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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PUSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to ____
Commission file number 0-50268
THE NEWKIRK MASTER LIMITED PARTNERSHIP
--------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-3636084
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114
- -------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(617) 570-4600
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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. |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes |_| No |X|
There is no public market for the Units of Limited Partnership Interest.
Accordingly, information with respect to the aggregate market value of Units of
Limited Partnership Interest has not been supplied.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Page
----
FORWARD-LOOKING STATEMENTS.....................................................1
PART I
ITEM 1. BUSINESS......................................................2
ITEM 2. PROPERTIES...................................................14
ITEM 3. LEGAL PROCEEDINGS............................................25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........25
PART II
ITEM 5. MARKET FOR LIMITED PARTNERSHIP UNITS, RELATED
SECURITY HOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES.........................................26
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.........................28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK..................................................39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..........................40
ITEM 9A. CONTROLS AND PROCEDURES......................................41
ITEM 9B. OTHER INFORMATION............................................41
PART III
ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT............42
ITEM 11. EXECUTIVE COMPENSATION.......................................44
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SECURITY HOLDER MATTERS...............44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............45
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.......................47
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES...................48
FORWARD-LOOKING STATEMENTS
In addition to historical information, this document contains
forward-looking statements. Forward-looking statements include information
relating to our intent, belief or current expectations, primarily, but not
exclusively, with respect to:
o economic outlook;
o capital expenditures;
o cash flow;
o operating performance;
o financing activities;
o industry developments, including trends affecting our business; and
o financial condition and results of operations.
We identify forward-looking statements in this registration statement by
using words or phrases such as "anticipate," "believe," "estimate," "expect,"
"intend," "may be," "objective," "plan," "predict," "project" and "will be" and
similar words or phrases (or the negative thereof).
The forward-looking information involves important risks and uncertainties
that could cause our actual results, performance or achievements to differ
materially from our anticipated results, performance or achievements expressed
or implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to:
o occupancy rates and market rents, which may be adversely affected by
economic and market conditions which are beyond our control,
including the financial condition of our tenants;
o uncertainties relating to potential changes in interest rates and
the availability of financing;
o uncertainties relating to our property portfolio;
o uncertainties relating to our operations;
o uncertainties relating to unexpected capital expenditures;
o uncertainties relating to domestic and international economic and
political conditions; and
o uncertainties regarding the impact of regulations, changes in
government policy, rules or laws and industry competition.
Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we cannot assure you that such
expectations will be attained or that any deviations will not be material. We
disclaim any obligation or undertaking to disseminate to you any updates or
revisions to any forward-looking statement contained in this registration
statement to reflect any change in our expectations or any changes in events,
conditions or circumstances on which any statement is based.
PART I
ITEM 1. BUSINESS
General
Your partnership is a Delaware limited partnership that owns commercial
properties, most of which are net-leased to investment grade corporate tenants,
as well as other real estate assets. Your partnership commenced operations on
January 1, 2002 following the completion of a transaction that we refer to as
the exchange, involving the merger into wholly-owned subsidiaries of your
partnership of 90 limited partnerships, each of which owned commercial
properties, and the acquisition by your partnership of various assets, including
those related to the management or capital structure of those partnerships. See
"Structure Chart" below. Each of the 90 partnerships, which we refer to as the
"Newkirk partnerships", was organized and sponsored by Integrated Resources,
Inc. between 1978 and 1984 and owned one or more commercial properties that we
refer to as the "Newkirk properties". Integrated Resources filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in February 1991 and
is no longer in existence. Members of the Newkirk Group, which consists of
affiliates of Apollo Real Estate Fund III, L.P., executive officers of Winthrop
Financial Associates, and affiliates of Vornado Realty Trust, first acquired
interests in the Newkirk partnerships in 1997.
Your partnership's initial capital structure consisted of units of limited
partnership interest, which we refer to as units, that were issued in the
exchange. These units were not registered under the Securities Act of 1933 (the
"Securities Act") in reliance on an exemption from registration under that Act.
There is no public market for the units, and there are substantial restrictions
on the transfer of units.
As of March 29, 2005, there were 6,266,388 units outstanding. 6,121,990
units were originally issued in the exchange, 188,908 of which have subsequently
been repurchased by your partnership, including 48,024 units repurchased by your
partnership in March 2005 upon completion of a tender offer by your partnership.
The balance of the outstanding units were issued in transactions completed
subsequent to the exchange.
Description of Assets
General. As of December 31, 2004, your partnership owned an interest in
188 of the Newkirk properties, subordinated interests in a securitized pool of
notes evidencing first mortgage indebtedness secured by certain of your
partnership's properties as well as other properties, limited partnership
interests in various partnerships that own commercial net-leased properties,
including 22 properties that are owned by partnerships whose operations are
consolidated for financial reporting purposes with those of your partnership,
substantially all of the interests in two entities that hold unsecured debt
obligations of your partnership, an interest in a management company that
provides services for your partnership as well as other real estate
partnerships, ground leases, remainder interests or the right to acquire
remainder interests in various properties and miscellaneous other assets. In
addition, your partnership or an affiliate of your partnership's general partner
controls the general partner of the real estate limited partnerships in which
your partnership owns limited partnership interests, and your partnership has an
option to acquire in the future second mortgage debt secured by a substantial
number of your partnership's properties as well as the properties owned by 9
other partnerships. As of December 31, 2004, your partnership's commercial
properties including discontinued operations represented approximately 86% of
the total value of your partnership's assets.
2
Properties. The table below summarizes as of December 31, 2004,
information on the 188 Newkirk properties and 22 properties owned by 7 limited
partnerships whose operations are consolidated for financial reporting purposes
with those of your partnership. We refer to the partnerships that own the 22
properties as the consolidated partnerships and their properties as the
consolidated properties.
Property Type Number Square Footage
------------- ------ --------------
Office 37 7,352,000
Retail 152 5,427,000
Other 21 5,257,000
---- -----------
TOTAL 210 18,036,000
==== ===========
Below is a listing of tenants which accounted for 3% or more of the
aggregate rental revenues including discontinued operations in 2004 from the
Newkirk properties and the consolidated properties:
Square Feet 2004 Percentage of Aggregate
Tenant Leased Revenues ($) Rental Revenues
------ ------ ------------ ---------------
Raytheon (1) 2,287,000 $40,421,161 15.8%
Albertson's, Inc. 2,810,000 26,683,143 10.4%
USF&G/The St Paul Co. 530,000 25,532,490 10.0%
Honeywell International 728,000 19,799,257 7.7%
Federal Express 592,000 14,811,521 5.8%
Owens-Illinois 707,000 13,363,280 5.2%
Entergy Gulf States 489,000 12,212,147 4.8%
Safeway, Inc. 736,000 8,543,296 3.3%
Hibernia Bank 403,000 8,196,314 3.2%
- ----------
(1) Property leased to Raytheon represented approximately 14.3% of your
partnership's total assets as of December 31, 2004. Raytheon is a public
company subject to the reporting requirements under the Securities
Exchange Act of 1934. As of December 31, 2004, no other lessee leased
property representing more than 10% of your partnership's total assets.
3
The following chart sets forth certain information as of December 31, 2004
concerning lease expirations on the Newkirk properties and the consolidated
properties (assuming no renewals) from 2005 to 2014:
Number of Properties Approximate Aggregate
at which sq/ft. Covered by Rental for Percentage of Total
Lease Expires Expiring Leases Leases Expiring ($) (1) Annualized Rental (1)
------------- --------------- ----------------------- ---------------------
2005 20 842,000 4,539,102 1.84%
2006 25 2,187,000 25,913,320 10.53%
2007 32 3,006,000 37,459,732 15.22%
2008 65 6,856,000 100,333,437 40.78%
2009 44 2,686,000 57,261,438 23.27%
2010 4 955,000 3,817,042 1.55%
2011 5 316,000 3,831,905 1.56%
2012 9 395,000 3,187,136 1.30%
2013 1 40,000 869,774 0.35%
2014 1 282,000 7,189,086 2.92%
- ----------
(1) Based on rent from continuing operations for the year ended December 31,
2004.
Please see "ITEM 2. PROPERTIES" for more detailed information regarding
your partnership's properties.
Limited Partnership Interests in Other Partnerships. Your partnership owns
between 32.1% and 68.68% of the limited partnerships interests in the
consolidated partnerships as well as between .7% and 45.29% of the limited
partnerships interests in 9 other partnerships that own commercial net leased
properties. We refer to these latter partnerships as the unconsolidated
partnerships.
General Partner Interests. Your partnership or an affiliate of your
general partner controls each of the general partners of (i) the 7 consolidated
partnerships, (ii) the 9 unconsolidated partnerships and (iii) 5 other
partnerships that own commercial net leased properties. Your partnership has
only a negligible economic interest, if at all, in each general partner entity
that it controls.
The Management Company. Your partnership holds a 50.01% interest in
Newkirk Capital LLC ("Newkirk Capital"). Newkirk Capital's wholly-owned
subsidiary, Newkirk Asset Management LLC, provides asset management services for
your partnership and 9 other limited partnerships, the general partners of which
are controlled by your partnership. In 2004 and 2003, approximately $6,738,000
and $7,168,000, respectively, of asset management fees were paid, or accrued for
payment, to Newkirk Asset Management. For financial statement purposes,
management fees received from the partnerships that own the Newkirk properties
and the consolidated properties are eliminated in consolidation. Management fees
eliminated in consolidation aggregated approximately $6,406,000 and $6,750,000
in 2004 and 2003, respectively. Newkirk Asset Management also provides services
in connection with the sale, refinancing and re-leasing of properties owned by
your partnership and other partnerships for additional fees. All of the fees
paid to Newkirk Asset Management inure to the benefit of your partnership and
its partners. Your partnership realizes the benefits of the fee payments through
its ownership interest in Newkirk Capital and through its ownership of Newkirk
Finco LLC (discussed below). A substantial portion of these fees are not
reflected in your partnership's financial statements as they are eliminated in
consolidation.
4
Pursuant to the terms of Newkirk Capital's Limited Liability Company
Agreement, Administrator LLC, which holds the 49.99% interest in Newkirk
Capital, is entitled to receive 100% of the distributions paid by Newkirk
Capital until Administrator LLC receives $2,568,000 annually and thereafter, the
balance of the distributions are paid to your partnership. Administrator LLC is
owned by former principals and employees of Integrated Resources, Inc. and is
not affiliated with the Newkirk Group. Those individuals owned various assets,
including interests in the general partners, related to the Newkirk
partnerships. In 1997, entities controlled by those individuals sold to members
of the Newkirk Group assets related to the Newkirk partnerships which assets
were eventually acquired by your partnership in the exchange. As part of the
1997 transaction members of the Newkirk Group made a $40 million loan to
Administrator LLC. For financial statement purposes this note is valued at $11.4
million. The priority distribution to Administrator LLC enables Administrator
LLC to pay interest on the promissory note evidencing the loan. The note is held
by Newkirk Finco LLC which is wholly-owned by your partnership. Accordingly,
your partnership effectively receives 100% of the fees paid to Newkirk Capital.
The note bears interest at a rate of 6.42% per annum and matures on November 20,
2007. Prior to maturity, the note requires payments of interest only. The note
is secured solely by Administrator LLC's 49.99% membership interest in Newkirk
Capital and is otherwise non-recourse. Accordingly, if Administrator LLC were to
default on the note, Newkirk Finco LLC would have the ability to foreclose on
Administrator LLC's interest in Newkirk Capital. To ensure payment of interest
on the note, Administrator LLC has directed Newkirk Capital to pay directly to
Newkirk Finco LLC all distributions payable to Administrator LLC in respect of
its interest in Newkirk Capital. As owner of Newkirk Finco LLC, your partnership
will receive as interest payments the amount of any distributions made by
Newkirk Capital to Administrator LLC. Your partnership's ownership interest in
Newkirk Capital is pledged to Administrator LLC to secure certain obligations
owed to Administrator LLC by the Newkirk Group. Creditworthy affiliates of the
Newkirk Group have agreed to indemnify your partnership for losses that it may
incur as a result of the failure of the Newkirk Group to satisfy such
obligations.
First Mortgage Interests. Your partnership owns the three most junior
classes of interests in a securitized pool of first mortgages which includes 29
first mortgage loans encumbering a total of 59 of the Newkirk properties, 2 of
the consolidated properties and 1 other property owned by partnerships that are
controlled by affiliates of your partnership's general partner. In general, the
classes of interests in the pool of first mortgage loans represent priorities of
payments. When a payment is made by your partnership on one of these loans, the
first amounts are used to make the required payments to the holders of senior
interests. As a result, if the number of loan defaults results in loan payments
insufficient to fully satisfy the payments due on all interests, payments will
be made in the order of priority until all required payments are made. If there
is a default in the payment due on any interest the entire loan is in default.
However, in determining whether and when to exercise various remedies upon a
default, the servicer (the entity that manages the trust fund into which the
loans are pooled) must take into consideration what is best for all interest
holders.
The interests held by your partnership are subordinate to interests which
had an original principal balance of $371,506,000 and a balance at December 31,
2004 of $150,728,533. The following table provides certain information with
respect to each of the first mortgage interests held by your partnership.
5
Class E Class F Class G
Certificate Certificate Certificate
----------- ----------- -----------
Contractual Principal Amount
at December 31, 2004 $4,824,000 $3,859,000 $5,794,000
Interest Rate 8.33% 8.38% 8.33%
Rating (Standard & Poor's) BB B Not Rated
Unsecured Loans. Your partnership beneficially owns 97.775% of the
interests in NK-Leyden Loan, L.P. which holds a $1,905,000 unsecured note of
your partnership and 97.324% of the interests in NK-Dautec Loan, L.P., which
holds a $1,075,000 unsecured note of your partnership. Your partnership acquired
these interests in connection with the exchange in order to substantially reduce
debt service costs associated with two properties owned by your partnership and
to eliminate potential conflicts relating to the unsecured loans in each case,
by owning a significant portion of the entity to which your partnership is
indebted. The remaining interests in these two entities are held by unaffiliated
third parties.
The $1,905,000 note provides for the payment of interest only at a basic
rate of 8% per annum until maturity on December 31, 2006. Additional interest,
which together with the basic interest can aggregate up to 25% per annum, is
payable after the establishment of reserves. Interest is payable solely out of
excess cash flow (as defined under the loan) from a property owned by your
partnership in Toledo, Ohio. Your partnership has the right to extend the loan
for 10 years. In that event the unpaid balance on the loan (including accrued
but unpaid interest) will thereafter bear interest at 18% per annum and be
required to be self-amortized over the remaining term of the loan. The principal
amount outstanding on this note at December 31, 2004 and 2003 was $1,905,000.
For financial statement purposes, the principal balance and interest income are
eliminated in consolidation.
The $1,075,000 note matures on May 1, 2008 and provides for payments of
principal and interest solely out of excess cash flow (as defined under the
loan) from a property owned by your partnership in New Kingston, Pennsylvania.
The basic interest rate is 8% per annum and additional interest, which together
with the basic interest can aggregate up to 18% per annum, is payable if excess
cash flow exceeds specified levels. The principal amount outstanding on this
note at December 31, 2004 and December 31, 2003 was $553,728 and $685,958,
respectively. For financial statement purposes, the principal balance and
interest income are eliminated in consolidation. See Item 3 for information
about a pending lawsuit with respect to this property.
The Subordinate Mortgage Interests. In addition to being encumbered by
first mortgage loans, 189 of your partnership's Newkirk properties (including
properties being marketed for sale that are included in discontinued operations)
are encumbered by second mortgage loans which as of December 31, 2004 had an
outstanding balance, including accrued interest, of approximately $366,022,000.
Prior to the transactions described below, affiliates of your partnership's
general partner, through a limited partnership called T-Two Partners, owned
subordinated beneficial interests in these and certain other second mortgage
loans. Senior beneficial interests in the second mortgage loans were held by an
unaffiliated entity and three junior tranches of such senior beneficial
interests were held by certain members of the Newkirk Group. Also prior to the
transactions described below, the owners of T-Two Partners had an option, which
we refer to as the put option, to require your partnership to purchase T-Two
Partners in December 2007 in exchange for units in your partnership and your
partnership had an option, which we refer to as the call option, to purchase
T-Two Partners in January 2008 in exchange for units in your partnership.
6
On November 24, 2003, your partnership obtained a $208,473,427 loan from
Fleet National Bank that bears interest at a rate elected by your partnership
equal to either (1) LIBOR plus 450 basis points or (2) the prime rate charged by
Fleet National Bank plus 250 basis points. The loan was obtained to replace your
partnership's existing loan from Fleet National Bank, and effectively reduced
the interest rate on such borrowing from a minimum of 8.5% to a floating rate
which is presently 7.01% and that will in no event exceed 9.5%, after giving
effect to the three-year interest rate protection agreement entered into by your
partnership. The loan is scheduled to mature on November 24, 2006, subject to
two one-year extensions. The loan requires monthly payments of interest only
which in January 2005 was approximately $1,002,000 per month. In addition,
mandatory prepayments of principal are required from the proceeds of property
sales and refinancings and other asset sales, as well as up to $1,312,500 per
quarter to the extent that T-Two Partners does not make the required principal
payments on the T-Two Loan that is described below. Your partnership can prepay
the loan in whole or in part at any time together with a premium of 1/2% if such
prepayment occurs between November 25, 2004 and November 24, 2005 and thereafter
with no premium. In addition, your partnership and T-Two Partners may prepay up
to $50,000,000 annually of this loan and the T-Two Loan without a premium. The
loan is secured by substantially all of the assets of your partnership, and
contains customary financial and other covenants consistent with the prior loan
from Fleet National Bank. The loan balance at December 31, 2004 was
$165,328,277.
On November 24, 2003, at the same time as your partnership obtained its
loan from Fleet National Bank, T-Two Partners obtained a $316,526,573 loan from
Fleet National Bank. We refer to this loan as the T-Two Loan. The interest rate,
maturity date and principal terms of the T-Two Loan are the same as your
partnership's loan. T-Two Partners used part of the proceeds of the T-Two Loan
to purchase the senior beneficial interests in the second mortgage loans
encumbering your partnership's and certain other partnerships' properties so
that T-Two Partners is now the 100% beneficial owner of these second mortgage
loans. We refer to these senior beneficial interests as the T-1 Certificate. The
T-Two Loan is secured by all the assets of T-Two Partners, including the second
mortgage loans receivable from your partnership. Your partnership guaranteed
repayment of the T-Two Loan to Fleet National Bank. In consideration for your
partnership's guarantee, the owners of T-Two Partners agreed to the elimination
of their put option, and to provide a credit line to your partnership bearing
interest at LIBOR plus 450 basis points. Any amounts advanced to your
partnership under the credit line would have to be repaid in full before your
partnership could purchase the interests in T-Two Partners if your partnership
exercises the purchase option described below. The loan balance at December 31,
2004 was $275,191,415.
Your partnership's call option had previously provided for the acquisition
of the interests in T-Two Partners in January 2008 in exchange for a number of
units in your partnership to be determined at the time of exercise based on an
agreed-upon formula. Your partnership and the owners of T-Two Partners modified
your partnership's option in certain respects. First, the option can now be
exercised by your partnership at any time between November 24, 2006 and November
24, 2009. Second, the purchase price is payable in cash rather than units in
your partnership. Finally, the formula for determining the purchase price
payable by your partnership if it exercises the option has been revised in a
manner that your partnership's general partner believes to be significantly more
favorable to your partnership than the formula previously in effect.
Specifically, the purchase price is calculated as follows: the sum of
$316,526,573 plus T-Two Partners' costs of obtaining the T-Two Loan
(approximately $7,346,000) and administering the trust that holds the second
mortgage loans, together with interest on the foregoing sum at the effective
rate of interest paid by T-Two Partners on the T-Two Loan, less all payments
made from and after November 24, 2003 on the second mortgage loans.
7
T-Two Partners will reimburse your partnership for approximately
$7,346,000 of closing costs incurred in connection with the Fleet loan and the
T-Two Loan, together with interest thereon at a rate equal to LIBOR plus 450
basis points.
Your partnership as well as T-Two Partners are currently in discussions to
restructure the Fleet Loan and the T-Two Loan in a transaction that would, among
other things, reduce the interest rates on these loans. No agreement has been
reached and there is no assurance that a restructuring will be consummated.
All of the above transactions were entered into in connection with the
settlement of an action that had been brought in the Connecticut Superior Court
against your partnership's general partner and various of its affiliates. See
"ITEM 3. LEGAL PROCEEDINGS."
On November 23, 2003, your partnership also acquired from T-Two Partners a
second mortgage loan on a property in El Segundo, California in which your
partnership has a 53% interest. The mortgage loan was acquired for $6,250,000
which represented its principal balance and accrued interest. The mortgage loan
bears interest at 8.0% per annum and matures in December 2023.
8
STRUCTURE CHART
Set forth below is a chart setting forth the structure of your
partnership.
---------------------------- --------------------------- ---------------------------
Former Limited Partners of
the Newkirk Partnerships (1) MLP GP LLC (2) The Newkirk Group (3)
(Other than the Newkirk
Group) and other Limited
Partners
---------------------------- --------------------------- ---------------------------
LIMITED PARTNER \ GENERAL PARTNER | LIMITED PARTNER /
\ | /
18.9% \ | / 81.1%
\ | /
\ | /
\ | /
-------------------------------------------------------------------------
THE NEWKIRK MASTER
LIMITED PARTNERSHIP
-------------------------------------------------------------------------
/ / | | \ \
/ / | | \ \
/ / | | \ \
/ / | | \ \
/ 100% / 100% | | 100% \ 100% \ 50.01%
/ / | | \ \
- ------------------------------- ------------------- | ------------------ --------------------- -----------------------
Subsidiary Limited Partnerships Limited Partnership | Newkirk GP LLC (6) Newkirk Finco LLC (7) Newkirk Capital LLC (8)
which hold the Newkirk interests (5) |
properties (4) |
- ------------------------------- ------------------- | ------------------ --------------------- -----------------------
|
|
|-------------------|------------------|------------------|----------------|----------|
| 100% | 100% | 97.775% | 97.324% | | 100%
| | | | | |
---------------- ----------------- --------------- --------------- ------------------------------------
NK-Remainder Option to Acquire NK-Leyden NK-Dautec NK First Loan E Certificate LLC
Interest LLC (9) Subordinate Loan, L.P. (11) Loan, L.P. (11) NK First Loan F Certificate LLC
Mortgage NK First Loan G Certificate LLC (12)
Interests (10)
---------------- ----------------- --------------- --------------- ------------------------------------
9
(1) As a result of the exchange, the outstanding limited and general
partnership interests in the Newkirk partnerships held by "accredited
investors" (as that term is defined pursuant to Regulation D under the
Securities Act) were converted into the right to receive units. Limited
partners in Newkirk partnerships who were not "accredited investors"
received a one-time cash payment in exchange for their limited partnership
interests.
(2) This entity is the general partner of your partnership, but has no
economic interest in your partnership. It is owned by affiliates of
Vornado Realty Trust and executives of Winthrop Financial Associates.
(3) The Newkirk Group consists of affiliates of Apollo Real Estate Investment
Fund III, L.P., executive officers of Winthrop Financial Associates and
affiliates of Vornado Realty Trust. See "ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY HOLDER
MATTERS" for more information on the allocation of units in your
partnership among members of The Newkirk Group.
