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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year
Ended December 31, 1993 Commission file no. 0-16976
ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Portions of the Prospectus of the registrant dated September 16, 1987 and
filed with the Commission pursuant to Rules 424(b) and 424(c) under the
Securities Act of 1933 are incorporated by reference in Parts II and III of
this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 9
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and Related
Security Holder Matters . . . . . . . . . . . . 9
Item 6. Selected Financial Data . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and Supplementary
Data. . . . . . . . . . . . . . . . . . . . . . 23
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . 63
PART III
Item 10. Director and Executive Officers of
the Registrant. . . . . . . . . . . . . . . . . 63
Item 11. Executive Compensation. . . . . . . . . . . . . 67
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 68
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 68
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K. . . . . . . 69
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 72
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership was
formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of up
to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1 under
the Securities Act of 1933 (No. 33-14091). A total of 400,000 Interests were
sold to the public (at an offering price of $1,000 per Interest before
discounts) and the holders of 400,000 Interests were admitted to the
Partnership in October 1987. The offering terminated October 31, 1987. In
addition, a holder (an affiliate of the dealer-manager of the public offering)
of 4,000 Interests was admitted to the Partnership in October 1987.
Subsequent to admittance to the Partnership, no holder of Interests (a
"Limited Partner" or "Holder") has made any additional capital contribution.
The Limited Partners of the Partnership generally share in their portion of
the benefits of ownership of the Partnership's real property investments and
other assets according to the number of Interests held.
Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner shall elect to
pursue one of the following courses of action: (i) to cause the Interests to
be listed on a national exchange or on the National Association of Securities
Dealers Automated Quotation System at any time on or prior to the date ten
years from the termination date of the offering of Interests; (ii) to
purchase, or cause one of its affiliates to purchase, ten years from the
termination of the offering of Interests, all of the Interests at their then
appraised fair market value (as determined by an independent nationally
recognized investment banking firm or real estate advisory company); or (iii)
to commence a liquidation phase ten years from the termination of the offering
of Interests in which all of the Partnership's remaining assets will be sold
prior to the end of the fifteenth year from the termination of the offering.
The assets of the Partnership consist principally of interests in land
which is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial and
industrial properties; mortgage notes and accounts receivable; certain
management and other service contracts; construction, brokerage and other
support businesses; real estate assets held for investment; certain club and
recreational facilities; and certain cable television businesses serving
certain of its Communities. The Partnership is principally engaged in the
development of comprehensively planned resort and primary home Communities
containing a diversified product mix designed for the middle and upper income
segments of the various markets in which the Partnership operates.
The Partnership sells individual residential lots and parcels of
partially developed and undeveloped land. The third-party builders and
developers to whom the Partnership sells homesites and land parcels are
generally smaller local builders who require project specific financing for
their developments and whose operations are more susceptible to fluctuations
in the availability of financing. In addition, within the Communities, the
Partnership constructs, or causes to be constructed, a variety of products,
including single-family homes, townhouses and condominiums to be developed for
sale, as well as related commercial and recreational facilities. The
Communities are located primarily throughout the State of Florida, with
Communities also located near Atlanta, Georgia; Highlands, North Carolina and
in Orange County, California. Additional undeveloped properties owned by the
Partnership in or near its Communities are being considered for development as
commercial, office and industrial properties. The Partnership also owns or
manages certain club and recreational facilities within certain of its
Communities. Certain assets located in Florida were acquired by the
Partnership from the Seller by purchasing a 99.9% interest in a joint venture
partnership in which the General Partner acquired the remaining joint venture
partnership interest. In addition, other assets are owned by various
partnerships, the interests of which are held by certain indirect subsidiaries
of the Partnership and by the Partnership.
Arvida Company ("Arvida"), an affiliate of the General Partner, provides
certain development and management supervisory personnel to the Partnership
for the supervision of all of its projects and operations, subject, in each
case, to the overall control of the General Partner on behalf of the
Partnership. The Partnership, directly or through certain subsidiaries,
provides development and management services to the home ownership
associations within the Communities. Two of the Partnership's Communities
currently offer cable television systems to certain of their residents, which
systems are owned and operated by entities owned by the Partnership.
The business of the Partnership is cyclical in nature and certain aspects
of the development of Community projects are to some degree seasonal. The
Partnership does not expect that such seasonality will have a material impact
on its business. A presentation of information about industry segments,
geographic regions or raw materials is not applicable and would not be
material to an understanding of the Partnership's business taken as a whole.
The Communities are in various stages of development. The remaining
estimated build-out time for the Communities ranges from one year to 11 years.
The Partnership generally follows the practice with respect to Communities of
(i) developing an overall master plan for the Community, (ii) creating a
unifying architectural theme that is consistent with the Community's master
plan, (iii) offering a variety of recreational facilities, (iv) imposing
architectural standards and other property restrictions on residents and
third-party developers, in order to enhance the long-term value of the
Community, (v) establishing property owners' associations to maintain
compliance with architectural, landscaping and other requirements and to
provide for ownership and maintenance of certain facilities, and/or (vi)
operating and controlling access to golf, tennis and other recreational
facilities.
The Partnership's development approach, individually or by joint venture,
is intended to enhance the value of real estate in successive phases. The
first step in the development of a property is to design a Community master
plan that addresses the appropriate land uses and product mix, including
residential, recreational and, where appropriate, commercial and industrial
uses. The Partnership then seeks to obtain the necessary regulatory and
environmental approvals for the development of the Community in accordance
with the master plan. This approval process is a major factor in determining
the viability and prospects for profitability of the Partnership's development
projects.
The first phase in the regulatory approval process will usually consist
of obtaining the proper zoning approvals for the intended development. The
Partnership must also comply with state and local laws governing large planned
developments which may vary from state to state and community to community.
In Florida, for example, land development is subject to the Florida Local
Government Comprehensive Planning and Land Development Regulation Act, as
administered by the State and implemented by regional, county and municipal
authorities. In addition, prior to or contemporaneously with zoning approval,
the Partnership, if subject to the applicable filing requirements, must obtain
"Development of Regional Impact" ("DRI") approval from the applicable local
governmental agency after review and recommendations from the appropriate
regional planning agency, with oversight by the Florida State Department of
Community Affairs. With the exception of approximately 2,460 acres of Weston
(Weston's Increment III), the Partnership has received DRI approval on all of
its Florida Properties. Application with respect to Weston's Increment III
DRI approval has been filed and is being processed in the ordinary course of
business. Receipt of DRI approval is a prerequisite to obtaining zoning,
platting, building permits or other approvals required to begin development or
construction. Obtaining such approvals can involve substantial periods of
time and expense and may result in the loss of desired densities, and
approvals may need to be resubmitted if there is any subsequent deviation in
current approved plans. The process may also require committing land for
public use and payment of substantial impact fees. In addition, state laws
generally provide further that a parcel of land cannot be subdivided into
distinct segments without having a plat filed and finalized with the local or
municipal authority, which will, in general, require the approval of various
local agencies, such as environmental and public works departments. In
addition, the Partnership must secure the actual permits for development from
applicable Federal (e.g., the Army Corps of Engineers and/or the Environmental
Protection Agency with respect to coastal and wetlands developments, including
dredging of waterways) and state or local agencies, including construction,
dredging, grading, tree removal and water management and drainage district
permits. The Partnership may, in the process of obtaining such permits or
approvals for platting or construction activities, incur delays or additional
expenses; however, such permits and approvals are customarily obtained to
permit development. Failure to obtain or maintain necessary approvals, or
rejection of submitted plans, would result in an inability to develop the
Community as originally planned and would cause the Partnership to reformulate
development plans for resubmission, which might result in a failure to
increase, or a loss of, market value of the property. The foregoing
discussion and the discussion which follows are also generally applicable to
the Partnership's commercial and industrial developments.
Upon receipt of all approvals and permits required to be obtained by the
Partnership for a specific Community, other than actual approvals or permits
for final platting and/or construction activities, the Partnership applies for
the permits and other approvals necessary to undertake the construction of
infrastructure, including roads, water and sewer lines and amenities such as
lakes, clubhouses, golf courses, tennis courts and swimming pools. These
expenditures for infrastructure and amenities are generally significant and
are usually required early in the development of a Community project, although
the Partnership will attempt, to the extent feasible, to develop Communities
in a phased manner. See Note 12 for further discussion regarding Tax
Increment Financing Entities and their involvement with infrastructure
improvements.
Certain of the Florida Communities described below have applied for and
have been designated as a Planned Unit Development ("PUD") by the local zoning
authority (usually the governing body of the municipality or the county in
which the Community is or will be located). Designation as a PUD generally
establishes permitted densities (i.e., the number of residential units which
may be constructed) with respect to the land covered thereby and, upon
receipt, enables the developer to proceed in an orderly, planned fashion.
Generally, such PUD approvals permit flexibility between single-unit and
multi-unit products since the developer can plan Communities in either fashion
as long as permitted densities are not exceeded. As a consequence,
developments with PUD status are able to meet changing demand patterns in
housing through such flexibility. It should be noted that some of the
Communities, while not having received PUD approval, have obtained the
necessary zoning approvals to create a planned community development with many
of the benefits of PUD approval such as density shifting.
In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership may function as a general
contractor although it may also from time to time hire firms for general
contracting work. The Partnership generally follows the practice of hiring
subcontractors, architects, engineers and other professionals on a project-by-
project basis rather than maintaining in-house capabilities, principally to be
able to select the subcontractors and consultants it believes are most
suitable for a particular development project and to control fixed overhead
costs. The Partnership maintains, through a wholly-owned affiliate, a staff
to perform certain construction work, to supervise construction and to perform
routine maintenance and minor repair work. Although the General Partner does
not expect the Partnership to be faced with any significant material or labor
shortages, the construction industry in general has from time to time
experienced serious difficulties in obtaining certain construction materials
and in having available a sufficiently large and adequately trained work
force.
The Partnership's strategy includes the ownership and development of
certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contain
acreage zoned for commercial use, although, except for the Weston Community,
such acreage is generally not substantial. On both of such types of
properties, the Partnership, individually or with a joint venture partner, may
build shopping centers, office buildings and other commercial buildings and
may sell land to be so developed.
Certain of the Communities and operations are owned by the Partnership
jointly with third parties. Such investments by the Partnership are generally
in partnerships or ventures which own and operate a particular property in
which the Partnership or an affiliate (either alone or with an affiliate of
the General Partner) has an interest.
The principal assets in which interests have been acquired by the
Partnership are described in more detail under Item 2 below to which reference
is hereby made for a description of such assets.
The Partnership's real properties are subject to competition from similar
types of properties in the vicinities in which they are located, including
properties owned, advised or managed by affiliates of the General Partner.
The Partnership has no real estate assets located outside of the United
States.
In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 1993 are adequately insured.
The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the names
of its Communities. The Arvida name and the service marks with respect to the
Arvida name are owned by Arvida, subject to the Partnership's non-exclusive
right to use the name and the service marks under its supervisory and
management agreement with Arvida and subject to the non-exclusive right of
certain third parties to the limited use of the name.
The Partnership has approximately 550 employees.
Reference is made to Item 8 - Schedule X filed with this annual report
for further information concerning real estate taxes and depreciation.
The terms of transactions between the Partnership and the General Partner
and its affiliates are set forth in Items 10, 11, 12 and 13 filed with this
annual report to which reference is hereby made for a description of such
terms and transactions.
ITEM 2. PROPERTIES
The principal assets being developed or managed by the Partnership are
described below. The acreage amounts set forth herein are approximations of
the gross acreage of the Communities or other properties referred to or
described and are not necessarily indicative of the net developable acreage
currently owned by the Partnership or its joint ventures. All of the
Partnership's properties are subject to mortgages to secure the repayment of
the Partnership's indebtedness as discussed in detail in Note 8.
(a) Palm Beach County, Florida
The Partnership owns property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offers a wide range of residential
products built by the Partnership or third-party builders and is in its final
stage of development.
(b) Broward County, Florida
The Partnership owns property in Weston, a 7,500-acre Community in its
mid stage of development. The Community offers a complete range of housing
products built by the Partnership or third-party builders, as well as tennis,
swim and fitness facilities, a golf course and an equestrian center. In
addition, the Partnership owns commercial properties, most of which are
currently undeveloped, located in the Weston Community. Reference is made to
Note 12 for a discussion of the Partnership's use of certain tax-exempt
financing in connection with the development of the Weston Community.
(c) Sarasota / Tampa, Florida
The Partnership owns property in the Longboat Key Club, a Community on
Longboat Key which is a barrier island on Florida's west coast, approximately
four miles from downtown Sarasota and seven miles from Sarasota/Bradenton
airport. The Community is in its late stage of development. The Partnership
also owns property in a Community in the Tampa area known as River Hills
Country Club which is a 1,200-acre Community in its mid stage of development.
The Partnership owned an interest in The Oaks Community in Sarasota, Florida.
The Partnership sold its interest in The Oaks during 1993. Reference is made
to Note 8 for a discussion of the sale of the Partnership's interest in The
Oaks property and the repayment of the mortgage loan secured by such property.
(d) Jacksonville, Florida
The Partnership owns property in two Communities in Ponte Vedra Beach,
Florida, twenty-five miles from downtown Jacksonville, known as Sawgrass
Country Club and The Players Club at Sawgrass. These Communities are in their
final stages of development. The Partnership also owns property in a 730-acre
Community known as the Jacksonville Golf and Country Club which is in its mid
stage of development.
(e) Atlanta, Georgia
The Partnership owns properties in the Atlanta, Georgia area known as
Water's Edge and Dockside, which are in their mid and final stages of
development, respectively.
(f) Highlands, North Carolina
The Partnership owns a 600-acre Community near Highlands, North Carolina
known as The Cullasaja Club. The Community is in its mid stage of
development. At December 31, 1991, the Partnership owned a 50% joint venture
interest in this Community; however, during 1992, the Partnership purchased
its joint venture partner's 50% interest in the Community. Reference is made
to Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note 7 for further discussion of this joint venture.
(g) Other
The Partnership also owns a 20% joint venture interest in a 4,000-acre
Community, known as Coto de Caza, located in Southern Orange County,
California. The Community is in its mid stage of development. At December
31, 1991, the Partnership was the managing partner and owned a 50% joint
venture interest in the Community; however, during 1992 the Partnership's
joint venture partner was reallocated an additional 30% interest in the
venture and assumed the role of managing partner in exchange for funding the
venture's future cash requirements. Reference is made to Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 7 for further discussion of this joint venture. The
Partnership also has joint venture interests in Mizner Court and Mizner Tower,
located in Mizner Village, which consisted of 335 luxury condominium units in
Palm Beach County, Florida, all of which were sold as of December 31, 1991.
The Partnership also owns land zoned for commercial use in or near its
Communities in Jacksonville, Boca Raton, Atlanta, Georgia and in its Weston
Community. The Partnership also owns, either directly or through joint
venture interests, various commercial and industrial sites and buildings in
Sarasota, Tampa, Ocala, Pompano Beach and Palm Beach County, Florida which are
not located in its residential Communities. At December 31, 1993, the joint
venture with property in Pompano Beach was encumbered by mortgages in the
aggregate principal amount of approximately $4 million. Reference is made to
Note 11 for further discussion of this venture and its related indebtedness.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is involved in an Environmental Protection Agency (EPA)
administrative enforcement proceeding with regard to the Partnership's Water's
Edge property. The EPA has asserted that a dam built to create a lake at the
Community during the time the property was owned by the Seller was in
violation of Section 404 of the Clean Water Act in that certain wetlands areas
had been filled. Pursuant to a Consent Agreement and Order entered into with
the EPA, the Partnership acquired certain land (at a cost of approximately
$400,000) for which it has developed and implemented a plan of mitigation for
the wetlands lost. In accordance with certain provisions of the Consent
Agreement and Order, the Partnership must provide the EPA with periodic
reports regarding the status of the mitigation plan. An agreement in principle
has been reached to settle the dispute between the parties pursuant to which
the EPA has agreed to assess a civil penalty of $125,000. The Partnership
cannot assure that the settlement agreement in fact will be consummated. The
Partnership is actively pursuing indemnification from the Seller for the total
costs that will ultimately be incurred to resolve this issue. There can be no
assurance that the Partnership will be reimbursed by the Seller.
The Partnership has been named as a defendant in a number of homeowner
lawsuits, each of which has been filed in the Circuit Court of the 11th
Judicial District for Dade County, Florida. Each of these suits allegedly in
part arises out of or relates to Hurricane Andrew, which resulted in damage
to, among other things, the Country Walk development in South Florida on
August 24, 1992. A number of the homeowner lawsuits were brought by various
plaintiffs in their individual capacity and other homeowner lawsuits were
brought as purported class actions.
In general, the complaints in the homeowner lawsuits allege that the
various plaintiffs and plaintiff classes purchased and owned homes and/or
condominiums located in the Country Walk development and that the damage or
destruction suffered by such homes and/or condominiums as a result of
Hurricane Andrew was beyond what should have been reasonably expected. The
allegations further suggest that the damage caused by Hurricane Andrew was a
result of the defendants' alleged defective design, construction, inspection
and/or other improper conduct in connection with development, construction and
sale of such homes and/or condominiums; that such misconduct on the part of
the defendants constituted, among other things, violations of various building
code provisions and breaches of express and implied warranties of merchant-
ability and habitability, or constituted intentional tort, negligence,
misrepresentation or fraudulent concealment, and caused personal injury. In
addition, there are allegations of latent defects that were uncovered by
Hurricane Andrew. The complaints allege that the Partnership is liable to the
named plaintiffs and plaintiff classes either as a result of the Partnership's
own acts of misconduct and/or as a result of the Partnership's purchase of the
assets of the Seller and the stock of three of the Seller's subsidiaries in
1987 and the Partnership's subsequent marketing, management and development of
the Country Walk development. The various named plaintiffs and purported
plaintiff classes seek compensatory damages in varying and, in some cases,
unspecified amounts, and other relief, including, in some of the actions,
injunctive relief and/or punitive damages. The Partnership intends to
vigorously defend itself in these lawsuits.
In connection with its purchase of assets, including certain assets
relating to the Country Walk development from the Seller, then a wholly-owned
subsidiary of The Walt Disney Company ("Disney"), in September 1987, the
Partnership obtained indemnification by Disney for certain liabilities
relating to facts or circumstances arising or occurring prior to the closing
of the Partnership's purchase of the assets. Over 80% of the Arvida-built
homes in Country Walk were built prior to the Partnership's ownership of the
Community. The Partnership has tendered each of the above-described lawsuits
to Disney for defense and indemnification in whole or in part pursuant to the
Partnership's indemnification rights. Where appropriate, the Partnership has
also tendered these lawsuits to its various insurance carriers for defense and
coverage. The Partnership is unable to determine at this time to what extent
damages in these lawsuits, if any, against the Partnership, as well as the
Partnership's cost of investigating and defending the lawsuits, will
ultimately be recoverable by the Partnership either pursuant to its rights of
indemnification by Disney or under contracts of insurance.
The Partnership has negotiated the terms of a class action settlement
with opposing counsel in one of the pending homeowners' lawsuits, which has
the potential for resolving substantial portions of the pending homeowners'
lawsuits which have been filed. On June 3, 1993, the Circuit Court of Dade
County entered an order preliminarily finding that the Partnership's proposed
class action settlement agreement, as revised, was within the range of what
appeared to be a fair and adequate settlement of the claims filed by single-
family homeowners and condominium owners at Country Walk. On August 10, 1993,
the court issued a final order approving the class action settlement. The
settlement, which is designed to resolve claims arising in connection with
estate and patio homes and condominiums sold by the Partnership after
September 10, 1987, is structured to compensate residents for losses not
covered by insurance. Settlement amounts payable are a function of the type
of unit involved and the claimant's proof regarding the adequacy of insurance
proceeds. Settlement class members representing 188 units in Country Walk
have accepted the settlement. Those who affirmatively rejected the offer may
continue to litigate against the Partnership. The Partnership currently
believes that the class action settlement may cost approximately $2.5 million.
