will be allocated 99% to
the Holders and 1% to the General Partners. All such profits or losses
will be allocated among the Holders in proportion to the number of
Interests held.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. Distributions of "Distributable Cash"
(as defined) of the Partnership generally will be made 94% to the Holders
of Interest and 6% to the General Partners. Distributions of "Sale
Proceeds" or "Financing Proceeds" (as defined) will be made first to the
Holders in an amount equal to their contributed capital, next to the
General Partners in an amount equal to their capital contributions, and the
balance 70% to the Holders and 30% to the General Partners. Distributions
would be made to the General Partners and Holders of Interests only after
the satisfaction of all Partnership liabilities.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's real property investments. Fees,
commissions and other expenses required to be paid by the Partnership to
the General Partners and their affiliates as of December 31, 2000, 1999 and
1998 are as follows:
UNPAID AT
DECEMBER 31,
2000 1999 1998 2000
------- ------ ------ ------------
Insurance commissions . . $ 563 792 792 --
Reimbursement (at cost)
for legal services . . . 4,676 2,063 2,796 672
Reimbursement (at cost)
for accounting services. -- 680 2,056 --
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 3,768 -- -- 535
Reimbursement (at cost)
for out-of-pocket
expenses . . . . . . . . -- -- 14 --
------- ------ ------ ------
$ 9,007 3,535 5,658 1,207
======= ====== ====== ======
Any reimbursable amounts currently payable to the General Partners and
their affiliates do not bear interest.
Reference is made to the Notes, "Investment in Unconsolidated Venture"
and "Notes Payable to an Affiliate" above for a discussion of certain loans
and notes payable by the Partnership to JMB and related collateral held by
JMB.
SUMMARY FINANCIAL INFORMATION OF UNCONSOLIDATED VENTURE
Summary financial information for BFP, LP as of and for the years
ended December 31, 2000 and 1999:
2000 1999
----------- -----------
(000's) (000's)
Assets:
Commercial properties . . . . . . $ 3,299,778 3,129,906
Other assets. . . . . . . . . . . 239,338 186,255
----------- -----------
Total assets . . . . . . . . . $ 3,539,116 3,316,161
=========== ===========
Liabilities and Partners Capital:
Accounts payable and
other liabilities . . . . . . . $ 254,151 252,788
Long and short term debt. . . . . 2,375,189 2,240,405
Venture Partners' equity. . . . . 860,204 778,013
----------- -----------
Total liabilities. . . . . . . $ 3,489,544 3,271,206
=========== ===========
Partnership's capital. . . . . $ 49,572 44,955
=========== ===========
2000 1999
----------- -----------
(000's) (000's)
Represented by:
Invested capital. . . . . . . . . $ 31,725 31,725
Cumulative distributions
and other . . . . . . . . . . . (605) (605)
Cumulative net earnings . . . . . 18,452 13,835
----------- -----------
$ 49,572 44,955
=========== ===========
Total income. . . . . . . . . . . . $ 514,729 544,393
Expenses. . . . . . . . . . . . . . 427,921 419,190
----------- -----------
Net income (loss) . . . . . . . . . $ 86,808 125,203
=========== ===========
Partnership's share:
Equity in earnings of BFP, LP . . $ 4,617 6,919
----------- -----------
$ 4,167 6,919
=========== ===========
The Partnership's capital in BFP, LP differs from its investment in
unconsolidated venture, primarily due to the adoption of fresh start
accounting by BFP, LP in connection with the restructuring, and the
resultant restatement of all of its assets and liabilities to reflect their
reorganization value. The Partnership is amortizing the difference between
its historical basis in 245 Park and its underlying equity (which was
transferred to the basis in BFP, LP on the Effective Date) over a period
not to exceed forty years. The amortization for the years ended
December 31, 2000, 1999 and 1998 was $2,455,143, $2,455,143 and $2,455,143,
respectively. Such amounts may be written off sooner in the event of the
sale or disposition of the properties owned by BFP, LP or the Partnership's
interest in BFP, LP.
The total income, expenses and net income (loss) for the year ended
December 31, 1998 were $451,441,000, $386,481,000, and $64,960,000,
respectively.
SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
2000
----------------------------------------------
At 3/31 At 6/30 At 9/30 At 12/31
---------- ---------- ---------- ----------
Total income. . . . . . $ 144,288 112,628 138,564 134,104
========== ========== ========== ==========
Net earnings (loss) . . $ 963,136 1,119,337 970,575 (7,410,167)
========== ========== ========== ==========
Net earnings (loss) per
Interest . . . . . . . $ 908 1,055 915 (6,994)
========== ========== ========== ==========
1999
----------------------------------------------
At 3/31 At 6/30 At 9/30 At 12/31
---------- ---------- ---------- ----------
Total income. . . . . . $ 116,402 125,850 137,475 135,557
========== ========== ========== ==========
Net earnings (loss) . . $ 804,480 1,077,541 940,512 3,348,521
========== ========== ========== ==========
Net earnings (loss) per
Interest . . . . . . . $ 757 1,014 885 3,162
========== ========== ========== ==========
INDEPENDENT AUDITORS' REPORT
To the Partners of
Brookfield Financial Properties, L.P.
New York, New York
We have audited the accompanying consolidated balance sheet of
Brookfield Financial Properties, L.P. (the Company) as of December 31,
2000, and the related consolidated statements of operations, partners'
capital and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated 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 audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of Brookfield Financial
Properties, L.P. as of December 31, 2000, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
March 8, 2001
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(000's)
ASSETS
NOTE 2000
---- ----------
Commercial properties . . . . . . . . . . . 2,3 $3,299,778
Cash and cash equivalents (including
restricted cash of $138,682) . . . . . . 2 152,411
Accounts receivable . . . . . . . . . . . . 54,867
Other assets. . . . . . . . . . . . . . . . 6 32,060
----------
Total Assets. . . . . . . . . . . . . . . . $3,539,116
==========
LIABILITIES AND PARTNERS' CAPITAL
Long term debt. . . . . . . . . . . . . . . 4 $2,375,189
Accounts payable and other liabilities. . . 6,7 254,151
----------
2,629,340
----------
Partners' capital . . . . . . . . . . . . . 1,4 909,776
----------
Total Liabilities and Partners' Capital . . $3,539,116
==========
The accompanying notes are an integral part
of these consolidated financial statements.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(000's)
NOTE 2000
---- ----------
REVENUES:
Rental income . . . . . . . . . . . . . . 2,5 $ 495,874
Equity earnings from joint venture. . . . 3 8,870
Interest and other income . . . . . . . . 6 9,985
----------
514,729
----------
EXPENSES:
Property operations . . . . . . . . . . . 172,767
Interest. . . . . . . . . . . . . . . . . 4,5,6 176,173
Administrative and development. . . . . . 11,269
Depreciation and amortization . . . . . . 2 67,712
----------
427,921
----------
NET INCOME. . . . . . . . . . . . . . . . . $ 86,808
==========
The accompanying notes are an integral part
of these consolidated financial statements.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2000
(000's)
Balance Balance
12/31/1999 Net Income 12/31/2000
---------- ------------ ----------
GENERAL PARTNERS
Brookfield Financial
Properties, Inc.. . . . . . . $ 8,278 873 9,151
JMB 245 Park Avenue Holding
Company, LLC. . . . . . . . . 44,955 4,617 49,572
LIMITED PARTNERS
Brookfield Properties
Corporation:
Brookfield Properties
Holdings Inc. . . . . . . . 335,601 35,620 371,221
Olympia & York Tower B
Company . . . . . . . . . . 65,311 6,869 72,180
Battery Park Partners
(Note 1). . . . . . . . . . 317,319 33,762 351,081
Emerald LP Holdings, Inc.
(Note 1). . . . . . . . . . . 43,187 4,410 47,597
Other . . . . . . . . . . . . . 8,317 657 8,974
--------- --------- ---------
$ 822,968 86,808 909,776
========= ========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(000's)
2000
----------
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 86,808
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . 67,712
Equity earnings from joint venture. . . . . . . . . (8,870)
Accrued interest income . . . . . . . . . . . . . . (108)
Accrued interest expense. . . . . . . . . . . . . . 17,878
Increase in straight-line rent receivable . . . . . (14,585)
Changes in other operating assets and liabilities:
Increase in restricted cash . . . . . . . . . . . (44,568)
Increase in accounts receivable . . . . . . . . . (13,760)
Increase in other assets. . . . . . . . . . . . . (1,078)
Decrease in accounts payable and other liabilities (4,196)
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . 85,233
---------
INVESTING ACTIVITIES:
Additions to commercial properties. . . . . . . . . . (195,412)
Distributions from joint ventures . . . . . . . . . . 1,374
Other assets. . . . . . . . . . . . . . . . . . . . . (2,574)
---------
NET CASH USED IN INVESTING ACTIVITIES . . . . . (196,612)
---------
FINANCING ACTIVITIES:
Additions to short term debt. . . . . . . . . . . . . 109,122
Additions to long term debt . . . . . . . . . . . . . 200,000
Repayments of short term debt . . . . . . . . . . . . (118,538)
Repayments of long term debt. . . . . . . . . . . . . (60,689)
Retainage on sale of investment . . . . . . . . . . . 29,000
Decrease in accounts payable and other payables . . . (50,791)
---------
NET CASH USED IN FINANCING ACTIVITIES . . . . . 108,104
---------
Decrease in cash and cash equivalents . . . . . . . . . (3,275)
Cash and cash equivalents - beginning of year . . . . . 17,004
---------
Cash and cash equivalents - end of year . . . . . . . . $ 13,729
=========
The accompanying notes are an integral part
of these consolidated financial statements.