(4) As part of the exchange, which took place on January 1, 2002, each Newkirk
partnership was merged with and into a separate newly formed limited
partnership that is wholly owned by your partnership, as a result of which
your partnership became the owner of the properties and other assets
previously owned by the Newkirk partnerships, subject to the liabilities
of such partnerships.
(5) Consists of limited partnership interests in the consolidated partnerships
and the unconsolidated partnerships. See "- Description of Assets -
Properties" above.
(6) Controls the general partner interests in (i) 3 of the consolidated
partnerships, (ii) 4 of the unconsolidated partnerships and (iii) 5
additional partnerships that own net leased property. See "- Description
of Assets - The Management Company" above.
(7) Holds a non-recourse note from the minority partner in Newkirk Capital
LLC, your partnership's management company, secured solely by the minority
partner's membership interest in Newkirk Capital LLC. See "- Description
of Assets - The Management Company" above.
(8) Performs management services for your partnership and 9 other affiliated
partnerships for which it receives fees. See "- Description of Assets -
The Management Company" above.
(9) Owns ground leases, or owns or has the right to acquire remainder
interests, in the land underlying certain properties owned by your
partnership and other real estate limited partnerships.
(10) The subordinated mortgage interests are held by T-Two Partners, L.P.,
which is owned by NK-CR Holdings LLC and Holdings Subsidiary LLC,
affiliates of The Newkirk Group. Your partnership has the right to acquire
T-Two Partners, L.P. between November 2006 and November 2009. See "-
Description of Assets - The Subordinate Mortgage Interests" above.
10
(11) Holds an unsecured debt obligation of your partnership. See "- Description
of Assets - Unsecured Loans" above.
(12) Own subordinated interests in a securitized pool of first mortgage
indebtedness with respect to 29 first mortgage loans encumbering a total
of 59 of the Newkirk properties, two of the consolidated properties and
one other property owned by affiliated partnerships. See "- Description of
Assets - First Mortgage Interests" above.
Description of Indebtedness
See "- Description of Assets - The Subordinate Mortgage Interests" for a
description of your partnership's loan with Fleet National Bank and the related
T-Two Loan to T-Two Partners. The loan requires your partnership and T-Two
Partners to maintain an aggregate minimum consolidated debt service coverage
ratio (i.e., the ratio of your partnership's and T-Two Partners' consolidated
net cash revenues from investments, exclusive of debt payable to T-Two Partners,
before property-level debt service to their total consolidated debt service) of
at least 1.15 during the initial 36 month term and at least 1.25 during the
extension periods. Your partnership and T-Two Partners are also required to
maintain an aggregate minimum debt service coverage ratio (i.e., the ratio of
your partnership's and T-Two Partners' net cash revenue from investments,
exclusive of debt payable to T-Two Partners, after property-level debt service
to unconsolidated debt service) of at least 1.75 during the initial 36 month
term or 2.0 during the extension periods. If your partnership's and T-Two
Partners' aggregate debt service coverage ratio falls below 1.75 during the
initial 36 month term or 2.0 during the extension periods, then all cash flow of
your partnership and T-Two Partners will be deposited into a cash sweep account
as additional collateral for the loan and your partnership would be prohibited
from making distributions. As of December 31, 2004, your partnership's and T-Two
Partners aggregate consolidated debt service coverage ratio was 1.39 and their
debt service coverage ratio was 2.85. Your partnership's general partner
believes that your partnership will be able to maintain the required ratios and
does not anticipate that the maintenance of these ratios will have an adverse
impact on your partnership's financial condition.
Your partnership is also required to maintain a consolidated leverage
ratio (i.e., the ratio of (i) your partnership's and T-Two Partners' allocable
share of all indebtedness with respect to investments plus the outstanding
balance under the loan and the T-Two Loan, but exclusive of the mortgage
indebtedness of your partnership owed to T-Two Partners, to (ii) your
partnership's allocable share of its investments, with your partnership's
properties being valued based on discounted cash flow, during the first, second
and third years of the initial term of the loan and during the extension
periods, if any, of not more than 70%, 67%, 65%, 60% and 55%, respectively. In
addition, your partnership is required to maintain minimum liquid assets of at
least $5,000,000 and a minimum consolidated net worth, with your partnership's
properties being valued based on discounted cash flow, equal to $500,000,000
during the initial loan term, $525,000,000 during the first extended term and
$550,000,000 during the second extended term. The loan also limits your
partnership's ability to incur any direct debt or contingent liabilities.
See "ITEM 2. PROPERTIES" for information on your partnership's mortgage
indebtedness.
11
Unit Repurchase
In 2004, your partnership purchased from its limited partners 20,472 units
at a price of $35 per unit, less distributions in some cases. Your partnership
had purchased 115,000 units from its limited partners for $35 per unit in
February 2003 and 5,412 units in 2002.
In February 2005, your partnership commenced a tender offer to purchase up
to 99,455 units of limited partnership interest at a price of $42.50 per unit.
In March 2005, your partnership acquired 48,024 units pursuant to the tender
offer.
Business Objectives and Strategies; Future Intentions
In general, your partnership seeks to enhance the value of your units by
availing itself of investment and development opportunities relating to existing
properties as well as by seeking other potential strategic transactions such as
the sale of your partnership to a third party.
Industry Segments and Seasonality
Your partnership's primary business is the ownership and management of
commercial net-leased properties. Most of your partnership's tenants are
investment-grade corporate tenants. The largest single tenant leased multiple
properties and accounted for approximately 15.8% of your partnership's rental
revenues from the Newkirk properties and the consolidated properties for 2004.
Reference is made to " - Description of Assets - Properties" above for
additional information on your partnership's most significant tenants. Our
business is not seasonal.
Competition
Numerous lessors and developers compete with your partnership's properties
in attracting tenants and corporate users. The principal means of competition
are rent charged, location, services provided and the nature and condition of
the facility to be leased. Some of these competing properties may be newer or
better located than your partnership's properties. The number of competitive
commercial properties in a particular area could have a material effect on your
partnership's ability to lease or develop space. In addition, your partnership
may not be in a position to materially benefit from any real estate market
appreciation for a number of years due to the fixed rate renewal term rates
under the various lease agreements encumbering the properties. Likewise, your
partnership will remain subject, after the initial lease terms expire, to
downturns in the real estate market and general economic conditions. Your
partnership does not operate outside of the United States.
Environmental Regulations
Under various federal, state and local laws and regulations, an owner or
operator of real estate may be held liable for the costs of removal or
remediation of hazardous or toxic substances located on or in the property.
These laws often impose such liability without regard to whether the owner knows
of, or was responsible for, the presence of such hazardous or toxic substances.
The cost of any required remediation or removal of such substances may be
substantial. In addition, the owner's liability as to any property is generally
not limited under such laws and regulations and could exceed the value of the
property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to remediate such substances properly, may also
adversely affect the owner's ability to sell or lease the property or to borrow
using the property as collateral. Under such laws and regulations, an owner or
entity who arranges for the disposal or treatment of hazardous or toxic
substances at a disposal or treatment facility may also be liable for the costs
12
of removal or remediation of all such substances at such facility, whether or
not such facility is owned or operated by such person. Some laws and regulations
impose liability for the release of certain materials into the air or water from
a property, including asbestos, and such release can form the basis for
liability to third parties for personal injury or other damages. Other laws and
regulations can limit the development of and impose liability for the
disturbance of wetlands or the habitats of threatened or endangered species.
Almost all of your partnership's properties are net-leased, and tenants
are therefore generally required to pay all of the expenses relating to the
leased property. Accordingly, your partnership's general partner believes that
compliance with federal, state and local provisions otherwise relating to the
properties or the environment will not have a material effect on the capital
expenditures, earnings or competitive position of your partnership. However, no
assurance can be given that material environmental liabilities do not exist,
that despite the leases in place your partnership will not be held liable for
environmental liabilities, that any prior owner or operator of a property or
land held for development did not create any material environmental condition
not known to your partnership, that a material environmental condition does not
otherwise exist as to any one or more of your partnership's properties or land
held for development, or that future uses and conditions (including changes in
applicable environmental laws and regulations and the uses and conditions of
properties in the vicinity, such as leaking underground storage tanks and the
activities of the tenants) will not result in the imposition of environmental
liability. No material expenditures have been made by your partnership to date
relating to environmental matters.
Employees
Your partnership has no employees. Winthrop Financial Associates, A
Limited Partnership, executive officers of which jointly own your partnership's
general partner with an affiliate of Vornado Realty Trust, provides the services
of some of its employees, including the executive officers of the manager of
your partnership's general partner, to perform accounting, asset management and
investor relation services for us. Your partnership anticipates that each
executive officer of the manager of our general partner will devote a
significant portion of his or her time to the business of Winthrop Financial
Associates and its other affiliates. Winthrop receives an annual fee which was
originally fixed at $1,800,000 (subject to adjustment based on increases in the
CPI) for its services to your partnership and to 9 other partnerships, the
general partners of which are controlled by your partnership. The CPI adjustment
for 2004 was 2.3% bringing the fee to $1,881,952. 24
13
ITEM 2. PROPERTIES
General
Substantially all of the Newkirk properties and the consolidated
properties are net-leased to investment grade corporate tenants. At December 31,
2004 your partnership had three vacant properties that were not subject to
leases. These properties contained an aggregate of 245,000 square feet or
approximately 1.4% of the total space of all properties. Your partnership's
remaining properties are net leased to various tenants. The leases are similar
in many respects and generally: (i) provide for fixed rent payments and obligate
the tenant to pay all capital and operating expenses for a property; (ii)
obligate the tenant to perform all responsibilities (other than the payment of
debt service) relating to the property; (iii) require the tenant to maintain
insurance against casualty and liability losses; (iv) permit the tenant to
sublet the property; and (v) afford the tenant in many instances the right to
terminate the lease at certain points during the primary term if it determines
that continued use and occupancy of the property would be uneconomic or
unsuitable. Many of the leases grant the tenant an option to purchase the
property upon the expiration of the primary term of the lease and at the end of
one or more renewal terms for a purchase price equal to the fair market value of
such property. Your partnership maintains insurance on properties that are not
leased and the general partner believes that your partnership's properties are
adequately covered by insurance.
The following table sets forth certain information on the Newkirk
properties and the consolidated properties as of December 31, 2004, including
discontinued operations. Except as otherwise indicated in the table, the
ownership interest is a fee interest in the underlying land.
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
OFFICE:
Arkansas Little Rock 36,000 11.34 Entergy Gulf States 2010/2030
Pine Bluff 27,000 12.54 Entergy Gulf States 2010/2030
California El Segundo (4) 185,000 16.10 Raytheon 2008/2038
El Segundo (4) 185,000 16.10 Raytheon 2008/2038
Long Beach (1)(3) 478,000 35.51 Raytheon 2008/2038
Walnut Creek (1) 55,000 37.52 Hercules Credit, Inc. 2007/2037
Colorado Colorado Springs 71,000 31.13 Federal Express Corporation 2008/2038
Connecticut Clinton (1) (7) 41,000 17.35 Cheeseborough Ponds/Ragu 2008/2033
Florida Orlando(1) 184,000 5.22 Martin Marietta Corporation 2008/2038
Orlando(1) 357,000 12.97 Harcourt Brace & Company 2009/2039
Indiana Columbus (1) 390,000 10.00 Cummins Engine Company Inc. 2009/2039
14
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
Kentucky Owensboro (1) (7) 443,000 10.52 Cheeseborough Ponds/Ragu 2008/2033
Louisiana New Orleans (1) (8) 222,000 20.86 Hibernia Bank 2008/2033
New Orleans (1) (8) 181,000 20.19 Hibernia Bank 2008/2033
Maryland Baltimore(1) 530,000 48.74 USF&G/The Saint Paul Co. 2009/2039
Missouri Bridgeton(1) 54,000 10.58 The Kroger Co. 2006/2031
New Jersey Carteret 96,000 18.25 Pathmark 2011/2036
Elizabeth 30,000 25.73 Summit Bank 2008/2038
Morris Township(1)(5) 225,000 26.20 Allied Signal Corp. 2008/2038
Morris Township(1)(5) 50,000 29.41 Allied Signal Corp. 2008/2038
Morris Township(1)(5) 137,000 25.99 Allied Signal Corp. 2008/2038
Morristown(1) 316,000 27.87 Allied Signal Corp. 2008/2038
Plainsboro(1) 2,000 77.97 Summit Bank 2008/2038
Nevada Las Vegas 282,000 27.43 Nevada Power Company 2014/2039
Ohio Miamisburg(1) 61,000 11.62 Reed Elsevier, Inc. 2008/2038
Miamisburg(1) 86,000 6.01 Reed Elsevier, Inc. 2008/2038
Toledo(1) 707,000 18.89 Owens-Illinois 2006/2036
Pennsylvania Allentown 71,000 6.05 First Union Corp. 2010/2025
Tennessee Johnson City 64,000 10.58 SunTrust Bank 2006/2031
Kingport 43,000 10.98 American Electric Power 2008/2038
Memphis(1) 521,000 27.56 Federal Express Corporation 2009/2039
Memphis(1) 75,000 16.57 The Kroger Co. 2008/2038
Texas Beaumont(1) 426,000 26.46 Entergy Gulf States 2007/2037
Beaumont 50,000 29.10 Allied Lakewood Bank 2007/2037
Bedford (14) 207,000 - Vacant -
Dallas (3 buildings) 185,000 16.39 Allied Lakewood Bank 2007/2037
Garland (11) 279,000 5.40 Raytheon 2006/2036
---------- ------
TOTAL/AVERAGE OFFICE 7,352,000 21.31
========== ======
RETAIL:
Alabama Dothan(1) 54,000 4.98 Albertson's Inc. 2005/2035
Florence(1) 42,000 15.65 The Kroger Co. 2008/2038
Hunstville(1) 60,000 7.45 Albertson's Inc. 2007/2037
Huntsville(1) 58,000 5.98 Albertson's Inc. 2006/2036
Montgomery(1) 54,000 3.97 Albertson's Inc. 2005/2010
Montgomery 66,000 10.35 Albertson's Inc. 2007/2037
Tuscaloosa(1) 53,000 4.22 Albertson's Inc. 2005/2020
Arizona Bisbee(1) 30,000 9.06 Safeway, Inc. 2009/2039
Mesa (6) 3,000 6.60 CSK Auto 2009/2039
Tucson(1) 37,000 9.77 Safeway, Inc. 2009/2039
15
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
California Atascadero (6) 4,000 8.02 CSK Auto 2009/2039
Beaumont (6) 4,000 7.61 CSK Auto 2009/2039
Corona(1) 9,000 26.43 GoodYear Tire 2007/2037
Downey 39,000 12.90 Alberston's Inc. 2007/2037
El Toro (12) 11,000 11.74 GoodYear Tire 2009/2039
Huntington Beach 44,000 12.61 Albertson's Inc. 2009/2039
Indio(1) 10,000 22.70 GoodYear Tire 2007/2037
Lancaster 42,000 12.75 Albertson's Inc. 2009/2039
Livermore(1) (13) 53,000 5.22 Albertson's Inc. 2006/2036
Lomita(1) 33,000 10.24 Albertson's Inc. 2008/2033
Mammoth Lakes(1) 44,000 18.33 Safeway, Inc. 2007/2037
Morgan Hill (12) 10,000 6.90 GoodYear Tire 2009/2039
Paso Robles (6) 7,000 4.70 CSK Auto 2009/2039
Pinole(1) 58,000 7.16 Albertson's Inc. 2011/2036
Pleasanton 175,000 6.73 Federated Department Stores 2012/2040
Redlands (12) 11,000 5.52 GoodYear Tire 2009/2039
San Diego(1) 226,000 7.08 Nordstrom, Inc. 2016/2036
Santa Monica 150,000 5.74 Federated Department Stores 2012/2040
Santa Rosa (13) 22,000 5.25 Albertson's Inc. 2006/2036
Simi Valley(1) 40,000 12.03 Albertson's Inc. 2008/2038
Tustin (1) (9) 72,000 1.99 Mervyn's 2009/2033
Union City (12) 10,000 7.32 GoodYear Tire 2009/2039
Ventura(1) 40,000 19.92 City of Buenaventura 2013/2013
Yorba Linda (12) 11,000 7.62 GoodYear Tire 2009/2039
Colorado Aurora(13) 41,000 6.96 Albertson's Inc. 2005/2035
Aurora(1) 42,000 5.06 Albertson's Inc. 2006/2036
Aurora(1) 24,000 21.26 Safeway, Inc. 2007/2037
Littleton(13) 29,000 6.50 Albertson's Inc. 2005/2035
Littleton 39,000 12.17 Albertson's Inc. 2009/2039
Florida Bradenton 60,000 12.16 Albertson's Inc. 2007/2037
Cape Coral 30,000 14.85 Albertson's/Lucky Stores 2008/2038
Casselberry(1) 68,000 11.26 Albertson's Inc. 2007/2037
Gainesville 41,000 12.53 Albertson's/Lucky Stores 2008/2038
Largo(13) 54,000 4.00 Albertson's Inc. 2005/2035
Largo 40,000 14.86 Albertson's/Lucky Stores 2008/2038
Largo 30,000 12.95 Albertson's/Lucky Stores 2008/2038
Orlando(1) 58,000 5.67 Albertson's Inc. 2006/2036
Pinellas Park 60,000 11.74 Albertson's Inc. 2007/2037
Port Richey(1) 54,000 5.09 Albertson's Inc. 2005/2035
Tallahassee(1)(13) 54,000 3.05 Albertson's Inc. 2005/2035
Venice (13) 42,000 5.76 Albertson's Inc. 2006/2036
Georgia Atlanta(1) 6,000 28.94 Bank South, N.A. 2009/2039
Atlanta(1) 4,000 32.56 Bank South, N.A. 2009/2039
Chamblee(1) 5,000 31.30 Bank South, N.A. 2009/2039
16
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
Cumming(1) 14,000 22.58 Bank South, N.A. 2009/2039
Duluth(1) 9,000 23.18 Bank South, N.A. 2009/2039
Forest Park(1) 15,000 21.71 Bank South, N.A. 2009/2039
Jonesboro(1) 5,000 25.51 Bank South, N.A. 2009/2039
Stone Mountain (1) 6,000 26.95 Bank South, N.A. 2009/2039
Idaho Boise 37,000 15.76 Albertson's Inc. 2007/2037
Boise(1) 43,000 8.05 Albertson's Inc. 2008/2038
Illinois Freeport 30,000 12.77 Albertson's/Lucky Stores 2008/2038
Rock Falls 28,000 14.57 Albertson's/Lucky Stores 2008/2038
Indiana Carmel 39,000 4.11 Marsh Supermarkets, Inc. 2008/2038
Lawrence 29,000 6.72 Marsh Supermarkets, Inc. 2008/2038
Kentucky Louisville(1) 10,000 11.57 The Kroger Co. 2006/2011
Louisville(1) 40,000 16.45 The Kroger Co. 2006/2036
Louisiana Baton Rouge 58,000 12.21 Albertson's Inc. 2007/2037
Minden 35,000 11.55 Safeway, Inc. 2007/2037
Montana Billings(1) 41,000 9.05 Safeway, Inc. 2007/2015
Bozeman(1)(13) 21,000 4.31 Albertson's Inc. 2005/2030
Nebraska Omaha 73,000 5.32 Albertson's Inc. 2006/2036
Omaha 66,000 10.71 Albertson's Inc. 2007/2037
Omaha 67,000 10.99 Albertson's Inc. 2007/2037
Nevada Las Vegas(13) 38,000 4.45 Albertson's Inc. 2005/2035
Las Vegas(1) 60,000 7.57 Albertson's Inc. 2011/2021
Las Vegas(1) 38,000 14.13 Albertson's Inc. 2008/2023
Las Vegas (6) 3,000 8.25 CSK Auto 2009/2039
Reno(1) 42,000 13.16 Albertson's Inc. 2007/2037
New Jersey Garwood(1) 52,000 11.91 Pathmark 2006/2021
New Mexico Albuquerque(1) 35,000 18.70 Safeway, Inc. 2007/2037
Farmington (6) 3,000 5.20 CSK Auto 2009/2039
Las Cruces 30,000 14.64 Albertson's Inc. 2007/2037
New York Portchester(1) 59,000 18.89 Pathmark 2008/2023
North Carolina Charlotte 34,000 2.90 Food Lion Stores, Inc. 2008/2038
Concord 32,000 6.09 Food Lion Stores, Inc. 2008/2038
Jacksonville 23,000 3.63 Food Lion Stores, Inc. 2008/2038
Jefferson(1) 23,000 3.17 Food Lion Stores, Inc. 2008/2013
Lexington(1) 23,000 6.02 Food Lion Stores, Inc. 2008/2038
Thomasville 21,000 5.07 Food Lion Stores, Inc. 2008/2038
17
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
Ohio Cincinnati(1) 26,000 14.39 The Kroger Co. 2006/2011
Columbus(1) 34,000 23.44 The Kroger Co. 2006/2036
Franklin 29,000 3.83 Marsh Supermarkets, Inc. 2008/2038
Oklahoma Lawton(1) 31,000 10.84 Safeway, Inc. 2009/2039
Oregon Beaverton 42,000 13.02 Albertson's Inc. 2009/2039
Grants Pass(1) 34,000 8.65 Safeway, Inc. 2009/2039
Portland 42,000 8.29 Albertson's Inc. 2006/2036
Salem 52,000 7.81 Albertson's Inc. 2009/2039
Pennsylvania Doylestown 4,000 38.81 Meritor Savings Bank 2008/2038
Lansdale 4,000 41.04 Meritor Savings Bank 2008/2038
Lima 4,000 44.66 Meritor Savings Bank 2008/2038
Philadelphia 50,000 13.96 Pathmark 2010/2035
Philadelphia 4,000 36.58 Meritor Savings Bank 2008/2038
Philadelphia 4,000 52.19 Meritor Savings Bank 2008/2038
Philadelphia 4,000 11.77 Meritor Savings Bank 2008/2038
Philadelphia 4,000 42.99 Meritor Savings Bank 2008/2038
Philadelphia 4,000 49.12 Meritor Savings Bank 2008/2038
Philadelphia 4,000 38.81 Meritor Savings Bank 2008/2038
Philadelphia 4,000 39.09 Meritor Savings Bank 2008/2038
Philadelphia 4,000 55.26 Meritor Savings Bank 2008/2038
Richboro 4,000 36.02 Meritor Savings Bank 2008/2038
Wayne 4,000 52.75 Meritor Savings Bank 2008/2038
South Carolina Moncks Corner(1) 23,000 2.69 Food Lion Stores, Inc. 2008/2018
Tennessee Chattanooga(1) 42,000 16.81 The Kroger Co. 2008/2038
Paris(1) 31,000 15.04 The Kroger Co. 2008/2038
Texas Carrolton(1) 61,000 8.24 Skaggs Alpha Beta 2006/2036
Dallas(1) 68,000 7.89 The Kroger Co. 2006/2019
Dallas (6)(16) 3,000 0.92 Rent a Tire 2005
El Paso (6) 3,000 7.79 CSK Auto 2009/2039
El Paso (6) 3,000 6.44 CSK Auto 2009/2039
Fort Worth(1) 44,000 13.72 Safeway, Inc. 2007/2037
Garland 40,000 17.05 Safeway, Inc. 2007/2037
Granbury(1) 35,000 12.15 Safeway, Inc. 2007/2037
Grand Prairie(1) 49,000 10.02 Safeway, Inc. 2009/2039
Greenville(1) 48,000 4.20 Safeway, Inc. 2006/2036
Hillsboro(1) 35,000 9.62 Safeway, Inc. 2007/2037
Houston(1) 52,000 14.45 The Kroger Co. 2006/2036
Lubbock(1)(13) 54,000 2.66 Albertson's Inc. 2005/2035
Lubbock (6) 3,000 8.52 CSK Auto 2009/2039
Midland 60,000 10.53 Albertson's Inc. 2009/2039
Rockdale(16) 44,000 2.78 Wal-Mart Stores, Inc. 2005/2035
Taylor(16) 62,000 0.86 Wal-Mart Stores, Inc. 2005/2035
Texarkana (13) 46,000 4.72 Albertson's Inc. 2006/2036
Woodville(16) 44,000 0.91 Wal-Mart Stores, Inc. 2005/2035
18
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
Utah Bountiful(1) 50,000 5.76 Albertson's Inc. 2011/2016
Sandy(1) 42,000 4.78 Albertson's Inc. 2006/2016
Virginia Staunton(1) 23,000 7.20 Food Lion Stores, Inc. 2008/2038
Washington Bothell(1)(13) 28,000 3.45 Albertson's Inc. 2005/2035
Edmonds(1)(13) 35,000 3.49 Albertson's Inc. 2005/2025
Everett 35,000 17.22 Albertson's Inc. 2007/2037
Federal Way 42,000 9.76 Albertson's Inc. 2007/2037
Graham(1) 45,000 9.22 Safeway, Inc. 2009/2039
Kent 42,000 12.99 Albertson's Inc. 2009/2039
Milton(1) 45,000 10.63 Safeway, Inc. 2009/2039
Port Orchard(1) 28,000 4.52 Albertson's Inc. 2005/2025
Redmond(1) 45,000 11.26 Safeway, Inc. 2009/2039
Spokane(13) 42,000 5.16 Albertson's Inc. 2005/2035
Spokane(1) 39,000 9.63 Safeway, Inc. 2009/2039
Woodinville(1) 30,000 5.77 Albertson's Inc. 2006/2031
Wyoming Cheyenne(13) 31,000 3.85 Albertson's Inc. 2006/2036
Evanston 10,000 3.91 Key Bancshares of Wyoming 2009
Evanston (15) 28,000 Vacant -
-
---------- -----
TOTAL/AVERAGE RETAIL 5,427,000 9.41
========== =====
OTHER:
Arizona Flagstaff 10,000 -- Vacant (2) --
Sun City 10,000 15.00 Furr's Restaurant Group (2) 2012
California Colton 668,000 3.52 Stater Bros. Markets 2008/2038
El Segundo(4) 959,000 16.10 Raytheon 2008/2038
Long Beach(1)(3) 201,000 14.88 Raytheon 2008/2038
Palo Alto(1) 123,000 32.37 Xerox Corporation 2008/2013
Colorado Ft. Collins 10,000 24.96 Lithia Motors (2) 2012
Florida Orlando(1) 205,000 5.89 Walgreen Co. 2006/2031
Maine North Berwick 821,000 3.03 United Technologies Corp. 2010/2035
New Mexico Carlsbad 10,000 15.00 Furr's Restaurant Group (2) 2012
New York Saugerties (10) 52,000 2.35 Rotron, Inc. 2009/2029
Pennsylvania New Kingston(1) 430,000 2.84 Hershey Foods Corporation 2008/2038
South Carolina Myrtle Beach(1) 37,000 3.88 Food Lion Stores, Inc. 2008/2028
19
Approximate 2005 Lease
Leaseable Annualized Base Expiration/
Building Rent Per sq. ft. Option
Location Square Footage ($) Principal Tenant Expiration
-------- -------------- --- ---------------- ----------
Tennessee Franklin(1) 289,000 5.10 United Technologies Corp. 2008/2038
Memphis 780,000 3.67 Sears Roebuck & Company 2007/2037
Texas Lewisville 256,000 5.89 Xerox Corporation 2008/2038
Corpus Christi 10,000 15.00 Furr's Restaurant Group (2) 2012
El Paso 10,000 15.00 Furr's Restaurant Group (2) 2012
McAllen 10,000 15.00 Furr's Restaurant Group (2) 2012
Victoria 10,000 15.00 Furr's Restaurant Group (2) 2012
Wisconsin Windsor(1) 356,000 7.52 Walgreen Co. 2007/2032
----------- ------
TOTAL/AVERAGE OTHER 5,257,000 7.54
=========== ======
GRAND TOTAL/AVERAGE 18,036,000 13.72
=========== ======
- ----------
(1) Land held in land estate or pursuant to ground lease.