The settlement is being funded by one of the Partnership's insurers, subject
to a reservation of rights. The amount of money, if any, which the insurance
company may recover from the Partnership pursuant to its reservation of rights
is uncertain.
On February 24, 1994, the Partnership was dismissed from the pending
class action homeowner lawsuits pursuant to the class action settlement. In
addition, the Partnership has been informed that Disney and an insurer have
reached agreements to settle five of the individual homeowner actions which
were tendered by the Partnership to Disney ("Disney Settlements"). These
Disney Settlements will be funded without any contribution from the
Partnership. The Partnership can give no assurance that the Disney
settlements will be finalized.
As noted above, those homeowners who affirmatively rejected the offer of
settlement may continue to litigate. The Partnership is currently a defendant
in eleven lawsuits brought by condominium and patio homeowners, all of whom
have declined to accept the terms of the class action settlement. These
lawsuits, involving nineteen named individuals, are pending in the Circuit
Court of Dade County. In these lawsuits, plaintiffs allege a variety of
claims involving, among other things, breach of warranty, negligence and
building code violations. The Partnership intends to vigorously defend itself
in these matters.
The Partnership has resolved a claim for construction related damages
brought by the Villages of Country Walk Homeowners' Association, Inc., among
others. Two of the Partnership's insurance carriers funded a settlement in
the amount of $2,740,000 to resolve claims related to the construction of the
common elements of the condominium units at Country Walk. One of the
insurance carriers has issued a reservation of rights in connection with these
claims and the extent to which that insurance company may ultimately recover
any of these proceeds from the Partnership is unknown.
On April 19, 1993, a subrogation claim entitled Village Homes At Country
Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company ("American
Reliance"). Plaintiffs seek to recover damages and pre- and post-judgment
interest in connection with $10,873,000 American Reliance has allegedly paid
to its insureds living in condominium units at Country Walk in the wake of
Hurricane Andrew. Disney is also a defendant in this suit. On July 1, 1993,
a subrogation lawsuit entitled Prudential Property and Casualty Company v.
Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for Dade
County. Plaintiff seeks to recover damages, costs, and interest in connection
with $16,679,622 Prudential allegedly paid to its insureds living in Country
Walk at the time of Hurricane Andrew. Disney is also a defendant in this
suit. On July 15, 1993, a subrogation lawsuit entitled Allstate Insurance
Company v. Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit
for Dade County. Plaintiff seeks to recover damages, costs, and interest in
connection with $18,540,196 Allstate allegedly paid to its insureds living in
Country Walk at the time of Hurricane Andrew. Disney is also a defendant in
this suit. The Partnership settled a threatened subrogation action by State
Farm Insurance Company. The settlement was funded by one of the Partnership's
insurance carriers subject to a reservation of rights. The amount of money
the insurance carrier may seek to recover from the Partnership for this and
any other settlements it has funded is uncertain. The Partnership is a
defendant in and anticipates other subrogation claims by insurance companies
which have allegedly paid policy benefits to Country Walk residents. The
Partnership intends to defend itself vigorously in all such matters.
On October 13, 1993, a lawsuit captioned Berry v. Merril (sic) Lynch,
Pierce Fenner & Smith, J&B Arvida Limited Partnership (sic) and Does 1 through
100, was filed in the Superior Court of the State of California in and for the
County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a
class action on behalf of the named plaintiffs and all other persons or
entities in the State of California who bought or acquired, directly or
indirectly, limited partnership interests ("Interests") in the Partnership
from September 1, 1987 through the present. The complaint in the action
alleges, among other things, that the defendants made misrepresentations and
concealed various facts, breached fiduciary duties, and violated the covenant
of good faith in connection with the sale of Interests in the Partnership.
The complaint further alleges that such conduct violated California state law
relating to fraud, breach of fiduciary duty, willful suppression of facts, and
breach of the covenant of good faith. Plaintiffs, on behalf of themselves and
the purported plaintiff class, seek unspecified compensatory damages,
consequential damages, punitive and exemplary damages, interest, costs of the
suit, and such other relief as the court may order. The Partnership believes
that the lawsuit is without merit and intends to vigorously defend itself.
Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership. Reference is made to Note 2
regarding certain other litigation involving the Partnership. Reference is
also made to Note 11 for a discussion of certain claims by Merrill Lynch for
indemnification by the Partnership and the General Partner against losses and
expenses that may be suffered by Merrill Lynch relating to claims for
arbitration asserted against it by certain investors in the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 1992
and 1993.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1993, there were 27,001 record Holders of Interests of
the Partnership. There is no public market for Interests, and it is not
anticipated that a public market for Interests will develop. Upon request,
the General Partner may provide information relating to a prospective transfer
of Interests to an investor desiring to transfer his Interests. The price to
be paid for the Interests, as well as any other economic aspects of the
transaction, will be subject to negotiation by the investor. However, there
are restrictions governing the transferability of these Interests as described
in "Transferability of Partnership Interests" on pages A-31 to A-33 of the
Partnership Agreement and limitations on the rights of assignees of Holders of
Interests as described in Sections 3 and 4 of the Assignment Agreement which
are hereby incorporated by reference to Exhibits 3 and 4.0, respectively, of
the Partnership's Report on Form 10-K dated March 29, 1993 (File No. 0-16976).
Reference is made to Item 1. Business for a discussion of the election to be
made by the General Partner with respect to causing a listing of Interests on
a national exchange, purchasing or causing an affiliate to purchase all of the
Interests at their then appraised fair market value, or commencing a
liquidation of all of the Partnership's assets.
Reference is made to Item 6. Selected Financial Data for a discussion of
cash distributions made to the Limited Partners. For a description of the
provisions of the Partnership Agreement relating to cash distributions, see
Note 14. Reference is made to Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note 8 for a discussion
of the factors impacting the Partnership's ability to reinstate distributions
to its partners.
ITEM 6. SELECTED FINANCIAL DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1993, 1992, 1991, 1990 AND 1989
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1993 1992 1991 1990 1989
------------ ------------ ------------ ----------- ------------
Total revenues . . . . . . $247,651,192 174,710,779 155,699,871 275,705,089 301,641,819
============ ============ ============ ============ ============
Net operating income
(loss). . . . . . . . . . $ 30,689,914 (23,337,245) (11,777,093) 12,023,818 9,152,644
============ ============ ============ ============ ============
Equity in earnings
(losses) of uncon-
solidated ventures. . . . $ 1,134,947 (2,225,531) (769,300) (179,242) 4,349,064
============ ============ ============ ============ ============
Net income (loss). . . . . $ 29,293,058 (43,974,366) (30,667,969) 757,335 7,615,948
============ ============ ============ ============ ============
Net income (loss) per
Limited Partnership
Interest (a). . . . . . . $ 71.78 (160.42) (74.39) (13.51) 4.41
============ ============ ============ ============ ============
Total assets (b) . . . . . $346,435,065 350,807,538 420,289,287 437,541,360 523,807,900
============ ============ ============ ============ ============
Total liabilities (b). . . $194,344,888 228,010,419 253,517,802 240,101,906 268,391,481
============ ============ ============ ============ ============
Cash distributions
per Interest (c). . . . . $ -- -- -- 130 130
============ ============ ============ ============ ============
The above selected financial data should be read in conjunction with the financial statements and the related notes
appearing elsewhere in this annual report.
(a) The net income (loss) per Limited Partnership Interest is based upon
the number of Interests outstanding at the end of each period (404,005).
(b) The Partnership does not present a classified balance sheet as a
matter of industry practice, and as such, does not distinguish between current
and non-current assets and liabilities.
(c) Cash distributions from the Partnership are generally not equivalent
to Partnership income as determined for Federal income tax purposes or as
determined under generally accepted accounting principles. Cash distributions
to the Limited Partners represent a return of capital for Federal income tax
purposes. There were no cash distributions in 1991, 1992 and 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993 and 1992, the Partnership had cash and cash
equivalents of approximately $18,907,000 and $7,634,000, respectively. Such
funds were available for debt service, working capital requirements and
distributions to partners. The favorable variance in cash and cash
equivalents at December 31, 1993 as compared to 1992 is due to an increase in
cash generated from operating activities due primarily to an overall increase
in sales activity, as well as an increase in net cash proceeds received from
the Partnership's joint ventures in 1993 as compared to 1992. The source of
both short-term and long-term future liquidity is expected to be derived
primarily from the sale of housing units, homesites and land parcels and
through the Partnership's credit facilities, which are discussed below.
In October 1992, the Partnership and its lenders executed a binding
agreement to restructure the Partnership's credit facility. The new facility
consists of a term loan in the amount of $126,805,195, a revolving line of
credit facility up to $45 million, an income property term loan of $20 million
and a $15 million letter of credit facility. The term loan, the revolving
line of credit and the letter of credit facility are secured by recorded
mortgages and security interests on all otherwise unencumbered tangible assets
of the Partnership as well as an assignment of all mortgages receivable,
equity memberships, certain joint venture interests or proceeds from joint
ventures, and cash balances (with the exception of deposits held in escrow).
The income property term loan is secured by the recorded first mortgages on a
mixed-use center and an office building in Boca Raton, Florida. All of the
notes under the new facility are cross-collateralized and cross-defaulted.
The Partnership made the required principal repayments under the new term loan
agreement of $8 million and $10 million in February 1993 and March 1994,
respectively. Principal repayments of $10 million are due in each of the
years 1995 and 1996, and the remaining balance outstanding is due in 1997. In
addition, the new term loan agreement provides for additional principal
repayments based upon a specified percentage of available cash flow and upon
the sale of certain assets. For the year ended December 31, 1993, the
Partnership made additional term loan payments totalling approximately $10.5
million. Under the new income property term loan, monthly principal and
interest payments are required to be paid on a 25-year amortization schedule
with the remaining balance outstanding due in July 1994. The revolving line
of credit and the letter of credit facility also mature in July 1994. The
Partnership is in the process of negotiating a renewal of its credit
facilities. Although the Partnership is hopeful these renewals will be
obtained, there can be no assurance that such will occur or that the terms,
amounts and restrictions of the renewed credit facilities will be similar to
those under the Partnership's existing facilities. As of December 31, 1993,
all available term loan proceeds had been borrowed, however, $45 million was
available under the revolving line of credit facility, subject to certain loan
covenant restrictions. Reference is made to Note 8 for further discussion of
the Partnership's credit facility.
The facility contains significant restrictions with respect to the
payment of distributions to partners, the maintenance of certain loan-to-value
ratios, the use of proceeds from the sale of the Partnership's assets, and
advances to the Partnership's joint ventures. Other than the uncertainty
surrounding the funding of any required joint venture advances, which require
the lenders' approval, and subject to the successful renewal of the
Partnership's credit facilities as discussed above, the Partnership believes
that the current and expected future liquidity and capital resources of the
Partnership, including its restructured bank credit facilities, generally
should be adequate to fund currently expected short and long-term capital
requirements for development and other costs of operations.
During November 1993, the Partnership received a commitment from a lender
for a $24 million revolving construction line of credit for the first building
and certain amenities within the Partnership's new condominium project on
Longboat Key, Florida known as Grand Bay. This line of credit was
subsequently executed on January 14, 1994. The line of credit bears interest
at the lender's prime rate plus 3/4% and matures January 14, 1996. See Note
15 for further discussion regarding this line of credit.
A statement of cash flows is required under generally accepted accounting
principles that classifies cash receipts and disbursements according to
whether they result from operating, investing or financing activities as those
terms are defined in Statement of Financial Accounting Standards No. 95. On a
cumulative basis, the Partnership has paid distributions from operating,
investing and financing activities.
At December 31, 1991, the Partnership owned a 50% joint venture interest
in the Cullasaja Community. The operations of the venture require periodic
cash advances from the partners. Since the fourth quarter of 1990, the
Partnership has funded the cash deficits of the venture in their entirety. As
a result, during July 1992, the Partnership purchased its joint venture
partner's 50% interest in the Community. The Partnership was not required to
make any cash payment to the joint venture partner for its interest. Instead,
the purchase price of such interest is in the form of subordinated non-
recourse promissory notes (the "Notes"), the payment of which is solely
contingent upon the ultimate net cash flow generated by the venture. The
Notes are subordinated to the repayment of the outstanding first mortgage loan
and certain advances, plus accrued interest thereon, made to the venture by
the partners. To the extent the Partnership has funded 100% of the venture's
cash deficits in the past or advances new funds, the repayment of such
advances, plus accrued interest thereon, is senior to the repayment of funds
previously advanced by both partners. A portion of the cash flow remaining
after payment of all senior indebtedness is to be applied annually against the
principal and interest (at 10% per annum) owed on the Notes. This agreement
was pursued as a more favorable alternative to the remedies included in the
previously existing joint venture agreement for situations in which the
partners advance unequal funds to the venture. As a result of this
transaction, the Partnership changed from the equity method of accounting to
the consolidated method of accounting for the joint venture effective January
1, 1992, resulting in a net increase in the Partnership's balance sheet of
approximately $12.1 million at that date. Certain of the Partnership's
property within the Cullasaja Community is encumbered by a mortgage note with
an outstanding balance of approximately $5.4 million at December 31, 1993.
The note has a maturity date of March 1, 1994 and bears interest at prime (6%
at December 31, 1993) plus 1.25% per annum, payable monthly. The Partnership
is currently seeking an extension of this loan. However, there can be no
assurance that the Partnership can obtain an extension. The Partnership is
required to make repayments on the note in accordance with a homesite lot
release provision of $72,750 per lot at closing. The note is collateralized
by a first mortgage on certain real estate inventories and 12.5% of the
outstanding balance is guaranteed by the Partnership.
The Coto de Caza joint venture had utilized the maximum amount available
under its operating line of credit and had been seeking alternative financing
sources to fund the significant additional cash necessary to continue
development of the project and to fund other joint venture operating costs.
In the interim, the Partnership and its joint venture partner had each
advanced approximately $3.1 million, net of reimbursements, to the joint
venture during 1991 and an additional $1.0 million during the first five
months of 1992. Given the weak market conditions in Orange County, California
and the continued lack of development financing available from traditional
lending sources, it was unlikely that the joint venture would be able to
secure additional financing in the near term. The Partnership's joint venture
partner was willing to continue to advance funds to meet the venture's
operating needs. The Partnership determined that it was in its best long-term
interest to utilize its capital for the development of its other properties
rather than commit additional funds for the development of the Coto de Caza
Community. As a result, the venture partner has funded the venture's cash
deficits in their entirety since June 1, 1992. As an alternative to advancing
funds for the venture's future capital requirements, the Partnership and its
joint venture partner amended the joint venture agreement, effective September
15, 1992, and reallocated ownership interests. In exchange for funding the
venture's future operating needs, the venture partner was reallocated an
additional 30% interest in the venture, and assumed the role of managing
general partner. As such, the venture partner has control over the future
operations of the Community, including the timing and extent of its
development. The Partnership retains a 20% limited partnership interest and
is entitled to receive distributions from net cash flow, after repayment of
third party loans and advances made by the venture partners, up to an amount
agreed upon by the Partnership and its joint venture partner. Certain
specified costs and liabilities incurred prior to the reallocation will
continue to be shared equally by the Partnership and its joint venture
partner. This agreement was pursued as a more favorable alternative to the
provisions included in the existing joint venture agreement for reallocation
of partnership interests should both partners not advance equal funds to the
venture. As a result of the Partnership's decrease in its ownership interest,
and its joint venture partner's control over the future operations of the
Community, commencing on September 15, 1992, the Partnership accounts for its
share of the operations of the Coto de Caza joint venture in accordance with
the cost method of accounting.
During 1992, the Partnership sold 60% of its interest in two land parcels
located in the Weston Community to unaffiliated third-party purchasers.
Subsequent to these transactions, the Partnership and the purchasers each
contributed their interests in these land parcels to two joint ventures which
were established for the purpose of constructing housing products within
Weston. The Partnership entered into development management agreements with
these joint ventures. Pursuant to the terms of these agreements, the
Partnership has agreed to fund all development and construction costs, as well
as certain overheads, incurred on behalf of the joint ventures' projects.
Amounts funded are to be reimbursed by the joint ventures from sales revenues
generated by each joint venture. Amounts advanced by the Partnership to each
respective joint venture earn interest at 8.5% for the first year and prime
(6.0% at December 31, 1993) plus 2% per annum thereafter. During the first
quarter of 1993, one of the joint ventures obtained project specific financing
in the amount of $4,950,000 to fund its development and construction
activities. In accordance with the provisions of this financing agreement, as
of December 31, 1993, the Partnership had been reimbursed the majority of
amounts previously advanced to the joint venture. As a result of this
financing arrangement, the Partnership does not anticipate the need for future
advances to this venture. Due to significant sales activity, amounts
previously advanced to the Partnership's other joint venture were reimbursed
in full as of December 31, 1993. These reimbursements are the primary reasons
for the decrease in investments in and advances to joint ventures on the
accompanying consolidated balance sheets from December 31, 1992 to December
31, 1993. Also contributing to the decrease in investments in and advances to
joint ventures on the accompanying consolidated balance sheets at December 31,
1993 as compared to December 31, 1992 is the receipt of distributions from
these joint ventures in the amount of $2.6 million, as well as $0.8 million
and $0.3 million of distributions from the Mizner Tower and Mizner Court joint
ventures, respectively.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
and are subject to protection as wetlands. The time involved to complete this
process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and comparable state and local regulatory
agencies, is expected to be lengthy. It is anticipated that certain costs of
mitigation will be incurred in conjunction with obtaining the necessary
permits, the amount and extent of which are unknown at this time. The
Partnership had previously gone through a similar process and was successful
in obtaining approvals for Increment II of the Weston Community. Although
there can be no assurance, given the Partnership's prior experience and
discussions to date with the appropriate agencies, the Partnership is hopeful
that a compromise will ultimately be reached that will adequately address the
concerns of the environmental agencies, while allowing the Partnership to
continue its development plans for Increment III of Weston.
In June 1993, the Partnership executed an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III of the Partnership's Weston
Community, whereby, in exchange for $5.0 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983, which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at the execution of the agreement and the balance of $2.5
million will be paid in equal annual installments of $500,000 together with
interest thereon at 8% per annum beginning May 1994. The unpaid principal
balance is secured by a mortgage on certain real estate located in the Weston
Community. As part of its efforts to obtain the appropriate development
permits discussed in the preceding paragraph, the Partnership has included
this land as part of its proposed mitigation plan for the development of
Increment III of its Weston Community.
The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. During the fourth quarter of 1991,
the Partnership's joint venture partner failed to make capital contributions
required to fund ongoing operations and pursuant to the joint venture
agreement, was in default of the agreement. The Partnership executed an
agreement in August 1993 with its joint venture partner, CIS Oaks, Ltd.,
("CIS"), whereby CIS assigned its 20% interest in The Oaks to the Partnership,
thereby vesting 100% control of the assets of the joint venture in the
Partnership.
Certain of the assets of The Oaks joint venture were encumbered by two
mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997
and a $3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default under
the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and its
failure to pay interest commencing with a payment due in April 1993. The
Partnership was able to reach an agreement with its lenders to pay off the
existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction contributed to the decrease in notes
and mortgages payable at December 31, 1993 as compared to December 31, 1992
and is the cause of the approximate $9.5 million extraordinary gain on the
early extinguishment of debt for the year ended December 31, 1993.