BROOKFIELD FINANCIAL PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2000
(000's)
1. ORGANIZATION
Brookfield Financial Properties, L.P. (the "Company") is a Delaware
limited partnership organized by and among Brookfield Financial Properties,
Inc., a subsidiary of Brookfield Properties Holdings, Inc., a Delaware
corporation, as a general partner, JMB 245 Park Avenue Holding Company,
LLC, as a general partner, and Brookfield Properties Holdings, Inc.,
Olympia & York Tower B Company, Battery Park Partners (which are
subsidiaries of Brookfield Properties Corporation and are collectively
referred to as BPHI), Emerald LP Holdings, Inc. (a subsidiary of Citigroup)
and various other partners as limited partners.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Principals of consolidation and accounting presentation
(i) The consolidated financial statements include the accounts of
the Company and all of its subsidiaries, as well as joint venture and
partnerships which the Company controls, after elimination of intercompany
accounts and transactions.
(ii) The Company accounts for its investments in joint ventures and
partnerships in which it does not have a controlling interest on the equity
method.
b. Commercial Properties
Included in commercial properties is real estate under development
which is carried at cost. Interest, property taxes, insurance and direct
project costs such as construction, administration and legal are
capitalized as property costs. Capitalized carrying costs, consisting
primarily of interest and real estate taxes, aggregated $4.3 million for
the year ended December 31, 2000.
c. Depreciation and amortization
Depreciation of office buildings and improvements is provided on the
straight-line method over the estimated lives of the buildings which
management has estimated to be 38-50 years. Amortization of tenant
improvements and other leasing costs is provided on the straight-line
method over the terms of the related leases.
d. Income taxes
The Company, as a partnership, is not subject to federal, state and
city income taxes, with the exception of certain corporate subsidiaries.
Accordingly, the Company makes no provision for income taxes in its
financial statements except for the aforementioned corporate subsidiaries,
where income taxes are provided as required. The Company's taxable income
or loss, excluding the taxable income or loss of the corporate
subsidiaries, is reportable by the partners.
e. Cash and Cash Equivalents
For financial reporting purposes, the Company considers all highly
liquid investments that have original maturities of three months or less,
to be cash equivalents.
Restricted cash principally represents amounts which are restricted
pursuant to the terms of certain loan agreements.
f. Financial instruments
Statement of Financial Accounting Standards No. 107 "Disclosures About
Fair Value of Financial Instruments" requires disclosures of fair values of
financial instruments for which it is practicable to estimate that value.
Based on available market information, the Company estimates that the fair
value of its financial assets and liabilities approximates their carrying
value.
g. Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from those estimates.
h. Rental income
Rental income from leases providing for periodic increases in base
rent is recognized on a straight-line basis over the noncancellable term of
the respective leases, and are recorded as adjustments to rental income.
i. Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities, is effective for all
fiscal years beginning after June 15, 2000. SFAS 133, as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and
for hedging activities. Under SFAS 133, certain contracts that were not
formerly considered derivatives may now meet the definition of a
derivative. The Company adopted SFAS 133 effective January 1, 2001. The
adoption of SFAS 133 did not have a significant impact on the financial
position, results of operations, or cash flows of the Company.