(2) See "- Property Matters" below for information on these properties.
(3) 55% interest owned by your partnership.
(4) 53% interest owned by your partnership.
(5) 99% interest owned by your partnership.
(6) 49.9% interest owned by your partnership.
(7) 62.2% interest owned by your partnership.
(8) 45.19% interest owned by your partnership.
(9) 68.68% interest owned by your partnership.
(10) 57.75% interest owned by your partnership.
(11) 60.5% interest owned by your partnership.
(12) 32.1% interest owned by your partnership.
(13) Your partnership received notice from Albertson's, Inc. ("Albertsons")
exercising a purchase option in accordance with their lease on fifteen of
your partnership's properties. Your partnership rejected this offer. The
tenant could have elected to terminate the lease on July 1, 2004 for ten
properties, October 1, 2004 for 3 properties and February 1, 2005 for 2
properties but extended its lease for eighteen months until December 31,
2005, March 31, 2006 and July 31, 2006, respectively. Rent during the
eighteen month period is at the renewal rates. Albertsons still has a
series of five year renewal options. As a condition of the rejection of
the Albertson's purchase offer, your partnership was required to pay off
the existing first mortgage debt of approximately $4,231,000, 40 days
prior to the purchase option sale dates of July 1, 2004, October 1, 2004
and February 1, 2005, respectively.
(14) The lease on this property expired June 30, 2004 and the property is now
vacant.
(15) The lease on this property expired March 31, 2004 and the property is now
vacant.
(16) The tenant has notified your partnership that they will not renew their
lease. Annualized base rent per square foot reflects rent through the
remaining term of the lease.
Property Matters. On January 22, 2002, Kmart Corporation, a tenant at 12
of your partnership's properties, filed for protection under Chapter 11 of the
United States Bankruptcy Code. Kmart had the right to either accept or reject
the leases. Kmart elected to reject the leases, which caused an immediate
termination of such leases. Your partnership re-leased 9 of the properties to
Furr's Restaurant Group for 10-year lease terms, one of the properties to Lithia
Motors for a 10-year lease term and another property for use as a restaurant for
a 5-year lease term. The tenant of the restaurant subsequently defaulted on its
20
lease. Your partnership pursued a claim against Kmart in the Bankruptcy Court.
The Bankruptcy Court has ordered that your partnership be awarded a Lease
Rejection Claim of $3,000,000. The claim will be satisfied in accordance with
the terms of Kmart's confirmed plan of reorganization. As part of this plan,
your partnership received 17,830 common shares of Kmart Holding Corporation
stock on January 1, 2005 having an estimated value of $1,783,000. Your
partnership subsequently sold the stock on February 15, 2005 for $1,767,991.
Your partnership anticipates receiving additional stock at a future time to
satisfy the remaining balance of the claim. In January 2003, Furr's Restaurant
Group filed for protection under Chapter 11 of the Bankruptcy Code and
subsequently rejected the lease on 3 sites. The remaining sites continue to be
leased to Furr's through 2012, and your partnership pursued a claim against
Furr's in the Bankruptcy Court for the 3 rejected sites. On May 14, 2004 your
partnership was awarded a net total of $304,967 on this claim by the Bankruptcy
Court. Furr's also has the right to reject the lease that now covers the
remaining sites. The aggregate annual rent for the 7 sites that are presently
leased is approximately $1,269,600 compared to the approximately $1,885,000 that
was scheduled to be received from Kmart on the 12 properties during its first
renewal term, which would have begun in February 2003. Your partnership has
purchased the land underlying all of the 12 original Kmart sites for $250,000.
In 2003, your partnership sold two of the vacant sites for $2,525,000. After
satisfying existing mortgage indebtedness and closing costs, there were no net
proceeds to your partnership. In 2004, your partnership sold two more vacant
sites for $2,100,000. There were approximately $1,955,000 of net proceeds to
your partnership after paying closing costs. On January 6, 2005, your
partnership sold the remaining vacant property and received net proceeds of
approximately $2,181,000.
In November 2002, your partnership received notice from the tenant of a
property located in Stuart, Florida exercising the economic discontinuance
provisions of its lease. Under the terms of the notice, the tenant proposed to
terminate the lease effective July 11, 2003 and to purchase the property for
$631,000, an amount which would have been insufficient to satisfy existing
mortgage indebtedness. Your partnership rejected the offer and satisfied the
existing first mortgage of approximately $531,000. Your partnership sold the
property for a net sales price of approximately $1,800,000 in October 2004.
Approximately $1,189,000 of proceeds were used to make principal payments on
your partnership's loan with Fleet National Bank and T-Two Partners.
In January 2004, your partnership sold the property owned by it in
Morristown, New Jersey for $36,500,000. After satisfying existing mortgage
indebtedness and closing costs, the net sales proceeds were approximately
$7,532,000 which was applied to a principal payment on your partnership's loan
with Fleet National Bank.
In January 2004, your partnership sold the multi-tenanted office building
owned by it in Dallas, Texas for $13,000,000. After closing costs and
adjustments, the net sales proceeds were approximately $11,939,000, $8,954,000
of which was applied to a principal payment on your partnership's loan with
Fleet National Bank.
In 2004, your partnership sold 21 retail properties owned by it and others
which were formerly leased to CSK Auto for approximately $4,538,000. After
closing costs and adjustments, the net sales proceeds were approximately
$4,152,000, approximately $1,459,000 of which was used to pay off debt to T-Two
Partners.
21
In March 2004, your partnership sold 3 retail properties formerly leased
to Key Bancshares of Wyoming for $1,948,000. After closing costs and
adjustments, the net sales proceeds were approximately $1,860,000, approximately
$1,351,000 of which was used to pay off debt to T-Two Partners and Fleet
National Bank.
In April 2004, your partnership sold a property located in Philadelphia,
Pennsylvania for $300,000. After payment of closing costs, your partnership used
sale proceeds to pay approximately $83,000 of principal owed to T-Two Partners
and approximately $138,000 to Fleet National Bank. The lease on this property
had been terminated effective July 1, 2003. The tenant made a $276,576 early
termination payment, $160,803 of which was applied to payoff the existing first
mortgage indebtedness.
Also in April 2004, your partnership sold 2 properties owned by it in
Aurora, Colorado and Mint Hill, North Carolina for $2,945,000 and $402,000,
respectively. After closing costs, your partnership paid approximately $557,000
towards principal on your note owed to T-Two Partners and $1,716,000 on your
note to Fleet National Bank. The Aurora, Colorado property had formerly been
leased to Alberston's Inc. and your partnership had previously rejected an offer
by Alberston's to purchase the property pursuant to the economic discontinuance
provisions of the lease.
In May 2004, your partnership sold a property located in Champaign,
Illinois to Lucky Stores, Inc. Lucky Stores, Inc. was the tenant at the property
and exercised their option to purchase the property pursuant to the lease. The
purchase price was approximately $879,000. Your partnership also received a
$942,189 lease termination payment. Your partnership used approximately $782,000
to pay down your loan with T-Two Partners and $212,000 to pay down your loan
with Fleet National Bank.
On July 29, 2004, your partnership sold 25 properties to Vornado Realty
Trust, a limited partner in your partnership and an affiliate of your
partnership's general partner, for a sales price of $63,800,000. The price paid
by Vornado Realty Trust was in excess of an offer received from an unaffiliated
third party. Your partnership used sales proceeds of $31,541,000 to pay off
contract right debt of which approximately $31,016,000 was paid to T-Two
Partners and approximately $23,733,000 to pay down the note payable to Fleet
National Bank.
During the second quarter of 2004, your partnership recorded a $9,600,000
impairment loss on a property located in Bedford, Texas. The impairment loss,
which is included in loss from discontinued operations in the Statement of
Operations, was recorded as a result of the existing tenant notifying your
partnership of their intention not to renew their existing lease that expired
June 30, 2004. Your partnership is attempting to sell the property.
During the third quarter of 2004, your partnership recorded a $3,200,000
impairment loss on a property located in New Kingston, Pennsylvania which is
included in loss for discontinued operations. Your partnership is negotiating a
contract to sell the property and anticipates closing in the second quarter of
2005.
Land Estates and Ground Leases. As indicated above, your partnership holds
either an estate for years with an option to lease the land upon expiration of
the estate for years or leases a number of its properties pursuant to ground
leases. Where your partnership holds an estate for years, the arrangement is for
a stated period of time, which is typically one day longer than the primary term
of the underlying lease. At the expiration of the estate for years, title to the
land will automatically vest in a remainderman. Your partnership then has the
22
option to lease the land from the remainderman for a stated period of time,
which would in all cases exceed the aggregate number of years that a building
lessee could extend its underlying lease by exercising all of its renewal terms.
In general, the rentals due under the ground leases are nominal through the last
renewal term of the improvements lease and then increase to fair market rent.
The remainderman in almost all cases has subordinated its interest in the land
to any first mortgage encumbering the property, but has not, in any case,
subordinated its interest in the land to the second mortgage encumbering the
property. Any second mortgage encumbers your partnership's option to lease the
land at the expiration of your partnership's estate for years, and will encumber
the leasehold interest in the land created upon any exercise of the option to
lease by your partnership. Your partnership is continually seeking to acquire
the "remainder" interests in its properties in an effort to acquire fee title to
the properties.
With respect to those properties subject to a ground lease, your
partnership has the right to extend the ground lease for at least as long as the
aggregate number of years that a building lessee could extend its underlying
lease by exercising all of its renewal terms. In general, the ground rent is
passed through to the building lessee under the improvements lease.
In June 2004, your partnership acquired the land underlying a property
located in Bedford, Texas. The land was acquired from an unrelated third party
for approximately $2,600,000.
Mortgage Indebtedness of Your Partnership
Mortgage Loans. Of your partnership's properties, all but 77 properties
are secured by one or more first mortgage loans. As of December 31, 2004, the
first mortgage indebtedness (exclusive of indebtedness on properties being
marketed for sale that are included in discontinued operations), together with
the second mortgage indebtedness on a property in El Segundo, California, in
which your partnership has a 53% interest, had an aggregate outstanding
principal balance of $478,939,000 with interest at rates ranging from 5.0% per
annum to 10.4% per annum and maturities at various dates from March 1, 2005 to
January 1, 2024. Most of these mortgage loans are prepayable only with a yield
maintenance payment or prepayment penalty. The weighted average interest rate on
these loans is 8% per annum, and there were no variable rate loans at December
31, 2004.
The following is a summary of scheduled principal maturities, by year,
under the mortgage debt described in the previous paragraph.
Year Amount
---- ------
2005............................... $ 98,397,000
2006............................... 131,481,000
2007............................... 91,720,000
2008............................... 68,399,000
2009............................... 34,221,000
Thereafter......................... 54,721,000
-------------
Total.............................. $ 478,939,000
=============
23
Second Mortgage Loans. A number of your partnership's properties are
encumbered by second mortgage loans. As of December 31, 2004, this second
mortgage indebtedness, which is referred to in our financial statements as
contract right mortgage notes, had an aggregate outstanding principal balance,
excluding discontinued operations of $263,072,000, with interest at rates
ranging from 8.11% per annum to 13.9% per annum and matured at various dates
from January 1, 2008 to January 1, 2025. Each of the loans is prepayable at any
time without premium or penalty subject to the prior or simultaneous
satisfaction of the underlying first mortgage loans. The weighted average
interest rate on these mortgage loans is 10.7% per annum. There are no variable
interest rates on these loans.
The following is a summary of scheduled principal payable as of December
31, 2004, by year, under the junior mortgage debt described in the previous
paragraph.
Year Amount
---- ------
2005............................... $ 9,213,000
2006............................... 10,244,000
2007............................... 17,963,000
2008............................... 21,214,000
2009............................... 19,609,000
Thereafter......................... 184,829,000
-------------
Total.............................. $ 263,072,000
=============
All rights of the mortgagee under each of the second mortgages are fully
subject and subordinate to the rights granted the holders of the first
mortgages. The second mortgages generally grant the mortgagee a security
interest in and include a subordinate assignment of, among other things, your
partnership's interest in its underlying lease. Each second mortgage contains an
assignment of your partnership's interest in all rents, income, revenues,
claims, issues and profits from and in respect of all of the property encumbered
by that second mortgage.
Substantially all of the second mortgages contain restrictions affecting
the ability of the applicable property-owning subsidiary of your partnership to
refinance its existing first mortgage loan or incur additional financing during
the primary term of the relevant lease. The principal restriction on such first
mortgage financing is a debt service coverage test under which the scheduled
rental payments from the properties at the time of such financing must be at
least 103% of your partnership's aggregate debt service payments due under the
second mortgage and such financing (except that if a lease is no longer in
effect, the debt service coverage test may be satisfied based on the scheduled
rent payments that otherwise would have been payable under the lease for the
period that the financing is to be in place). There is also a general risk that
a property encumbered by a second mortgage will not generate sufficient cash
flow to satisfy the debt service payments on the second mortgage loan after
satisfying payments on the first mortgage encumbering the property. However, the
combination of the Newkirk properties pursuant to the exchange has lessened this
risk to your partnership by substantially increasing the capital resources of
your partnership and thereby enhancing your partnership's ability to respond to
the capital needs of any particular property. In addition, as described under
"ITEM 1. BUSINESS - Description of Assets - The Subordinate Mortgage Interests,"
your partnership has an option to acquire the interests in T-Two Partners and
thereby effectively eliminate substantially all of its subordinate indebtedness.
24
ITEM 3. LEGAL PROCEEDINGS
In July 2002, an action was commenced in the Connecticut Superior Court
against, among others, your partnership's general partner and various affiliates
of your partnership's general partner. Plaintiffs are four limited partners of
three of the Newkirk partnerships. In order to avoid the expenses, distraction,
and uncertainties of litigation, the defendants entered into a settlement
agreement dated December 31, 2003 to settle the litigation. On April 16, 2004,
the Court approved the settlement. The settlement provides for the following
material terms: (i) the Newkirk Group will convey to unitholders of the Newkirk
partnerships who are unaffiliated with the general partner and who received
limited partnership units in the exchange, units in your partnership equal to 1%
of the outstanding units; (ii) your partnership will pay $1.5 million to an
escrow agent for the benefit of unaffiliated unitholders who were entitled to
receive units in the exchange transaction; and (iii) your partnership will pay
$2.0 million to an escrow agent for the benefit of unitholders of the Newkirk
partnerships who were entitled to receive cash in the exchange. Your partnership
accrued $3.5 million with respect to this matter, which is included in general
and administrative expense in the consolidated statement of operations for the
year ended December 31, 2003. In April 2004, your partnership paid out $3.5
million with respect to this matter. A hearing has been set for April 11, 2005,
at which time it is expected that the Court will approve the allocation of the
1% of outstanding units for distribution.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
25
PART II
ITEM 5. MARKET FOR LIMITED PARTNERSHIP UNITS, RELATED SECURITY HOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
General
There is no established public trading market for the units. As of
December 31, 2004, there were 1,360 holders of record of units.
Distributions
Since January 1, 2003 your partnership has made the following
distributions aggregating approximately $80,837,000.
Date Per Unit Distribution
---- ---------------------
2/03 $.75
4/03 $2.22 (1)
5/03 $.80
8/03 $.85
11/03 $.90
2/04 $1.75
5/04 $1.80
9/04 $1.85
11/04 $1.90
- ----------
(1) This distribution represents proceeds from the sale of your partnership's
property that was leased to Kaiser Aluminum.
Your partnership currently anticipates making regular quarterly
distributions in respect of your partnership's operations as well as special
distributions in respect of future property sales. However, future distributions
are dependent upon many factors, including your partnership's earnings, capital
requirements, property sales, financial condition and available cash flow. In
this regard, your partnership's Fleet loan requires your partnership to maintain
liquid assets of at least $5,000,000 and a minimum consolidated net worth equal
to $500,000,000 during the initial loan term and up to $550,000,000 during the
last extended term. In addition, under the terms of the loan, your partnership
is prohibited from making distributions if its unconsolidated debt service
coverage ratio falls below 1.75 during the initial period of the loan or 2.0
during the extension periods. These and other restrictions relating to the Fleet
loan that are discussed above under "ITEM 1. BUSINESS - Description of
Indebtedness" could impact your partnership's ability to make distributions in
the future.
26
Purchase of Units
Your partnership repurchased 1,729 of its units during the fourth quarter
of 2004.
Units
Repurchased Price Per Unit
----------- --------------
October 597 $ 35.00
November 1,132 $ 35.00
December - -
------
1,729
======
27
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following financial data are derived from the audited consolidated
financial statements of your partnership for the years ended December 31, 2004,
2003 and 2002 and from the combined consolidated financial statements of Newkirk
RE Holdings, LLC and Newkirk NL Holdings, LLC ("Predecessor Entity") for the
years ended December 31, 2001 and 2000. The financial data set forth below
should be read in conjunction with "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" below and "The Consolidated
Financial Statements" and the notes thereto appearing elsewhere in this report.
During the years ended December 31, 2001 and 2000 the Predecessor Entity
acquired additional limited partnership interests in entities it had recorded on
an equity basis. At the point sufficient limited partnership interests were
acquired to assert control over the limited partnership the Predecessor Entity
consolidated the respective limited partnership resulting in the recognition of
cash balances and other assets and liabilities as shown below.
Year Ended December 31,
(In thousands, except unit data)
-------------------------------------------------------------------
2004 2003 2002 2001 2000
Predecessor Predecessor
- ---------------------------------------------------------------------------------------------
Total Revenue $ 249,528 $ 262,153 $ 251,886 $ 258,975 $ 35,255
Income from Continuing
Operations 97,942 89,903 93,891 46,387 40,004
Income from Continuing
Operations per Unit 15.50 14.20 15.34 -- --
Total Assets 1,237,129 1,384,094 1,476,623 1,476,922 434,974
Long Term Debt 907,339 1,104,231 1,238,494 1,024,539 157,058
Cash Distributions
per Unit $ 7.30 $ 5.52 $ 32.16 $ -- $ --
28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
At December 31, 2004 your partnership owned an interest in 188 Newkirk
properties and limited partnership interests in seven partnerships which own 22
properties whose operations are consolidated for financial reporting purposes.