The Partnership also sold its remaining land holdings in The Oaks
Community and its interest in The Oaks Club, an equity club, to an
unaffiliated third-party purchaser for $5.8 million. This sale transaction
occurred simultaneously with the repayment of the loans and satisfaction of
the mortgages, as discussed above. These transactions are the cause of
various changes in the Consolidated Balance Sheets at December 31, 1993 as
compared to December 31, 1992. In light of the Partnership's guarantee under
the loan agreement of $2.7 million of the outstanding mortgage loans, as well
as other factors, these transactions were pursued as the least costly
alternative available to the Partnership. These transactions resulted in a
minimal net gain for Federal income tax purposes.
During the first quarter of 1993, the Partnership reached a settlement
agreement with its joint venture partner in a property located in Ocala,
Florida, whereby in exchange for its partner's 50% interest in the venture,
the Partnership agreed to dismiss a lawsuit previously filed against its
venture partner for failure to perform in accordance with the terms of a
$1,600,000 note which had been issued to the Partnership by the joint venture.
This agreement was pursued as a more favorable remedy to other alternatives
available to the Partnership. As a result of this transaction, the
Partnership changed from the equity method of accounting to the consolidated
method of accounting for the joint venture effective March 1, 1993. This
consolidation contributes to the decrease in mortgages receivable at December
31, 1993 as compared to December 31, 1992.
During October 1993, the Partnership closed on the sale of its Oak Bridge
Club near Jacksonville, Florida to an unaffiliated third party for
approximately $3.2 million. This is the primary cause for the decrease in
property and equipment in the Consolidated Balance Sheets at December 31, 1993
as compared to December 31, 1992.
Reference is made to Note 11 regarding the Partnership's financial
guarantees pursuant to the terms of a loan agreement for a
commercial/industrial joint venture in Pompano Beach, Florida in which the
Partnership owns a 50% interest. The Partnership also has certain continuing
obligations relative to this joint venture as referred to in such Note.
Reference is made to Item 3. Legal Proceedings of this annual report for
a discussion of several lawsuits, in which the Partnership is a defendant,
allegedly arising out of or relating to Hurricane Andrew and certain property
damage allegedly suffered by the plaintiffs at a previously developed
community known as Country Walk.
During 1991, the Partnership obtained project specific financing in the
amount of $7 million on a retail shopping plaza located in the Partnership's
Weston Community. Subsequent to this transaction, the Partnership contributed
the assets and related indebtedness associated with the plaza to a joint
venture and sold a 21% interest in the venture to an unaffiliated third-party.
In July 1991, the Partnership converted the Weston Hills Country Club
(the "Club") from an equity to a non-equity membership plan in an effort to
increase membership and usage of the Club and stimulate sales momentum within
the Community.
In addition, during 1991 the Partnership closed on the sale of a land
parcel in its Broken Sound Community to an unaffiliated third-party builder in
conjunction with the repurchase of a land parcel in the Partnership's Weston
Community from the same builder. This transaction will alter the timing and
amount of expected future revenues.
The Partnership's obligations under bonds and standby letters of credit
have decreased approximately $13.9 million since December 31, 1992 primarily
due to decreased development and construction activity at the Partnership's
Broken Sound Community and the release of obligations related to the land
repurchased by the Partnership in its Weston Community, as discussed above.
The Partnership has been advised by Merrill Lynch that Merrill Lynch has
been named a defendant in actions pending in the Eleventh and Seventeenth
Judicial Circuit Courts in Dade and Broward Counties, Florida to compel
arbitration of claims brought by certain investors of the Partnership
representing approximately 4% of the total Interests outstanding. Merrill
Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
including without limitation attorney's fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests in the Partnership through
Merrill Lynch on behalf of the Partnership. The Partnership is unable to
determine at this time the ultimate investment of investors who have filed
arbitration claims as to which Merrill Lynch might seek indemnification in the
future. At this time, and based upon the information presently available
about the arbitration statements of claims filed by some of these investors,
the Partnership and its General Partner believe that they have meritorious
defenses to demands for indemnification made by Merrill Lynch and intend to
vigorously pursue such defenses. In the event Merrill Lynch is entitled to
indemnification of its attorney's fees and expenses or other losses and
expenses, these amount may prove to be material.
RESULTS OF OPERATIONS
The results of operations for the years ended December 31, 1993, 1992 and
1991 are primarily attributable to the development and sale or operation of
the Partnership's assets. See Note 1 for a discussion regarding the
recognition of profit from sales of real estate.
Housing revenues are generated from the sale of homes within the
Partnership's Communities. Housing revenues increased significantly for the
year ended December 31, 1993 as compared to 1992 due primarily to increased
sales activity at the Partnership's Weston, Broken Sound and Jacksonville Golf
& Country Club Communities as well as the completion and close-out of the
Partnership's Marina Bay condominium project on Longboat Key, Florida. In an
effort to capture additional market share in Broward County, Florida, the
Partnership introduced several new value-oriented products in Weston in late
1992 and early 1993. The success of these products contributed to the
increased closings in Weston and the overall increase in revenues for the year
ended December 31, 1993 as compared to 1992. Revenues increased at Broken
Sound and Jacksonville Golf & Country Club due to new products introduced in
late 1992 which had their initial closings in 1993. Housing revenues
increased for the year ended December 31, 1992 as compared to 1991 due
primarily to an increase in sales activity at the Partnership's Broken Sound
and River Hills Communities. The increase in revenues at Broken Sound is due
to the sale of a new product line first offered in 1992, as well as an
increase during 1992, as compared to 1991, in sales volume of another housing
product offered at the Community. The increase in activity at the River Hills
Community was due primarily to the broader market appeal of the Partnership's
new lower-priced, value-oriented products.
Approximately 63% of 1993's housing revenues were generated during the
fourth quarter. This substantial increase in revenues was due primarily to an
increase in the demand for housing product in Weston combined with the
introduction of several new value oriented products in this Community earlier
in the year. Also contributing to the increase in revenues during the fourth
quarter of 1993 was the completion and close-out of all of the units in the
final phase of the Partnership's Marina Bay condominium project on Long Boat
Key, Florida in November and December 1993.
The gross operating profit from housing sales increased for the year
ended December 31, 1993 as compared to 1992 due primarily to the mix of
product sold at the Partnership's Weston and Broken Sound Communities. The
increase in gross operating profits is also attributable to higher profit
margins recognized from the final phase of Marina Bay on Longboat Key,
Florida. These closings generated increased revenues due to the desirable
location of the final building.
Revenues from the sale of homesites include amounts earned from the sale
of developed lots within the Partnership's Communities. Revenues from the
sale of homesites increased for the year ended December 31, 1993 as compared
to the same period in 1992 due to the initial closing of lots in several
homesite projects introduced early in 1993 in the Weston Hills Country Club
section of the Partnership's Weston Community. Also contributing to the
favorable variance was the closing of the remaining lots held for sale by the
Partnership on Longboat Key, Florida during September 1993. This favorable
variance was partially offset by decreased revenues at the Partnership's
Broken Sound Community due to the close-out of the final homesites in that
Community in 1992. Revenues from homesite sales activities were higher for
the year ended December 31, 1992 as compared to 1991 due primarily to an
increase in closings at the Partnership's Weston and River Hills Communities.
The increased activity was primarily attributable to the introduction of
several new products within these Communities in 1992. This favorable volume
variance was partially offset by decreased closing activity associated with
certain product lines which were substantially or completely sold out in 1991,
as well as decreased closing activity at one of the Partnership's Atlanta
Communities. In an effort to stimulate sales activity at one of the Atlanta
Communities, the Partnership is offering lower-priced homesites more
consistent with market demand.
Land and property revenues are generated from the sale of developed and
undeveloped residential or commercial land tracts, as well as the sale of
equity memberships in the clubs within the Partnership's Boca Raton, Florida
Community, as well as its Communities near Jacksonville, Florida and
Highlands, North Carolina. Revenues from land and property sales increased
for the year ended December 31, 1993 primarily as a result of the sale of the
remaining real estate and equity memberships at the Partnership's Oaks
Community. See further discussion regarding this transaction in Liquidity and
Capital Resources, above. In addition, the Partnership closed on the sale of
the Oak Bridge Club near Jacksonville, Florida to an unaffiliated third-party
purchaser in October 1993. The sale of this club also contributed to the
increase in land and property revenues for 1993 as compared to 1992. The
increase in the gross operating profit from land and property sales in 1993 as
compared to 1992 is due primarily to the recognition of deferred revenues in
1993 for sales, primarily at Broken Sound and Weston, which previously did not
meet the criteria for revenue recognition in accordance with generally
accepted accounting principles ("GAAP"). This increase was partially offset,
however, by the sale of the remaining real estate and equity memberships at
the Partnership's Oaks Community. Certain sales transactions which closed in
previous periods but did not meet the criteria for revenue recognition remain
deferred at December 31, 1993, and profit will be recognized in future periods
as these sales become eligible for revenue recognition in accordance with
GAAP. Land and property revenues decreased for the year ended December 31,
1992 as compared to 1991. Land and property revenues in 1992 resulted
primarily from the sale of a 17-acre single family residential parcel located
in the Partnership's Weston Community, the sale of 60% of the Partnership's
interest in two residential land parcels also located in the Weston Community,
and the sale of approximately 21 acres of undeveloped residential land located
in the Partnership's Broken Sound Community. Certain of these residential
sales transactions legally closed in 1992 but were not eligible for accounting
profit recognition during the year due to certain contract provisions.
However, certain amounts which had been deferred in previous years became
eligible for profit recognition in 1992 and are included in 1992 land and
property revenues. Sales of undeveloped commercial tracts in 1992 include
approximately four acres located in Palm Beach County, Florida, and
approximately nine acres located on Longboat Key, Florida. Land and property
revenues for the year ended December 31, 1991 resulted primarily from the sale
of a 28-acre multi-family residential parcel and a 16-acre single family
residential parcel in Palm Beach County, Florida, as well as an 18-acre multi-
family residential parcel located in one of the Partnership's Jacksonville
Communities.
Revenues from the sale of equity memberships decreased in 1992 as
compared to 1991 due primarily to the inclusion in 1991 of profits related to
the sales of Broken Sound equity memberships which had previously been
deferred for accounting purposes. The recognition of these deferred profits
in 1991 is the primary cause for the decrease in the net margin from land and
property sales in 1992 as compared to 1991.
Costs of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest and
marketing and disposition costs. The costs related to the Partnership's
homesite sales reflect the cost of the acquired assets, related development
expenditures, certain capitalized overhead costs, capitalized interest and
disposition costs. Land and property costs reflect the cost of the acquired
assets, certain development costs and related disposition costs as well as the
costs associated with the sale of equity memberships.
Operating properties represents activity from the Partnership's club and
hotel operations, commercial properties and certain other operating assets.
Revenues generated by the Partnership's operating properties increased for the
year ended December 31, 1993 as compared to 1992 primarily as a result of an
increase in membership activity at the Partnership's club facilities in Weston
resulting from the overall increase in home sales activity within that
Community. In addition, revenues from the Partnership's cable operations in
Broken Sound and Weston increased during the year ended December 31, 1993 as
compared to 1992 resulting from an increase in the number of cable subscribers
within those Communities as well as a change in the cable rate structure. The
decrease in the negative net margins for 1993 as compared to 1992 is due
primarily to cost reductions implemented at the Partnership's club and hotel
operations coupled with an overall increase in revenues from these operations.
The Partnership continues to evaluate the operations of its club and hotel
facilities and institute additional cost controls as deemed appropriate. The
decrease in the negative margins generated from operating properties for the
year ended December 31, 1992 as compared to 1991 was primarily the result of
increased operating revenues combined with reductions in certain overheads and
other operating costs at the Partnership's hotel operation and at several of
the Partnership's clubs and commercial and retail operating properties. These
favorable variances are partially offset, however, by the inclusion of the
funding of deficits for the Cullasaja Club during 1992 resulting from the
consolidation of the assets of the Cullasaja Joint Venture, as discussed above
in Liquidity and Capital Resources. Contributing to the improvement in the
1992 net margins as compared to 1991 was the inclusion in 1991 of certain
costs associated with the conversion of the Weston Hills Country Club from an
equity to a non-equity club.
Brokerage and other operations represents activity from the resale of
real estate inside and outside the Partnership's Communities, activity from
the sale of builders' homes within the Partnership's Communities, proceeds
from the Partnership's property management activities as well as fees earned
from various management agreements with joint ventures. The increase in
revenues and the corresponding increase in the gross operating profit from
brokerage and other operations for the year ended December 31, 1993 as
compared to 1992 was attributable to an increase in the volume of resale
activity, primarily in the Sarasota, Broward County and Palm Beach County,
Florida areas, as well as a decrease in the related cost of revenues resulting
from a reduction in commissions paid due to a modification of the
Partnership's brokerage commission structure. The increase in revenues and
gross operating profit from brokerage and other operations at December 31,
1992 as compared to 1991 is due primarily to an increase in commissions earned
by the Partnership from the sale of builder units, primarily at the
Partnership's Weston and Broken Sound Communities, as well as the reduction of
commissions associated with the sale of these units. Also contributing to the
improved margins is the increase in the volume of resale activity in the
Weston Community as well as the Jacksonville and Palm Beach County areas.
Selling, general and administrative expenses include all marketing costs,
with the exception of those costs capitalized in conjunction with the
construction of housing units, and project and general administrative costs.
These expenses are net of the marketing fees earned from third-party builders.
Selling, general and administrative expenses were significantly lower for the
year ended December 31, 1993 as compared to 1992. The significant reductions
in selling, general and administrative costs during the past three years are
attributable to the implementation of a series of overhead reductions
including the consolidation of certain administrative functions, a reduction
in the number of employees and other employee-related expenditures, the
implementation of more cost-effective marketing programs, as well as an
overall reduction of other administrative expenses. The favorable variance in
selling, general and administrative expenses for the year ended December 31,
1993 as compared to 1992 is also due in part to an increase in marketing fees
earned by the Partnership as a result of the increase in builder unit
closings. Management will continue to evaluate the operations of the
Partnership and institute additional cost controls as deemed necessary to
maximize the Partnership's profits in the future.
Charges to the carrying value of real estate inventories and other assets
represent adjustments to the book values of the Partnership's projects based
upon the analysis of each projects' estimated selling price in the ordinary
course of business less estimated costs of completion, holding and disposal as
compared to its recorded book value. At December 31, 1992, the Partnership
recorded charges to the inventory carrying values of certain residential and
commercial properties totalling approximately $12.2 million to reflect their
estimated net realizable values as determined by management's evaluation of
these properties. These charges include approximately $7.4 million to reduce
the carrying values of the Partnership's Water's Edge and Dockside Communities
located near Atlanta, Georgia and $1.8 million to reduce the carrying value of
its River Hills Community in Tampa, Florida. These Communities had been
experiencing slower sales absorptions than anticipated due to the pricing of
current products not being in line with current market demand. The charges to
the inventory carrying values result from the Partnership's plans to offer
lower-priced homesite and housing products in these Communities which are more
consistent with market demand. The Partnership did reduce the price of
homesites in the Water's Edge and Dockside Communities as planned; however,
during 1993, the Partnership experienced no significant increase in sales
absorptions in these Communities. Recent market studies indicate that the
housing product offered for sale by third-party builders in Water's Edge and
Dockside continues to be priced higher than market, and further reductions of
housing sales prices are warranted. Therefore, during the second quarter of
1993, the Partnership recorded an additional charge totalling approximately
$4.9 million to the inventory carrying value of the Water's Edge and Dockside
Communities to reflect the adverse impact of these additional reductions in
housing prices on future anticipated lot values.
In light of the circumstances surrounding The Oaks joint venture as
discussed in Liquidity and Capital Resources above, the Partnership, as a
matter of prudent accounting practice, recorded a charge to the carrying value
of real estate inventories and equity memberships of approximately $2.3
million and $1.0 million, respectively, in the fourth quarter of 1992 to
properly reflect the estimated market value of The Oaks property in its
current state of development assuming a bulk sale of the entire property under
present market conditions. The balance of the charges to reduce real estate
inventories at December 31, 1992, totalling approximately $0.7 million, were
recorded to reflect the then current market value of several parcels of
undeveloped commercial real estate.
In the fourth quarter of 1992, the Partnership recorded an approximate
$3.4 million charge to the net book value of property and equipment to reflect
the reduction in the values of a 29,000 square foot office building located in
Palm Beach County, Florida and the golf and country club facility at the
Partnership's River Hills Community. The value of the golf and country club
facility at River Hills had been adversely impacted by the introduction of new
lower-priced products within the Community, which are more in line with market
demand, as well as overall economic conditions and the competition from other
club facilities within the Tampa, Florida area.
The Partnership owns interests in a number of commercial joint ventures
located throughout Florida. Due to a significant decline in the demand for
undeveloped commercial real estate in the markets in which these properties
are located, in 1992 the respective joint ventures recorded charges to the
carrying values of their real estate inventories of approximately $7.4 million
to reflect their estimated net realizable values.
The amenities within the Partnership's Jacksonville Golf and Country Club
and Broken Sound Communities are conveyed to homeowners through the sale of
equity memberships. The sales of memberships in Jacksonville Golf and Country
Club have been adversely impacted during the past several years by the
introduction of lower-priced products within the Community in response to
market conditions as well as competition from other club facilities located in
the Jacksonville area. At Broken Sound, the higher-priced equity memberships
had experienced a slowdown in absorptions due primarily to the overall
slowdown in the economy and the low levels of consumer confidence. As a
result of the above, in 1992 the Partnership recorded charges to the carrying
value of its equity memberships at Jacksonville Golf and Country Club and
Broken Sound of approximately $2.2 million and $1.0 million, respectively. In
addition, equity memberships also included a $1.0 million reduction in the
value of The Oaks country club's equity memberships as discussed above.
Charges to the carrying value of real estate inventories and other assets
during 1991 consisted of a charge to income of approximately $1.4 million to
reduce the carrying value of the Partnership's interest in a commercial joint
venture located in Tampa, Florida. Also included in 1991, was an approximate
$0.7 million charge to the carrying value of housing product offered for sale
in the Partnership's River Hills Community due to the decision to replace a
higher-priced product line with a new lower-priced product more in line with
market demand. In addition, the Partnership reduced the carrying value of an
undeveloped land parcel held for sale in Jacksonville, Florida.
Interest income decreased for the year ended December 31, 1993 as
compared to 1992 primarily due to an overall decrease in the average amounts
invested in short-term instruments during 1993 as compared to 1992. Interest
income decreased in 1992 in comparison to 1991 primarily as a result of the
Partnership's purchase of its venture partner's interest in the Cullasaja
Joint Venture and the resulting consolidation of the venture's operations.
Interest income at December 31, 1991 includes interest earned on advances
previously made by the Partnership to the joint venture. Also contributing to
the decrease in interest income is the Partnership's decision to reserve
interest income accrued on advances to the Coto de Caza Joint Venture.
Reference is made to the Liquidity and Capital Resources section above for
further discussion concerning the Partnership's ownership interest in the Coto
de Caza joint venture.
Equity in earnings of unconsolidated joint ventures increased for the
year ended December 31, 1993 as compared to the same periods in 1992 due to
the change from the equity to the cost method of accounting for the
Partnership's investment in the Coto de Caza joint venture, which resulted in
the Partnership no longer recording its ownership share of the loss from the
Coto de Caza venture's operations. See Liquidity and Capital Resources above
for further discussion of the change in ownership of the Coto de Caza joint
venture. The increase was also attributable to the earnings generated from
the two joint ventures formed during the second half of 1992 for the purpose
of constructing homes within the Partnership's Weston Community. See
Liquidity and Capital Resources above and Notes 1 and 7 for further discussion
regarding these joint venture interests. The increase in equity in losses of
unconsolidated ventures in 1992 in comparison to 1991 is due primarily to the
Partnership's ownership interest in the Coto de Caza joint venture. Increased
operating losses were generated by the Coto de Caza joint venture primarily
due to the expensing of costs that previously qualified for capitalization.