3. COMMERCIAL PROPERTIES
Description
The Company, through its subsidiaries and joint venture, is primarily
involved in the operation and development of commercial real estate located
in New York City and Boston and whose tenants are principally large
financial and professional service institutions. The properties owned by
the Company, in whole or in part, are as follows:
NEW YORK CITY BOSTON
------------- ------
World Financial Center - Tower A 53 State Street
World Financial Center - Tower B 75 State Street
World Financial Center - Tower D
245 Park Avenue
One Liberty Plaza
These properties aggregate approximately 12 million square feet and are
wholly owned, except for Tower A in which CIBC, a major tenant, holds a 26%
partnership interest and Tower D, in which an affiliate of Merrill Lynch &
Co., hold a 49% partnership interest. The company is also currently
developing a 31 story office building to be completed in 2003 known as 300
Madison Avenue.
On December 31, 1999, the Company executed an option agreement (the
"Agreement") with a subsidiary of Deutsche Bank (Deutsche) whereby Deutsche
agreed to an option to purchase a 49% limited partnership interest in the
entities which own 53 State Street and 75 State Street. Pursuant to the
Agreement, Deutsche has made deposits totaling $34 million. This
transaction is scheduled to close on March 31, 2001. The Company had
pledged $168 million of expected proceeds from Deutsche to a lender in
satisfaction of certain short term debt the Company had outstanding. The
pledge was extinguished subsequent to December 31, 2000 (see Footnote 7b).
Included in Commercial Properties at December 31, 2000 are consolidated
operating commercial properties of $2,930.9 million, real estate under
development of $169.5, a joint venture investment of $80.9 million, and
straight-line rent receivables of $118.5 million.
CONSOLIDATED COMMERCIAL PROPERTIES:
The Company's consolidated operating commercial properties at
December 31, 2000 are as follows:
Land . . . . . . . . . . . . $ 406,561
Buildings and improvements . 2,757,238
----------
3,163,799
Accumulated depreciation
and amortization. . . . . . (232,926)
----------
Total. . . . . . . . . . . . $2,930,873
==========
JOINT VENTURE - COMMERCIAL PROPERTY:
The condensed balance sheet and condensed statement of operations of
Tower D, in which the Company has a joint venture investment, at and for
the year ended December 31, 2000 is as follows:
BALANCE SHEET
ASSETS
Commercial property. . . . . . . . . . $617,273
Other assets . . . . . . . . . . . . . 80,334
--------
Total assets . . . . . . . . . . . . . $697,607
========
LIABILITIES
Long term debt . . . . . . . . . . . . $434,346
Accounts payable and other . . . . . . 4,638
--------
Total liabilities. . . . . . . . . . . 438,984
--------
PARTNERS' CAPITAL
Brookfield Financial Properties, L.P.. 80,938
Co-venturer. . . . . . . . . . . . . . 177,685
--------
258,623
--------
Total liabilities and
partners' capital. . . . . . . . . . $697,607
========
STATEMENT OF OPERATIONS
Revenues . . . . . . . . . . . . . . . . $ 81,732
Operating expenses . . . . . . . . . . . (51,034)
Depreciation and amortization. . . . . . (13,481)
--------
Net income . . . . . . . . . . . . . . $ 17,217
========
4. LONG TERM DEBT
Long term debt secured by mortgages and other security interests which
are collateralized by commercial properties of $2,320.5 million at
December 31, 2000 carries a weighted average interest rate of 7.3%. Cash
paid for interest on long term debt obligations for the year ended
December 31, 2000 aggregated $158 million.
In addition, included in long term debt is subordinated long-term debt
of $54.7 million which represents the net carrying value of a zero coupon
note (the Note) payable by WFP Tower B Co., L.P. (the Partnership), a
subsidiary of the Company, and which matures in 2014 (Maturity). The Note
carries a face amount of $150 million (the Face Principal Amount). On
maturity, the Partnership will pay the Face Principal Amount and, if any,
the Maturity Contingent Principal Amount (together, the Maturity Stated
Principal Amount). The Maturity Contingent Principal Amount is the lesser
of (a) 25% of amount by which Tower B fair market value exceeds $600
million and (b) $517,298,409. In lieu of paying in cash the Maturity
Stated Principal Amount, the Partnership may elect to deliver a 25%
interest in the building, provided the fair market value of the building
taking into account the then outstanding principal indebtedness secured by
the leasehold interest in the building, is at least $600 million. However,
if the lender elects to receive cash instead, the Partnership only has to
repay the Face Principal Amount. The carrying amount represents the
current value of the Note based upon the estimated residual value of the
building discounted at 9.5%.