Almost all of the properties are leased to one or more tenants pursuant to net
leases. Approximately 90% of the original lease terms expire between 2005 and
2009. There are three properties which are vacant and not leased which represent
approximately 245,000 square feet of your partnership's Newkirk properties. The
remaining 17,791,000 square feet or 98.6% are leased. Your partnership also
holds subordinated interests in a securitized pool of notes evidencing first
mortgage indebtedness secured by certain of your partnership's properties as
well as other properties, limited partnership interests in various partnerships
that own commercial net-leased properties, an interest in a management company
that provides services for your partnership as well as other real estate
partnerships, ground leases, remainder interests or the right to acquire
remainder interests in various properties and miscellaneous other assets. In
addition, your partnership, or an affiliate of your general partner, controls
the general partner of the real estate limited partnerships in which your
partnership owns limited partnership interests, and your partnership has an
option to acquire in the future second mortgage debt secured by a substantial
number of your partnership's properties as well as the properties owned by nine
other partnerships.
Your partnership receives rental income from its properties which is its
primary source of liquidity. Pursuant to the terms of the leases, the tenants
are responsible for substantially all of the operating expenses with respect to
the properties, including maintenance, capital improvements, insurance and
taxes. If a tenant fails to exercise its renewal option or exercises its option
to terminate its lease early, your partnership will be required to either sell
the property or procure a new tenant. If your partnership attempts to procure a
new tenant, it will be competing for new tenants in the then current rental
markets, which may not be able to support terms as favorable as those contained
in the original lease options.
The level of liquidity based on cash and cash equivalents experienced a
$8,318,000 decrease at December 31, 2004 as compared to December 31, 2003. The
decrease was due to net cash provided by operating activities of $151,483,000
and net cash provided by investing activities of $95,492,000, which were more
than offset by net cash used in financing activities of $255,293,000. Net cash
provided by operating activities consisted of $146,159,000 from continuing
operations and $5,324,000 from discontinued operations. Net cash provided by
investing activities included $98,771,000 of net proceeds from disposal of real
estate and $389,000 of distributions from partnership interests, which were
partially offset by land acquisitions of $2,557,000 and investments in limited
partnership interests of $1,111,000. Net cash used in financing activities
consisted primarily of mortgage loan and contract right mortgage loan payoffs of
$48,350,000, principal payments on mortgage, contract right and notes payable of
$152,813,000 and partner distributions of $46,106,000. At December 31, 2004,
your partnership had $29,533,000, of which $8,216,000 is restricted, in cash
reserves which were invested primarily in money market mutual funds.
29
A summary of your partnership's obligations excluding discontinued operations is
as follows:
(in thousands)
Payment due by period
------------------------------------------------------------------
Less than 1-3 3-5 More than
Total 1 year years years 5 years
Mortgage Notes and $ 489,955 $ 109,413 $ 223,201 $ 102,620 $ 54,721
Accrued Interest Payable
Contract Right Mortgage
Notes and Accrued Interest 354,197 22,060 47,525 53,247 231,365
Payable
Note Payable 165,328 -- 165,328 -- --
Ground Lease Obligations 9,309 3,013 4,174 1,944 178
---------- ---------- ---------- ---------- ----------
Total $1,018,789 $ 134,486 $ 440,228 $ 157,811 $ 286,264
========== ========== ========== ========== ==========
Off-Balance Sheet Arrangements
On November 24, 2003, at the same time as your partnership obtained its
loan from Fleet National Bank, T-Two Partners obtained a $316,526,573 loan from
Fleet National Bank. We refer to this loan as the T-Two Loan. The interest rate,
maturity date and principal terms of the T-Two Loan are the same as your
partnership's loan. The T-Two Loan is secured by all the assets of T-Two
Partners, including the second mortgage loans receivable from your partnership.
Your partnership guaranteed repayment of the T-Two Loan to Fleet National Bank.
Currently, your partnership believes it has no exposure to loss under the
guarantee since the T-Two Loan is over collateralized. In consideration for your
partnership's guarantee, the owners of T-Two Partners agreed to the elimination
of their put option, and to provide a credit line to your partnership bearing
interest at LIBOR plus 450 basis points. Any amounts advanced to your
partnership under the credit line would have to be repaid in full before your
partnership could purchase the interests in T-Two Partners if your partnership
exercises the purchase option described below. There are no amounts that have
been advanced under the credit line.
Your partnership's call option had previously provided for the acquisition
of the interests in T-Two Partners in January 2008 in exchange for a number of
units in your partnership to be determined at the time of exercise based on an
agreed-upon formula. Your partnership and the owners of T-Two Partners modified
your partnership's option in certain respects. First, the option can now be
exercised by your partnership at any time between November 24, 2006 and November
24, 2009. Second, the purchase price is payable in cash rather than units in
your partnership. Finally, the formula for determining the purchase price
payable by your partnership if it exercises the option has been revised in a
manner that your partnership's general partner believes to be significantly more
favorable to your partnership than the formula previously in effect.
Specifically, the purchase price is calculated as follows: the sum of
$316,526,573 plus T-Two Partners' costs of obtaining the T-Two Loan
(approximately $7,346,000) and administering the trust that holds the second
mortgage loans, together with interest on the foregoing sum at the effective
rate of interest paid by T-Two Partners on the T-Two Loan, less all payments
made from and after November 24, 2003 on the second mortgage loans.
30
Your partnership has determined that T-Two Parners is a variable interest
entity but that your partnership is not the primary beneficiary of the variable
interest entity.
Other Matters
Your partnership received notice from Albertson's indicating that it
intended to exercise its right to terminate the lease for the supermarket
property located in Stuart, Florida. In accordance with the economic
discontinuance provision of its lease, Albertson's made a rejectable offer to
purchase the property for an amount stipulated in the lease of approximately
$631,000. Your partnership elected to reject the offer. As a result of the
rejection, your partnership was required to payoff the first mortgage
encumbering the property, which had a balance of approximately $531,000. Your
partnership satisfied the first mortgage using its cash reserves. Your
partnership sold this property in October 2004 for a sale price of $1,950,000.
Your partnership received notice from Albertsons exercising a purchase
option in accordance with their lease on fifteen of your partnership's
properties. Your partnership rejected this offer. If your partnership accepted
the offer, the sale would have been effective July 1, 2004 for 10 properties,
October 1, 2004 for 3 properties and February 1, 2005 for 2 properties. Since
your partnership rejected this offer, the tenant elected to extend its lease for
eighteen months until December 31, 2005, March 31, 2006 or July 31, 2006,
respectively. Rent during the eighteen month period is at the renewal rates.
Alberstons still has a series of five year renewal options.
In January 2004, your partnership sold the property owned by it in
Morristown, New Jersey for $36,500,000. After satisfying existing mortgage
indebtedness and closing costs, the net sales proceeds were approximately
$7,532,000 which was applied to a principal payment on your partnership's loan
with Fleet National Bank.
In January 2004, your partnership sold the multi-tenanted office building
owned by it in Dallas, Texas for $13,000,000. After closing costs and
adjustments, the net sales proceeds were approximately $11,939,000, $8,954,000
of which was applied to a principal payment on your partnership's loan with
Fleet National Bank.
In 2004, your partnership sold 21 retail properties owned by it and others
which were formerly leased to CSK Auto for approximately $4,538,000. After
closing costs and adjustments, the net sales proceeds were approximately
$4,152,000, approximately $1,459,000 of which was used to pay off debt to T-Two
Partners.
In March 2004, your partnership sold 3 retail properties formerly leased
to Key Bancshares of Wyoming for $1,948,000. After closing costs and
adjustments, the net sales proceeds were approximately $1,860,000, approximately
$1,351,000 of which was used to pay off debt to T-Two Partners and Fleet
National Bank.
In April 2004, your partnership sold a property located in Philadelphia,
Pennsylvania for $300,000. After payment of closing costs, your partnership used
sale proceeds to pay approximately $83,000 of principal owed to T-Two Partners
and approximately $138,000 to Fleet National Bank. The lease on this property
had been terminated effective July 1, 2003. The tenant made a $276,576 early
termination payment, $160,803 of which was applied to payoff the existing first
mortgage indebtedness.
31
Also in April 2004, your partnership sold 2 properties owned by it in
Aurora, Colorado and Mint Hill, North Carolina for $2,945,000 and $402,000,
respectively. After closing costs, your partnership paid approximately $557,000
towards principal on your note owed to T-Two Partners and $1,716,000 on your
note to Fleet National Bank. The Aurora, Colorado property had formerly been
leased to Alberston's Inc. and your partnership had previously rejected an offer
by Alberston's to purchase the property pursuant to the economic discontinuance
provisions of the lease.
In May 2004, your partnership sold a property located in Champaign,
Illinois to Lucky Stores, Inc. Lucky Stores, Inc. was the tenant at the property
and exercised their option to purchase the property pursuant to the lease. The
purchase price was approximately $879,000. Your partnership also received a
$942,189 lease termination payment. Your partnership used approximately $782,000
to pay down your loan with T-Two Partners and $212,000 to pay down your loan
with Fleet National Bank.
During the second quarter of 2004, your partnership recorded a $9,600,000
impairment loss on a property located in Bedford, Texas. The impairment loss,
which is included in loss from discontinued operations in the Statement of
Operations, was recorded as a result of the existing tenants' lease expiring
June 30, 2004. Your partnership is attempting to sell the property.
In June 2004, your partnership acquired the land underlying one of its
properties in Bedford, Texas. The land was acquired from an unaffiliated party
for $2,555,000.
In June 2004, your partnership acquired for $297,500, pursuant to a tender
offer, approximately 9.85% of the total limited partnership units outstanding in
one partially owned consolidated partnership. The partnership currently owns
approximately 45.2% of the limited partnership.
In July 2004, your partnership acquired for $472,500 and $325,000,
pursuant to two separate tender offers, approximately 7% and 4.5% of the total
limited partnership units outstanding in two partially owned partnerships. Your
partnership currently owns approximately 62.2% in one of the partnerships whose
operations are consolidated and 45.3% in the other partnership.
During the third quarter of 2004, your partnership recorded a $3,200,000
impairment loss on a property located in New Kingston, Pennsylvania which is
included in loss from discontinued operations. Your partnership is negotiating a
contract to sell the property and anticipates closing in the second quarter of
2005.
On July 29, 2004, your partnership sold 25 properties to Vornado, a
limited partner in your partnership and an affiliate of your partnership's
general partner, for a sales price of $63,800,000. The price paid by Vornado
Realty Trust was in excess of an offer received from an unaffiliated third
party. Your partnership used sales proceeds of $31,500,000 to pay off contract
right debt and $23,700,000 to pay down the note payable netting approximately
$8,600,000 of cash. For financial reporting purposes, your partnership
recognized a net gain on the sale of the properties of approximately
$38,700,000.
32
Results of Operations
Comparison of the year ended December 31, 2004 to the year ended December 31,
2003.
Income from Continuing Operations
Income from continuing operations increased by $8,039,000 to $97,942,000
for the year ended December 31, 2004 from $89,903,000 for the year ended
December 31, 2003. As more fully described below, this increase is attributable
to a decrease in total expenses of $20,205,000 and an increase in equity in
income from investments in limited partnerships of $608,000 which was partially
offset by an increase in minority interest expense of $149,000 and a decrease in
total revenue of $12,625,000.
Rental Income
Rental income decreased by $12,701,000 or approximately 5% to $246,062,000
for the year ended December 31, 2004 from $258,763,000 for the year ended
December 31, 2003. The decrease was primarily due to lower rental income on
lease renewals or renegotiations. Leased square footage at December 31, 2004 and
2003 is approximately 99%.
Interest Income
Interest income increased by $162,000 or approximately 5% to $3,134,000
for the year ended December 31, 2004 from $2,972,000 for the year ended December
31, 2003. The increase was primarily due to interest income of $456,000 on a
loan to T-Two Partners, which was partially offset by a decrease in interest
income of $107,000 on a note held by Newkirk Finco LLC and decreases in overall
invested cash balances.
Management Fees
Management fees decreased by $86,000 or approximately 21% to $332,000 for
the year ended December 31, 2004 from $418,000 for the year ended December 31,
2003. The decrease is attributable to fewer properties under management.
Interest Expense
Interest expense decreased by $13,832,000 or approximately 13% to
$88,971,000 for the year ended December 31, 2004 compared to $102,803,000 for
the year ended December 31, 2003. The decrease was primarily due to loan payoffs
of $48,350,000, normal scheduled principal payments of $109,785,000 and payments
on the note payable of $43,028,000 and assumption of debt on a sold property of
$28,460,000.
Depreciation
Depreciation expense remained relatively consistent at $36,044,000 for the
year ended December 31, 2004 compared to $36,067,000 for the year ended December
31, 2003.
33
General and Administrative
General and administrative expenses decreased by $5,053,000 or
approximately 44% to $6,333,000 for the year ended December 31, 2004 compared to
$11,386,000 for the year ended December 31, 2003. The decrease is primarily the
result of a $4,437,000 decrease in legal costs due to a $3,600,000 legal
settlements in 2003.
Amortization Expense
Amortization expense decreased by $1,934,000 or approximately 41% to
$2,796,000 for the year ended December 31, 2004 as compared to $4,730,000 for
the year ended December 31, 2003. The decrease in amortization expense is
primarily the result of the refinancing of the Fleet debt.
Ground Rent
Ground rent expense increased by $16,000 to $3,067,000 for the year ended
December 31, 2004 as compared to $3,051,000 for the year ended December 31,
2003. The increase in ground rent expense is primarily the result of increases
in ground rent rates for two partnerships.
State Income Taxes
State income tax expense increased by $621,000 or approximately 82% to
$1,379,000 for the year ended December 31, 2004 compared to $758,000 for the
year ended December 31, 2003. The increase is the result of higher taxable
income in several states with partnership income tax requirements.
Equity in Income from Investments in Limited Partnerships
Equity in income from investments in limited partnerships increased by
$608,000 or approximately 30% to $2,662,000 for the year ended December 31, 2004
compared to $2,054,000 for the year ended December 31, 2003. This increase was
due to additional purchases of equity positions in limited partnerships.
Minority Interest Expense
Minority interest expense increased by $149,000 or approximately 1% to
$15,658,000 for the year ended December 31, 2004 compared to $15,509,000 for the
year ended December 31, 2003. The increase was the result of increased
profitability at the non-wholly owned partnerships.
Discontinued Operations
During the year ended December 31, 2004, your partnership sold 58
properties for a combined net sales price of $127,231,000. Your partnership
recognized a net gain on disposal of these properties of $49,350,000. During the
year ended December 31, 2003, your partnership sold fourteen properties for a
combined net sales price of $156,409,000. Your partnership recognized a net gain
on disposal of these properties of $29,514,000. The sale and operations of these
properties for all periods presented have been recorded as discontinued
operations in compliance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets."
34
Comparison of the year ended December 31, 2003 to the year ended December 31,
2002.
Income from Continuing Operations
Income from continuing operations decreased by $3,988,000 to $89,903,000
for the year ended December 31, 2003 from $93,891,000 for the year ended
December 31, 2002. As more fully described below, this decrease is attributable
to an increase in total expenses of $8,917,000 and an increase in minority
interest expense of $7,392,000, which was partially offset by an increase in
total revenue of $10,267,000 and an increase in equity in income from
investments in limited partnerships of $2,054,000.
Rental Income
Rental income increased by $10,922,000 or approximately 4% to $258,763,000
for the year ended December 31, 2003 from $247,841,000 for the year ended
December 31, 2002. The increase was primarily due to five newly acquired
consolidated partnerships which contributed approximately $13,810,000 in rental
income. This increase was partially offset by lower rental income received from
properties previously leased by Kmart of $555,000 and lower rental income on
lease renewals or renegotiations of $2,333,000.
Interest Income
Interest income decreased by $311,000 or approximately 9% to $2,972,000
for the year ended December 31, 2003 from $3,283,000 for the year ended December
31, 2002. The decrease was due to the payoff of a loan receivable and overall
lower interest rates on the invested cash balances.
Management Fees
Management fees decreased by $344,000 or approximately 45% to $418,000 for
the year ended December 31, 2003 from $762,000 for the year ended December 31,
2002. The decrease is attributable to fewer properties under management.
Interest Expense
Interest expense decreased by $4,061,000 or approximately 4% to
$102,803,000 for the year ended December 31, 2003 compared to $106,864,000 for
the year ended December 31, 2002. The decrease was primarily due to loan payoffs
of $266,599,000, normal scheduled principal payments of $120,111,000 and
payments on the note payable of $34,110,000 and assumption of debt on a sold
property of $94,918,000, which were only partially offset with proceeds from new
debt of $262,338,000.
Depreciation
Depreciation expense increased by $10,077,000 or approximately 39% to
$36,067,000 for the year ended December 31, 2003 compared to $25,990,000 for the
year ended December 31, 2002. The increase is primarily attributable to changing
the estimated useful lives of the real estate and additional depreciation
expense from five newly acquired consolidated partnerships. A significant
percentage of the increase in depreciation expense relating to the change in
estimated useful lives is offset by a corresponding decrease in minority
interest expense.
35
General and Administrative
General and administrative expenses increased by $2,292,000 or
approximately 25% to $11,386,000 for the year ended December 31, 2003 compared
to $9,094,000 for the year ended December 31, 2002. The increase is the result
of $3,600,000 incurred related to legal settlements. This increase was partially
offset by one-time organizational expenses relating to the formation of your
partnership in 2002.
Amortization Expense
Amortization expense increased by $635,000 or approximately 16% to
$4,730,000 for the year ended December 31, 2003 as compared to $4,095,000 for
the year ended December 31, 2002. The increase in amortization expense is the
result of the refinancing of the Fleet debt which was partially offset by
savings from loans which have been paid off.
Ground Rent
Ground rent expense increased by $56,000 to $3,051,000 for the year ended
December 31, 2003 as compared to $2,995,000 for the year ended December 31,
2002. The increase in ground rent expense is the result of the addition of new
properties in 2003 partially offset by land purchases made in 2003.
State Income Taxes
State income tax expense decreased by $82,000 or approximately 10% to
$758,000 for the year ended December 31, 2003 compared to $840,000 for the year
ended December 31, 2002. The decrease is the result of tax savings in the State
of New Jersey.
Equity in Income from Investments in Limited Partnerships
Equity in income from investments in limited partnerships is the result of
the January 2003 purchase of equity positions in five new partnerships.
Minority Interest Expense
Minority interest expense increased by $7,392,000 or approximately 91% to
$15,509,000 for the year ended December 31, 2003 compared to $8,117,000 for the
year ended December 31, 2002. The increase was the result of minority interests
in the amount of $5,365,000 related to the five newly consolidated partnerships.
The remaining increase of $2,027,000 related to increased profitability at the
previous partially owned partnerships.
Discontinued Operations
During the year ended December 31, 2003, your partnership sold fourteen
properties for a combined net sales price of $156,409,000. Your partnership
recognized a net gain on disposal of these properties of $29,514,000. During the
year ended December 31, 2002, your partnership sold two properties for a
combined net sales price of approximately $3,200,000. Your partnership
recognized a net loss on disposal of these properties of $983,000. The sale and
operations of these properties for all periods presented have been recorded as
discontinued operations in compliance with the provisions of SFAS No. 144.
36
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related notes. In preparing these consolidated financial
statements, management has made its best estimates and judgments of certain
amounts included in the consolidated financial statements, giving due
consideration to materiality. Your partnership does not believe there is a great
likelihood that materially different amounts would be reported related to the
accounting policies described below. However, application of these accounting
policies involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.
Impairment of long-lived assets. At December 31, 2004, your partnership
had $1,032,797,000 of real estate (net) and $27,536,000 of real estate held for
sale (net), which combined, account for approximately 86% of your partnership's
total assets. Buildings and improvements are carried at cost net of adjustments
for depreciation and amortization. The fair values of your partnership's
buildings and improvements are dependent on the performance of the properties.
Your partnership evaluates recoverability of the net carrying value of its
real estate and related assets at least annually, and more often if
circumstances dictate. If there is an indication that the carrying value of a
property might not be recoverable, your partnership prepares an estimate of the
future undiscounted cash flows expected to result from the use of the property
and its eventual disposition, generally over a five-year holding period. In
performing this review, management takes into account, among other things, the
existing occupancy, the expected leasing prospects of the property and the
economic situation in the region where the property is located.
If the sum of the expected future undiscounted cash flows is less than the
carrying amount of the property, your partnership recognizes an impairment loss
and reduces the carrying amount of the asset to its estimated fair value. Fair
value is the amount at which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or
liquidation sale. Management estimates fair value using discounted cash flows or
market comparables, as most appropriate for each property. Independent certified
appraisers are utilized to assist management when warranted. During the years
ended December 31, 2004 and December 31, 2003, your partnership recorded
$13,065,000 and $1,560,000, respectively, in allowances for impairment.
Because the cash flows used to evaluate the recoverability of the assets
and their fair values are based upon projections of future economic events, such
as property occupancy rates, rental rates, operating cost inflation and market
capitalization rates, which are inherently subjective, the amounts ultimately
realized at disposition may differ materially from the net carrying values at
the balance sheet dates. The cash flows and market comparables used in this
process are based on good faith estimates and assumptions developed by
management.
37
Unanticipated events and circumstances may occur, and some assumptions may
not materialize; therefore, actual results may vary from the estimates, and
variances may be material. The Partnership may provide additional write-downs,
which could be material in subsequent years if real estate markets or local
economic conditions change.
Useful lives of long-lived assets. Building and improvements and certain
other long-lived assets are depreciated or amortized over their useful lives.
Depreciation and amortization are computed using the straight-line method over
the useful life of the building and improvements. The cost of properties
represents the initial cost of the properties to your partnership plus
acquisition and closing costs less impairment adjustments.
Recently Issued Accounting Standards. None of the recently issued
accounting standards had any effect on your partnership's consolidated financial
statements.
38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Your partnership has both fixed and variable rate debt, as well as one
interest rate cap. All financial instruments were entered into for other than
trading purposes. A change in interest rates on the fixed rate portion of the
debt portfolio or the interest rate cap impacts the net financial instrument
position, but has no impact on interest incurred or cash flows. A change in
interest rates on the variable portion of the debt portfolio impacts the
interest incurred and cash flows, but does not impact the net financial
instrument position.
The fair value of your partnership's debt, based on discounted cash flows
at the current market conditions and interest rates for the remaining term of
such debt was less than the aggregate carrying amount by approximately
$9,300,000 at December 31, 2004. The change in the fair value of your
partnership's debt as of December 31, 2004 reflects the impact of the T-Two
Partners refinancing affected by your partnership in November 2003.
At December 31, 2004, your partnership had one loan which had a variable
interest rate. The loan which had an outstanding balance of $165.3 million at
December 31, 2004, was obtained in November 2003 and has a three-year term.
Interest on the outstanding balance accrues at a rate equal to, at your
partnership's option, either, (i) LIBOR rate (as defined) plus 450 basis points
or (ii) the bank's prime rate plus 250 basis points. Your partnership purchased
an interest rate cap on the loan so that the interest rate would be capped at
9.5%.
Your partnership elected to pay the loan based on the LIBOR rate. The
following table shows what the annual effect of a change in the LIBOR rate
(2.51% at December 31, 2004) will have on interest expense based upon increases
up to the cap of 9.5% all in interest rate.