In addition, interest income earned by the joint venture decreased in
comparison to 1991 due to the sale of the venture's mortgage portfolio in the
fourth quarter of 1991. The increase in losses during 1992 is also
attributable to the Partnership's ownership interest in a commercial joint
venture located in Ocala, Florida. This venture's 1991 results of operations
included profits from land sale activity, while no land sales occurred for
this venture in 1992. These unfavorable variances were partially offset by
the Partnership's interest in the Cullasaja joint venture's losses no longer
being included in equity in losses of unconsolidated ventures due to the
purchase in 1992 of the joint venture partner's interest in the venture. The
results of operations for Cullasaja since that purchase have been consolidated
in the accompanying Consolidated Statement of Operations.
Interest and real estate taxes decreased for the year ended December 31,
1993 as compared to 1992 due to an overall decrease in the Partnership's
average debt balance outstanding and an increase in the amount of real estate
inventories which meet the requirements for capitalization of these costs.
Nationwide housing starts and total nationwide single-family permits for
1993 increased 7.1 %* and 10.3%**, respectively from 1992. Trends in housing
permits for the major markets in which the Partnership's properties are
located are shown below.
% CHANGE FROM
------------------------------------------
HOUSING PERMITS
(SINGLE FAMILY)** 1992-1993 1991-1992 1990-1991 1989-1990
------------------ --------- --------- --------- ---------
Florida Markets:
West Palm Beach
(includes Boca Raton). +9.4% +22.6% -7.5% -47.7%
Miami - Ft. Lauderdale . +27.4% +34.8% -14.9% -30.4%
Jacksonville . . . . . . +4.2% +13.9% -1.3% -10.2%
Tampa Bay. . . . . . . . +6.4% +23.9% -0.2% -27.5%
Atlanta, Georgia . . . . . +14.1% +26.0% +4.9% -6.3%
Orange County, California. +24.0% -0.3% -16.8% -57.3%
* Source: "Housing Market Statistics" (February 1994) a publication
of the National Association of Home Builders
** Source: "U.S. Housing Markets" (February 2, 1994, February 5, 1993,
February 4, 1992, and February 1, 1992) a publication of Lomas Mortgage USA
For the year ended December 31, 1993, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under the
equity method) closed on the sale of 626 housing units, 752 homesite lots,
approximately 50 acres of developed and undeveloped residential or
commercial/industrial land tracts as well as the sales of The Oak Bridge Club
and the remaining real estate and equity memberships at The Oaks Community.
This compares to sales closings in 1992 of 320 housing units, 639 homesite
lots and approximately 91 acres of developed and undeveloped residential or
commercial/industrial land tracts. Sales closings in 1991 were for 273
housing units, 594 homesite lots and 107 acres of developed and undeveloped
land tracts. Outstanding contracts ("backlog") as of December 31, 1993 were
for 521 housing units, 127 homesites and approximately 47 acres of developed
and undeveloped land tracts. This compares to a backlog as of December 31,
1992 of 270 housing units, 86 homesites and 6 acres of developed and
undeveloped land tracts. The backlog as of December 31, 1991 was for 96
housing units, 28 homesites and approximately 34 acres of developed and
undeveloped land tracts. The increasing trend in backlog as compared to prior
years is indicative of the improvement in sales activity seen at many of the
Partnership's Communities.
As a result of management's efforts to broaden the appeal of the
Partnership's Communities through the introduction of new housing products,
the implementation of a series of cost reductions as well as the upward trends
in housing activity that the nation as well as the markets in which the
Partnership's properties are located have been experiencing, the Partnership
was able to generate significant cash flow before debt service during 1993.
The Partnership utilized this excess cash flow to make scheduled and
accelerated principal repayments on its outstanding debt, as required under
the terms of the credit facility agreement, and to increase its cash reserves.
Furthermore, in February 1994, the Partnership made a distribution of
$2,565,433 to its Limited Partners ($6.35 per Interest) and $142,523 to the
General Partner and Associate Limited Partners, collectively. As mentioned
above, the Partnership's income property term loan, revolving line of credit
and letter of credit facility are due for renewal in July 1994. Although the
Partnership is hopeful these renewals will be obtained, there can be no
assurance that such will occur or that the terms, amounts and restrictions of
the renewed credit facilities will be similar to those under the Partnership's
existing facilities. As a result, the Partnership will not be able to assess
whether or not cash distributions to partners can be made for 1994 until the
end of 1994 when the final operating results for the year as well as the terms
and conditions of a new credit facility are known.
INFLATION
Although the relatively low rates of inflation in recent years generally
have not had a material effect on the Community development business,
inflation in future periods can adversely affect the development of
Communities generally because of its impact on interest rates. High interest
rates not only increase the cost of borrowed funds to developers, but also
have a significant effect on the affordability of permanent mortgage financing
to prospective purchasers. In addition, any increased costs of materials and
labor resulting from high rates of inflation may, in certain circumstances, be
passed through to purchasers of real properties through increases in sales
prices, although such increases may reduce sales volume. If such cost
increases are not passed through to purchasers, there could be a negative
impact on the ultimate margins realized by the Partnership.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Reports of Independent Accountants
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Partners' Capital Accounts
(Deficit) for the years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
SCHEDULE
Supplementary Statements
of Operations Information . . . . . . . . X
SCHEDULES NOT FILED:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or immaterial, or the information
is presented in the consolidated financial statements or related notes.
Report of Independent Accountants
To the Partners of
Arvida/JMB Partners, L.P.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) (1) and (2) present fairly, in all material
respects, the financial position of Arivda/JMB Partners, L.P. (a limited
partnership) and its subsidiaries at December 31, 1992, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1992, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express and opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above. We
have not audited the consolidated financial statements of Arvida/JMB Partners,
L.P. and its subsidiaries for any period subsequent to December 31, 1992.
PRICE WATERHOUSE
Miami, Florida
March 23, 1993
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
ARVIDA/JMB PARTNERS, L.P.
We have audited the accompanying consolidated balance sheet of Arvida/JMB
Partners, L.P. and Consolidated Ventures as of December 31, 1993, and the
related consolidated statements of operations, changes in partners' capital
accounts (deficit), and cash flows for the year then ended. Our audit also
included the 1993 financial statement schedule listed in the Index at Item 8.
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Arvida/JMB Partners, L.P. and Consolidated Ventures at December 31, 1993,
and the consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Also, in our opinion, the related 1993 financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG
Miami, Florida
March 15, 1994
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
------
1993 1992
----------- -----------
Cash and cash equivalents (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,906,679 7,634,320
Restricted cash (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,645,678 7,955,251
Trade and other accounts receivable (net of allowance for doubtful accounts of
$381,151 and $695,504 at December 31, 1993 and 1992, respectively) . . . . . . . . . . . . . . . . . 7,298,714 7,192,420
Mortgages receivable, net (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,940,961 5,737,331
Real estate inventories (notes 5 and 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,679,152 189,649,253
Property and equipment, net (notes 6 and 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,989,577 70,072,466
Investments in and advances to joint ventures, net (note 7). . . . . . . . . . . . . . . . . . . . . . 24,731,852 31,298,724
Equity memberships (note 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,146,661 21,238,580
Amounts due from affiliates (note 10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,389 356,797
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,007,402 9,672,396
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 350,807,538
============ ===========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1993 1992
----------- -----------
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,172,895 8,444,327
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,010,408 23,750,954
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,390,593 14,878,966
Notes and mortgages payable, net (note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,770,992 180,936,172
------------ -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,344,888 228,010,419
------------ -----------
Partners' capital accounts (note 14)
General Partner and Associate Limited Partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,739,753 33,446,823
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,466,823) (33,466,823)
------------ -----------
292,930 --
------------ -----------
Limited partners (404,005 interests including five Interests - Initial Limited Partner):
Capital contributions, net of offering costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 364,841,815 364,841,815
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,963,692) (107,963,820)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134,080,876) (134,080,876)
------------ -----------
151,797,247 122,797,119
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,090,177 122,797,119
------------ -----------
Commitments and contingencies (notes 7, 8, 10, 11 and 12)
Total liabilities and partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 350,807,538
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
------------ ------------ ------------
Revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,135,532 53,579,787 45,972,101
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,171,109 50,431,467 38,843,578
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,646,960 18,708,924 29,696,899
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,326,255 24,129,461 17,847,356
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . 31,371,336 27,861,140 23,339,937
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,651,192 174,710,779 155,699,871
------------ ------------ ------------
Cost of revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,598,055 47,240,372 40,939,176
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,025,954 32,445,059 26,028,401
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,431,543 15,501,055 19,447,313
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,552,287 26,868,457 23,045,011
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . 25,113,709 23,462,659 21,736,687
------------ ------------ ------------
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . 192,721,548 145,517,602 131,196,588
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Gross operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,929,644 29,193,177 24,503,283
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . 19,343,730 25,283,422 33,526,558
Charges to the carrying value of real estate inventories
and other assets (notes 1, 5, 6, 7 and 9). . . . . . . . . . . . . . . . . . . 4,896,000 27,247,000 2,753,818
------------ ------------ ------------
Net operating income (loss). . . . . . . . . . . . . . . . . . . . . . 30,689,914 (23,337,245) (11,777,093)
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672,000 1,616,309 2,111,587
Equity in earnings (losses) of unconsolidated ventures (notes 1 and 7) . . . . . 1,134,947 (2,225,531) (769,300)
Interest and real estate taxes, net (note 1) . . . . . . . . . . . . . . . . . . (12,739,584) (20,027,899) (20,233,163)
------------ ------------ ------------
Net income (loss) before extraordinary item. . . . . . . . . . . . . . 19,757,277 (43,974,366) (30,667,969)
Extraordinary item:
Gain on early extinguishment of debt (note 8). . . . . . . . . . . . 9,535,781 -- --
------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,293,058 (43,974,366) (30,667,969)
============ ============ ============
Net income (loss) per Limited Partnership Interest . . . . . . . . . . $ 71.78 (160.42) (74.39)
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS LIMITED PARTNERS (404,005 INTERESTS)
----------------------------------------------------------------------------------------------------------------------
NET NET
CONTRIBU- INCOME CASH INCOME
TIONS (LOSS) DISTRIBUTIONS TOTAL CONTRIBUTIONS (LOSS) DISTRIBUTIONS TOTAL
--------- --------- ------------- ----------- ------------- ----------- ------------- -------------
Balance (deficit)
December 31,
1990. . . . . . . $20,000 13,224,612 (33,466,823) (20,222,211) 364,841,815 (13,099,274) (134,080,876) 217,661,665
Net loss
(note 14) . . . . -- (613,359) -- (613,359) -- (30,054,610) -- (30,054,610)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance (deficit)
December 31,
1991. . . . . . . 20,000 12,611,253 (33,466,823) (20,835,570) 364,841,815 (43,153,884) (134,080,876) 187,607,055
Net income (loss)
(note 14) . . . . -- 20,835,570 -- 20,835,570 -- (64,809,936) -- (64,809,936)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance (deficit)
December 31,
1992. . . . . . . 20,000 33,446,823 (33,466,823) -- 364,841,815 (107,963,820) (134,080,876) 122,797,119
Net income
(note 14) . . . . -- 292,930 -- 292,930 -- 29,000,128 -- 29,000,128
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
December 31,
1993. . . . . . . $20,000 33,739,753 (33,466,823) 292,930 364,841,815 (78,963,692) (134,080,876) 151,797,247
======= ========== =========== =========== =========== =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,293,058 (43,974,366) (30,667,969)
Charges (credits) to net income (loss) not requiring (providing) cash:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 6,232,092 7,550,386 7,072,673
Equity in earnings (losses) of unconsolidated ventures . . . . . . . . . . . . (1,134,947) 2,225,531 769,300
Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . 269,400 42,423 735,921
(Gain) loss on sale of property and equipment. . . . . . . . . . . . . . . . . 34,827 (13,133) 401,016
Gain on sale of joint venture interest . . . . . . . . . . . . . . . . . . . . -- -- (1,185,130)
Charge to carrying value of real estate inventories and other
assets (notes 1, 5, 6, 7 and 9). . . . . . . . . . . . . . . . . . . . . . . 4,896,000 27,247,000 2,753,818
Extraordinary gain on early extinguishment of debt (note 8). . . . . . . . . . (9,535,781) -- --
Changes in:
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,690,427) (784,260) (793,627)
Trade and other accounts receivable. . . . . . . . . . . . . . . . . . . . . . (499,618) 2,161,155 314,725
Real estate inventories:
Additions to real estate inventories . . . . . . . . . . . . . . . . . . . . (131,513,189) (65,702,042) (54,614,385)
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,055,552 95,186,486 86,414,890
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,738,179) (4,470,150) (2,939,326)
Capitalized real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . (3,179,099) (2,026,309) (1,072,410)
Equity memberships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,091,919 5,723,093 460,444
Amounts due from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . 268,408 (4,464,883) (275,529)
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . (134,749) (2,539,319) 1,918,138
Accounts payable, accrued expenses and other liabilities . . . . . . . . . . . 1,484,062 1,840,679 (3,654,630)
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,740,546) 5,345,420 (4,601,063)
------------ ------------ ------------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (834,275) 67,322,077 31,704,825
------------ ------------ ------------
Net cash provided by operations. . . . . . . . . . . . . . . . . . . . 28,458,783 23,347,711 1,036,856
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Investing activities:
Mortgages receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,196,370 1,825,359 (2,749,485)
Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . (3,470,360) (4,000,910) (1,932,818)
Proceeds from disposals of property and equipment. . . . . . . . . . . . . . . 1,121,253 83,071 983,218
Joint venture distributions (contributions), net . . . . . . . . . . . . . . . 3,916,119 (3,676,826) 8,039,040
Payments from (advances to) joint ventures . . . . . . . . . . . . . . . . . . 3,956,980 916,114 (5,135,352)
Proceeds from sale of joint venture interest . . . . . . . . . . . . . . . . . -- -- 775,000
Proceeds from acquisition of joint venture interest. . . . . . . . . . . . . . 6,614 81,741 --
------------ ------------ ------------
Net cash provided by (used in) investing activities. . . . . . . . . . 6,726,976 (4,771,451) (20,397)
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings . . . . . . . . . . . . . . . . . 28,095,548 22,102,094 69,466,723
Payments of notes and long-term borrowings . . . . . . . . . . . . . . . . . . (52,008,948) (62,618,870) (43,136,757)
Payments of short-term bank borrowings . . . . . . . . . . . . . . . . . . . . -- (2,246,174) (6,323,328)
------------ ------------ ------------
Net cash provided by (used in) financing activities. . . . . . . . . . (23,913,400) (42,762,950) 20,006,638
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 11,272,359 (24,186,690) 21,023,097
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . 7,634,320 31,821,010 10,797,913
------------ ------------ ------------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . $ 18,906,679 7,634,320 31,821,010
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest, net of amounts capitalized. . . . . $ 7,387,204 10,945,116 14,598,590
============ ============ ============
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Non-cash investing and financing activities:
Conversion of equity country club. . . . . . . . . . . . . . . . . . . . . . $ -- -- 20,270,336
Land contributed in exchanges for joint venture interests (note 7) . . . . . -- 3,681,600 --
Acquisition of joint venture interests (note 7). . . . . . . . . . . . . . . 324,169 12,090,912 --
------------ ------------ ------------
$ 324,169 15,772,512 20,270,336
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF ACCOUNTING
Principles of Consolidation
The consolidated financial statements include the accounts of Arvida/JMB
Partners, L.P. (the "Partnership") and its consolidated ventures (Note 7).
All material intercompany balances and transactions have been eliminated in
consolidation. The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments where the Partnership's ownership interest is 50% or less, with
the exception of the Partnership's investment in the Coto de Caza Joint
Venture which is accounted for in accordance with the cost method of
accounting, effective September 15, 1992 (Note 7).
Recognition of Profit from Sales of Real Estate
For sales of real estate, profit is recognized in full when the collecta-
bility of the sales price is reasonably assured and the earnings process is
virtually complete. When the sale does not meet the requirements for
recognition of income, profit is deferred until such requirements are met.
For sales of residential units, profit is recognized at the time of closing or
if certain criteria are met, on the percentage-of-completion method.
Real Estate Inventories and Cost of Real Estate Revenues
Real estate inventories are carried at cost, including capitalized
interest and property taxes, but not in excess of the net realizable value
determined by the evaluation of individual projects. Management's evaluation
of net realizable value is based on each projects' estimated selling price in
the ordinary course of business less estimated costs of completion, holding
and disposal. These estimates are reviewed periodically and compared to each
project's recorded book value. Adjustments to book value, as they become
necessary, are reported in the period in which they become known. The total
cost of land, land development and common costs are apportioned among the
projects on the relative sales value method. Costs pertaining to the
Partnership's housing, homesite, and land and property revenues reflect the
cost of the acquired assets as well as development costs, construction costs,
capitalized interest, capitalized real estate taxes and capitalized overheads.
Certain marketing costs relating to housing projects, including exhibits and
displays, and certain planning and other predevelopment activities, excluding
normal period expenses, are capitalized and charged to housing cost of
revenues as related units are closed. A warranty reserve is provided as
residential units are closed. This reserve is reduced by the cost of
subsequent work performed.
Capitalized Interest and Real Estate Taxes
Interest and real estate taxes incurred are capitalized to qualifying
assets, principally real estate inventories. Such capitalized interest and
real estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $14,786,169, $17,424,850 and $16,621,042 was incurred for the years
ended December 31, 1993, 1992 and 1991, respectively, of which $7,738,179,
$4,470,150 and $2,939,326 was capitalized for the years ended December 31,
1993, 1992 and 1991, respectively. Interest payments, including amounts
capitalized, of $15,125,383, $15,415,266 and $17,537,916 were made for the
years ended December 31, 1993, 1992 and 1991, respectively.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Real estate taxes of $8,870,693, $9,099,508 and $7,623,857 were incurred
for the years ended December 31, 1993, 1992 and 1991, respectively, of which
$3,179,099, $2,026,309 and $1,072,410 were capitalized for the years ended
December 31, 1993, 1992 and 1991, respectively. Real estate tax payments of
$8,733,910, $10,301,400 and $7,217,145 were made for the years ended December
31, 1993, 1992 and 1991, respectively. The preceding analysis of real estate
taxes does not include real estate taxes incurred or paid with respect to the
Partnership's club facilities and operating properties as these taxes are
included in cost of revenues for operating properties.
Property and Equipment and Other Assets
Property and equipment are carried at cost less accumulated depreciation
and are depreciated on the straight-line method over the estimated useful
lives of the assets which range from two to forty years. Expenditures for
maintenance and repairs are charged to expense as incurred. Costs of major
renewals and improvements which extend useful lives are capitalized. Other
assets are amortized on the straight-line method, which approximates the
interest method, over the useful lives of the assets which range from one to
five years. Amortization of debt discounts (1992 and 1991 only) and other
assets, excluding loan fees, of approximately $247,400, $1,074,000 and
$1,289,100 was incurred for the years ended December 31, 1993, 1992 and 1991,
respectively. Amortization of loan fees, which is included in interest
expense, of approximately $587,500, $343,800 and $0 was incurred for the years
ended December 31, 1993, 1992 and 1991, respectively.