The scheduled repayments of long term debt at December 31, 2000 are as
follows:
Years ending December 31, 2001 . . . . $ 59,247
2002 . . . . . 77,889
2003 . . . . . 722,850
2004 . . . . . 72,914
2005 . . . . . 67,374
Thereafter . . 1,374,915
----------
$2,375,189
==========
5. RENTALS UNDER OPERATING LEASES
Rental revenues are derived from the leasing of space in the buildings
to commercial and retail tenants. The leases are for fixed terms of
varying length and generally provide for annual rentals and expense
escalations to be paid in monthly installments. Rental income includes
additional rentals for operating expense reimbursements and escalations
amounting to $64.4 million for the year ended December 31, 2000.
The following is a schedule of minimum future rental payments under
noncancellable operating leases during the next five years and thereafter.
Years ending December 31, 2001 . . . . $ 409,190
2002 . . . . . 409,698
2003 . . . . . 414,844
2004 . . . . . 419,845
2005 . . . . . 392,610
Thereafter . . 2,725,198
----------
Total future
minimum
rental
payments . . $4,771,385
==========
6. RELATED PARTY TRANSACTIONS
a. Included in other assets is a note receivable from BPHI in the
amount of $1.5 million. This note bears interest at 9% and is due in 2001.
b. During the year the Company was indebted to affiliates of BPHI
for certain short-term advances which were repaid prior to year end. Such
advances bore interest at 8.0%, which totaled $1.6 million for the year
ended December 31, 2000.
7. COMMITMENTS AND CONTINGENCIES
a. The Company is obligated under various ground leases expiring
between 2069 and 2077. The following is a schedule of the future minimum
rental payments under these leases.
Years ending December 31, 2001 . . . . $ 13,868
2002 . . . . 13,886
2003 . . . . 13,903
2004 . . . . 13,922
2005 . . . . 13,939
Thereafter . 676,597
--------
$746,115
========
b. Included in other liabilities is a $124 million loan which
bears interest at 8%. This amount represents a liability for which the
proceeds from the sale of the partnership interests in 53 State Street and
75 State Street as discussed in Note 3 have been pledged. During 2000
deposits received from Deutsche Bank totaling $34 million were applied
against this amount. (and subsequent to December 31, 2000, this amount was
repaid in full.) Interest accrued on this liability aggregated $10.8
million for the year ended December 31, 2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
1999 and 2000.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership, JMB Park Avenue,
Inc., an Illinois corporation, is a wholly-owned subsidiary of 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 shares of JMB are owned, directly or
indirectly, by certain of its officers, directors, members of their
families and their affiliates. The Corporate General Partner has
responsibility for all aspects of the Partnership's operations, subject to
the requirement that the sale of all or substantially all of the
Partnership's interest in BFP, LP or of all or substantially all of the 245
Park Avenue office building, unless required by the terms of the BFP, LP
venture agreement, must be approved by the Associate General Partner of the
Partnership, Park Associates, L.P., an Illinois limited partnership with
JMB Park Avenue, Inc. as the sole general partner. The limited partners of
the Associate General Partner are generally JMB, current or former officers
and directors of JMB, their affiliates and an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership by affiliates of the General
Partners, including insurance brokerage and administrative services. In
general, such services are to be provided on terms no less favorable to the
Partnership than could be obtained from independent third parties and are
otherwise subject to conditions and restrictions contained in the
Partnership Agreement. The Partnership Agreement permits the General
Partners and their affiliates to provide services to, and otherwise deal
and do business with, persons who may be engaged in transactions with the
Partnership, and permits the Partnership to borrow from, purchase goods and
services from, and otherwise to do business with, persons doing business
with the General Partners or their affiliates. The General Partners and
their affiliates may be in competition with the Partnership or its
investment properties under certain circumstances, including for tenants
for properties and/or for the sale of properties. Because the timing and
amount of cash distributions and profits and losses of the Partnership may
be affected by various determinations by the General Partners under the
Partnership Agreement, including whether and when to sell (or consent to
the sale of) investment property, the establishment and maintenance of
reasonable reserves, the timing of expenditures and the allocation of
certain tax items under the Partnership Agreement, the General Partners may
have a conflict of interest with respect to such determinations. The
General Partners and their affiliates may also have a conflict of interest
with respect to matters relating to the term loan notes and the demand
notes payable to JMB. Reference is made to the discussions under
"Investment in Unconsolidated Venture" and "Notes Payable to an Affiliate"
in the Notes for further information concerning the term loan and demand
notes.