Change in LIBOR
(In thousands)
-------------------------------------
1% 2% 2.49%
-- -- -----
Additional interest expense $1,653 $3,307 $4,117
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements" under "ITEM 15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES"
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
40
ITEM 9A. CONTROLS AND PROCEDURES
In accordance with Exchange Act Rules 13a-15 and 15d-15, your partnership
carried out an evaluation, under the supervision and with the participation of
the Chief Executive Officer and Chief Financial Officer of your general
partner's manager, as well as other key members of your partnership's
management, of the effectiveness of your partnership's disclosure controls and
procedures as of the end of the period covered by this report. Based on that
evaluation, your partnership's Chief Executive Officer and Chief Financial
Officer concluded that your partnership's disclosure controls and procedures
were effective, as of the end of the period covered by this report, to provide
reasonable assurance that information required to be disclosed in your
partnership's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
No change occurred in your partnership's internal controls concerning
financial reporting during the fourth quarter of the fiscal year ended December
31, 2004 that has materially affected, or is reasonably likely to materially
affect, your partnership's internal controls over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
41
PART III
ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The general partner of your partnership is MLP GP LLC, a Delaware limited
liability company, that is owned by affiliates of Vornado Realty Trust and
executive officers of Winthrop Financial Associates. In addition, Winthrop
Financial Associates performs asset management services for your partnership.
MLP GP LLC has no assets, liabilities or equity and does not have an equity
interest in your partnership.
The manager of your partnership's general partner is Newkirk MLP Corp.,
the principal officers of which are Michael L. Ashner, Chief Executive Officer;
Peter Braverman, Executive Vice President; Thomas C. Staples, Chief Financial
Officer; and Carolyn Tiffany, Chief Operating Officer. Such persons also serve
in those capacities for Winthrop Financial Associates. These officers manage and
control the day-to-day operations of your partnership on behalf of your
partnership's general partner. However, significant transactions, whether by
your partnership or any subsidiary partnership, such as sales, acquisitions,
debt refinancings and mergers, require the consent of the members of the general
partner under the limited liability company agreement of the general partner.
The principal occupations and relevant affiliations of the officers of
your partnership's general partner are as follows:
Michael L. Ashner. Mr. Ashner, age 52, serves as the Chief Executive
Officer of Newkirk MLP Corp., the manager of the general partner of your
partnership, a position he has held since January 2002 as well as the Chief
Executive Officer of Winthrop Financial Associates, a Limited Partnership and
its affiliates ("WFA"), a position he has held since January 1996. Mr. Ashner
has been the Chief Executive Officer of First Union Real Estate Equity and
Mortgage Investments, a publicly traded real estate investment trust which we
refer to as First Union, since December 31, 2003 and Chairman since April 2004.
Mr. Ashner has also served as the Chief Executive Officer of Shelbourne
Properties I, Inc ("Shelbourne I"), Shelbourne Properties II, Inc. ("Shelbourne
II") and Shelbourne Properties III, Inc. ("Shelbourne III"), three separate
publicly traded real estate investment trusts listed on the American Stock
Exchange that were recently liquidated. Since 1981, Mr. Ashner has been Chairman
of Exeter Capital Corporation, a firm that has organized and administered real
estate limited partnerships. Mr. Ashner also currently serves on the Boards of
Directors of the following publicly traded companies: GB Holdings, Inc and
Atlantic Entertainment Holdings, Inc., hotel and casino operators, and NBTY
Inc., a manufacturer, marketer and retailer of nutritional supplements.
Peter Braverman. Mr. Braverman, age 53, has served as the Executive Vice
President of Newkirk MLP Corp. since January 2002. Mr. Braverman has also served
as the Executive Vice President of WFA since January 1996. Mr. Braverman has
been the President of First Union since August 2004 and was the Executive Vice
President of First Union from January 2004 to such date. Mr. Braverman has also
served as the Executive Vice President of Shelbourne Properties I, II and III.
Thomas C. Staples. Mr. Staples, age 49, has been the Chief Financial
Officer of Newkirk MLP Corp. since January 2002. Mr. Staples has been with WFA
since 1995 and has served as its Chief Financial Officer since January 1999. Mr.
Staples has also been the Chief Financial Officer of First Union since January
2004. Since August 2002, Mr. Staples has also served as Assistant Treasurer of
Shelbourne I, Shelbourne II and Shelbourne III. Mr. Staples is a certified
public accountant.
42
Carolyn Tiffany. Ms. Tiffany, age 38, has been the Chief Operating Officer
and Secretary of Newkirk MLP Corp. since January 2002 and First Union since
January 2004. Since December 1997, Ms. Tiffany has served as the Chief Operating
Officer of WFA. Ms. Tiffany also served as Vice President, Treasurer, Secretary
and Chief Financial Officer of Shelbourne I, Shelbourne II and Shelbourne III.
One or more of the above persons are also directors or officers of a
general partner (or general partners of a general partner) of a number of
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section15(d) of such Act.
Except as indicated above, neither your partnership nor your general
partner or its manager has any significant employees within the meaning of Item
401(c) of Regulation S-K. There are no family relationships among the officers
and directors of the general partner.
Compliance with Section 16(a) of the Exchange Act.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to your partnership under Rule 16a-34(e) during your partnership's
most recent fiscal year and Forms 5 and amendments thereto furnished to your
partnership with respect to its most recent fiscal year, your partnership is not
aware of any manager, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in your partnership that failed to
file on a timely basis, as disclosed in the above Forms, reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal years.
Code of Ethics
Your partnership has adopted a Code of Ethics that applies to the chief
executive officer and chief financial officer of the manager of your
partnership's general partner, who perform functions similar to principal
executive officer and principal financial officer, respectively, for the
partnership. A copy of the Code of Ethics will be provided without charge to any
person who requests it by writing to the attention of Thomas Staples at the
address set forth on the cover page to this Form 10-K.
Your partnership has no directors and is not a "listed-issuer" under Item
401 to Regulation S-K. Accordingly, your partnership does not have an audit
committee or an audit committee financial expert under Item 401 of Regulation
S-K.
43
ITEM 11. EXECUTIVE COMPENSATION
Your partnership has no employees. Winthrop Financial Associates, an
affiliate of your general partner and of the Newkirk Group, provides the
services of some of its employees, including the executive officers of the
manager of your partnership's general partner, to perform asset management
services. Winthrop Financial Associates receives an annual fee which was
originally fixed at $1,800,000 (subject to adjustment based on increases in the
CPI) for its services to your partnership and 15 other affiliated partnerships.
The CPI adjustment for 2004 was 2.3% bringing the fee to $1,881,952. See "ITEM
1. BUSINESS - Employees."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTER
Security Ownership.
The following table sets forth the number of units held as of March 24,
2005 by (i) each person that, to our knowledge, beneficially owns more than 5%
of the total number of units, (ii) each officer or director of Newkirk MLP
Corp., the manager of your partnership's general partner, and (iii) the
directors and executive officers of Newkirk MLP Corp. as a group.
Name and Address of Percent of
Beneficial Owner Number of Units Total Units
- ---------------- --------------- -----------
Michael L. Ashner 3,657,210 (2) (3) (5) 58.36%
Apollo Real Estate Investment Fund III, L.P.
Apollo Real Estate Advisors III, L.P.
Apollo Real Estate Management III, L.P. (1)
Vornado Realty Trust 1,422,400 (3) (4) (5) 22.7%
888 Seventh Avenue
New York, NY 10019
Peter Braverman 0 --
Thomas Staples 0 --
Carolyn Tiffany 0 --
All executive officers and directors 3,657,230 (2) (3) (5) 58.36%
as a group (4 individuals)
- ----------
(1) The address for Apollo Real Estate Investment Fund III, L.P. ("Apollo
Fund"), Apollo Real Estate Advisors III, L.P. ("Apollo Advisors"), and
Apollo Real Estate Management III, L.P. ("Apollo Management") is 2
Manhattanville Road, Purchase, New York 10577. The address for Mr. Ashner
and Mr. Braverman is Two Jericho Plaza, Wing A, Suite 111, Jericho, New
York 11753. The address for Mr. Staples and Ms. Tiffany is 7 Bulfinch
Place, Suite 500, Boston, Massachusetts 02114.
44
(2) Comprised of units that are held by Newkirk RE Holdings LLC, Newkirk NL
Holdings LLC, Newkirk Tender Holdings LLC, Marbax Venture LLC, AP-WIN
Associates, L.L.C., AP-III WEM WIN Tender LLC and AP-IV WEM WIN Tender
LLC, each of which is directly or indirectly controlled by either
WEM-Brynmawr Associates LLC, WEM Fund 1998 Limited Partnership or WEM-WIN
Tender Associates (the "WEM Entities") and by Apollo Fund. For purposes of
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act"), as
the sole manager of each of the WEM Entities, Mr. Ashner may be deemed to
be the beneficial owner of all units beneficially owned by the WEM
Entities. In addition, for purposes of Section 13 of the Exchange Act, as
the general partner of Apollo Fund, Apollo Advisors may be deemed to be
the beneficial owner of all units beneficially owned by Apollo Fund, and
all such units may be deemed to be beneficially owned by Apollo Management
as the day-to-day manager of Apollo Fund.
(3) Due to the relationships between the individual and entities referred to
on this chart and in notes (2) and (4) thereto, such individual and
entities may be deemed to constitute a "group" for purposes of Section
13d-3 of the Exchange Act.
(4) Comprised of units that are held by VNK Corp., Vornado Newkirk L.L.C. and
Vornado Realty L.P., each of which is controlled by Vornado Realty Trust.
(5) Pursuant to the terms of a court-approved settlement of an action, a total
of approximately 61,220 units will be transferred by members of the
Newkirk Group to other unitholders. Following such transfer the number of
units beneficially owned by Mr. Ashner and the Apollo entities, Vornado
Realty Trust and all executive officers and directors as a group will be
reduced to approximately 3,608,234 (57.58%), 1,410,156 (22.50%) and
3,608,234 (57.58%), respectively.
Changes in Control.
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.
Securities Authorized for Issuance under Equity Compensation Plans.
The partnership has no securities authorized for issuance under any equity
compensation plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF LIMITED PARTNERSHIP INTERESTS
In April 2004, your partnership exercised an option to purchase from the
Newkirk Group additional limited partnership interests in two partnerships that
own net leased properties in exchange for 15,539 units. Additional information
on this transaction is contained in Item 7 of Amendment No. 3 to our Form 10
under the heading "Acquisition of Limited Partnership Interests" which is
incorporated herein by reference.
MORTGAGE INDEBTEDNESS AND OTHER INDEBTEDNESS
Members of the Newkirk Group own approximately 55% of the second mortgage
indebtedness encumbering properties owned by your partnership in El Segundo,
California. During 2004, your partnership incurred approximately $715,000 of
interest expense on this mortgage indebtedness, $66,000 of which was paid to
45
members of the Newkirk Group and the balance of which was added to the principal
balance of the mortgage indebtedness. At December 31, 2004, your partnership
owed approximately $15,232,000 on the second mortgage to members of the Newkirk
Group.
T-TWO PARTNERS
See "ITEM 1. BUSINESS - Description of Assets - The Subordinate Mortgage
Interests" for a description of T-Two Partners, its ownership of second mortgage
loans on your partnership's properties. During 2004, your partnership incurred
approximately $25,041,000 of interest expense payable to T-Two Partners,
$20,058,500 of which was applied to make payments on the T-Two Loan that is
guaranteed by your partnership. T-Two Partners is owned by NK-CR Holdings and
Holdings Subsidiary, both of which are owned by members of the Newkirk Group.
MORTGAGE ON PROPERTY OF AFFILIATE
See "ITEM 1. BUSINESS - Description of Assets - First Mortgage Interests"
for information on a securitized pool of first mortgages held by your
partnership that is partially secured by properties owned by partnerships that
are controlled by affiliates of your partnership's general partner.
ASSET MANAGEMENT AGREEMENT
See "ITEM 1. BUSINESS - Description of Assets - The Management Company"
for a description of fees paid to Winthrop Financial Associates by Newkirk Asset
Management LLC for services rendered for your partnership and certain other
partnerships.
SALE OF PROPERTY
See "ITEM 2. PROPERTIES - Property Matters" for information on the sale in
July 2004 of 25 properties to Vornado, an affiliate of your partnership's
general partner.
46
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees for professional services rendered by Imowitz, Koenig &
Co. during 2004 and 2003 were as follows:
Audit Fees. Fees for the audit of your partnership's annual financial
statements, the reviews of the financial statements in the Partnership's Forms
10-Q, the review of the financial statements in the Partnership's Form 10 and
amendments thereto, and other services in connection with statutory and
regulatory filings and engagements were $330,000 and $338,000 in 2004 and 2003,
respectively.
Audit Related Fees. The aggregate audit-related fees billed during 2004
and 2003 for assurance and related services that were reasonably related to the
performance of the audit or review of your partnership's financial statements
and not reported under "Audit Fees" were in the amount of $0 and $15,000,
respectively, billed by Imowitz, Koenig & Co. and covered agreed upon procedures
related to a bank financing in 2003.
Tax Fees. Fees for tax services relating to tax compliance were $241,000
and $366,000 in 2004 and 2003, respectively.
All Other Fees. None.
47
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
1. See "Index to Financial Statements" below.
2. The following financial statement schedule should be read in
conjunction with the financial statements included in Item 8
of this Annual Report on Form 10-K.
III - Real Estate and Accumulated Depreciation as of December
31, 2004.
Schedules other than those listed above are omitted because
they are not applicable or the information required is
included in the consolidated financial statements or the notes
thereto.
(b) Exhibits
Exhibit No. Description
- ----------- -----------
*2.1 Agreement and Plan of Merger between the Newkirk Master
Limited Partnership and each of the Merger Partnerships set
forth on Schedule A, dated December 6, 2001.
*2.2 Assignment and Assumption Agreement by and between Newkirk
Stock LLC, The Newkirk Master Limited Partnership, Newkirk NL
Holdings LLC and VNK Corp. dated as of December 26, 2001.
*2.3 Assignment and Assumption Agreement by and between Newkirk
Eastgar LLC, Newkirk Partner Interest LLC, The Newkirk Master
Limited Partnership and Newkirk MLP Unit LLC dated as of
December 26, 2001.
*2.4 Assignment and Assumption Agreement by and between Vornado
Realty L.P., Vornado Newkirk L.L.C., The Newkirk Master
Limited Partnership, and Newkirk MLP Unit LLC, dated as of
December 26, 2001.
*2.5 Assignment and Assumption Agreement between Newkirk RE
Associates LLC, The Newkirk Master Limited Partnership,
Newkirk RE Holdings and Vornado Newkirk L.L.C. dated as of
December 26, 2001.
*2.6 Assignment and Assumption Agreement by and between Newkirk
Associates LLC, The Newkirk Master Limited Partnership,
Newkirk NL Holdings LLC and Vornado Newkirk L.L.C. dated as of
December 26, 2001.
*2.7 Agreement and Plan of Merger by and between The Newkirk Master
Limited Partnership, Lanmar Associates Limited Partnership and
Newkirk Lanmar L.P., dated as of December 6, 2001.
*3 Certificate of Limited Partnership of the Newkirk Master
Limited Partnership.
*4.1 Agreement of Limited Partnership of The Newkirk Master Limited
Partnership, by and among MLP GP LLC, Newkirk Manager Corp.
and all other persons who shall, pursuant to the Exchange or
otherwise become limited partners of the Partnership, dated as
of October 23, 2001.
*4.2 Additional provisions incorporated by reference into the
Agreement of Limited Partnership of the Newkirk Master Limited
Partnership.
*4.3 Limited Liability Agreement of MLP GP LLC.
48
Exhibit No. Description
- ----------- -----------
*10.1 Amended and Restated Cash Participation Agreement, dated as of
January 1, 2002, by and among Newkirk GP LLC, Newkirk Capital
LLC, Newkirk RE Associates LLC, Newkirk Stock LLC, Newkirk
Associates LLC, Vornado Realty L.P., Vornado Newkirk L.L.C.,
VNK Corp., on the one hand, and Administrator LLC, as agent
for itself and as agent for the persons listed on Schedule A
thereto.
*10.2 Amended and Restated Pledge Agreement, dated as of January 1,
2002, by and between The Newkirk Master Limited Partnership
and Administrator LLC, for itself and as agent for the parties
listed on Schedule A thereto.
*10.3 Put-Call Option Agreement, dated as of January 1, 2002, by and
among The Newkirk Master Limited Partnership,, NK-CR Holdings
LLC and Holdings Subsidiary LLC.
*10.4 Asset Management Agreement dated as of January 1, 2002, by and
between Newkirk Asset Management LLC and Winthrop Financial
Associates.
*10.5 Loan Agreement, dated January 30, 2002, among The Newkirk
Master Limited Partnership and Fleet National Bank and the
lenders party thereto.
*10.6 Promissory Note, dated as of January 30, 2002, by The Newkirk
Master Limited Partnership in favor of Fleet National Bank.
*10.7 Security Agreement, dated as of January 30, 2002, between The
Newkirk Master Limited Partnership and Fleet National Bank.
*10.8 Ownership Interest Pledge and Security Agreement, dated as of
January 30, 2002, from The Newkirk Master Limited Partnership,
Newkirk GP Holding LLC and General Partners of Participating
Limited Partnerships to Fleet National Bank.
*10.9 Ownership Interest Pledge and Security Agreement, dated as of
January 30, 2002, from The Newkirk Master Limited Partnership
to Fleet National Bank.
*10.10 Ownership Interest Pledge and Security Agreement, dated as of
January 30, 2002, from The Newkirk Master Limited Partnership
to Fleet National Bank.
*10.11 Ownership Interest Pledge and Security Agreement, dated as of
January 30, 2002, from The Newkirk Master Limited Partnership
to Fleet National Bank.
**10.12 Indemnity Agreement, dated as of January 30, 2002, among
Newkirk NL Holdings, LLC, Newkirk MLP Corp., Vornado Realty,
L.P., Vornado Newkirk, LLC, VNK Corp., Apollo Real Estate Fund
III, L.P., The Newkirk Master Limited Partnership and Fleet
National Bank.
***10.13 Master Loan Agreement, dated November 24,2003, among The
Newkirk Master Limited Partnership, T-Two Partners, L.P., and
Fleet National Bank and the lender's party thereto.
***10.14 Master Promissory Note, dated as of November 24, 2003, by The
Newkirk Master Limited Partnership in favor of Fleet National
Bank.
***10.15 Security Agreement, dated as of November 24, 2003, between The
Newkirk Master Limited Partnership and Fleet National Bank.
***10.16 Ownership Interest Pledge and Security Agreement, dated as of
November 24, 2003, from The Newkirk Master Limited
Partnership, Newkirk GP Holding LLC and General Partners of
certain Limited Partnerships to Fleet National Bank.
49
Exhibit No. Description
- ----------- -----------
***10.17 Ownership Interest Pledge and Security Agreement (GMAC
Partnerships), dated as of November 24, 2003, from The Newkirk
Master Limited Partnership to Fleet National Bank.
***10.18 Ownership Interest Pledge and Security Agreement
(Subsidiaries), dated as of November 24, 2003, from The
Newkirk Master Limited Partnership to Fleet National Bank.
***10.19 Ownership Interest Pledge and Security Agreement (Finco and
Capital), dated as of November 24, 2003, from The Newkirk
Master Limited Partnership to Fleet National Bank.
***10.20 Amended and Restated Indemnity Agreement, dated as of November
24, 2003, among Newkirk NL Holdings, LLC, Newkirk MLP Corp.,
Vornado Realty, L.P., Vornado Newkirk, LLC, VNK Corp., Apollo
Real Estate Fund III, L.P., The Newkirk Master Limited
Partnership and Fleet National Bank.
***10.21 Guaranty from The Newkirk Master Limited Partnership to Fleet
National Bank.
****10.22 Amended Stipulation of Settlement of Albert McCall, et. al.,
v. Newkirk Capital LLC, et al.
*****14 Code of Ethics.
****16 Letter from Deloitte & Touche LLP.
*21 List of subsidiaries of the Registrant.
31.1 Certificates of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certificates of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's Certificate, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Chief Financial Officer's Certificate, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
- ----------
* Previously filed as an Exhibit to Form 10 filed on April 30, 2003.
** Previously filed as an Exhibit to Amendment No. 1 to Form 10 filed on
September 10, 2003.
*** Incorporated by reference to Exhibits filed with Form 8-K dated
November 24, 2003.
**** Previously filed as an Exhibit to Amendment No. 2 to Form 10 filed on
February 12, 2004.
***** Previously filed as an Exhibit to Form 10-K for the year ended December
31, 2003, filed on April 5, 2004.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2005
THE NEWKIRK MASTER LIMITED PARTNERSHIP
By: MLP GP LLC, its General Partner
By: Newkirk MLP Corp., its Manager
By: /s/ Michael L. Ashner
----------------------------------
Name: Michael L. Ashner
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
Signature Title Date
--------- ----- ----
By: /s/ Michael L. Ashner Chief Executive Officer of the Manager of the March 29, 2005
-------------------------- General Partner of the Registrant
Michael L. Ashner
By: /s/ Thomas Staples Chief Financial Officer of the Manager of the March 29, 2005
-------------------------- General Partner of the Registrant
Thomas Staples
51
Item 8. Financial Statements and Supplementary Data
THE NEWKIRK MASTER LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
Page
----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 F - 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 2004 and 2003 F - 2
Consolidated Statements of Operations for the Years Ended December 31, 2004,
2003 and 2002 F - 3
Consolidated Statements of Partners' Equity for the Years Ended December 31, 2004,
2003 and 2002 F - 4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004,
2003 and 2002 F - 5 to F - 8
Notes to Consolidated Financial Statements F - 9 to F - 30
Report of Independent Registered Public Accounting Firm
To the Partners of
The Newkirk Master Limited Partnership
We have audited the accompanying consolidated balance sheets of The Newkirk
Master Limited Partnership (a Delaware limited partnership) (the "Partnership")
as of December 31, 2004 and 2003 and the related consolidated statements of
operations, partners' equity and cash flows for each of the years in the
three-year period ended December 31, 2004. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Partnership as
of December 31, 2004 and 2003, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.
In connection with our audits of the consolidated financial statements referred
to above, we audited the financial statement schedule listed under Item 15. In
our opinion, this financial statement schedule, when considered in relation to
the consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information stated therein.
/s/ Imowitz Koenig & Co., LLP
New York, New York
January 31, 2005
F-1
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003
(In thousands, except unit data)
December 31,
2004 2003
----------- -----------
ASSETS
Real estate investments:
Land $ 32,172 $ 37,674
Land estates 43,997 45,204
Buildings and improvements 1,548,660 1,619,199
----------- -----------
Total real estate investments 1,624,829 1,702,077
Less accumulated depreciation and amortization (592,032) (572,840)
----------- -----------
Real estate investments, net 1,032,797 1,129,237
Real estate held for sale, net of accumulated depreciation of
$10,169 and $19,692 27,536 59,481
Cash and cash equivalents, of which $8,216 and $5,148 is restricted 29,533 37,851
Receivables and deferred rental income (including $8,687 and $8,491
from related parties) 95,713 97,845
Equity investments in limited partnerships 11,107 8,492
Deferred costs, net of accumulated amortization of $34,991 and $29,638 15,072 22,993
Other assets (including $10,111 and $9,800 from related parties) 25,127 27,240
Other assets of discontinued operations 244 955
----------- -----------
Total Assets $ 1,237,129 $ 1,384,094
=========== ===========
LIABILITIES, MINORITY INTERESTS AND EQUITY
Liabilities:
Mortgage notes and accrued interest payable (including $15,232 and $ 489,955 $ 615,993
$14,583 to a related party)
Note payable 165,328 208,356
Contract right mortgage notes and accrued interest payable
(including $249,447 and $296,035 to related parties) 354,197 401,132
Accounts payable and accrued expenses 3,758 15,427
Liabilities of discontinued operations 17,497 35,997
----------- -----------
Total Liabilities 1,030,735 1,276,905
Contingencies
Minority interests (27,665) (39,822)
Partners' equity (6,314,458 and 6,319,391 limited partnership units outstanding
at December 31, 2004 and 2003, respectively) 234,059 147,011
----------- -----------
Total Liabilities, Minority Interests and Equity $ 1,237,129 $ 1,384,094
=========== ===========
See Notes to Consolidated Financial Statements.