Investments in and Advances to Joint Ventures, Net
In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments for which the Partnership does not have majority control and where
the Partnership's ownership interest is 50% or less. The cost method of
accounting has been applied in the accompanying consolidated financial
statements with respect to the Coto de Caza joint venture, effective September
15, 1992, as a result of the Partnership's decrease in its ownership interest
and its joint venture partner's control over the future operations of the
Community. The cost method of accounting is used when a limited partner has
virtually no influence over venture operations and financial policies. Under
the cost method, income is generally recorded only to the extent of
distributions received. Reference is made to Note 7 for further discussion of
this joint venture.
Investments in joint ventures are carried at the Partnership's
proportionate share of the ventures' assets (not in excess of their net
realizable value determined by evaluation of individual projects), net of
their related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ from
the recorded cost of the Partnership's proportionate share of the joint
ventures' net assets.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership periodically advances funds to certain of its joint
ventures in which it holds ownership interests when deemed necessary and
economically justifiable. Such advances are generally interest bearing and
are payable to the Partnership from amounts earned through joint venture
operations.
Equity Memberships
The amenities within certain of the Partnership's Boca Raton and
Jacksonville, Florida Communities, as well as its Community near Highlands,
North Carolina are sold to the respective homeowners through the sale of
equity memberships. The amounts recorded as equity memberships in the
accompanying Consolidated Balance Sheets represent the accumulation of costs
incurred in constructing clubhouses, golf courses, tennis courts and various
other related assets, less amounts allocated to memberships sold not in excess
of their net realizable value determined by evaluations of individual
amenities. Equity membership revenues and related cost of revenues are
included in land and property in the Consolidated Statements of Operations.
Partnership Records
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect the
Partnership's accounts in accordance with generally accepted accounting
principles ("GAAP") and to consolidate the accounts of the ventures as
described above. The net effect of these items is summarized as follows:
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1993 1992
--------------------------- ---------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 416,391,142 350,807,538 366,368,152
Partners' capital accounts (deficit):
General Partner and Associate Limited Partners. . . . . 292,930 19,280 -- --
Limited Partners. . . . . . . . . . . . . . . . . . . . 151,797,247 263,965,551 122,797,119 236,342,695
Net income (loss):
General Partner and Associate Limited Partners. . . . . 292,930 19,280 20,835,570 9,229,820
Limited Partners. . . . . . . . . . . . . . . . . . . . 29,000,128 27,622,856 (64,809,936) (13,688,552)
Net income (loss) per Limited Partnership Interest. . . . 71.78 68.37 (160.42) (33.88)
============ ============ ============= =============
Reference is made to Note 14 for further discussion of the allocation of
profits and losses to the General Partner, Associated Limited Partners and
Limited Partners.
The net income (loss) per Limited Partnership Interest is based upon the
number of Limited Partnership Interests outstanding at the end of each period
(404,005).
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Reclassifications
During 1992, the Partnership evaluated the presentation and
classification of information in its consolidated financial statements, the
usefulness of such information and its conformity with the financial
statements of other real estate developers and builders. As a result of this
evaluation, the Partnership restructured the presentation of financial
information in its Consolidated Statements of Operations. Such
reclassifications are reflected in the accompanying Consolidated Statements of
Operations and the Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991. Certain reclassifications have also been
made to the 1991 Consolidated Statement of Cash Flows to conform with the 1992
presentation. Management believes that these reclassifications have resulted
in a more informative presentation of the Partnership's financial information.
Certain reclassifications have also been made to the 1992 and 1991 financial
statements to conform to the 1993 presentation.
Income Taxes
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the Partnership.
However, in certain instances, the Partnership has been required under
applicable state law to remit directly to the state tax authorities amounts
representing withholding on applicable taxable income allocated to partners.
(2) INVESTMENT PROPERTIES
The Partnership's assets consist principally of interests in land which
is in the process of being developed into master-planned residential
Communities (the "Communities") and, to a lesser extent, commercial
properties; mortgage notes and accounts receivable; management and other
service contracts; construction, brokerage and other support activities; real
estate assets held for investment; club and recreational facilities; and cable
television businesses serving certain of its Communities.
On August 27, 1991, the General Partner, on behalf of the Partnership,
initiated a lawsuit in the Circuit Court of Cook County (County Department,
Chancery Division), Illinois against The Walt Disney Company ("Disney"). The
litigation arises out of the Partnership's acquisition of substantially all of
the real estate and other assets of Arvida Corporation, a subsidiary of
Disney, in September 1987. In the complaint filed on its behalf, the
Partnership alleges that under the terms of the contract with Disney for the
acquisition, the purchase price of the assets was to be reduced by the amount
of certain payments made prior to the closing (the "Closing") of the
transaction out of funds of Arvida Corporation in order to satisfy certain
obligations that were not assumed by the Partnership. The complaint also
alleges that the contract entitles the Partnership to (i) reimbursement by
Disney for amounts advanced by the Partnership to pay certain other claimed
obligations of Arvida Corporation, including certain post-Closing adjustments,
in connection with the acquisition and (ii) indemnification by Disney for
additional costs and expenses incurred by the Partnership subsequent to the
Closing in order to remedy certain environmental conditions that existed prior
to the Closing. The complaint further alleges that the Partnership has made
various demands on Disney for payment of these amounts and that Disney has
refused to make such payments. The Partnership seeks declaratory judgments
that the Partnership is entitled to a purchase price reduction from Disney and
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
reimbursement or indemnification by Disney for amounts advanced or costs and
expenses incurred by the Partnership for certain obligations of Arvida
Corporation, together with interest on all such amounts and costs. During the
second quarter of 1992, the Partnership received approximately $0.8 million in
settlement of portions of this claim. There is no assurance as to what
amounts, if any, the Partnership will recover as a result of the litigation
with regard to the remaining open issues under the initially filed complaint.
During July 1993, Disney filed an answer denying the substantive allegations
of the Partnership's complaint and raising various affirmative defenses. The
Partnership believes Disney's defenses are without merit and will continue to
pursue its claims. In addition, Disney has filed a three count counterclaim
in which it seeks among other things: a complete accounting of liabilities
allegedly assumed but not discharged by the Partnership to ascertain whether
certain funds, not to exceed $2.9 million, are due Disney in accordance with
the purchase agreement; an unspecified amount of damages exceeding $500,000
allegedly representing workers compensation and warranty payments made by
Disney, which Disney alleges are obligations of the Partnership; an accounting
for funds disbursed from a claims pool in the amount of $3,000,000 established
by the parties; and attorney fees and costs. The Partnership believes it has
meritorious defenses to these counterclaims and will defend itself vigorously
against them.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
At December 31, 1993 and 1992, cash and cash equivalents primarily
consisted of U.S. Government obligations with original maturities of three
months or less, money market demand accounts and repurchase agreements, the
cost of which approximated market value. Cash and cash equivalents include
treasury bills with original maturities of three months or less of
approximately $3,900,000 and $0 at December 31, 1993 or 1992. Included in
restricted cash are amounts restricted under various escrow agreements.
Credit risk associated with cash, cash equivalents and restricted cash is
considered low due to the high quality of the financial institutions in which
these assets are held.
(4) MORTGAGES RECEIVABLE
Mortgages receivable generally range in maturity from 1 to 3 years,
certain of which are collateralized by liens on the property sold and bear
interest with stated rates up to 10% per annum. All mortgages receivable with
below market rates are discounted at the market rate prevailing at the date of
issue or purchase. The resulting effective interest rates on mortgages
receivable range from approximately 11% to 14% per annum. The outstanding
principal balances of mortgages receivable at December 31, 1993 and 1992 are
summarized as follows:
1993 1992
----------- ------------
Total gross mortgages receivable . . . . $3,958,649 6,838,848
Unamortized discount and
valuation allowances . . . . . . . . . (1,017,688) (1,101,517)
---------- ----------
Mortgages receivable, net . . . . . $2,940,961 5,737,331
========== ==========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) REAL ESTATE INVENTORIES
Real estate inventories at December 31, 1993 and 1992 are summarized as
follows:
1993 1992
------------ ------------
Land held for future development or
sale . . . . . . . . . . . . . . . . . $ 24,259,509 30,459,094
Community development inventory:
Work in progress and
land improvements. . . . . . . . . . 137,048,514 133,507,511
Completed inventory. . . . . . . . . . 27,371,129 25,682,648
------------ -----------
Real estate inventories . . . . . . $188,679,152 189,649,253
============ ===========
Real estate inventories at December 31, 1992 include charges to the
inventory carrying values of certain residential and commercial properties
totalling approximately $12.2 million to reflect their estimated net
realizable values as determined by management's evaluation of these
properties. These charges include approximately $9.2 million to reduce the
carrying values of the Partnership's Water's Edge and Dockside Communities
located near Atlanta, Georgia and its River Hills Community in Tampa, Florida.
These Communities had been experiencing slower sales absorptions than
anticipated due to the pricing of products not being in line with market
demand. The charges to the inventory carrying values resulted from the
Partnership's plans to offer lower-priced homesite and housing products in
these Communities which are more consistent with market demand. The
Partnership did reduce the price of homesites in the Water's Edge and Dockside
Communities as planned; however, during 1993, the Partnership experienced no
significant increase in sales absorptions in these Communities. Recent market
studies indicate further reductions of housing sales prices in these
communities are warranted. Therefore, real estate inventories at December 31,
1993 include an additional charge totalling approximately $4.9 million to the
inventory carrying value of the Water's Edge and Dockside Communities to
reflect the adverse impact of these additional reductions in housing prices on
future anticipated lot values.
Also included in real estate inventories at December 31, 1992, is a
charge of approximately $2.3 million to reduce the carrying value of real
estate inventories at The Oaks to properly reflect the estimated market value
of the property assuming a bulk sale of the entire property. The balance of
the charges to reduce real estate inventories, of approximately $0.7 million,
was recorded to reflect the then current market value of several parcels of
undeveloped commercial real estate. See Note 8 for discussion regarding the
Partnership's sale of its remaining land holdings in The Oaks Community during
1993.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 and 1992 are summarized as
follows:
1993 1992
------------ ------------
Land . . . . . . . . . . . . . . . . . $ 6,566,045 6,560,828
Land improvements. . . . . . . . . . . 18,214,258 19,388,725
Buildings. . . . . . . . . . . . . . . 51,166,841 50,098,289
Equipment and furniture. . . . . . . . 19,024,112 18,225,992
Construction in progress . . . . . . . 1,281,936 873,411
------------ ------------
Total . . . . . . . . . . . . . . 96,253,192 95,147,245
Accumulated depreciation. . . . . (29,263,615) (25,074,779)
------------ ------------
Property and equipment, net . . . $ 66,989,577 70,072,466
============ ============
In the fourth quarter of 1992, the Partnership recorded an approximate
$3.4 million charge to the net book value of property and equipment to reflect
reductions in the values of a 29,000 square foot office building located in
Palm Beach County, Florida and a golf and country club facility at the
Partnership's River Hills Community. The value of the golf and country club
facility at River Hills had been adversely impacted by the introduction of new
lower-priced products within the Community as well as overall economic
conditions and the competition from other club facilities within the Tampa,
Florida area.
Depreciation expense of approximately $5,397,200, $6,132,700 and
$5,783,600 was incurred for the years ended December 31, 1993, 1992 and 1991,
respectively.
(7) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET
The Partnership has numerous investments in real estate joint ventures
with ownership interests ranging from 20% to 50%. The Partnership's joint
venture interests accounted for under the equity method are as follows:
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------
Arvida Boose
Joint Venture 50 Florida
Arvida Corporate
Park Associates 50 Florida
Arvida Pompano Associates
Joint Venture 50 Florida
H.A.E. Joint Venture 33-1/3 Florida
Mizner Court Associates
Joint Venture 50 Florida
Mizner Tower Associates
Joint Venture 50 Florida
Ocala 202 Joint Ventures 50 Florida
Tampa 301 Associates
Joint Venture 50 Florida
Windmill Lake Estates
Associates
Joint Venture 50 Florida
Arvida/RBG I Joint Venture 40 Florida
Arvida/RBG II Joint Venture 40 Florida
The following is combined summary information of joint ventures accounted
for under the equity method. The 1993 and 1992 summary information presented
below is not comparable to the 1991 information due to the consolidation of
the Cullasaja Joint Venture effective January 1, 1992 and the application of
the cost method of accounting, effective September 15, 1992, for the
Partnership's ownership interest in the Coto de Caza joint venture. The 1993
summary information presented is not comparable to the 1992 and 1991
information due to the consolidation of AOK Group effective March 1, 1993.
See further discussion below regarding the Partnership's accounting for these
joint venture interests.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
ASSETS
------
Real estate inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,170,628 21,701,201
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,209,918 11,453,177
----------- ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,380,546 33,154,378
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable, deposits and other liabilities . . . . . . . . . . . . . . . . . . . . . . $ 752,274 3,862,725
Notes and mortgages payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,109,656 10,963,677
----------- ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,861,930 14,826,402
Venture partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,753,884 9,057,262
Partnership's capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,764,732 9,270,714
----------- ------------
Total liabilities and partners' capital. . . . . . . . . . . . . . . . . . . . . . $17,380,546 33,154,378
=========== ============
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
COMBINED RESULTS OF OPERATIONS
------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------ ------------ ------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,846,925 10,667,527 38,568,785
=========== ============ ============
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,409,483 (24,284,665) (2,864,164)
=========== ============ ============
Partnership's proportionate share of net income (loss) . . . . . . . . . . $ 953,165 (12,205,635) (1,421,006)
=========== ============ ============
Partnership's equity in earnings (losses) of unconsolidated ventures . . . $ 1,134,947 (2,225,531) (769,300)
=========== ============ ============
The following is a reconciliation of the Partnership's Capital accounts within the joint ventures
to its investments in and advances to joint ventures as reflected on the accompanying Consolidated Balance
Sheets:
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------ ------------ ------------
Partnership's Capital, equity method . . . . . . . . . . . . . . . . . . . $ 6,764,732 9,270,714 27,753,620
Partnership's Capital, cost method . . . . . . . . . . . . . . . . . . . . 5,836,000 8,763,000 --
Basis difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,888,487 5,065,397 3,534,512
----------- ------------ ------------
Investments in joint ventures. . . . . . . . . . . . . . . . . . . . . . . 20,489,219 23,099,111 31,288,132
Advances to joint ventures, net. . . . . . . . . . . . . . . . . . . . . . 4,242,633 8,199,613 9,115,727
----------- ------------ ------------
Investments in and advances to joint ventures, net. . . . . . . . . . $24,731,852 31,298,724 40,403,859
=========== ============ ============
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership's share of net income (loss) is based upon its ownership
interest in numerous investments in joint ventures which are accounted for in
accordance with the equity method of accounting. Equity in earnings (losses)
of unconsolidated ventures represents the Partnership's share of net income
(loss) and reflects a component of purchase price adjustments included in the
Partnership's basis, which are generally being amortized in relation to the
cost of revenues of the underlying real estate assets. Equity in earnings
(losses) of unconsolidated ventures may also include adjustments to carrying
values of the investments as deemed necessary to reflect such investments at
their appropriate net realizable values. These factors contribute to the
differential in the Partnership's proportionate share of the net income (loss)
of the joint ventures and its equity in earnings (losses) of unconsolidated
ventures as well as to the basis differential between the Partnership's
investments in joint ventures and its equity in underlying net assets, as
shown above.
Due to a significant decline in the demand for undeveloped commercial
real estate in the markets in which the Partnership's joint venture properties
are located, the respective joint ventures recorded charges to the carrying
values of their real estate inventories of approximately $7.4 million in 1992
to reflect their estimated net realizable values. Equity in earnings (losses)
of unconsolidated joint ventures for the year ended December 31, 1991 includes
a charge to income of approximately $1.4 million to reduce the carrying value
of the Partnership's interest in a commercial joint venture located in Tampa,
Florida.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the Partnership's
joint venture partners in an investment might become unable or unwilling to
fulfill their financial or other obligations, or that such joint venture
partners may have economic or business interests or goals that are
inconsistent with those of the Partnership. In addition, under certain
circumstances, either pursuant to the joint venture agreements or due to the
Partnership's obligations as a general partner, the Partnership may be
required to make additional cash advances or contributions to certain of the
ventures.
At December 31, 1991, the Partnership owned a 50% joint venture interest
in the Cullasaja Community. Certain of the venture's property is encumbered
by a mortgage. The principal balance outstanding on this note at December 31,
1993 and 1992 was approximately $5,412,000 and $6,649,000, respectively. The
note matures on March 1, 1994 and bears interest at a rate of prime (6% at
December 31, 1993) plus 1.25% per annum which is payable monthly. The
Partnership is required to make repayments on the note in accordance with a
homesite lot release provision of $72,750 per lot at closing. The Partnership
is currently seeking an extension of this loan. However, there can be no
assurance that the Partnership can obtain an extension. The operations of the
venture required periodic cash advances from the partners. Since the fourth
quarter of 1990, the Partnership has funded the venture's cash deficits in
their entirety. As a result, during July 1992, the Partnership reached an
agreement to purchase its joint venture partner's 50% interest in the
Community. The Partnership was not required to make any cash payment to the
joint venture partner for its interest. Instead, the purchase price of such
interest is in the form of subordinated non-recourse promissory notes (the
"Notes"), the payment of which is solely contingent upon the ultimate net
cash flow generated by the joint venture. The Notes are subordinated to the
repayment of the outstanding first mortgage loan and certain advances, plus
accrued interest thereon, made to the venture by the partners. To the extent
the Partnership has funded 100% of the venture's cash deficits in the
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
past or advances new funds, the repayment of such advances, plus accrued
interest thereon, is senior to the repayment of funds previously advanced by
both partners. A portion of the cash flow remaining after payment of all
senior indebtedness is to be applied annually against the principal and
interest (at 10% per annum) owed on the Notes. This agreement was pursued as
a more favorable alternative to the remedies included in the previously
existing joint venture agreement for situations in which the partners advance
unequal funds to the venture. As a result of this transaction, the
Partnership has changed from the equity method of accounting to the
consolidated method of accounting for the joint venture effective January 1,
1992. The consolidation and the issuance of the Notes described above yielded
an increase in the Partnership's total assets of approximately $12.1 million.
The Coto de Caza joint venture had utilized the maximum amount available
under its operating line of credit and had been seeking alternative financing
sources to fund the significant additional cash necessary to continue
development of the project and to fund the venture's other operating costs.
In the interim, the Partnership and its joint venture partner had each
advanced, net of reimbursements, approximately $3.1 million to the venture
during 1991 and an additional $1.0 million during the first five months of
1992. Interest earned, at 10% per annum, during 1991 had been paid in full as
of December 31, 1991. Interest earned during 1993 and 1992 totalling
approximately $803,000 was unpaid as of December 31, 1993. Due to the
reallocation of the Partnership's interest in the Coto de Caza joint venture
effective September 15, 1992, the Partnership has provided an allowance for
doubtful accounts with regard to the interest earned and unpaid at December
31, 1993 on advances previously made by the Partnership. Given the weak
market conditions in Orange County, California and the continued lack of
development financing available from traditional lending sources, it was
unlikely that the joint venture would be able to secure additional financing
in the near term. The joint venture partner was willing to continue to
advance funds to meet the venture's operating needs. Given the finite amount
of available capital, the Partnership determined that it was in its best long-
term interest to utilize that capital for the development of its other
properties rather than commit additional funds for the development of the Coto
de Caza Community. As a result, the venture partner has funded the venture's
cash deficits in their entirety since June 1, 1992. As an alternative to
funding future capital requirements, the Partnership and its joint venture
partner agreed to amend the joint venture agreement and reallocate ownership
interests. In exchange for funding the venture's future operating needs, the
venture partner was reallocated an additional 30% interest in the venture, and
assumed the role of managing general partner. As such, the venture partner
has control over the future operations of the Community, including the timing
and extent of its development. The Partnership retains a 20% limited
partnership interest and is entitled to receive distributions from net cash
flow, after repayment of third party loans and advances made by the venture
partners, up to an amount agreed upon by the Partnership and its joint venture
partner. Certain specified costs and liabilities incurred prior to the
reallocation will continue to be shared equally by the Partnership and its
joint venture partner. This agreement was pursued as a more favorable
alternative to the provisions included in the previously existing joint
venture agreement for reallocation of partnership interests should both
partners not advance equal funds to the venture. As a result of the
Partnership's decrease in its ownership interest, and its joint venture
partner's control over the future operations of the Community, commencing on
September 15, 1992, the Partnership accounts for its share of the operations
of the Coto de Caza joint venture in accordance with the cost method of
accounting.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During 1992 the Partnership sold 60% of its interest in two land parcels
located in its Weston Community to unaffiliated third-party purchasers.