The names, current positions and length of service therein of the
director and the executive officers of the Corporate General Partner of the
Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 03/26/84
Neil G. Bluhm Vice President 03/26/84
Gary Nickele Vice President 12/18/90
Patrick J. Meara President and Director 12/22/00
H. Rigel Barber Vice President 03/26/84
Gailen J. Hull Vice President 03/26/84
There is no family relationship among any of the foregoing director or
officers. The foregoing director has been elected to serve a term until
the annual meeting of the Corporate General Partner to be held on August
14, 2001. All of the foregoing officers have been elected to serve terms
until the first meeting of the Board of Directors held after the annual
meeting of the Corporate 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 any director or
officer was elected as such.
The foregoing director and officers are also officers and/or directors
of JMB. JMB 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.
The foregoing director and officers are also officers and/or directors
of various affiliated companies of JMB. Certain of such officers are also
partners, directly or indirectly, of the associate general partners in the
Partnership, Carlyle-XIII, Carlyle-XIV and Carlyle-XV.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership
includes the following:
Judd D. Malkin (age 63) is Chairman, a director and Chief Financial
Officer 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 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.
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.
Patrick J. Meara (age 38) has been Senior Vice President of JMB since
January 1997. Prior to becoming President and Director of the Corporate
General Partner, Mr. Meara was Vice President of the Corporate General
Partner from August 8, 2000 to December 22, 2000. He is also an officer
and/or director of various other JMB affiliates. He has been associated
with JMB, JMB Institutional Realty Corporation and their affiliates since
1987. Mr. Meara is a Certified Public Accountant.
H. Rigel Barber (age 52) is Executive Vice President and Chief
Executive Officer of JMB and an officer of various JMB affiliates.
Mr. Barber has been associated with JMB since March, 1982. He holds 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934, as amended, and the rules
and regulations thereunder require directors and officers of the Corporate
General Partner to file initial statements of their beneficial ownership of
Interests and statements of changes in their beneficial ownership of
Interests on Form 3, Form 4 and Form 5 with the Securities and Exchange
Commission ("SEC"). Such persons are also required by SEC rules to furnish
the Partnership a copy of such statements filed with the SEC. The
Partnership believes that for 2000, Patrick J. Meara failed to file reports
on Form 3 and Form 5 for his initial statement of beneficial ownership of
Interests.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General 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 in the Notes. No such cash distributions were paid
to the General Partners in 2000, 1999 or 1998. The General Partners were
allocated aggregate profits for tax purposes of $257,636 from the
Partnership in 2000. Such allocation of profits reduces the deficit
balances in the capital accounts of the General Partners and an obligation
under the terms of the Partnership Agreement to make capital contributions
in the amount of the deficit balances in their capital accounts (determined
for Federal income tax purposes) upon termination of the Partnership.
The Partnership is permitted to engage in various transactions
involving affiliates of the Corporate General Partner of the Partnership,
as described under the captions "Compensation, Fees and Other Payments" at
pages 19-21, and "Management" at pages 31-38 of the Private Placement
Memorandum, which descriptions are hereby incorporated herein by reference
to Exhibit 99.1 to this annual report. Such transactions may involve
conflicts of interest for the General Partners or their affiliates,
including, among others, those discussed in Item 10. Various relationships
of the Partnership to the Corporate General Partner (and its director and
executive officers) and its affiliates are also set forth above in Item 10.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 2000
aggregating $563 in connection with the provision of professional liability
insurance coverage for the Partnership. Such commissions are at rates set
by insurance companies for the classes of coverage involved.
The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses and out-of-pocket expenses relating to
the administration of the Partnership and operation of the Partnership's
real property investments. No such expenses were reimbursed to the General
Partners during 2000.
The General Partners and their affiliates are entitled to
reimbursements of salary and salary related expenses for legal, accounting
and certain other services. Such reimbursements will not exceed the lesser
of the actual cost of such services or the amount which the Partnership
would be required to pay independent parties for comparable services. For
2000, an affiliate of the General Partners was entitled to reimbursements
for such expenses in the amount of $8,444 of which $1,207 was payable at
December 31, 2000.