F-2
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except unit and per unit data)
December 31, December 31, December 31,
2004 2003 2002
------------ ------------ ------------
Revenue:
Rental income $ 246,062 $ 258,763 $ 247,841
Interest income 3,134 2,972 3,283
Management fees 332 418 762
----------- ----------- -----------
Total revenue 249,528 262,153 251,886
----------- ----------- -----------
Expenses:
Interest (including $23,511, $11,306 and $8,620 to
related parties, respectively) 88,971 102,803 106,864
Depreciation 36,044 36,067 25,990
General and administrative (including $1,882, $1,843 and
$1,800 to a related party, respectively) 6,333 11,386 9,094
Amortization 2,796 4,730 4,095
Ground rent 3,067 3,051 2,995
State income taxes 1,379 758 840
----------- ----------- -----------
Total expenses 138,590 158,795 149,878
----------- ----------- -----------
Income from continuing operations before equity in income
from investments in limited partnerships and minority interest 110,938 103,358 102,008
Equity in income from investments in limited partnerships 2,662 2,054 --
Minority interest (15,658) (15,509) (8,117)
----------- ----------- -----------
Income from continuing operations 97,942 89,903 93,891
----------- ----------- -----------
Discontinued operations:
(Loss) income from discontinued operations (1,191) 32,079 29,954
Impairment loss (13,065) (1,560) --
Gain (loss) from disposal of real estate 49,350 29,514 (983)
----------- ----------- -----------
Income from discontinued operations 35,094 60,033 28,971
----------- ----------- -----------
Net income $ 133,036 $ 149,936 $ 122,862
=========== =========== ===========
Income from continuing operations per limited partnership unit $ 15.50 $ 14.20 $ 15.34
Income from discontinued operations per limited partnership unit 5.56 9.49 4.74
----------- ----------- -----------
Net income per limited partnership unit $ 21.06 $ 23.69 $ 20.08
=========== =========== ===========
Distributions per limited partnership unit $ 7.30 $ 5.52 $ 32.16
=========== =========== ===========
Weighted average limited partnership units 6,317,753 6,329,204 6,119,942
=========== =========== ===========
See Notes to Consolidated Financial Statements.
F-3
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands, except unit data)
Limited
Partnership Partners'
Units Equity
----------- ----------
Equity contributions 6,121,990 $ 98,893
Distributions -- (196,880)
Limited partner buyouts (5,412) (182)
Net income -- 122,862
---------- ----------
Balance at December 31, 2002 6,116,578 24,693
Equity contributions 317,813 11,050
Distributions -- (34,731)
Limited partner buyouts (115,000) (3,937)
Net income -- 149,936
---------- ----------
Balance at December 31, 2003 6,319,391 147,011
Equity contributions 15,539 836
Distributions -- (46,106)
Limited partner buyouts (20,472) (718)
Net income -- 133,036
---------- ----------
Balance at December 31, 2004 6,314,458 $ 234,059
========== ==========
See Notes to Consolidated Financial Statements.
F-4
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands)
For the Years Ended December 31,
2004 2003 2002
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing Operations:
Income from continuing operations $ 97,942 $ 89,903 $ 93,891
Adjustments to reconcile income from continuing
operations to net cash provided by continuing operations:
Amortization of deferred costs and land estates 10,185 13,637 9,481
Depreciation expense 36,044 36,067 25,990
Net (gain) loss from early extinguishment of debt (10) 28 (5,729)
Minority interest expense 15,658 15,509 8,117
Equity in income of limited partnerships (2,662) (2,054) --
Changes in operating assets and liabilities:
Decrease (increase) in receivables and deferred rental income 2,132 (14,325) (1,366)
(Decrease) increase in accounts payable and accrued expenses (5,238) 3,344 (14,521)
Decrease in accrued interest-mortgages
and contract rights (9,352) (12,134) (14,635)
Decrease in other assets 1,460 1,871 5,044
--------- --------- ---------
Net cash provided by continuing operations 146,159 131,846 106,272
--------- --------- ---------
Discontinued Operations:
Income from discontinued operations 35,094 60,033 28,971
Adjustments to reconcile income from discontinued
operations to net cash provided by discontinued
operations:
Amortization of deferred costs and land estates 35 252 338
Depreciation expense 779 4,272 8,033
Net loss (gain) from early extinguishment of debt 6,279 (8,733) (553)
(Gain) loss on disposal of real estate (49,350) (29,514) 983
Minority interest expense 236 781 --
Impairment loss 13,065 1,560 --
Changes in assets and liabilities:
Net decrease in assets and liabilities of discontinued
operations (814) (2,640) (552)
--------- --------- ---------
Net cash provided by discontinued operations 5,324 26,011 37,220
--------- --------- ---------
Net cash provided by operating activities 151,483 157,857 143,492
--------- --------- ---------
(Continued)
See Notes to Consolidated Financial Statements.
F-5
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(In thousands)
(Continued)
For the Years Ended December 31,
2004 2003 2002
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash related to formation of partnership $ -- $ -- $ 10,776
Land additions (2,557) (2,518) (2,904)
Net proceeds from disposal of real estate 98,771 61,491 3,208
Distributions from limited partnership interests 389 492 --
Cash related to previously unconsolidated limited partnerships -- 650 --
Investments in limited partnership interests (1,111) (1,307) --
--------- --------- ---------
Net cash provided by investing activities 95,492 58,808 11,080
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Satisfaction of notes payable -- (253,281) (24,153)
Satisfaction of mortgage notes (12,180) (7,265) (115,537)
Satisfaction of contract right mortgage notes and accrued interest (36,170) (6,053) (52,619)
Principal payments of mortgage notes (109,776) (119,541) (104,640)
Principal payments of notes payable (43,028) (34,110) (20,123)
Principal payments of contract right mortgage notes (9) (570) (1,090)
Proceeds from new debt -- 262,338 411,403
Mortgage prepayment penalties (326) (400) (4,710)
Distributions to partners (46,106) (34,731) (196,880)
Limited partner redemptions (718) (3,937) (182)
Distributions to minority interests (7,147) (6,166) (1,693)
Deferred costs 167 (8,550) (10,896)
--------- --------- ---------
Net cash used in financing activities (255,293) (212,266) (121,120)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (8,318) 4,399 33,452
Cash and Cash Equivalents at Beginning of Year 37,851 33,452 --
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 29,533 $ 37,851 $ 33,452
========= ========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for state income taxes $ 1,353 $ 1,072 $ 542
========= ========= =========
Cash paid for interest $ 104,021 $ 124,342 $ 174,488
========= ========= =========
See Notes to Consolidated Financial Statements.
F-6
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(CONTINUED)
Supplemental Information
In January 2003, balances related to the issuance of 317,813 Units in the
Partnership for the various assets contributed to the Partnership were as
follows:
2003
-----------
(In thousands)
Real estate investments, net $ 36,836
Cash and cash equivalents 382
Receivables 3,557
Deferred costs, net 1,512
Equity investments in limited partnerships 6,335
Mortgage notes payable (61,057)
Accrued interest payable (1,134)
Accounts payable and accrued expenses (68)
Minority interests 24,687
-----------
Partners' equity $ 11,050
===========
In March 2003, in connection with the disposal of real estate, the purchaser of
a property assumed $94,918,000 of the Partnership's debt.
In January 2004, in connection with the sale of a property, the purchaser of the
property assumed $28,460,000 of associated Partnership debt.
In April 2004, the Partnership issued 15,539 units in the Partnership to holders
of minority interests in two partially owned consolidated partnerships.
See Notes to Consolidated Financial Statements.
F-7
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(CONTINUED)
Supplemental Information (Continued)
The combined financial statements of Newkirk RE Holdings, LLC and Newkirk NL
Holdings, LLC are considered the acquirer and predecessor of the business
transferred to the Partnership because the members of the combined entity
acquired majority control of the businesses transferred to the Partnership.
As of January 1, 2002, balances related to the exchange of Units in the
Partnership for the various assets of the combined entity and other contributing
unit holders were as follows:
2002
------------
(In thousands)
Real estate, net $ 1,233,756
Real estate held for sale 113,982
Cash and cash equivalents 10,776
Receivables 78,376
Deferred costs, net 19,957
Other assets 34,377
Other assets of discontinued operations 880
Mortgage notes payable (776,633)
Contract right mortgage notes payable (325,264)
Accrued interest (188,567)
Accounts payable and accrued expenses (15,189)
Liabilities of discontinued operations (123,078)
Minority interest 35,520
------------
Partners' equity $ 98,893
============
See Notes to Consolidated Financial Statements.
F-8
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND BUSINESS
The Newkirk Master Limited Partnership (the "Partnership") was organized
in October 2001 as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act. The Partnership's term is perpetual
unless it is otherwise dissolved in accordance with the terms of the
Partnership's partnership agreement. The Partnership commenced operations
on January 1, 2002 following the completion of a transaction (the
"Exchange") involving the merger into wholly-owned subsidiaries of the
Partnership of 90 limited partnerships, each of which owned commercial
properties (the "Newkirk Partnerships"), and the acquisition by the
Partnership of various assets, including those related to the management
or capital structure of the Newkirk Partnerships. The Partnership was
formed to facilitate and consummate the Exchange and for the purpose of
directly or indirectly (whether through a subsidiary or otherwise),
investing in, acquiring, owning, holding, managing, operating, selling,
exchanging and otherwise disposing of interests in real estate and assets
related to real estate and to engage in activities and transactions as the
general partner deems necessary or advisable to promote the business of
the Partnership.
As part of the Exchange, each Newkirk Partnership was merged with and into
a separate newly-formed limited partnership that is wholly-owned by the
Partnership; the Newkirk Partnerships ceased to exist following completion
of the merger. Each Newkirk Partnership owned one or more commercial
properties that are generally net leased to a single tenant. As a result
of the Exchange, the Partnership owns the properties and other assets
formerly owned by the Newkirk Partnerships, subject to the liabilities of
such partnerships. In addition, as part of the Exchange, the "Newkirk
Group" contributed certain assets to the Partnership. The Newkirk Group,
which managed the Newkirk Partnerships, is comprised of certain affiliates
of Apollo Real Estate Fund III, L.P., ("Apollo"), Vornado Realty Trust
("Vornado") and senior executives of Winthrop Financial Associates, A
Limited Partnership ("WFA"). At December 31, 2004, the Newkirk Group owned
approximately 79% of the Partnership.
The limited partners of the Partnership consist of former limited partners
of the Newkirk Partnerships, former limited partners that elected to
participate in the Exchange of an additional limited partnership that was
affiliated with the Newkirk Partnerships and affiliates of the Newkirk
Group. The general partner of the Partnership is MLP GP LLC, ("General
Partner"), a Delaware limited liability company owned by affiliates of the
Newkirk Group. MLP GP LLC does not receive any compensation for managing
the Partnership. MLP GP LLC has no assets, liabilities or equity and has
no economic interest in the Partnership. WFA,
F-9
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND BUSINESS (Continued)
which performed asset management services for the Newkirk Partnerships,
performs asset management services for the Partnership.
At December 31, 2004, the Partnership owned the following:
(i) Net-Leased Properties:
Ownership of 210 commercial properties located throughout the United
States of America, substantially all of which are net-leased to a single
tenant.
(ii) Other Assets:
(a) Limited partnership interests in (i) seven consolidated
partnerships ("Consolidated Partnerships") which represent
between 32.1% and 68.68% and (ii) nine unconsolidated
partnerships ("Unconsolidated Partnerships") which represent
between .7% and 45.29%.
(b) The Partnership or an affiliate of the General Partner of the
Partnership control general partnership interests in (i) seven
Consolidated Partnerships, (ii) nine Unconsolidated
Partnerships and (iii) five Other Partnerships that own
commercial net leased properties. Other Partnerships are
partnerships that were controlled by the Newkirk Group and
were not merged into the Partnership.
(c) A 50.01% interest in Newkirk Capital LLC whose wholly-owned
subsidiary, Newkirk Asset Management LLC, provides asset
management and other services to the Partnership and the Other
Partnerships. Prior to the Exchange, Newkirk Asset Management
LLC provided these services to the Newkirk Partnerships and
the Other Partnerships. Newkirk Capital LLC and Newkirk Asset
Management LLC have retained WFA to perform certain of the
services provided to the Partnership and the Other
Partnerships. The fees payable to Newkirk Asset Management LLC
and Newkirk Capital LLC are retained by the Partnership.
(d) Newkirk Finco LLC, which holds a note receivable from
Administrator LLC, a 49.99% owner of Newkirk Capital LLC,
valued at $11.4 million at December 31, 2004.
F-10
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND BUSINESS (Continued)
(e) The right to acquire T-Two Partners, L.P., ("T-Two Partners")
from its current owners, affiliates of the Newkirk Group.
(f) Land interests comprised of ground leases, remainder interests
or the right to acquire remainder interests in the land
underlying certain properties owned by the Partnership and
other real estate limited partnerships.
(g) An interest in NK-Leyden Loan, L.P. and NK-Dautec Loan, L.P.,
each of which hold an unsecured note of the Partnership.
(h) Interests in entities which hold a securitized pool of 29
first mortgage loans encumbering 61 Partnership properties and
1 property owned by another limited partnership.
In 2004, 2003 and 2002, the Partnership acquired from its limited partners
20,472, 115,000 and 5,412, respectively, of its units of limited
partnership interest.
F-11
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements present the
consolidated financial position, results of operations and cash flows of
the Partnership and its controlled subsidiaries. All significant
intercompany transactions, receivables and payables have been eliminated
in consolidation. Minority interests relate to the interest in certain
partnerships not owned by the Partnership. The Partnership accounts for
its investments in partnerships and joint ventures, in which it does not
have a controlling interest, using the equity method of accounting. Equity
investments are recorded initially at cost and subsequently adjusted for
the Partnership's share of the net income or loss and cash contributions
to and distributions from these partnerships and joint ventures.
The Partnership has accounted for the Exchange as an exchange of equity
interests between entities under common control and initially recognized
the assets and liabilities contributed at the carrying amounts of the
contributing entities.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
Real Estate
Investments in real estate are stated at historical cost basis less
accumulated depreciation and amortization. Depreciation of buildings and
improvements is computed on a straight-line basis over their estimated
useful lives, which range from fourteen to forty years. Amortization of
the land estates is computed on a straight-line basis over their estimated
useful lives, which range from twenty-two to thirty years.
During 2003, the Partnership made a change to its accounting estimates
with respect to the depreciable lives of its real estate assets. The
change in accounting estimates resulted in a decrease in net income of
approximately $6.8 million and a decrease in net income of approximately
$1.08 per limited partnership unit for the year ended December 31, 2003.
F-12
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Real Estate (Continued)
The Partnership's real estate investments are reviewed for impairment if
events or changes in circumstances indicate that the carrying amount of
the real estate may not be recoverable. In such an event, a comparison is
made of the current and projected operating cash flows of such real estate
on an undiscounted basis to the carrying amount of such real estate. Such
carrying amount would be adjusted, if necessary, to estimated fair value
to reflect impairment in the value of the real estate. Real estate assets
for which the Partnership has committed to a plan to dispose of the
assets, whether by sale or abandonment, are reported at the lower of
carrying amount or fair value less cost to sell. Preparation of projected
cash flows is inherently subjective and is based on the Partnership's best
estimate of assumptions concerning expected future conditions.
Upon acquisitions of real estate, the Partnership assesses the fair value
of acquired assets (including land, buildings, tenant improvements, and
identified intangibles such as above and below market acquired in-place
leases) and acquired liabilities, and allocates purchase price based on
these assessments.
The Partnership accounts for properties as held for sale under the
provisions of Statement of Financial Accounting Standards ("SFAS") No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144"), when all criteria of SFAS No. 144 have been met.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with original
purchase maturity dates of three months or less to be cash equivalents.
Restricted Cash
Restricted cash includes reserves for tenant improvements, leasing
commissions and related costs established pursuant to the Partnership's
note payable agreement.
Concentration of Credit Risk
Substantially all of the Partnership's cash and cash equivalents consist
of money market mutual funds which invest in U.S. Treasury Bills and
repurchase agreements with original maturity dates of three months or
less.
The Partnership maintains cash with one banking institution, which amounts
at times exceed federally insured limits.
F-13
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest Rate Protection Agreements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires the recording of all derivative instruments as
either assets or liabilities depending on the rights and obligations under
the contracts. In addition, all derivative instruments shall be measured
at fair value, with the resulting gain or loss being recognized either in
earnings or equity in the period of change, depending on whether the
contract is designated as a hedge or not. The Partnership invests in
interest rate caps in order to cap the maximum interest rate payable on
its variable rate debt. The interest rate caps are not designated as
hedging instruments, and are measured at fair value, with the resulting
gain or loss being recognized in interest expense in the period of change.
Receivables
Receivables consist of rent from tenants and other receivables which are
deemed collectable by the Partnership. No provision for doubtful accounts
was considered necessary based upon the Partnership's evaluation of the
collectability of these amounts.
Loans Receivable
The Partnership evaluates the collectability of both interest and
principal of each of its loans, if circumstances warrant, to determine
whether it is impaired. A loan is considered to be impaired, when based on
current information and events, it is probable that the Partnership will
be unable to collect all amounts due according to the existing contractual
terms. When a loan is considered to be impaired, the amount of the loss
accrual is calculated by comparing the recorded investment to the value
determined by discounting the expected future cash flows at the loan's
effective interest rate. Interest on impaired loans is recognized on a
cash basis. Loans receivable are included with "other assets" in the
accompanying consolidated balance sheets.
Investments in Debt Securities and Mortgage Loans
Investments in debt securities are classified as held-to-maturity and
reported at amortized cost. Investment in mortgage loans is included with
"other assets" in the accompanying consolidated balance sheets.
F-14
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Costs
Fees paid in connection with the financing of the Partnership's properties
are deferred and amortized over the terms of the related agreements as a
component of interest expense.
Investments in Partnerships
The Partnership evaluates its investments in partially-owned entities in
accordance with Financial Accounting Standards Board ("FASB")
Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, or FIN 46R. If the partially-owned entity is a
"variable interest entity," or a "VIE," and the Partnership is the
"primary beneficiary" as defined in FIN 46R, the Partnership would account
for such investment as if it were a consolidated subsidiary.
For a partnership investment which is not a VIE or in which the
Partnership is not the primary beneficiary, the Partnership follows the
accounting set forth in AICPA Statement of Position No. 78-9 - Accounting
for Investments in Real Estate Ventures (SOP 78-9). In accordance with
this pronouncement, the Partnership accounts for its investments in
partnerships and joint ventures in which it does not have a controlling
interest using the equity method of accounting. Factors that are
considered in determining whether or not the Partnership exercises control
include important rights of partners in significant business decisions,
including dispositions and acquisitions of assets, financing, operations
and capital budgets, other contractual rights, and ultimate removal of the
general partner in situations where the Partnership is the general
partner. To the extent that the Partnership is deemed to control these
entities, these entities would be consolidated. Determination is made on a
case-by-case basis.
The Partnership accounts for the purchase of minority interests at fair
value utilizing the purchase method of accounting in accordance with SFAS
No. 141, "Business Combinations".
F-15
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
The Partnership's lease agreements are operating leases and generally
provide for varying rents over the lease terms. The Partnership records
rental income for the full term of each lease on a straight-line basis.
Accordingly, deferred rental income is recorded from tenants for the
amount that is expected to be collected over the remaining lease term
rather than currently. When a property is acquired, the term of existing
leases is considered to commence as of the acquisition date for purposes
of this calculation. Deferred rental income recorded amounted to $27.1
million and $31.6 million for the Partnership at December 31, 2004 and
2003, respectively.
Income Taxes
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is
made in the consolidated financial statements of the Partnership. However,
the Partnership is required to pay certain state and local entity level
taxes which are expensed as incurred.
Net Income per Unit
Net income per Unit is computed by dividing net income by 6,317,753,
6,329,204 and 6,119,942 weighted average Units outstanding during the
years ended December 31, 2004, 2003 and 2002, respectively.
Distributions; Allocations of Income and Loss
As provided in the partnership agreement, distributions are allocated to
the limited partners based on their ownership of Units. No distributions,
or net income or loss allocation, are made to the general partner. Income
and loss for financial reporting purposes is allocated to limited partners
based on their ownership of Units. Special allocation rules affect the
allocation of taxable income and loss. The Partnership paid distributions
of $46,106,000 ($7.30 per Unit), $34,731,000 ($5.52 per Unit) and
$196,880,000 ($32.16 per Unit) to its limited partners during the years
ended December 31, 2004, 2003 and 2002, respectively.
Segment Reporting
The Partnership has one reportable segment, net-leased commercial real
estate. The Partnership evaluates performance based on net operating
income, which is income before depreciation, amortization, interest and
non-operating items.
F-16
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
Financial instruments held by the Partnership include cash and cash
equivalents, receivables, accounts payable and long-term debt. The fair
value of cash and cash equivalents, receivables and accounts payable
approximates their current carrying amounts due to their short-term
nature. The fair value of long-term debt, which has fixed interest rates,
was determined based upon current market conditions and interest rates.
The fair value of the mortgage notes payable approximates fair value for
debt with similar terms and conditions due to yield maintenance
requirements and prepayment penalties. The fair value of the Partnership's
contract right mortgage notes payable, including those in discontinued
operations, is approximately $356.7 million, which is $9.3 million less
than the aggregate carrying amount at December 31, 2004. The fair value of
the Partnership's interest rate cap is approximately $0.3 million at
December 31, 2004. Such fair value estimates are not necessarily
indicative of the amounts that would be realized upon disposition of the
Partnerships' financial instruments.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 2004
presentation, including the reporting of discontinued operations for those
assets that have been disposed of or classified as held for sale in
accordance with SFAS No. 144.
F-17
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - REAL ESTATE INVESTMENTS
Most of the Partnership's properties are net-leased to a single commercial
tenant. The properties are located throughout the United States. The
leases are similar in many respects and generally provide for fixed rent
payments and obligate the tenant to pay all capital and operating expenses
for a property; obligate the tenant to perform all responsibilities (other
than the payment of debt service) relating to the property; require the
tenant to maintain insurance against casualty and liability losses; permit
the tenant to sublet the property; and afford the tenant in many instances
the right to terminate the lease at certain points during the primary term
if it determines that its continued use and occupancy of the property
would be uneconomic or unsuitable.