Subsequent to these transactions, the Partnership and the purchasers each
contributed their interests in these land parcels to joint ventures
established for the purpose of developing housing products within Weston. The
Partnership entered into development management agreements with these joint
ventures. Pursuant to the terms of these agreements, the Partnership agreed
to fund all development and construction costs, as well as certain overheads,
incurred on behalf of the joint venture projects. Amounts funded are
reimbursed by the joint ventures from sales revenues generated by each joint
venture. Amounts advanced by the Partnership to each respective joint venture
earn interest at 8.5% for the first year and prime plus 2% per annum
thereafter. During the first quarter of 1993, one of the joint ventures
obtained third-party, project specific financing in the amount of $4,950,000
to fund its development and construction activities. In accordance with the
provisions of this financing agreement, as of December 31, 1993, the
Partnership had been reimbursed the majority of amounts previously advanced to
the joint venture. As a result of this financing arrangement, the Partnership
does not anticipate the need for future advances to this venture. Due to
significant sales activity, amounts previously advanced to the Partnership's
other joint venture were reimbursed in full during 1993.
During the first quarter of 1993, the Partnership reached a settlement
agreement with AOK Group, its joint venture partner in a property located in
Ocala, Florida, whereby in exchange for its joint venture partner's 50%
interest in the venture, the Partnership agreed to dismiss a lawsuit
previously filed against its joint venture partner for failure to perform in
accordance with the terms of a $1,600,000 note which had been issued to the
Partnership by the joint venture. This agreement was pursued as a more
favorable remedy to other alternatives available to the Partnership. As a
result of this transaction, the Partnership has changed from the equity method
of accounting to the consolidated method of accounting for the joint venture
effective March 1, 1993. This transaction resulted in an increase in the
Partnership's total assets of approximately $324,000.
The Partnership incurs certain general and administrative expenses,
including insurance premiums, which are paid by the Partnership on behalf of
the joint ventures in which it holds interests. The Partnership receives
reimbursements from the joint ventures for such costs. For the year ended
December 31, 1993, the Partnership was entitled to receive approximately
$343,000 from certain of the joint ventures in which it holds interests. At
December 31, 1993, approximately $64,000 was owed to the Partnership, of which
approximately $27,000 was received as of March 15, 1994.
(8) NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable at December 31, 1993 and 1992 are summarized
as follows:
1993 1992
------------ ------------
Term loan credit facility of $126,805,195
bearing interest at approximately 5.6%
and 6.5% per annum at December 31, 1993
and 1992, respectively (A). . . . . . . $108,262,248 126,805,195
Income property term loan of $20,000,000,
bearing interest at approximately 5.6%
and 6.0% per annum at December 31, 1993
and 1992, respectively (A). . . . . . . 18,933,328 19,733,332
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1993 1992
------------ ------------
Revolving line of credit of $45,000,000
(A) . . . . . . . . . . . . . . . . . . -- --
Other notes and mortgages payable (B). . 20,575,416 34,397,645
------------ ------------
Total. . . . . . . . . . . . . $147,770,992 180,936,172
============ ============
(A) At December 31, 1991, the Partnership had an agreement with two
commercial banks permitting the Partnership to borrow up to $225 million under
various credit facilities consisting of a term loan originally totalling $150
million and a revolving credit line of up to $75 million. In addition, the
Partnership had a letter of credit agreement up to $20 million. Although the
Partnership's term loan was not scheduled to mature until February 1998, the
lenders required the Partnership to restructure its entire credit facility as
part of the extension of the revolving line of credit facility which
originally matured on January 15, 1992. The Partnership and its lenders
finalized an agreement in October of 1992 for a new facility. The new
facility consists of a term loan in the amount of $126,805,195, a revolving
line of credit facility up to $45 million, an income property term loan of $20
million, and a $15 million letter of credit facility. The term loan, the
revolving line of credit and the letter of credit facility are secured by
recorded mortgages on all otherwise unencumbered real property assets of the
Partnership as well as an assignment of all mortgages receivables, equity
memberships, certain joint venture interests or joint venture proceeds and
cash balances (with the exception of deposits held in escrow). The income
property term loan is secured by the recorded first mortgages on a mixed-use
center and an office building in Boca Raton, Florida. All of the notes under
the new facility are cross-collateralized and cross-defaulted. The term loan,
the revolving line of credit and the income property term loan bear interest
based, at the Partnership's option, on one of the lender's prime rate plus 1%
or on the relevant London Inter-Bank Offering Rate (LIBOR) plus 2.25% per
annum. At December 31, 1993, $75 million of the Partnership's outstanding
credit facility was under two interest rate swap arrangements. For the year
ended December 31, 1993, the effective interest rate for the combined term
loan, income property term loan and revolving line of credit facility was
approximately 9.3% per annum. This rate includes the effect of the interest
rate swap agreements, one of which matured in February 1994 and the other of
which will mature in October 1994. In addition, the Partnership was required
to pay the lenders certain commitment and administration fees as well as all
closing costs relating to these borrowings.
Under the term loan agreement, the Partnership made the first scheduled
principal repayments of $8 million in February 1993 and $10 million in March
1994. Principal repayments of $10 million are due in each of the years 1995
and 1996, and the remaining balance outstanding is due in July 1997. In
addition, the term loan agreement provides for additional principal repayments
based upon a specified percentage of available cash flow and upon the sale of
certain assets. For the year ended December 31, 1993, the Partnership made
additional term loan payments totalling approximately $10.5 million. Under
the income property term loan, monthly principal and interest payments are
required to be paid on a 25-year amortization schedule with the remaining
balance outstanding due in July 1994. The revolving line of credit and letter
of credit facility also mature in July 1994.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership is in the process of negotiating a renewal of its credit
facilities. Although the Partnership is hopeful these renewals will be
obtained, there can be no assurance that such will occur or that the terms,
amounts and restrictions of the renewed credit facilities will be similar to
those under the Partnership's existing facilities. The credit agreement
contains significant restrictions with respect to the payment of distributions
to partners, the maintenance of certain loan-to-value ratios, the use of
proceeds from the sale of the Partnership's assets and advances to the
Partnership's joint ventures. As of March 15, 1994, all of the term loan
proceeds had been borrowed with a remaining balance of $92,360,145, and $0,
$18,733,327 and $11,868,393 were outstanding on the revolving line of credit
facility, the income property term loan and the letter of credit facility,
respectively.
Loan fees incurred in connection with the restructuring of the
Partnership's credit facility have been capitalized and are being amortized
over the lives of the loans included in the credit facility using the
straight-line method, which approximates the interest method.
(B) Other notes and mortgages payable are collateralized by certain real
estate inventories, property and equipment and certain investments with a net
book value of approximately $22 million at December 31, 1993. These notes and
mortgage notes have a weighted average annual effective interest rate of
approximately 7.2% and 7.5% at December 31, 1993 and 1992, respectively, and
mature in varying amounts through 2017.
The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. The Partnership's joint venture
partner was in default under the terms of the joint venture agreement due to
its failure to make capital contributions to fund ongoing operations. In
August 1993, the Partnership's joint venture partner assigned its 20% interest
in The Oaks to the Partnership thereby vesting 100% control of the joint
venture assets in the Partnership.
Certain of the assets of The Oaks joint venture were encumbered by two
mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997
and a $3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default under
the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and its
failure to pay interest commencing with a payment due in April 1993. The
Partnership was able to reach an agreement with the lenders to pay off the
existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction contributes to the decrease in notes
and mortgages payable at December 31, 1993 as compared to December 31, 1992
and is the cause of the approximate $9.5 million extraordinary gain on the
early extinguishment of debt as of December 31, 1993.
The joint venture also sold its remaining land holdings in The Oaks
Community and its interest in The Oaks Club to an unaffiliated third party
purchaser for $5.8 million simultaneously with the repayment of the loans and
satisfaction of the mortgages. These transactions are the cause of various
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
changes in the consolidated balance sheets at December 31, 1993 as compared to
December 31, 1992. In light of the Partnership's guarantee under the loan
agreement of $2.7 million of the outstanding mortgage loans, as well as other
factors, the above transactions were pursued as the least costly alternative
available to the Partnership. These transactions resulted in a minimal net
gain for Federal income tax purposes.
In anticipation of the above circumstances, the Partnership, as a matter
of prudent accounting practice, recorded a charge to the carrying value of
real estate inventories and equity memberships of approximately $2.3 million
and $1.0 million, respectively, in the fourth quarter of 1992 to properly
reflect the estimated market value of the property in its then current state
of development assuming a bulk sale of the entire property.
Following is a schedule of the maturities of the notes and mortgages
payable at December 31, 1993.
1994 . . . . . . . . . . . . . . . $ 37,184,325
1995 . . . . . . . . . . . . . . . 10,665,714
1996 . . . . . . . . . . . . . . . 17,374,705
1997 . . . . . . . . . . . . . . . 78,762,248
1998 . . . . . . . . . . . . . . . 500,000
Thereafter . . . . . . . . . . . . 3,284,000
------------
Total notes and
mortgages payable. . . . . . $147,770,992
============
(9) EQUITY MEMBERSHIPS
Equity memberships represent the accumulation of costs incurred in
constructing club houses, golf courses, tennis courts and various other
related assets, less amounts allocated to memberships sold, not in excess of
their net realizable values determined by evaluation of individual amenities.
These amenities are conveyed to homeowners through the sale of equity
memberships. The sale of memberships in Jacksonville Golf and Country Club
has been adversely impacted during the past several years by the introduction
of lower-priced products within the Community as well as the competition from
other club facilities located in the Jacksonville area. At Broken Sound, the
higher-priced equity memberships have experienced a slowdown in absorptions
due primarily to the overall slowdown in the economy and the low levels of
consumer confidence. As a result of the above, in 1992, the Partnership
recorded charges to the carrying value of its equity memberships at
Jacksonville Golf and Country Club and Broken Sound of approximately $2.2
million and $1.0 million, respectively. In addition, equity memberships for
the year ended December 31, 1992 also include a $1.0 million reduction in the
value of The Oaks Country Club's equity memberships as discussed further in
Note 8.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(10) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to affiliates of the General Partner as
of December 31, 1993 and for the years ended December 31, 1993, 1992 and 1991 are as follows:
UNPAID AT
DECEMBER 31,
1993 1992 1991 1993
-------- -------- -------- --------------
Property management fees . . . . . . . . . . . . . . . . . . . . $153,088 108,243 -- 8,460
Insurance commissions. . . . . . . . . . . . . . . . . . . . . . 287,639 267,673 346,193 --
Reimbursement (at cost) for accounting services. . . . . . . . . 61,881 61,101 70,130 61,881
Reimbursement (at cost) for legal services . . . . . . . . . . . 31,821 38,344 35,543 31,821
Reimbursement (at cost) for data processing services . . . . . . -- -- 3,545 --
Reimbursement (at cost) for out-of-pocket expenses . . . . . . . 20,534 24,562 17,369 --
-------- -------- -------- ----------
$554,963 499,923 472,780 102,162
======== ======== ======== ==========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership receives reimbursements from or reimburses affiliates of
the General Partner for certain general and administrative costs including,
and without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership and certain out-of-pocket
expenditures incurred on behalf of such affiliates. For the year ended
December 31, 1993, the total of such costs incurred by the Partnership on
behalf of these affiliates totalled approximately $171,000. Approximately
$24,700 was outstanding at December 31, 1993, of which approximately $4,400
was received as of March 15, 1994. This amount does not bear interest and is
expected to be paid in future periods. For the year ended December 31, 1992,
the Partnership was entitled to receive reimbursements of approximately
$129,000.
In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partners have deferred a portion of their distributions of
net cash flow from the Partnership totaling approximately $810,000 as of
December 31, 1993. This amount does not bear interest and is expected to be
paid in future periods subject to certain restrictions contained in the
Partnership's credit facility.
Arvida Company ("Arvida"), pursuant to an agreement with the Partnership,
provides development, construction, management and other personnel and
services to the Partnership for all of its projects and operations. Pursuant
to such agreement, the Partnership shall reimburse Arvida for all of its
out-of-pocket expenditures (including salary and salary-related costs),
subject to certain limitations. The total of such costs for the years ended
December 31, 1993 and 1992 was approximately $6,686,100 and $6,622,800,
respectively, of which approximately $80,000 was unpaid as of December 31,
1993 and all of which was paid as of March 15, 1994.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited
partnership affiliated with the General Partner) each employ project related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative costs, including certain
insurance premiums, are incurred and allocated to each partnership as
appropriate. The Partnership receives reimbursements from or reimburses
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related costs). For the year ended December 31, 1993, the Partnership was
entitled to receive approximately $2,497,400 from Arvida/JMB Partners, L.P.-
II. At December 31, 1993, approximately $26,100 was outstanding, all of which
was received as of March 15, 1994. In addition, for the year ended December
31, 1993, the Partnership was obligated to reimburse Arvida/JMB Partners,
L.P.-II approximately $1,234,300, all of which was paid as of December 31,
1993. The net reimbursements paid to the Partnership for the year ended
December 31, 1992 was approximately $236,000.
The Partnership pays for certain general and administrative costs,
including insurance premiums, on behalf of its affiliated clubs, homeowners
associations and maintenance associations. The Partnership receives
reimbursements from the affiliates for such costs. For the year ended
December 31, 1993, the Partnership was entitled to receive approximately
$366,400 from its affiliates. At December 31, 1993, approximately $116,700
was owed to the Partnership, of which approximately $23,000 was received as of
March 15, 1994. The amount reimbursed to the Partnership for the year ended
December 31, 1992 was approximately $2,327,200.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) COMMITMENTS AND CONTINGENCIES
As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and bonds
for approximately $11,651,000 and $11,146,000, respectively, at December 31,
1993. As of December 31, 1992, the Partnership was contingently liable under
standby letters of credit and bonds for approximately $18,438,000 and
$18,293,000, respectively. In addition, certain joint ventures in which the
Partnership holds an interest are also contingently liable under bonds for
approximately $1,089,000 and $1,180,000 at December 31, 1993 and 1992,
respectively.
The Partnership leases certain building space for its management offices,
sales offices and other facilities, as well as certain equipment. The
building and equipment leases expire over the next 2 to 11 years. Minimum
future rental commitments under non-cancelable operating leases having a
remaining term in excess of one year as of December 31, 1993 are as follows:
1994 . . . . . . . . . . . $1,287,841
1995 . . . . . . . . . . . 1,130,218
1996 . . . . . . . . . . . 855,780
1997 . . . . . . . . . . . 228,167
1998 . . . . . . . . . . . 150,437
Thereafter . . . . . . . . 283,835
----------
$3,936,278
==========
Rental expense of $2,786,710, $2,320,028 and $2,865,680 was incurred for
the years ended December 31, 1993, 1992 and 1991, respectively.
The Partnership is named a defendant in a number of homeowner lawsuits,
certain of which purported to be class actions, that allegedly in part arose
out of or related to Hurricane Andrew, which on August 24, 1992 resulted in
damage to a former community development known as Country Walk. The homeowner
lawsuits allege, among other things, that the damage suffered by the
plaintiffs' homes and/or condominiums within Country Walk was beyond what
could reasonably be expected from the hurricane and/or was a result of the
defendants' alleged defective design, construction, inspection and/or other
improper conduct in connection with the development, construction and sales of
such homes and condominiums, including alleged building code violations. The
various plaintiffs seek varying and, in some cases, unspecified amounts of
compensatory damages and other relief. In certain of the lawsuits injunctive
relief and/or punitive damages are sought. The Partnership intends to
vigorously defend itself in these lawsuits.
The various lawsuits arising out of or relating to Hurricane Andrew
allege that the Partnership is liable, among other reasons, as a result of its
own alleged acts of misconduct or as a result of the Partnership's assumption
of Arvida Corporation's liabilities in connection with the Partnership's
purchase of Arvida Corporation's assets from the Walt Disney Company
("Disney") in 1987, which included certain assets related to the Country Walk
development. Pursuant to the agreement to purchase such assets, the
Partnership obtained indemnification by Disney for certain liabilities
relating to facts or circumstances arising or occurring prior to the closing
of the Partnership's purchase of the assets. Over 80% of the Arvida-built
homes in Country Walk were built prior to the Partnership's ownership of the
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Community. Where appropriate, the Partnership has tendered or will tender
each of the above-described lawsuits to Disney for defense and indemnification
in whole or in part pursuant to the Partnership's indemnification rights.
Where appropriate, the Partnership is also tendering these lawsuits to its
various insurance carriers for defense and coverage. The Partnership is
unable to determine at this time to what extent damages in these lawsuits, if
any, against the Partnership, as well as the Partnership's cost of
investigating and defending the lawsuits, will ultimately be recoverable by
the Partnership either pursuant to its rights of indemnification by Disney or
under contracts of insurance.
The Partnership has negotiated the terms of a class action settlement
with opposing counsel in one of the pending homeowners' lawsuits which has the
potential for resolving substantial portions of the pending homeowners'
lawsuits which have been filed. On June 3, 1993, the Circuit Court of Dade
County entered an order preliminarily finding that the Partnership's proposed
class action settlement agreement, as revised, was within the range of what
appeared to be a fair and adequate settlement of the claims filed by single-
family homeowners and condominium owners at Country Walk. On August 10, 1993,
the court issued a final order approving the class action settlement. The
settlement, which is designed to resolve claims arising in connection with
estate and patio homes and condominiums sold by the Partnership after
September 10, 1987, is structured to compensate residents for losses not
covered by insurance. Settlement amounts payable are a function of the type
of unit involved and the claimant's proof regarding the adequacy of insurance
proceeds. Homeowners of 188 units of Country Walk have accepted the
settlement. Those who affirmatively rejected the offer may continue to
litigate against the Partnership. The Partnership currently believes that the
class action settlement may cost approximately $2.5 million. The settlement
is being funded by one of the Partnership's insurers, subject to a reservation
of rights. The amount of money, if any, which the insurance company may
recover from the Partnership pursuant to its reservation of rights is
uncertain. Due to this uncertainty, the accompanying consolidated balance
sheets do not reflect an accrual for such costs.
On February 24, 1994, the Partnership was dismissed from the pending
class action lawsuits pursuant to the class action settlement. In addition,
the Partnership has been informed that Disney and an insurer have reached
agreements to settle five of the individual homeowners actions which were
tendered by the Partnership to Disney. These Disney Settlements will be
funded without any contribution from the Partnership. The Partnership can
give no assurance that the Disney settlements will be finalized.