As of December 31, 2000, JMB has advanced $12,375,591, evidenced by a
demand note, which relates primarily to principal and interest payments
made on the LIBOR Note (one of the term loan notes discussed below) in
connection with the closing of the term loan note modifications in 1993 as
well as funding of Partnership operating expenses. The demand note payable
to JMB allows a maximum principal sum of a specified amount and bears
interest at the prime rate plus 1% per annum, which accrues and was being
deferred. During the fourth quarter of 1999, the Partnership made an
interest payment to JMB of $850,000. The demand note is secured by the
Partnership's interest in BFP, LP. The amount of interest accrued and
deferred on the demand note for 2000 and in the aggregate through December
31, 2000 is $1,287,405 and $6,757,337, respectively. In July 1995, JMB
purchased from the lenders the term loans to the Partnership and their
security interest in the related collateral, which included the
Partnership's interest in real estate and the JMB guarantee, which was
terminated. JMB continued to hold these notes generally under the same
terms and conditions that were in effect prior to the purchase. However,
no scheduled principal payments were required on any of these notes prior
to maturity. Interest on the LIBOR Note is payable monthly at a floating
rate which, at the option of the Partnership, is related to either LIBOR or
the prime rate of Bank of America. Through December 31, 2000, no payments
of interest on the LIBOR Note had been made subsequent to July 31, 1995,
and unpaid interest at the applicable rate (including the default interest
rate for the period from December 31, 1998, the maturity date prior to
extension) has accrued and compounded monthly. The amount of interest
accrued and deferred or unpaid on these notes for the year ended December
31, 2000 and in the aggregate through December 31, 2000, is $10,434,103 and
$20,946,340, respectively. The term loan notes had a scheduled maturity of
December 31, 1998. The term loans were extended effective January 3, 2001
to January 2, 2006. Reference is made to "Investment in Unconsolidated
Venture" and "Notes Payable to an Affiliate" in the Notes for a further
discussion of the demand and term loan notes.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner, its executive officers and director and the Associate General Partner
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 Corporate General 26 Interests 2.6%
Interests Partner, its (1)(2)
executive officers
and director and
the Associate
General Partner
as a group
(1) Includes 24 Interests owned by an investment partnership of which two executive officers are the
managing general partners and have shared investment and voting power with respect to such Interests.
(2) Includes one Interest owned by an executive officer for which he has sole investment and voting power
and one Interest owned by an estate for which such officer acts as co-executor and for which such officer is
deemed to have shared investment and voting power.
No executive officer or director of the Corporate General Partner of the Partnership possesses a right to
acquire beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(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
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those 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 and
Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership
of the Partnership is hereby incorporated by reference to Exhibit 3 to the
Partnership's Form 10-K Report for December 31, 1992 (File No. 0-13545)
filed on March 19, 1993.
3-B. Amendment to the Amended and Restated Agreement of
Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between
JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is
hereby incorporated by reference to Exhibit 3-B to the Partnership's Form
10-Q Report for March 31, 1995 (File No. 0-13545) filed May 11, 1995.
4-A. Loan agreement dated June 27, 1984 between JMB/245
Park Avenue Associates and Continental Illinois National Bank and Trust
Company of Chicago is hereby incorporated by reference to Exhibit 4-B to
the Partnership's Registration Statement on Form 10 (as amended) of the
Securities Exchange Act of 1934 (File No. 0-13545) filed on April 29, 1985.
4-B. $16,042,000 Second Amended and Restated Promissory
Note and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation are hereby incorporated herein by
reference to Exhibit 4-U to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-C. $25,000,000 Second Amended and Restated Promissory
Note and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation, are hereby incorporated herein by
reference to Exhibit 4-V to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-D. $2,194,631.25 Amended and Restated Promissory Note
and related documents dated August 1, 1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation, are hereby incorporated herein by
reference to Exhibit 4-W to the Partnership's Form 10-Q Report for
September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-E. Amended and Restated Demand Note dated August 1, 1995
between JMB/245 Park Avenue Associates and JMB Realty Corporation, are
hereby incorporated herein by reference to Exhibit 4-X to the Partnership's
Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on
November 9, 1995.
4-F. Fourth Amendment to Loan Documents dated August 1,
1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty
Corporation detailing amendments to the term loans, are hereby incorporated
herein by reference to Exhibit 4-Y to the Partnership's Form 10-Q Report
for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-G. Consent Agreement dated December 29, 1983 from
JMB/245 Park Avenue Associates to Continental Illinois Bank of Chicago
(Continental) detailing the transactions for which the Partnership would
obtain Continental's consent, are hereby incorporated herein by reference
to Exhibit 4-Z to the Partnership's Form 10-Q Report for September 30,
1995, (File No. 0-13545) filed on November 9, 1995.