The Partnership's ability to maintain and operate its properties and
satisfy its contractual obligations is dependent upon the performance by
the tenants of their obligations under their lease agreements with the
Partnership. Under certain conditions (including the destruction of the
property), many of the tenants have an option to purchase the property
upon the expiration of the primary term of the lease and at the end of one
or more renewal terms for a price stated in the lease agreement.
The Partnership's properties are encumbered by mortgage notes payable and
subordinated contract rights payable.
The future minimum lease payments that are scheduled to be received under
non-cancellable operating leases are as follows (in thousands):
2005 $ 247,502
2006 236,733
2007 203,245
2008 149,180
2009 50,337
Thereafter 48,804
-----------
$ 935,801
===========
Three tenants accounted for approximately 36% of the aggregate rental
revenues including discontinued operations of the Partnership in 2004. Two
tenants accounted for approximately 24% and 25% of the aggregate rental
revenues including discontinued operations of the Partnership in 2003 and
2002, respectively.
F-18
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - REAL ESTATE INVESTMENTS (Continued)
The Partnership owns the fee interest in the land on which certain of its
properties are located, leases the land pursuant to ground leases or holds
an estate for years with an option to lease the land upon expiration of
the estate for years. Certain land interests held by the Newkirk Group
comprised of ground leases, remainder interests or the right to acquire
remainder interests in the land underlying certain properties were
contributed to the Partnership in connection with the Exchange.
The rent payable under the ground leases is as follows (in thousands):
2005 $ 3,013
2006 2,401
2007 1,773
2008 1,147
2009 798
Thereafter 177
---------
$ 9,309
=========
Note 4 - NOTES AND CONTRACT RIGHTS PAYABLE
The Partnership, excluding discontinued operations, had outstanding
mortgage notes payable and contract right mortgage notes payable with an
aggregate principal balance of $742.0 million and $895.9 million at
December 31, 2004 and 2003, respectively. The mortgage notes are at fixed
interest rates with payments of principal and interest generally due
either monthly, quarterly or semi-annually. All the mortgage notes are
collateralized by the Partnership's real estate; some of the mortgage
notes are cross-collateralized.
An aggregate of $478.9 million in indebtedness under the mortgage notes
mature at various dates from 2005 to 2024. Prepayment of most of the
mortgage notes is permitted only with a yield maintenance payment or
prepayment penalty as defined in the mortgage note agreements. Interest
rates on the mortgages ranged from 5.0% to 10.4%, with a weighted average
interest rate of 8.1% at December 31, 2004. Interest rates on the
mortgages ranged from 4.2% to 11.3% with a weighted average interest rate
of 8.0% at December 31, 2003.
F-19
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - NOTES AND CONTRACT RIGHTS PAYABLE (Continued)
The contract right mortgage notes aggregating $263.1 million mature at
various dates from 2008 to 2024. The Partnership has the option to prepay
some of these mortgage notes at a discount. All of the contract right
mortgages are prepayable at any time without premium or penalty subject to
the prior or simultaneous satisfaction of the underlying first mortgage
loans. Interest rates ranged from 8.11% to 13.9%, with a weighted average
interest rate of 10.7% at December 31, 2004. Interest rates ranged from
8.11% to 16.25%, with a weighted average interest rate of 10.3% at
December 31, 2003.
Mortgage notes payable and contract right mortgage notes payable
aggregating approximately $1.1 billion and accrued interest thereon were
assumed as part of the Exchange. These notes were recorded at their fair
value as of the various dates of acquisition. This accounting method
resulted in recorded interest expense that was $5.5 million, $3.8 million
and $4.0 million greater than the contractual interest expense for the
years ended December 31, 2004, 2003 and 2002, respectively. The effect of
utilizing this accounting method was to increase the principal balance of
mortgage and contract rights notes payable and reduce interest accrued on
these obligations. The cumulative reduction in liabilities related to
utilizing this accounting method was $38.7 million and $56.1 million at
December 31, 2004 and 2003, respectively.
During November 2003, the Partnership obtained a $208.5 million loan,
which had an outstanding balance of $165.3 million and $208.4 million at
December 31, 2004 and 2003, respectively. The note payable bears interest
at a rate elected by the Partnership equal to either (1) LIBOR plus 450
basis points or (2) the prime rate charged by the bank plus 250 basis
points. The note payable was obtained to replace the Partnership's
existing note payable and effectively reduced the interest rate on such
borrowing from a minimum of 8.5% to a floating rate which was 7.01% (LIBOR
plus 450 basis points) at December 31, 2004 and that will in no event
exceed 9.5%, after giving effect to the three-year interest rate
protection agreement entered into by the Partnership. The note payable is
scheduled to mature on November 24, 2006, subject to two one-year
extensions. The note payable requires monthly payments of interest only.
In addition, mandatory prepayments of principal are required from the
proceeds of property sales and refinancings and other asset sales, as well
as up to approximately $1.3 million per quarter to the extent that T-Two
Partners does not make the required principal payments on the T-Two Loan
that is described in Note 6. The Partnership can prepay the note payable
in whole or in part at any time together with a premium of 1/2% if such
prepayment occurs on or before November 24, 2005 and with no premium after
November 24, 2005. In addition, the Partnership and T-Two Partners may
prepay up to $50.0
F-20
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - NOTES AND CONTRACT RIGHTS PAYABLE (Continued)
million annually of this Loan and the T-Two Loan without a premium. The
note payable is secured by substantially all of the assets of the
Partnership, and contains customary financial and other covenants.
In connection with the Partnership's refinancings, real estate sales and
repayments of mortgage debt during 2004, the Partnership has recognized a
net loss from early extinguishment of debt of $6.3 million, which is
included in discontinued operations. The net loss from early
extinguishment of debt consisted of loss from debt extinguishment of $6.0
million, plus mortgage prepayment penalties of $0.3 million. During 2003,
the Partnership recognized a net gain from early extinguishment of debt of
$8.7 million, which is included in discontinued operations. The net gain
from early extinguishment of debt consisted of gains from debt
extinguishment of $9.1 million, net of mortgage prepayment penalties of
$0.4 million.
Scheduled payments of principal at December 31, 2004, for the next five
years and thereafter through maturity, are as follows (in thousands):
Contract Right
Mortgage Note Mortgage
Year Notes Payable Payable Notes Payable Total
------------------ ------------- ----------- -------------- -----------
2005 $ 98,397 $ - $ 9,213 $ 107,610
2006 131,481 165,328 10,244 307,053
2007 91,720 - 17,963 109,683
2008 68,399 - 21,214 89,613
2009 34,221 - 19,609 53,830
Thereafter 54,721 - 184,829 239,550
----------- ----------- ----------- -----------
478,939 165,328 263,072 907,339
Plus: Accrued
interest payable 11,016 - 91,125 102,141
----------- ----------- ----------- -----------
$ 489,955 $ 165,328 $ 354,197 $ 1,009,480
=========== =========== =========== ===========
F-21
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - MINORITY INTERESTS
Minority interests consist of external ownership interests in limited
partnerships consolidated by the Partnership. Certain limited partnerships
have negative partnership capital balances, as liabilities exceed assets,
principally depreciated real estate. The limited partnerships have
profitable operations and due to their nature, triple net-leased
properties with declining debt service obligations are expected to
maintain profitable operations and eliminate any negative capital balance.
Note 6 - RELATED PARTY TRANSACTIONS
WFA, an affiliate of the Newkirk Group, performs asset management services
for the Partnership and received a fee of $1.9 million, $1.8 million and
$1.8 million for the years ended December 31, 2004, 2003 and 2002,
respectively.
The Partnership provides certain asset management, investor and
administrative services to some of the Unconsolidated Partnerships and the
Other Partnerships. Control of the general partners of these partnerships
was acquired by the Partnership. The Partnership earned $0.3 million, $0.4
million and $0.8 million of management fees for these services for the
years ended December 31, 2004, 2003 and 2002, respectively. The
Partnership had receivables for management fees of $0.9 million and $1.1
million due from these partnerships at December 31, 2004 and 2003,
respectively.
The Partnership had a loan receivable and accrued interest of $0.2 million
at December 31, 2002 and earned interest income of $0.2 million for the
year ended December 31, 2002 from Cenland Associates Limited Partnership,
one of the Other Partnerships. In February 2003, the Partnership received
the remaining amount due on this loan.
The Partnership has an ownership interest in the three most junior
tranches of a securitized pool of first mortgages which includes 29 first
mortgage loans encumbering 61 Partnership properties and 1 other property
controlled by affiliates of the general partner. The Partnership had a
loan receivable, net of discount, of $10.1 million and $9.8 million at
December 31, 2004 and 2003, respectively, and earned interest income of
$1.2 million per year for the years ended December 31, 2004, 2003 and 2002
related to this ownership interest.
Affiliates and executives of the Newkirk Group owned $17.3 million of a
$145.2 million Real Estate Mortgage Investment Conduit ("REMIC") which was
secured by the contract rights payable. The affiliates and executives of
the Newkirk Group
F-22
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - RELATED PARTY TRANSACTIONS (Continued)
earned $2.2 million and $2.5 million of interest income during 2003 and
2002. The affiliates and executives were repaid in 2003 when T-Two
Partners purchased the T-1 Certificate as discussed in the following
paragraph.
T-Two Partners, an affiliate of the Newkirk Group, is the 100% beneficial
owner of certain of the contract rights. T-Two Partners owned the portion
of the contract rights referred to as the T-2 Certificate and during 2003
purchased the portion of the contract rights referred to as the T-1
Certificate. The Partnership incurred $25.0 million, $13.8 million and
$12.5 million ($2.2 million, $3.2 million and $3.9 million of which is
included in discontinued operations, respectively) of interest expense on
these contract rights during 2004, 2003 and 2002, respectively. Contract
right mortgage notes and accrued interest payable includes $249.5 million
and $296.0 million due to T-Two Partners at December 31, 2004 and December
31, 2003, respectively. The Partnership had the right to acquire T-Two
Partners' interest in the contract rights in January 2008 by acquiring
T-Two Partners in exchange for Units. The Newkirk Group had the right to
require the Partnership to purchase this interest in December 2007 in
exchange for Units. During 2003, as described below, the Partnership and
the owners of T-Two Partners modified these rights.
The Partnership's call option had previously provided for the acquisition
of the interests in T-Two Partners in January 2008 in exchange for a
number of units in your partnership to be determined at the time of
exercise based on an agreed-upon formula. The Partnership and the owners
of T-Two Partners modified the Partnership's option in certain respects.
First, the option can now be exercised by the Partnership at any time
between November 24, 2006 and November 24, 2009. Second, the purchase
price is payable in cash rather than units in your partnership. Finally,
the formula for determining the purchase price payable by your partnership
if it exercises the option has been revised in a manner that your
partnership's general partner believes to be significantly more favorable
to the Partnership than the formula previously in effect. Specifically,
the purchase price is calculated as follows: the sum of $316,526,573 plus
T-Two Partners' costs of obtaining the T-Two Loan (approximately
$7,346,000) and administering the trust that holds the second mortgage
loans, together with interest on the foregoing sum at the effective rate
of interest paid by T-Two Partners on the T-Two Loan, less all payments
made from and after November 24, 2003 on the second mortgage loans.
During November 2003, the Partnership obtained a $208.5 million loan,
which had an outstanding balance of $165.3 million at December 31, 2004.
At the same time that the Partnership obtained the loan, T-Two Partners
obtained a $316.5 million loan. This loan is referred to as the T-Two
Loan. The owners of T-Two Partners
F-23
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - RELATED PARTY TRANSACTIONS (Continued)
agreed to eliminate their put option which could require the Partnership
to purchase T-Two Partners in December 2007 and the Partnership agreed to
guarantee repayment of the T-Two Loan. Currently, the Partnership believes
that it has no exposure to loss under the guarantee since the T-Two Loan
is over collateralized. T-Two Partners also agreed to provide a credit
line to the Partnership bearing interest at LIBOR plus 450 basis points.
If the Partnership exercises the option, the purchase price is to be
calculated as follows: the sum of $316.5 million plus T-Two Partners'
costs of obtaining the T-Two Loan (approximately $7.3 million to the
extent not reimbursed) and administering the trust that holds the contract
rights, together with interest on the foregoing sum at the effective rate
of interest paid by T-Two Partners on the T-Two Loan, less all payments
made from and after November 24, 2003 on the contract rights.
The Partnership has determined that T-Two Partners is a VIE, but that the
Partnership is not the primary beneficiary of the VIE.
T-Two Partners will reimburse the Partnership for approximately $7.3
million of closing costs incurred in connection with the note payable and
the T-Two Loan, together with interest thereon at a rate equal to LIBOR
plus 450 basis points. The Partnership earned interest income of $0.5
million and $37,000 on this obligation during 2004 and 2003, respectively.
An affiliate of the general partner owns a portion of the second mortgage
indebtedness of a property in which the Partnership has an interest. The
second mortgage payable and accrued interest owned by the affiliate
aggregated $15.2 million and $14.6 million at December 31, 2004 and
December 31, 2003, respectively. Included in interest expense is $0.7
million related to this second mortgage payable for 2004 and 2003.
On July 29, 2004, the Partnership sold 25 properties for a combined net
sales price of $63.8 million to Vornado, which is a limited partner in the
Partnership and an affiliate of the Partnership's general partner. After
satisfying existing mortgage debt of $31.5 million, the net sales proceeds
were approximately $32.3 million of which $23.7 million was applied to a
principal payment on the note payable. The Partnership recognized a net
gain on the sale of these properties of $38.7 million.
Also see Note 8 for related party acquisitions.
F-24
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - CONTINGENCIES
Legal
In July 2002, an action was commenced in the Connecticut Superior Court
against, among others, the Partnership's general partner and various
affiliates of the Partnership's general partner. Plaintiffs are four
limited partners of three of the Newkirk Partnerships. In order to avoid
the expenses, distraction, and uncertainties of litigation, the defendants
entered into a settlement agreement dated December 31, 2003 to settle the
litigation. On April 16, 2004, the Court approved the settlement. The
settlement provides for the following material terms: (i) the Newkirk
Group will convey to unitholders of the Newkirk Partnerships who are
unaffiliated with the general partner and who received limited partnership
units in the Exchange, units in the Partnership equal to 1% of the
outstanding units; (ii) the Partnership will pay $1.5 million to an escrow
agent for the benefit of unaffiliated unitholders who were entitled to
receive units in the exchange transaction; and (iii) the Partnership will
pay $2.0 million to an escrow agent for the benefit of unitholders of the
Newkirk Partnerships who were entitled to receive cash in the Exchange.
The Partnership accrued $3.5 million with respect to this matter, which is
included in general and administrative expense in the consolidated
statement of operations for the year ended December 31, 2003. In April
2004, the Partnership paid out $3.5 million with respect to this matter. A
hearing has been set for April 11, 2005, at which time it is expected that
the Court will approve the allocation of the 1% of outstanding units for
distribution.
Note 8 - ACQUISITIONS
On January 1, 2003, the Partnership acquired from an affiliate of the
general partner, limited partnership interests in nine limited
partnerships that own net-leased commercial properties. The limited
partnership interests acquired by the Partnership ranged between 4.9% and
57.75% of each partnership and were acquired in exchange for 317,813
limited partnership units of the Partnership valued at $22.7 million. In
August 2003, the Partnership acquired approximately an additional 10.05%
interest in one of these limited partnerships for a cash purchase price of
$525,000, increasing the partnership interest to 23.55% from 13.5%. These
interests were aquired from unaffiliated limited partners. In April 2004,
the Partnership exercised an option to purchase additional limited
partnership interests in two of the partnerships in exchange for 15,539
units. The values of the net-leased real estate partnerships and the
Partnership units were determined without arms-length negotiations.
Independent appraisals were obtained on the value of the properties owned
by the limited partnerships. The Partnership has accounted for the
acquisition on a historical cost basis. Four of the limited partnerships
have been
F-25
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - ACQUISITIONS (Continued)
consolidated into the Partnership's financial statements and five of the
limited partnerships are being accounted for under the equity method of
accounting.
In June 2004, the Partnership acquired for $297,500, pursuant to a tender
offer, approximately 9.85% of the total limited partnership units
outstanding in one partially owned consolidated partnership. The
Partnership currently owns approximately 45.2% of the limited partnership.
In July 2004, the Partnership acquired for $472,500 and $325,000, pursuant
to two separate tender offers, approximately 7% and 4.5% of the total
limited partnership units outstanding in two partially owned partnerships.
The Partnership currently owns approximately 62.2% in one of the
partnerships whose operations are consolidated and 45.3% in the other
partnership.
In January 2003, the Partnership acquired the land underlying the property
owned by one of the net-leased partnerships referred to immediately above.
The land was acquired from a company affiliated with the general partner
for $1.0 million, $50,000 of which was paid in cash and the balance in the
form of a $950,000 note due September 8, 2008. The note bore interest at
the rate of 6.0% per annum, compounded annually, and was payable
interest-only until maturity, at which time the full balance of the note
was to be due. In October 2003, the note was satisfied by the Partnership
from cash reserves. The purchase price for the land sale was determined
without arms-length negotiations. An independent appraisal was obtained on
the value of the land that was acquired.
In April and June 2003, the Partnership acquired 30.6% and 46.1%,
respectively, of the outstanding limited partnership interests in two
Other Partnerships. The partnership interests were acquired for an
aggregate cash purchase price of $711,250. The Partnership previously
owned 1.5% and 3.8%, respectively, of the outstanding limited partnership
interests in these two partnerships. The Partnership controls the general
partners of each of these partnerships. The Partnership has consolidated
these partnerships in accordance with the guidance provided by Statement
of Position 78-9 "Accounting for Investments in Real Estate Ventures" and
are now considered Consolidated Partnerships.
In May and June 2003, the Partnership purchased the remainder interest in
the land underlying 26 properties for an aggregate purchase price of $1.2
million and, as a result, now owns a fee interest in the underlying land.
The improvements on 24 of
F-26
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - ACQUISITIONS (Continued)
the properties are owned by the Partnership and the improvements on the
two other properties are owned by one of the Unconsolidated Partnerships
in which the Partnership owns limited partnership interests and controls
the general partner.
In June 2004, the Partnership acquired the land underlying one of its
properties in Bedford, Texas. The land was acquired from an unaffiliated
party for approximately $2.6 million.
Note 9 - DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE
During the year ended December 31, 2004, the Partnership sold fifty-eight
properties for a combined net sales price of $127.2 million. The
Partnership recognized a net gain on sale of these properties of $49.4
million. During the year ended December 31, 2003, the Partnership sold
fourteen properties for a combined net sales price of $156.4 million. The
Partnership recognized a net gain on sale of these properties of $29.5
million. During the year ended December 31, 2002, the Partnership sold two
properties for a combined net sales price of $3.2 million. The Partnership
recognized a net loss on sale of these properties of $1.0 million. The
sale and operations of these properties for all periods presented have
been recorded as discontinued operations in accordance with the provisions
of SFAS No. 144. In addition, the Partnership has classified various
properties which have met all of the criteria of SFAS No. 144 as real
estate held for sale in the accompanying consolidated balance sheets and
has classified the operations of the properties and the sold properties as
discontinued operations in the accompanying consolidated statements of
operations.
Discontinued operations for the years ended December 31, 2004, 2003 and
2002 are summarized as follows (in thousands):
2004 2003 2002
-------- -------- --------
Revenue $ 10,549 $ 37,743 $ 62,569
Expenses (5,461) (14,397) (33,168)
Impairment loss on real estate (13,065) (1,560) --
Net (loss) gain from early extinguishment
of debt (6,279) 8,733 553
Gain (loss) from disposal of real estate 49,350 29,514 (983)
-------- -------- --------
Income from discontinued operations $ 35,094 $ 60,033 $ 28,971
======== ======== ========
F-27
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE (Continued)
Expenses include interest expense to related parties of $2.2 million, $3.2
million and $3.9 million for the years ended December 31, 2004, 2003 and
2002, respectively.
Other assets of discontinued operations at December 31, 2004 and 2003 are
summarized as follows (in thousands):
2004 2003
-------- --------
Receivables $ 81 $ 734
Other assets 163 221
-------- --------
$ 244 $ 955
======== ========
Liabilities of discontinued operations at December 31, 2004 and 2003 are
summarized as follows:
2004 2003
------- -------
Mortgage notes and accrued interest payable $ 5,672 $30,371
Contract right mortgage notes and accrued
interest payable (including $11,825 and
$5,626 to related parties) 11,825 5,626
------- -------
$17,497 $35,997
======= =======
F-28
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - INCOME TAXES
The Partnership's taxable income for 2004 and 2003 differs from net income
for financial reporting purposes as follows (in thousands):
2004 2003
--------- ---------
Net income for financial reporting purposes $ 133,036 $ 149,936
Depreciation and amortization 30,472 37,364
Interest expense 4,650 10,219
Gain on sale of real estate 42,290 80,517
Impairment loss 13,065 1,560
Other (3,766) (4,687)
Net loss (gain) from early extinguishment of debt 6,269 (4,266)
Straight-line rent adjustment 5,139 (3,248)
--------- ---------
Taxable income $ 231,155 $ 267,395
========= =========
The net basis of the Partnership's assets and liabilities for tax
reporting purposes is approximately $818.0 million and $896.0 million
lower than the amount reported for financial statement purposes at
December 31, 2004 and 2003, respectively.
Note 11 - SUBSEQUENT EVENTS
During January 2005, the Partnership sold one property to an unaffiliated
third party for a net sales price of $2.3 million. For financial reporting
purposes, the Partnership expects to recognize a net gain on sale of this
property of approximately $0.6 million during 2005.
F-29
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following summary represents the results of operations for each
quarter in 2004 and 2003:
(In thousands, except per unit amounts)
Quarters Ended
------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
2004
Revenues $ 62,634 $ 62,264 $ 62,716 $ 61,914
=========== ========== ========== ===========
Net income $ 33,072 (1) $ 19,355 (2) $ 53,886 (3) $ 26,723(4)
=========== ========== ========== ===========
Net income per
limited partnership unit $ 5.24 $ 3.06 $ 8.53 $ 4.23
=========== ========== ========== ===========
2003
Revenues $ 66,174 $ 66,323 $ 64,325 $ 65,331
=========== ========== ========== ===========
Net income $ 65,330 (5) $ 34,097 (6) $ 26,180 (7) $ 24,329(8)
=========== ========== ========== ===========
Net income per
limited partnership unit $ 10.27 $ 5.40 $ 4.14 $ 3.85
=========== ========== ========== ===========
(1) Includes gain from disposal of real estate of $7.7 million.
(2) Includes gain from disposal of real estate of $1.8 million and an
impairment loss of $9.7 million.
(3) Includes gain from disposal of real estate of $38.9 million, an impairment
loss of $3.4 million and a net loss from early extinguishment of debt of
$6.7 million.
(4) Includes gain from disposal of real estate of $1.0 million.
(5) Includes gain from disposal of real estate of $26.1 million and a net gain
from early extinguishment of debt of $8.1 million.
(6) Includes gain from disposal of real estate of $6.2 million.
(7) Includes loss from disposal of real estate of $2.0 million.
(8) Includes loss from disposal of real estate of $0.8 million.