As noted above, those homeowners who affirmatively rejected the offer of
settlement may continue to litigate. The Partnership is currently a defendant
in eleven lawsuits brought by condominium and patio home owners, all of whom
have declined to accept the terms of the class action settlement. These
lawsuits, involving nineteen named individuals, are pending in the Circuit
Court of Dade County. In these lawsuits, plaintiffs allege a variety of
claims involving, among other things, breach of warranty, negligence and
building code violations. The Partnership intends to vigorously defend itself
in these matters.
On April 19, 1993, a subrogation claim entitled Village Homes at Country
Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company ("American
Reliance"). Plaintiffs seek to recover damages and pre- and post-judgment
interest in connection with $10,873,000 American Reliance has allegedly paid
to its insureds living in condominium units at Country Walk in the wake of
Hurricane Andrew. Disney is also a defendant in this suit. On July 1, 1993,
a subrogation lawsuit entitled Prudential Property and Casualty Company v.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for Dade
County. Plaintiff seeks to recover damages, costs, and interest in connection
with $16,679,622 Prudential allegedly paid to its insureds living in Country
Walk at the time of Hurricane Andrew. Disney is also a defendant in this
suit. On July 15, 1993, a subrogation lawsuit entitled Allstate Insurance
Company v. Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit
for Dade County. Plaintiff seeks to recover damages, costs, and interest in
connection with $18,540,196 Allstate allegedly paid to its insureds living in
Country Walk at the time of Hurricane Andrew. Disney is also a defendant in
this suit. The Partnership settled a threatened subrogation action by State
Farm Insurance Company. The settlement was funded by one of the Partnerships
insurance carriers subject to a reservation of rights. The amount of money
the insurance carrier may seek to recover from the Partnership for this and
any other settlements it has funded is uncertain. The Partnership is a
defendant in and anticipates other subrogation claims by insurance companies
which have allegedly paid policy benefits to Country Walk residents. The
Partnership intends to defend itself vigorously in all such matters.
The Partnership has resolved a claim for construction related damages
brought by the Villages of Country Walk Homeowners' Association, Inc., among
others. Two of the Partnership's insurance carriers funded a settlement in
the amount of $2,740,000 to resolve claims related to the construction of the
common elements of the condominium units at Country Walk. One of the
insurance carriers has issued a reservation of rights in connection with these
claims and the extent to which that insurance company may ultimately recover
any of these proceeds from the Partnership is unknown. Therefore, the
accompanying consolidated balance sheets do not reflect an accrual for such
costs.
The Partnership is involved in an Environmental Protection Agency (EPA)
administrative enforcement proceeding with regard to the Partnership's Water's
Edge property. The EPA has asserted that a dam built to create a lake at the
Community during the time the property was owned by Arvida Corporation was in
violation of Section 404 of the Clean Water Act in that certain wetland areas
had been filled. Pursuant to a Consent Agreement and Order entered into with
the EPA, the Partnership acquired certain land (at a cost of approximately
$400,000) for which it has developed and implemented a plan of mitigation for
the wetlands lost. In accordance with certain provisions of the Consent
Agreement and Order, the Partnership must provide the EPA with periodic
reports regarding the status of the mitigation plan. An agreement in
principle has been reached to settle the dispute between the parties pursuant
to which the EPA has agreed to assess a civil penalty of $125,000. The
Partnership is actively pursuing indemnification from Disney for the total
costs that will ultimately be incurred to resolve this issue. There can be no
assurance that the Partnership will be reimbursed by Disney.
On October 13, 1993, a lawsuit captioned Berry v. Merril (sic) Lynch,
Pierce Fenner & Smith, J&B Arvida Limited Partnership (sic) and Does 1 through
100, was filed in the Superior Court of the State of California in and for the
County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a
class action on behalf of the named plaintiffs and all other persons or
entities in the State of California who bought or acquired, directly or
indirectly, limited partnership interests ("Interests") in the Partnership
from September 1, 1987 through the present. The complaint in the action
alleges, among other things, that the defendants made misrepresentations and
concealed various facts, breached fiduciary duties, and violated the covenant
of good faith in connection with the sale of Interests in the Partnership.
The complaint further alleges that such conduct violated California state law
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
relating to fraud, breach of fiduciary duty, willful suppression of facts, and
breach of the covenant of good faith. Plaintiffs, on behalf of themselves and
the purported plaintiff class, seek unspecified compensatory damages,
consequential damages, punitive and exemplary damages, interest, costs of the
suit, and such other relief as the court may order. The Partnership believes
that the lawsuit is without merit and intends to vigorously defend itself.
In addition, the Partnership has been advised by Merrill Lynch that
Merrill Lynch has been named a defendant in actions pending in the Eleventh
and Seventeenth Judicial Circuit Courts in Dade and Broward Counties, Florida
to compel arbitration of claims brought by certain investors of the
Partnership representing approximately 4% of the total Interests outstanding.
Merrill Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
including without limitation attorneys' fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests in the Partnership through
Merrill Lynch on behalf of the Partnership. In the actions to compel
arbitration, the claimants have advised Merrill Lynch that they will seek to
file demands for arbitration and claims for unspecified damages against
Merrill Lynch based on Merrill Lynch's alleged violation of applicable state
and/or federal securities laws and alleged violations of the rules of the
National Association of Securities Dealers, Inc., together with pendent state
law claims. The Agency Agreement generally provides that the Partnership and
its General Partner shall indemnify Merrill Lynch against losses occasioned by
an actual or alleged misstatements or omission of material facts in the
Partnership's offering materials used in connection with the sale of Interests
and suffered by Merrill Lynch in performing its duties under the Agency
Agreement, under certain specified conditions. The Agency Agreement also
generally provides, under certain conditions, that Merrill Lynch shall
indemnify the Partnership and its General Partner for losses suffered by the
Partnership and occasioned by certain specified conduct by Merrill Lynch in
the course of Merrill Lynch's solicitation of subscriptions for Interests.
The Partnership is unable to determine at this time the ultimate investment of
investors who have filed arbitration claims as to which Merrill Lynch might
seek indemnification in the future. At this time, and based upon the
information presently available about the arbitration statements of claims
filed by some of these investors, the Partnership and its General Partner
believe that they have meritorious defenses to demands for indemnification
made by Merrill Lynch and intend to vigorously pursue such defenses. In the
event Merrill Lynch is entitled to indemnification of its attorney's fees and
expenses or other losses and expenses, these amounts may prove to be material.
The Partnership is also a defendant in several actions brought against it
arising in the normal course of business. It is the belief of the General
Partner, based on knowledge of facts and advice of counsel, that the claims
made against the Partnership in such actions will not result in any material
adverse effect on the Partnership's consolidated financial position or results
of operations.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership owns a 50% joint venture interest in 31 acres located
within a 209-acre commercial/industrial park in Pompano Beach, Florida. The
joint venture's property is encumbered by a mortgage loan in the principal
amount of approximately $4 million as of December 31, 1993. As the
Partnership believes the economics of the project do not warrant making
additional cash investments or providing further financial guarantees, it was
determined in 1991 that the least costly alternative for the venture would be
to convey the land to the lender and to make certain cash payments to the
lender in connection with the existing guarantees under the venture loan
agreement. During April 1992, the Partnership and its joint venture partner
each tendered payment in the amount of approximately $3.1 million for their
respective shares of the guarantee payment and certain other holding costs to
the lender, the majority of which reduced the outstanding mortgage loan to the
current balance. Title to the property was not conveyed at that time pending
resolution of certain general development obligations of the venture and
certain environmental issues. The Partnership has been negotiating with the
lender regarding the scope of the development work required to be done and
does not anticipate the associated costs to be significant. With respect to
the environmental issues, the previous owner remains obligated to undertake
the clean up pursuant to, among other things, a surviving obligation under the
purchase and sale agreement. During January 1994, the Florida Department of
Environmental Protection approved the first phase of a three phase
environmental clean-up program. However, no substantial clean-up has occurred
to date. If the previous owner is unable to fulfill its obligations as they
relate to this environmental issue, the resolution of the environmental issue
and its related costs may become an obligation of the venture and ultimately
the Partnership. Should this occur, the Partnership does not anticipate the
cost of this clean-up to be material to its operations. The lender has
recently asserted the mortgage loan is with recourse to the joint venture
partners as a result of the partners' failure to perform in accordance with
the terms of the loan agreement. The Partnership believes this claim is
without merit and will vigorously defend itself against this allegation. The
transfer of title, when fully consummated, will not have a significant impact
on the Partnership's operations for financial reporting purposes due to the
prior payment of the financial guarantees and certain holding costs. However,
the Partnership will recognize a loss for Federal income tax purposes.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
that may be subject to protection as wetlands. The time involved to complete
this process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and other regulatory agencies, is expected to
be lengthy. It is anticipated that certain costs of mitigation will be
incurred in conjunction with obtaining the necessary permits, the amount and
extent of which are unknown at this time. The Partnership had previously gone
through a similar process and was successful in obtaining the approvals for
Increment II of the Weston Community. Although there can be no assurance,
given the Partnership's prior experience and discussions to date with the
appropriate agencies, the Partnership is hopeful that a compromise will
ultimately be reached that will adequately address the concerns of the
environmental agencies, while allowing the Partnership to continue its
development plans for Weston's Increment III.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In June 1993, the Partnership reached an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III in the Partnership's Weston
Community, whereby, in exchange for $5.0 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983 which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at closing and the balance of $2.5 million will be paid in
equal annual installments of $500,000 together with interest thereon of 8% per
annum beginning May 1994. The unpaid principal balance will be secured by a
mortgage on certain real estate located in the Partnership's Weston Community.
As part of its efforts to obtain the appropriate development permits discussed
in the preceding paragraph, the Partnership has included this land as part of
its proposed mitigation plan for the development of Increment III of its
Weston Community.
The Partnership may be responsible for funding certain other ancillary
activities for related entities in the ordinary course of business which the
Partnership does not currently believe will have any material effect on its
consolidated financial position or results of operations.
(12) TAX INCREMENT FINANCING ENTITIES
In connection with the development of the Partnership's Weston Community,
which is in the mid stage of development, bond financing is utilized to
construct certain on-site and off-site infrastructure improvements, including
major roadways, lakes, other waterways and pump stations, which the
Partnership would otherwise be obligated to finance and construct as a
condition to obtain certain approvals for the project. This bond financing is
obtained by The Indian Trace Community Development District ("District"), a
local government district operating in accordance with Chapter 190 of the
Florida Statutes. Under this program, the Partnership is not obligated
directly to repay the bonds. Rather, the bonds are expected to be fully
serviced by special assessment taxes levied on the property, which effectively
collateralizes the obligation to pay such assessments. While the owner of the
property, the Partnership is responsible to pay the special assessment taxes
until land parcels are sold. At such point, the liability for the assessments
related to parcels sold will be borne by the purchasers through a tax
assessment on their property. These special assessment taxes are designed to
cover debt service on the bonds, including principal and interest payments, as
well as the operating and maintenance budgets of the District. The use of
this type of bond financing is a common practice for major land developers in
South Florida.
The District issued $64,660,000 of variable rate bonds in November 1989
and $31,305,000 of variable rate bonds in July 1991. These bonds mature in
various years commencing in May 1991 through May 2011. At December 31, 1993,
the amount of bonds issued and outstanding totalled $89,950,000. For the
twelve months ended December 31, 1993, the Partnership paid special
assessments related to these bonds of approximately $5.2 million.
In order to take advantage of historically low interest rates and reduce
the exposure of variable rate debt, the District is pursuing a new bond
issuance. If successful, the proceeds from this offering will be used to
refund 1989 and 1991 bonds currently outstanding.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107
("SFAS 107") - DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS
SFAS 107 requires entities with total assets exceeding $150 million for
fiscal years ending after December 15, 1992 to disclose the SFAS 107 values of
all financial assets and liabilities for which it is practicable to estimate.
Value is defined in SFAS 107 as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. The Partnership believes the carrying amount of
its financial instruments (excluding its interest rate swap agreements)
approximates SFAS 107 value. The SFAS 107 value of the Partnership's interest
rate swap agreements were obtained from dealer quotes. These values represent
the estimated amounts the Partnership would be obligated to pay to terminate
the agreements, taking into account current interest rates. The notional
amounts, the carrying amounts, and SFAS 107 values for the Partnership's
interest rate swap agreements are as follows:
At December 31, 1993
---------------------------------
Notional Carrying SFAS 107
Amount Amount (1) Value
---------- ---------- ----------
Interest Rate Swap Agreements:
In a net payable position. . . $50,000,000 $1,018,902 $1,306,410
In a net payable position. . . 25,000,000 240,838 1,229,232
(1) The amounts shown under "carrying amount" represent interest
expense accruals arising from these unrecognized financial instruments.
(14) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2 which allocates Profits, as defined, to the General Partner and
Associate Limited Partners), profits or losses of the Partnership will be
allocated as follows: (i) profits will be allocated such that the General
Partner and the Associate Limited Partners will be allocated profits equal to
the amount of cash flow distributed to them for such fiscal period with the
remainder allocated to the Limited Partners, except that in all events, the
General Partner shall be allocated at least 1% of profits and (ii) losses will
be allocated 1% to the General Partner, 1% to the Associate Limited Partners
and 98% to the Limited Partners.
In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated profits
equal to the amount of cash flow distributed to them for such year. The
Limited Partners will be allocated losses such that the sum of amounts
allocated to the General Partner, Associate Limited Partners, and Limited
Partners equals the profit for the given year.
Section 4.2F of the Partnership Agreement requires the allocation of
Profits (as defined) to the General Partner and Associate Limited Partners in
order to take account of a current or anticipated reduction in the
Partnership's indebtedness and certain other circumstances. In accordance
with Section 4.2F of the Partnership Agreement, for financial reporting and
Federal income tax purposes for the year ended December 31, 1992, the General
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Partner and Associate Limited Partners received allocations of Profits in
addition to their respective allocations, pursuant to the other allocation
provisions of the Partnership Agreement, of the Partnership's loss, as
adjusted for such allocation of Profits. The amount of Profits, net of such
loss, allocated to the General Partner and Associate Limited Partner,
collectively, for tax and financial reporting purposes for 1992 was
approximately $9,230,000 and $20,836,000, respectively. In future periods in
which the Partnership incurs a loss, the General Partner and Associate Limited
Partners may be allocated Profits pursuant to Section 4.2F equivalent to the
amount of loss (as adjusted for such allocation of Profits), if any, allocable
to them for financial reporting and Federal income tax purposes. For the year
ended December 31, 1993, the Partnership had net income for financial
reporting and Federal income tax purposes, however, no cash distributions were
made during 1993. In accordance with Section 4.2A of the Partnership
Agreement, the amount of net income allocated, collectively, to the General
and Associate Limited Partners for tax and financial reporting purposes was
approximately $19,000 and $293,000, respectively.
In general, and subject to certain limitations, the distribution of Cash
Flow (as defined) after the initial admission date is allocated 90% to the
Holders of Interests and 10% to the General Partner and the Associate Limited
Partners (collectively) until the Holders of Interests have received
cumulative distributions of Cash Flow equal to a 10% per annum return (non-
compounded) on their Adjusted Capital Investments (as defined) plus the return
of their Capital Investments; provided, however, that 4.7369% of the 10%
amount otherwise distributable to the General Partner and Associate Limited
Partners (collectively) will be deferred, and such amount will be paid to the
Holders of Interests, until the Holders of Interests receive Cash Flow
distributions equal to a cumulative, non-compounded amount of 12% per annum of
their Capital Investments (as defined). This deferral provision is in place
until the Holders of Interests receive total cash distributions equal to their
Capital Investments. Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) will be distributable to them out of
Cash Flow otherwise distributable to the Holders of Interests at such time as
such Holders have received a 12% per annum cumulative, non-compounded return
on their Capital Investments (as defined) or in any event, to the extent of
one-half of Cash Flow otherwise distributable to the Holders of Interests at
such time as they have received total distributions of Cash Flow equal to
their Capital Investments (as defined). Thereafter, all distributions of Cash
Flow will be made 85% to the Holders of Interests and 15% to the General
Partner and the Associate Limited Partners (collectively); provided, however,
that the General Partner and the Associate Limited Partners (collectively)
shall be entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this sentence.
(15) Subsequent Events
(a) During February 1994, the Partnership paid a distribution of
$2,565,433 to the Limited Partners ($6.35 per Interest) and $142,523 to the
General Partner and Associate Limited Partners, collectively.
(b) During November 1993, the Partnership received a commitment from a
lender for a $24 million revolving construction line of credit for the first
building and certain amenities within the Partnership's new condominium
project on Longboat Key, Florida known as Grand Bay. This note was
subsequently executed on January 14, 1994 and bears interest at the lender's
prime rate plus 3/4%, payable monthly. In addition, the Partnership is
required to make repayments on the note in accordance with release provisions
as set forth in the credit agreement, with any remaining outstanding principal
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
balance payable at maturity on January 14, 1996. The note is secured by a
recorded first mortgage on certain real and personal property in Sarasota
County, Florida. As of March 15, 1994, approximately $2.6 million was
outstanding under this note. The Grand Bay project is planned to consist of
six condominium buildings on 24 acres and will offer certain amenities
including a recreation facility with a community pool and two tennis courts.
The Partnership intends to obtain additional lines of credit prior to the
construction of each of the remaining five buildings at Grand Bay. These
buildings are planned to be constructed over the next five years with the
final building expected to be completed in 1998.
SCHEDULE X
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
CHARGED TO COSTS AND EXPENSES
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Depreciation and
amortization . . . . . $6,232,092 7,550,386 7,072,673
Repairs and
maintenance. . . . . . 2,623,072 2,328,918 1,673,475
Property taxes, net of amounts
capitalized. . . . . . 6,925,925 8,220,342 7,353,574
Advertising costs. . . . 5,051,175 5,240,007 7,561,712
----------- ----------- -----------
$20,832,264 23,339,653 23,661,434
=========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 30, 1993, the General Partner of the Partnership approved the
engagement of Ernst & Young as the Partnership's independent auditors for the
fiscal year ending December 31, 1993 to replace the firm of Price Waterhouse
who were dismissed as auditors of the Partnership effective November 30, 1993.
The reports of Price Waterhouse on the Partnership's consolidated financial
statements for the year ended December 31, 1992 and 1991 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principles. In connection with
the audits of the Partnership's financial statements for the above-mentioned
years and in the subsequent interim period, there were no disagreements with
Price Waterhouse on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Price Waterhouse would have caused Price
Waterhouse to make reference to the matter in their report. The change in
accountants was previously reported in the Partnership's Report on Form 8-K
dated December 8, 1993, a copy of which is filed as Exhibit 99.2 to this
report, describing the change in the Partnership's independent auditors.
There were no changes or disagreements with auditors during 1992.
PART III
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, all of whose outstanding shares of stock are owned by
JMB Holdings Corporation, an Illinois corporation, 75% of the outstanding
shares of which are owned by JMB Realty Corporation ("JMB"), a Delaware
corporation, and the remaining 25% of which are owned by 900 Partner
Investments, an Illinois general partnership whose partners include certain
officers and directors of JMB and its affiliates. Arvida/JMB Managers, Inc.
was substituted as general partner of the Partnership as a result of a merger
on March 30, 1990 of an affiliated corporation that was the then general
partner of the Partnership into Arvida/JMB Managers, Inc., which, as the
surviving corporation of such merger, continues as General Partner. All
references herein to "General Partner" include Arvida/JMB Managers, Inc. and
its predecessor, as appropriate. The General Partner has responsibility for
all aspects of the Partnership's operations. Arvida/JMB Associates, an
Illinois general partnership, of which certain officers and affiliates of JMB
are partners and Arvida/JMB Limited Partnership, an Illinois limited
partnership, of which Arvida/JMB Associates is the general partner, are the
Associate Limited Partners of the Partnership. Various relationships of the
Partnership to the General Partner and its affiliates are described under the
caption "Conflicts of Interest" at pages 21-24 of the Prospectus, which
description is hereby incorporated herein by reference to Exhibit 28.1 of the
Partnership's Report on Form 10-K dated March 29, 1993 (File No. 0-16976).