4-H. Third Amended and Restated Security Agreement dated
August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty
Corporation, are hereby incorporated herein by reference to Exhibit 4-AA to
the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-
13545) filed on November 9, 1995.
10-A. Third Amended Joint Plan of Reorganization dated
September 12, 1996 is hereby incorporated herein by reference to the
Partnership's report for September 31, 1996 on Form 10-Q (File No. 0-13545)
filed on November 8, 1996.
10-B. Limited Liability Company Agreement of JMB 245 Park
Avenue Holding Company, LLC dated as of November 12, 1996 is hereby
incorporated by reference to the Partnership's Report for November 21, 1996
on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-C. Amended and Restated Agreement of Limited Partnership
of World Financial Properties, L.P. dated as of November 21, 1996 is hereby
incorporated by reference to the Partnership's Report for November 21, 1996
on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-D. JMB Transaction Agreement dated as of November 21,
1996 is hereby incorporated by reference to the Partnership's Report for
November 21, 1996 on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-E. Consent and Substitution of Collateral dated
November 21, 1996 is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1997 on Form 10-Q (File No. 0-13545)
filed on May 9, 1997.
21. List of Subsidiaries of the Partnership.
99.1. Pages 19-21; and 31-38 from the Partnership's Private
Place Memorandum dated May 7, 1984 and Article 14 (pages 15-17) of the
Partnership's Amended and Restated Agreement of Limited Partnership are
hereby incorporated herein by reference to Exhibit 99.1 to the
Partnership's 10-K Report for December 31, 1994, (File No. 0-13545) filed
on March 27, 1995.
(b) No report on Form 8-K has been filed since the beginning of 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.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc.
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: April 12, 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.
By: JMB Park Avenue, Inc.
Corporate General Partner
PATRICK J. MEARA
By: Patrick J. Meara, President and Director
Principal Executive Officer
Date: April 12, 2001
JUDD D. MALKIN
By: Judd D. Malkin
Principal Financial Officer
Date: April 12, 2001
GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
Date: April 12, 2001
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE
-------------
3-A. Amended and Restated Agreement of
Limited Partnership of the
Partnership. Yes
3-B. Amendment to the Amended Limited
Partnership Agreement of Partnership
of JMB/245 Park Avenue Associates, Ltd. Yes
4-A. Loan agreement dated June 27,
1984 between JMB/245 Park Avenue
Associates and Continental Illinois
National Bank and Trust Company of
Chicago. Yes
4-B. $16,042,000 Second Amended and
Restated Promissory Note and
related documents dated August 1,
1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation Yes
4-C. $25,000,000 Second Amended and
Restated Promissory Note and
related documents dated August 1,
1995 between JMB/245 Park Avenue
Associates and JMB Realty Corporation Yes
4-D. $2,194,631.25 Amended and Restated
Promissory Note and related documents
dated August 1, 1995 between
JMB/245 Park Avenue Associates and
JMB Realty Corporation Yes
4-E. Amended and Restated Demand Note
dated August 1, 1995 between JMB/245
Park Avenue Associates and JMB Realty
Corporation Yes
4-F. Fourth Amendment to Loan Documents
dated August 1, 1995 between JMB/245
Park Avenue Associates, Ltd. and
JMB Realty Corporation Yes
4-G. Consent Agreement dated December 29,
1983 from JMB/245 Park Avenue Associates
to Continental Illinois Bank of
Chicago (Continental) Yes
4-H. Third Amended and Restated Security
Agreement dated August 1, 1995 between
JMB/245 Park Avenue Associates, Ltd.
and JMB Realty Corporation Yes
10-A. Third Amended Joint Plan of Reorganiza-
tion dated September 12, 1996 Yes
10-B. Limited Liability Company Agreement of
JMB 245 Park Avenue Holding Company, LLC
dated as of November 12, 1996. Yes
10-C. Amended and Restated Agreement of
Limited Partnership of World Financial
Properties dated as of November 21, 1996 Yes
10-D. JMB Transaction Agreement dated as of
November 21, 1996 Yes
10-E. Consent and Substitution of Collateral
dated November 21, 1996 Yes
21. List of Subsidiaries of the Partnership. No
99.1. Pages 19-21; 31-38; and 55-57 from the
Partnership's Private Place Memorandum
dated May 7, 1984 and Article 14
(pages 15-17) of the Partnership's
Amended and Restated Agreement of
Limited Partnership Yes