The director, executive officers and certain other officers of the
General Partner of the Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 04/08/87
Neil G. Bluhm President 04/08/87
Roger E. Hall Vice President 04/09/87
Ernest M. Miller, Jr. Vice President 04/09/87
H. Rigel Barber Vice President 04/08/87
Ira J. Schulman Vice President 04/09/87
Gailen J. Hull Vice President 04/09/87
Howard Kogen Vice President
and Treasurer 04/08/87
Gary Nickele Vice President,
General Counsel 04/08/87
and Director 12/18/90
Vincent P. Donahue, Jr. Vice President 04/09/87
James D. Motta Vice President 04/09/87
John Garrity Vice President 02/01/91
John Grab Vice President 04/09/87
There is no family relationship among any of the foregoing director or
officers. The foregoing director has been elected to serve a one-year term
until the annual meeting of the General Partner to be held on June 7, 1994.
All of the foregoing officers have been elected to serve one-year terms until
the first meeting of the Board of Directors held after the annual meeting of
the General Partner to be held on June 7, 1994. 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 selected as such.
The foregoing director and certain of the officers are also officers
and/or directors of various affiliated companies, including JMB, which is the
corporate general partner of Carlyle Real Estate Limited Partnership-VII
("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"),
Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), Carlyle Real Estate
Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partner-
ship-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"),
Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate
Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited
Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd. ("Mortgage
Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II"), JMB
Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners,
Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income
Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"),
JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties,
Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB
Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII
("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB-XIII"). Most of
the foregoing director and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers-II, Inc.
(the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II") and Income
Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced
Income Growth, Ltd. ("IDS/BIG")). The director and most of such officers are
also partners, directly or indirectly, of certain partnerships (the "Associate
Partnerships") which are associate general partners in the following real
estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI,
Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII,
JMB Income-VI, JMB-VII, JMB Income-VIII, JMB Income-IX, JMB Income-X, JMB
Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage
Partners-II, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus,
Carlyle Income Plus-II and IDS/BIG. The following director and officers are
partners, indirectly through other partnerships, of one of the Associate
Limited Partners of the Partnership and of the Associate Limited Partner of
Arvida-II.
The business experience during the past five years of the director and
such officers of the Corporate General Partner of the Partnership in addition
to that described above is as follows:
Judd D. Malkin (age 56) is Chairman of the Board of JMB, an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual general
partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Malkin
has been associated with JMB since October, 1969. He is a Certified Public
Accountant.
Neil G. Bluhm (age 56) is President and a director of JMB and an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual general
partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Bluhm
has been associated with JMB since August, 1970. He is a member of the Bar of
the State of Illinois and a Certified Public Accountant.
Roger E. Hall (age 62) is Chairman of Arvida. Prior thereto, he was
President-Arvida (September, 1987 to January, 1989).
Ernest M. Miller, Jr. (age 51) is President and Chief Executive Officer
of Arvida. Prior thereto, he was Executive Vice President and Chief Financial
Officer of Arvida (September, 1987 to February, 1989). From February, 1984,
Mr. Miller has been Chairman of Wilson Miller Capital Corp., a real estate
investment and consulting business.
H. Rigel Barber (age 45) is Chief Executive Officer and Executive Vice
President of JMB, an officer of various JMB affiliates and a partner of
various Associate Partnerships. Mr. Barber has been associated with JMB since
March, 1982. He received a J.D. Degree from the Northwestern Law School and
is a member of the Bar of the State of Illinois.
Ira J. Schulman (age 42) is Executive Vice President of JMB, an officer
of various JMB affiliates and a partner, directly or indirectly, of various
Associate Partnerships. He holds a Masters Degree in Business Administration
from the University of Pittsburgh.
Gailen J. Hull (age 46) is a Senior Vice President of JMB, an officer of
various JMB affiliates and a partner, directly or indirectly, of various
Associate Partnerships. 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.
Howard Kogen (age 58) is Senior Vice President and Treasurer of JMB, an
officer of various JMB affiliates and a partner, directly or indirectly, of
various Associate Partnerships. Mr. Kogen has been associated with JMB since
March, 1973. He is a Certified Public Accountant.
Gary Nickele (age 41) is Executive Vice President, Secretary and General
Counsel of JMB, an officer of various JMB affiliates and a partner, directly
or indirectly, of various Associate Partnerships. 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.
Vincent P. Donahue Jr. (age 40) is Vice President of Finance and Chief
Financial Officer of Arvida. Prior thereto, he was Vice President-
Acquisitions of Arvida from October, 1987 to October, 1990.
James D. Motta (age 37) is President-Community Development Division of
Arvida. Prior thereto, he was President-Southeast Division of Arvida (July,
1992 to July, 1993), President-South Florida Division of Arvida (January, 1989
to July, 1992) and Vice President and General Manager--Boca Raton of Arvida
(September, 1987 to January, 1989).
John R. Grab (age 37) is Vice President and General Manager - Club/Hotel
Operations. Prior thereto, he was Vice President and Project General Manager
- - Weston Hills (October 1990 to October 1993), Vice President and Project
General Manager - Jacksonville Golf & Country Club (June 1988 to October
1990), and Vice President of Finance - North Florida Division (September 1987
to June 1988). Previously, he was employed by Arvida Corporation, which he
joined in December 1981, and was Vice President - Finance and Accounting with
Arvida Hospitality Management, Inc. (October 1986 to September 1987). He is a
Certified Public Accountant. He received his B.S. in Accounting from St. Leo
College.
John M. Garrity (age 47) is Vice President and General Manager - Arvida
Homes, with Arvida Company. Prior thereto, he was Vice President of
Construction - Arvida Homes (December 1992 to March 1993) and Vice President
and Project General Manager - Weston (February 1991 to December 1992).
Previously, he was President of The Key Company (September 1988 to February
1991), and Vice President and Market Manager - Tampa (March 1981 to August
1988). He holds a Masters degree in Business Administration from the
University of North Carolina.
ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the General Partner receive no current
or proposed direct remuneration in such capacities from the Partnership. The
General Partner and the Associate Limited Partners are entitled to receive a
share of cash distributions, when and as cash distributions are made to the
Limited Partners, and a share of profits or losses as described under the
caption "Cash Distributions and Allocations of Profit and Losses" at pages 61
to 64 of the Prospectus and at pages A-9 to A-16 of the Partnership Agreement,
which description incorporated herein by reference to Exhibits 28.1 and 3.,
respectively, to the Partnership's Report for December 31, 1992 on Form 10-K
dated March 29, 193 (File No. 0-16976). Reference is also made to Notes 1 and
14 for a description of such distributions and allocations. The General
Partner and the Associate Limited Partners did not receive any cash
distributions in 1993. Under certain circumstances they will be entitled to
approximately $810,000 which was deferred in 1990. Such payment is subject to
certain restrictions contained in the Partnership Agreement and the
Partnership's credit facility. Pursuant to the Partnership Agreement, the
General Partner and Associate Limited Partners were allocated profits for tax
purposes for 1993 of approximately $19,280. Reference is made to Note 14 for
further discussion of this allocation.
The Partnership is permitted to engage in various transactions involving
the General Partner and its affiliates, as described under the captions
"Management of the Partnership" at pages 56 to 59, "Conflicts of Interest" at
pages 21-24 of the Prospectus and "Rights, Powers and Duties of the General
Partner" at pages A-16 to A-28 of the Partnership Agreement, which
descriptions are hereby incorporated herein by reference to Exhibits 28.1 and
3., respectively, to the Partnership's Report for December 31, 1992 on Form
10-K dated March 29, 1993 (File No. 0-16976). The relationships of the
General Partner (and its director and executive officers and certain other
officers) and its affiliates to the Partnership are set forth above in Item
10.
Arvida may be reimbursed fully for all of its out-of-pocket expenditures
(including salary and salary-related expenses) incurred while supervising the
development and management of the Partnership's properties and other
operations, subject to the limitation that such reimbursement may not exceed
5% of the aggregate gross revenues from the business of the Partnership. In
1993, such expenses were approximately $6,686,100, of which approximately
$80,000 was unpaid as of December 31, 1993.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited
partnership affiliated with the General Partner) each employ project related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative expenses, including certain
insurance premiums, are incurred and allocated to each partnership as
appropriate. The Partnership receives reimbursements from or reimburses
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related expenses). The Partnership was entitled to receive approximately
$2,497,400 from Arvida/JMB Partners, L.P.-II for such costs and services
incurred in 1993, approximately $26,100 of which was outstanding as of
December 31, 1993. In addition, the Partnership was obligated to reimburse
Arvida/JMB Partners, L.P.-II approximately $1,234,300 for the year ended
December 31, 1993, all of which was paid at December 31, 1993.
JMB Insurance Agency, Inc., an affiliate of the General Partner, earned
and received insurance brokerage commissions in 1993 of approximately $288,000
in connection with providing insurance coverage for certain of the properties
of the Partnership, all of which were paid as of December 31, 1993. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The General Partner of the Partnership or its affiliates are entitled to
property management fees and may be reimbursed for their direct expenses or
out-of-pocket expenses relating to the administration of the Partnership and
the acquisition, development, ownership, supervision, and operation of the
Partnership assets. In 1993, the General Partner of the Partnership or its
affiliates were due reimbursement for such direct or out-of-pocket expenses
and property management fees in the amount of approximately $173,600,
approximately $165,200 of which was paid as of December 31, 1993.
Additionally, the General Partner and its affiliates are entitled to
reimbursements for legal and accounting services. Such costs for 1993 were
approximately $93,700, none of which was paid as of December 31, 1993.
The Partnership was also entitled to receive reimbursements from
affiliates of the General Partner for certain general and administrative
expenses including, and without limitation, salary and salary-related expenses
relating to work performed by employees of the Partnership and certain out-of-
pocket expenditures incurred on behalf of such affiliates. The Partnership
was owed approximately $171,000 for such costs and services incurred in 1993,
approximately $146,300 of which was received as of December 31, 1993.
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 General Partner and its officers and directors own the following
Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
Limited Partnership General Partner 125 Interests Less
Interests and its officers than 1%
and director as
a group
- ---------------
No officer or director of the General Partner of the Partnership
possesses a right to acquire beneficial ownership of Interests of the
Partnership.
All of the outstanding shares of the General Partner of the Partnership
are owned by affiliates of its officers and director as set forth above in
Item 10.
(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
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
filed with this annual report on Form 10-K).
2. Exhibits.
3. Amended and Restated Agreement of Limited
Partnership.**
4.0 Assignment Agreement by and among the General
Partner, the Initial Limited Partner and the Partnership.**
4.1 Amended and Restated Credit Agreement dated
October 7, 1992, among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited
Partnership and Chemical Bank and Nationsbank of Florida, N.A. is herein
incorporated by reference to Exhibit No. 4.4 to the Partnership's Report on
Form 10Q (File number 0-16976) dated November 11, 1992.
4.2 Security Agreement dated as of October 7, 1992
made by Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country Club Limited Partnership (as
"grantors") in favor of Chemical Bank and Nationsbank of Florida, N.A. (as
"lenders") is herein incorporated by reference to Exhibit No. 4.5 the
Partnership's Report on Form 10Q (File number 0-16976) dated November 11,
1992.
4.3 Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country Club Limited Partnership (as
"pledgors") and Chemical Bank and Nationsbank of Florida, N.A. (as "lenders")
is herein incorporated by reference to Exhibit No. 4.6 the Partnership's
Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.4 Various mortgages and other security interests
dated October 7, 1992 related to the assets of Arvida/JMB Partners, Center
Office Partners, Center Retail Partners, Center Hotel Limited Partnership,
Weston Hills Country Club Limited Partnership which secure loans under the
Amended and Restated Credit Agreement referred to in Exhibit 4.1 are herein
incorporated by reference to Exhibit No. 4.7 the Partnership's Report on Form
10Q (File number 0-16976) dated November 11, 1992.
4.7. $24,000,000 Consolidated Revolving Promissory
Note dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V and Arvida Grand Bay Limited Partnership-VI and
Barnett Bank of Broward County, N.A. is filed herewith.
4.8. Amended and Restated Mortgage and Security
Agreement dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V, Arvida Grand Bay Limited Partnership-VI and Arvida
Grand Bay Properties, Inc. and Barnett Bank of Broward County, N.A. is filed
herewith.
4.9. Construction Loan Agreement dated January 14,
1994 by and between Arvida Grand Bay Limited Partnership-I and Arvida Grand
Bay Properties, Inc. and Barnett Bank of Broward County, N.A. is filed
herewith.
10.1. Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is hereby incorporated by reference to
Exhibit 10.2 to the Partnership's Registration Statement on Form S-1 (File No.
33-14091) under the Securities Act of 1933 filed on May 7, 1987.
10.2. Management, Advisory and Supervisory Agreement is
hereby incorporated by reference to Exhibit 10.2 to the Partnership's Form 10-
K (File No. 0-16976) dated March 27, 1991.
10.3. Letter Agreement, dated as of September 10, 1987,
between the Partnership and The Walt Disney Company, together with exhibits
and related documents.*
10.4. Joint Venture Agreement dated as of September 10,
1987, of Arvida/JMB Partners, a Florida general partnership. *
21. Subsidiaries of the Registrant.
99.1. Pages 21-24, 56-59, 61-64, A-9 to A-28, A-31 to
A-33, and B-2 of the Partnership dated September 16, 1987 (relating to SEC
Registration Statement File No. 33-14091).*
99.2. The Registrant's Form 8-K Report (File
No. 0-16976) dated December 6, 1993 is incorporated by reference.
* Previously filed with the Securities and Exchange
Commission as Exhibits 10.4 and 10.5, respectively, to the Partnership's
Registration Statement (as amended) on Form S-1 (File No. 33-14091) under the
Securities Act of 1933 filed on September 11, 1987 and incorporated herein by
reference.
** Previously filed with the Securities and Exchange
Commission as Exhibits 3 and 4, respectively, to the Partnership's Form 10-K
Report (File No. 0-16976) filed on March 27, 1990 and hereby incorporated
herein by reference.
The Partnership agrees to furnish to the Securities and Exchange
Commission upon request a copy of each instrument with respect to long-term
indebtedness of the Partnership and its consolidated subsidiaries, the
authorized principal amount of which is 10% or less than the total assets of
the Partnership and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
The Partnership's report dated December 6, 1993 describing the
change in the Partnership's independent auditors for the year ended
December 31, 1993. No financial statements were required to be filed
therewith.
No annual report or proxy material for the fiscal year 1993 has been sent to
the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ARVIDA/JMB PARTNERS, L.P.
BY: Arvida/JMB Managers, Inc.
(The General Partner)
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1994
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: Arvida/JMB Managers, Inc.
(The General Partner)
NEIL G. BLUHM
By: Neil G. Bluhm, President
(Principal Executive Officer)
Date: March 25, 1994
JUDD D. MALKIN
By: Judd D. Malkin, Chairman
(Principal Financial Officer)
Date: March 25, 1994
GARY NICKELE
By: Gary Nickele, Vice President
and Director
Date: March 25, 1994
GAILEN J. HULL
By: Gailen J. Hull, Vice President
(Principal Accounting Officer)
Date: March 25, 1994
ARVIDA/JMB PARTNERS, L.P.
EXHIBIT INDEX
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
3.** Amended and Restated Agree-
ment of Limited Partnership
of the Partnership. No
4.0.** Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership
4.1. Amended and Restated Credit
Agreement dated October 7, 1992,
among Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners,
Center Retail Partners, Center Hotel
Limited Partnership, Weston Hills Country
Club Limited Partnership and Chemical
Bank and Nationsbank of Florida, N.A.
is herein incorporated by reference to
Exhibit No. 4.4 to the Partnership's
Report on Form 10Q (File No. 0-16976)
dated November 11, 1992. Yes
4.2. Security Agreement dated as of October 7,
1992 made by Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership and
Weston Hills Country Club Limited Partnership
(as "grantors") in favor of Chemical Bank and
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
Nationsbank of Florida, N.A. (as "lenders")
is herein incorporated by reference to
Exhibit No. 4.5 to the Partnership's Report
on Form 10Q (File No. 0-16976) dated
November 11, 1992. Yes
4.3. Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office
Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country
Club Limited Partnership (as "pledgors") and
Chemical Bank and Nationsbank of Florida, N.A.
(as "lenders") is herein incorporated by
reference to Exhibit No. 4.6 to the
Partnership's Report on Form 10Q (File
No. 0-16976) dated November 11, 1992. Yes
4.4. Various mortgages and other security interests
dated October 7, 1992 related to the assets of
Arvida/JMB Partners, Center Office Partners,
Center Retail Partners, Center Hotel Limited
Partnership, Weston Hills Country Club Limited
Partnership which secure loans under the Amended
and Restated Credit Agreement referred to in
Exhibit 4.1 are herein incorporated by reference
to Exhibit No. 4.7 the Partnership's Report on
Form 10Q (File No. 0-16976) dated November 11, 1992. Yes
4.7. $24,000,000 Consolidated Revolving Promissory Note
dated January 14, 1994 by and between Arvida Grand
Bay Limited Partnership-I, Arvida Grand Bay Limited
Partnership-II, Arvida Grand Bay Limited Partner-
ship-III, Arvida Grand Bay Limited Partnership-IV,
Arvida Grand Bay Limited Partnership-V and Arvida
Grand Bay Limited Partnership-VI and Barnett
Bank of Broward County, N.A. is filed herewith. No
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.8. Amended and Restated Mortgage and Security Agreement
dated January 14, 1994 by and between Arvida Grand Bay
Limited Partnership-I, Arvida Grand Bay Limited Partner-
ship-II, Arvida Grand Bay Limited Partnership-III,
Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V, Arvida Grand Bay Limited
Partnership-VI and Arvida Grand Bay Properties, Inc.
and Barnett Bank of Broward County, N.A. is filed herewith. No
4.9. Construction Loan Agreement dated January 14, 1994 by
and between Arvida Grand Bay Limited Partnership-I and
Arvida Grand Bay Properties, Inc. and Barnett Bank of
Broward County, N.A. is filed herewith. No
10.1. Agreement between the Partnership and
The Walt Disney Company dated January 29, 1987,
is hereby incorporated by reference to
Exhibit 10.2 to the Partnership's Registration
Statement on Form S-1 (File No. 33-14091) under
the Securities Act of 1933 filed on May 7, 1987 Yes
10.2. Management, Advisory and
Supervisory Agreement. Yes
10.3. *Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company, together with exhibits
and related documents. Yes
10.4. *Joint Venture Agreement
dated as of September 10, 1987,
of Arvida/JMB Partners, a
Florida general partnership. Yes
21. Subsidiaries of the Registrant No
99.1. Pages 21-24, 56-59, 61-64 and Yes
A-9 to A-28, A-31 to A-33, and B-2 of
the Partnership's Prospectus
dated September 16, 1987 filed
pursuant to Rules 424(b) and
424(c) (relating to SEC
Registration Statement File
No. 33-14091).
99.2 The Registrant's report on Form 8K Yes
(File No.0-16976) is incorporated
by reference.
- ---------------
* Previously filed as Exhibits 10.3 and 10.4, respectively, to the
Partnership's Registration Statement (as amended) on Form S-1 (File No. 33-
14091) to the Securities Exchange Act of 1933 and incorporated herein by
reference.
** Previously filed as Exhibits 3.0 and 4.1, respectively, to the
Partnership's Form 10-K Report (File No. 0-16976) filed on March 27, 1990 and
hereby incorporated herein by reference.