F-30
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Continuing Operations:
Office Little Rock AR $ 306,196 $ 430,337 $ 244,068 $ -- $ 2,596,681 $ --
Office Pine Bluff AR 282,812 349,600 37,723 0 2,997,699 0
Office Sierra Vista AR 0 0 20,012 0 0 0
Office El Segundo CA 28,260,147 0 0 1,466,543 38,918,858 551,095
Office Long Beach CA 42,163,444 7,127,294 0 15,161,774 71,426,082 0
Office Walnut Creek CA 2,851,607 2,832,588 0 1,339,403 12,740,691 0
Office Colorado Spring CO 4,155,550 0 384,876 0 13,537,369 0
Office Clinton CT 1,282,874 0 0 0 2,465,218 0
Office Orlando FL 0 0 0 0 15,198,784 0
Office Orlando FL 9,113,078 9,074,642 2,015,271 0 39,647,028 0
Office Columbus IN 0 10,813,570 0 0 53,535,792 0
Office Owensboro KY 14,162,276 0 0 0 27,211,608 0
Office Carondelet LA 13,383,608 0 0 0 27,328,458 0
Office Tulane LA 10,762,326 0 0 0 21,975,969 0
Office Baltimore MD 0 53,545,257 0 0 138,489,552 0
Office Bridgeton MO 530,388 470,524 0 420,249 3,177,573 0
Office Carteret NJ 5,382,338 1,652,759 482,890 0 10,450,068 0
Office Elizabeth NJ 1,196,806 1,000,772 131,054 0 4,761,579 125,000
Office Morristown NJ 13,521,257 12,119,523 0 0 61,910,388 0
Office MorrisTownship NJ 10,359,363 8,257,347 0 0 35,912,060 0
Office MorrisTownship NJ 2,300,894 1,834,020 0 0 7,976,343 0
Office MorrisTownship NJ 6,211,595 4,951,201 0 0 21,533,288 0
Office Plainsboro NJ 217,836 182,155 23,853 0 866,678 25,000
Office Las Vegas NV 19,625,028 10,509,093 1,993,597 0 42,579,675 0
Office Miamisburg OH 0 2,531,406 0 702,011 7,922,845 0
Office Miamisburg OH 0 1,364,191 0 251,821 6,454,696 0
Office Toledo OH 46,808,386 6,536,878 0 0 95,878,252 0
Office Allentown PA 1,007,660 0 29,773 0 4,816,913 0
Office Johnson City TN 0 1,548,968 550,046 0 4,569,794 0
Office Kingport TN 730,911 775,116 89,846 0 3,159,093 0
Office Memphis TN 36,929,449 10,876,117 50,183 0 63,296,739 306,467
Office Memphis TN 1,715,021 1,223,028 0 647,569 6,005,774 0
Office Beaumont TX 2,438,258 1,798,513 318,642 0 9,484,884 47,730
Office Beaumont TX 23,953,131 9,255,220 0 0 49,406,412 0
Office Dallas TX 4,124,396 5,301,317 489,985 0 20,059,117 141,576
Office Garland TX 0 2,542,341 60,079 1,676,696 11,406,998 188,162
----------------------------------------------------------------------------------------
303,776,635 168,903,777 6,921,898 21,666,066 939,698,958 1,385,030
----------------------------------------------------------------------------------------
Retail Dothan AL 120,207 259,059 0 0 1,622,392 0
Retail Florence AL 910,151 649,053 0 343,661 3,187,227 0
Retail Huntsville AL 0 583,816 0 0 2,834,566 0
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
$ 244,068 $ -- $ 2,596,681 $ 2,840,749 $ 818,466 1/1/2002 40 yrs
37,723 0 2,997,699 3,035,422 1,246,646 1/1/2002 40 yrs
20,012 0 0 20,012 0 1/1/2002
551,095 1,466,543 38,918,858 40,936,496 14,999,215 1/1/2002 26-40 yrs
0 15,161,774 71,426,082 86,587,856 34,194,621 1/1/2002 27-40 yrs
0 1,339,403 12,740,691 14,080,094 5,371,068 1/1/2002 27-40 yrs
384,876 0 13,537,369 13,922,245 4,716,037 1/1/2002 38-40 yrs
0 0 2,465,218 2,465,218 1,106,480 1/1/2003 20-40 yrs
0 0 15,198,784 15,198,784 5,749,199 1/1/2002 38-40 yrs
2,015,271 0 39,647,028 41,662,299 14,620,193 1/1/2002 38-40 yrs
0 0 53,535,792 53,535,792 12,030,124 1/1/2002 38-40 yrs
0 0 27,211,608 27,211,608 12,749,161 1/1/2003 20-40 yrs
0 0 27,328,458 27,328,458 16,951,600 1/1/2003 20-40 yrs
0 0 21,975,969 21,975,969 13,631,498 1/1/2003 20-40 yrs
0 0 138,489,552 138,489,552 58,610,907 1/1/2002 14-40 yrs
0 420,249 3,177,573 3,597,822 1,545,599 1/1/2002 25-40 yrs
482,890 0 10,450,068 10,932,958 3,652,238 1/1/2002 38-40 yrs
256,054 0 4,761,579 5,017,633 1,664,751 1/1/2002 38-40 yrs
0 0 61,910,388 61,910,388 26,878,073 1/1/2002 20-40 yrs
0 0 35,912,060 35,912,060 11,694,807 1/1/2002 20-40 yrs
0 0 7,976,343 7,976,343 2,597,506 1/1/2002 20-40 yrs
0 0 21,533,288 21,533,288 7,012,342 1/1/2002 20-40 yrs
48,853 0 866,678 915,531 303,009 1/1/2002 38-40 yrs
1,993,597 0 42,579,675 44,573,272 8,547,357 1/1/2002 38-40 yrs
0 702,011 7,922,845 8,624,856 4,332,133 1/1/2002 22-40 yrs
0 251,821 6,454,696 6,706,517 2,875,813 1/1/2002 22-40 yrs
0 0 95,878,252 95,878,252 35,865,822 1/1/2002 38-40 yrs
29,773 0 4,816,913 4,846,686 2,305,748 1/1/2002 40 yrs
550,046 0 4,569,794 5,119,840 946,675 1/1/2002 38-40 yrs
89,846 0 3,159,093 3,248,939 961,846 1/1/2002 38-40 yrs
356,650 0 63,296,739 63,653,389 15,950,245 1/1/2002 38-40 yrs
0 647,569 6,005,774 6,653,343 2,557,639 1/1/2002 27-40 yrs
366,372 0 9,484,884 9,851,256 3,473,394 1/1/2002 38-40 yrs
0 0 49,406,412 49,406,412 8,204,549 1/1/2002 38-40 yrs
631,561 0 20,059,117 20,690,678 9,694,012 1/1/2002 38-40 yrs
248,241 1,676,696 11,406,998 13,331,935 4,083,692 1/1/2002 29-40 yrs
- --------------------------------------------------------------------------
8,306,928 21,666,066 939,698,958 969,671,952 351,942,465
- --------------------------------------------------------------------------
0 0 1,622,392 1,622,392 739,170 1/1/2002 40 yrs
0 343,661 3,187,227 3,530,888 1,357,323 1/1/2002 27-40 yrs
0 0 2,834,566 2,834,566 1,291,657 1/1/2002 38-40 yrs
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Huntsville AL 492,627 531,500 0 0 2,417,739 0
Retail Montgomery AL 578,710 624,377 269,635 0 2,840,225 0
Retail Montgomery AL 65,022 239,205 0 0 1,463,512 0
Retail Tuscaloosa AL 43,661 253,034 0 0 1,238,855 0
Retail Bisbee AZ 714,914 339,456 0 333,266 2,127,157 0
Retail Mesa AZ 0 0 45,834 0 0 0
Retail Pheonix AZ 0 0 47,943 0 0 0
Retail Springdale AZ 0 0 0 0 0 3,670
Retail Tucson AZ 816,227 387,562 0 380,494 2,428,605 0
Retail Tucson AZ 0 0 48,430 0 0 0
Retail Beaumont CA 0 0 0 0 0 3,830
Retail Blythe CA 0 0 0 0 0 3,797
Retail Corona CA 343,006 201,862 0 121,144 1,014,368 0
Retail Downey CA 336,636 585,297 327,365 0 2,104,623 0
Retail El Toro CA 0 290,702 141,727 319,982 879,560 0
Retail Huntington Beach CA 444,163 1,086,549 421,465 0 2,867,999 0
Retail Indio CA 300,914 177,090 0 106,278 889,906 0
Retail Lancaster CA 429,728 1,051,235 407,766 0 2,774,789 0
Retail Livermore CA 0 519,248 138,725 0 2,903,113 41,717
Retail Lomita CA 271,247 471,657 0 287,131 1,746,370 0
Retail Loveland CA 0 0 18,581 0 0 0
Retail Mammoth Lake CA 976,202 1,234,214 0 700,534 4,857,298 0
Retail Morgan Hill CA 0 170,961 83,350 188,181 517,268 0
Retail Pasadena CA 0 0 18,226 0 0 0
Retail Pinole CA 1,609,002 426,706 0 190,365 3,930,655 0
Retail Pleasanton CA 5,988,751 1,077,582 480,348 0 13,118,825 0
Retail Redlands CA 0 149,507 72,890 164,566 452,353 0
Retail Rialto CA 0 0 14,673 0 0 0
Retail San Diego CA 0 3,405,562 0 0 15,656,895 0
Retail San Dimas CA 0 0 15,713 0 0 0
Retail Santa Monica CA 4,263,674 917,220 445,955 0 7,050,333 0
Retail Santa Rosa CA 0 207,862 48,484 0 931,273 20,590
Retail Simi Valley CA 609,586 497,668 0 0 2,778,433 0
Retail Simi Valley CA 0 0 16,828 0 0 0
Retail Tustin CA 0 0 285,000 0 2,664,295 0
Retail Union City CA 0 190,864 93,053 210,089 577,486 0
Retail Ventura CA 3,361,147 1,604,083 0 0 6,870,815 0
Retail Yorba Linda CA 0 198,675 96,861 218,686 601,118 0
Retail Yucca Valley CA 0 0 17,463 0 0 0
Retail Aurora CO 556,458 703,531 0 400,072 2,768,775 0
Retail Aurora CO 54,568 316,249 280,145 0 1,548,355 0
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
0 0 2,417,739 2,417,739 554,661 1/1/2002 38-40 yrs
269,635 0 2,840,225 3,109,860 651,584 1/1/2002 38-40 yrs
0 0 1,463,512 1,463,512 711,693 1/1/2002 40 yrs
0 0 1,238,855 1,238,855 467,869 1/1/2002 40 yrs
0 333,266 2,127,157 2,460,423 1,044,007 1/1/2002 27-40 yrs
45,834 0 0 45,834 0 1/1/2002
47,943 0 0 47,943 0 1/1/2002
3,670 0 0 3,670 0 1/1/2002
0 380,494 2,428,605 2,809,099 1,191,955 1/1/2002 27-40 yrs
48,430 0 0 48,430 0 1/1/2002
3,830 0 0 3,830 0 1/1/2002
3,797 0 0 3,797 0 1/1/2002
0 121,144 1,014,368 1,135,512 291,644 1/1/2002 22-40 yrs
327,365 0 2,104,623 2,431,988 698,158 1/1/2002 38-40 yrs
141,727 319,982 879,560 1,341,269 667,775 4/1/2003 20-40 yrs
421,465 0 2,867,999 3,289,464 632,295 1/1/2002 38-40 yrs
0 106,278 889,906 996,184 255,857 1/1/2002 26-40 yrs
407,766 0 2,774,789 3,182,555 611,745 1/1/2002 38-40 yrs
180,442 0 2,903,113 3,083,555 1,118,235 1/1/2002 38-40 yrs
0 287,131 1,746,370 2,033,501 757,293 1/1/2002 25-40 yrs
18,581 0 0 18,581 0 1/1/2002
0 700,534 4,857,298 5,557,832 2,416,240 1/1/2002 27-40 yrs
83,350 188,181 517,268 788,799 392,717 4/1/2003 20-40 yrs
18,226 0 0 18,226 0 1/1/2002
0 190,365 3,930,655 4,121,020 1,800,469 1/1/2002 30-40 yrs
480,348 0 13,118,825 13,599,173 5,764,732 1/1/2002 40 yrs
72,890 164,566 452,353 689,809 343,434 4/1/2003 20-40 yrs
14,673 0 0 14,673 0 1/1/2002
0 0 15,656,895 15,656,895 6,964,114 1/1/2002 38-40 yrs
15,713 0 0 15,713 0 1/1/2002
445,955 0 7,050,333 7,496,288 2,598,907 1/1/2002 38-40 yrs
69,074 0 931,273 1,000,347 183,713 1/1/2002 38-40 yrs
0 0 2,778,433 2,778,433 982,012 1/1/2002 38-40 yrs
16,828 0 0 16,828 0 1/1/2002
285,000 0 2,664,295 2,949,295 2,102,822 1/1/2002 35-40 yrs
93,053 210,089 577,486 880,628 438,436 4/1/2003 20-40 yrs
0 0 6,870,815 6,870,815 2,925,470 1/1/2002 20-40 yrs
96,861 218,686 601,118 916,665 456,378 4/1/2003 20-40 yrs
17,463 0 0 17,463 0 1/1/2002
0 400,072 2,768,775 3,168,847 1,377,907 1/1/2002 27-40 yrs
280,145 0 1,548,355 1,828,500 584,756 1/1/2002 40 yrs
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Aurora CO 150,064 378,760 0 0 1,687,582 0
Retail Aurora CO 0 0 19,324 0 0 0
Retail Colorado Springs CO 0 0 20,139 0 0 0
Retail Littleton CO 138,343 273,793 226,074 0 1,885,393 0
Retail Littleton CO 380,788 931,514 361,327 0 2,458,779 0
Retail Pueblo CO 0 0 15,588 0 0 0
Retail Bradenton FL 932,701 884,763 254,760 0 4,088,632 17,827
Retail Cape Coral FL 0 464,773 175,559 0 2,125,785 0
Retail Casselberry FL 546,914 950,899 411,929 0 3,953,110 0
Retail Gainsville FL 0 525,396 198,458 0 2,325,274 0
Retail Homestead FL 0 0 19,681 0 0 0
Retail Largo FL 71,700 415,538 278,585 0 2,034,476 0
Retail Largo, 66th FL 0 404,691 152,864 0 2,008,829 0
Retail Largo, Keene FL 0 619,697 234,080 0 2,508,802 0
Retail Orlando FL 0 553,723 0 0 2,661,472 0
Retail Orlando FL 0 0 15,410 0 0 0
Retail Pinellas Park FL 660,179 712,118 288,344 0 3,158,143 0
Retail Port Richey FL 115,214 228,017 0 0 1,570,169 0
Retail Tallahassee FL 0 275,954 0 0 1,729,065 0
Retail Venice FL 0 559,451 99,324 0 3,127,889 41,717
Retail Atlanta (Dunwoody) GA 0 266,145 0 120,697 813,389 0
Retail Atlanta (Exec Park) GA 0 337,407 0 153,014 1,031,179 0
Retail Atlanta (Ponce de Leon) GA 0 236,492 0 107,249 722,764 0
Retail Cumming GA 0 597,388 0 270,916 1,825,733 0
Retail Duluth GA 0 401,538 0 182,098 1,227,177 0
Retail Forest Park (Clayton) GA 0 600,912 0 272,514 1,836,502 0
Retail Jonesboro GA 0 232,566 0 105,469 710,765 0
Retail Stone Mountain GA 0 286,326 0 129,849 875,068 0
Retail Boise ID 745,292 706,987 203,572 0 3,267,103 17,827
Retail Boise ID 442,352 361,137 89,102 0 2,016,194 0
Retail Freeport IL 0 393,374 148,591 0 1,999,052 0
Retail Rock Falls IL 0 414,929 156,731 0 2,052,332 0
Retail Carmel IN 0 494,994 28,752 0 2,326,954 23,279
Retail Lawrence IN 0 602,971 30,606 0 2,877,258 23,279
Retail Louisville KY 695,154 640,821 0 690,033 3,996,527 0
Retail Baton Rouge LA 630,525 680,280 232,849 0 3,094,520 0
Retail Minden LA 622,050 427,997 342,304 76,762 1,961,545 0
Retail Arnold MO 0 0 0 0 0 4,817
Retail Independence MO 0 0 15,561 0 0 0
Retail Lee's Summit MO 0 0 0 0 0 3,886
Retail St. Louis MO 0 0 18,418 0 0 0
Retail Billings MT 563,861 712,891 0 0 2,805,610 0
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
0 0 1,687,582 1,687,582 432,057 1/1/2002 40 yrs
19,324 0 0 19,324 0 1/1/2002
20,139 0 0 20,139 0 1/1/2002
226,074 0 1,885,393 2,111,467 610,427 1/1/2002 38-40 yrs
361,327 0 2,458,779 2,820,106 542,076 1/1/2002 38-40 yrs
15,588 0 0 15,588 0 1/1/2002
272,587 0 4,088,632 4,361,219 1,339,453 1/1/2002 38-40 yrs
175,559 0 2,125,785 2,301,344 806,375 1/1/2002 38-40 yrs
411,929 0 3,953,110 4,365,039 1,311,349 1/1/2002 38-40 yrs
198,458 0 2,325,274 2,523,732 882,046 1/1/2002 38-40 yrs
19,681 0 0 19,681 0 1/1/2002
278,585 0 2,034,476 2,313,061 768,345 1/1/2002 40 yrs
152,864 0 2,008,829 2,161,693 762,009 1/1/2002 38-40 yrs
234,080 0 2,508,802 2,742,882 951,664 1/1/2002 38-40 yrs
0 0 2,661,472 2,661,472 1,212,781 1/1/2002 38-40 yrs
15,410 0 0 15,410 0 1/1/2002
288,344 0 3,158,143 3,446,487 773,019 1/1/2002 38-40 yrs
0 0 1,570,169 1,570,169 508,368 1/1/2002 38-40 yrs
0 0 1,729,065 1,729,065 743,547 1/1/2002 40 yrs
141,041 0 3,127,889 3,268,930 1,204,815 1/1/2002 38-40 yrs
0 120,697 813,389 934,086 360,751 1/1/2002 25-35 yrs
0 153,014 1,031,179 1,184,193 457,345 1/1/2002 25-35 yrs
0 107,249 722,764 830,013 320,558 1/1/2002 25-35 yrs
0 270,916 1,825,733 2,096,649 809,742 1/1/2002 25-35 yrs
0 182,098 1,227,177 1,409,275 544,273 1/1/2002 25-35 yrs
0 272,514 1,836,502 2,109,016 814,519 1/1/2002 25-35 yrs
0 105,469 710,765 816,234 315,236 1/1/2002 25-35 yrs
0 129,849 875,068 1,004,917 388,107 1/1/2002 25-35 yrs
221,399 0 3,267,103 3,488,502 1,070,320 1/1/2002 38-40 yrs
89,102 0 2,016,194 2,105,296 712,605 1/1/2002 38-40 yrs
148,591 0 1,999,052 2,147,643 758,891 1/1/2002 38-40 yrs
156,731 0 2,052,332 2,209,063 778,512 1/1/2002 38-40 yrs
52,031 0 2,326,954 2,378,985 1,019,160 1/1/2002 20-40 yrs
53,885 0 2,877,258 2,931,143 1,260,185 1/1/2002 20-40 yrs
0 690,033 3,996,527 4,686,560 2,018,484 1/1/2002 27-40 yrs
232,849 0 3,094,520 3,327,369 709,924 1/1/2002 38-40 yrs
342,304 76,762 1,961,545 2,380,611 495,470 1/1/2002 27-40 yrs
4,817 0 0 4,817 0 1/1/2002
15,561 0 0 15,561 0 1/1/2002
3,886 0 0 3,886 0 1/1/2002
18,418 0 0 18,418 0 1/1/2002
0 0 2,805,610 2,805,610 1,077,520 1/1/2002 38-40 yrs
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Bozeman MT 67,122 144,655 0 0 905,925 0
Retail Charlotte NC 0 182,550 20,819 0 898,638 15,259
Retail Concord NC 0 367,400 41,180 0 1,777,516 15,259
Retail Jacksonville NC 0 160,215 64,422 0 729,731 0
Retail Jefferson NC 0 139,630 0 0 635,971 0
Retail Lexinton NC 0 265,357 106,705 0 1,208,617 0
Retail Thomasville NC 0 198,991 23,546 0 1,016,388 15,259
Retail Omaha NE 525,693 914,004 257,838 0 4,414,646 0
Retail Omaha NE 181,196 689,265 548,061 0 2,989,091 0
Retail Omaha NE 622,584 671,713 242,848 0 3,055,569 0
Retail Garwood NJ 495,554 735,121 0 0 3,802,120 607,569
Retail Albuquerque NM 786,458 541,116 261,712 97,050 2,480,017 0
Retail Albuquerque NM 0 0 16,692 0 0 0
Retail Albuquerque NM 0 0 15,482 0 0 0
Retail LasCruces NM 561,492 532,633 153,370 0 2,461,381 17,827
Retail Las Vegas NV 341,943 533,291 0 0 2,516,348 0
Retail Las Vegas NV 680,885 555,876 0 0 3,103,406 0
Retail Las Vegas NV 0 284,049 313,727 0 1,629,723 0
Retail Las Vegas NV 0 0 19,977 0 0 0
Retail Reno NV 437,480 325,869 0 0 1,760,213 0
Retail Portchester NY 1,507,414 1,382,633 0 0 7,308,836 0
Retail Cincinatti OH 333,937 307,837 0 0 2,446,610 0
Retail Columbus OH 714,460 658,617 0 608,625 3,531,942 0
Retail Franklin OH 0 348,067 13,860 0 1,685,071 23,279
Retail Lawton OK 758,774 360,282 0 353,712 2,257,661 0
Retail Ponca City OK 0 0 47,435 0 0 0
Retail Still Water OK 0 0 15,239 0 0 0
Retail Beaverton OR 438,882 1,073,630 416,452 0 2,833,900 0
Retail Grants Pass OR 686,492 325,961 0 320,017 2,042,594 0
Retail Portland OR 0 580,807 555,800 0 2,156,029 0
Retail Salem OR 325,333 795,857 308,707 0 2,100,707 0
Retail Doylestown PA 296,861 196,497 97,322 0 819,192 108
Retail Lansdale PA 313,946 207,805 102,922 0 866,323 108
Retail Lima PA 341,708 226,182 112,019 0 942,899 108
Retail Philadelphia PA 596,417 801,444 628,239 0 3,796,188 0
Retail Philadelphia, 52nd PA 375,881 248,801 123,229 0 1,037,260 108
Retail Philadelphia, Broad PA 399,374 264,352 130,925 0 1,102,037 108
Retail Philadelphia, Bustle PA 296,861 196,497 97,322 0 819,192 108
Retail Philadelphia, Cottman PA 422,866 279,901 138,629 0 1,166,885 108
Retail Philadelphia, Frankford PA 328,896 217,701 108,178 0 907,541 108
Retail Philadelphia, Lehigh PA 298,996 197,910 98,020 0 825,061 108
Retail Philadelphia, N 5th PA 89,699 59,373 29,406 0 247,488 104
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
0 0 905,925 905,925 412,744 1/1/2002 40 yrs
36,078 0 898,638 934,716 239,582 1/1/2002 38-40 yrs
56,439 0 1,777,516 1,833,955 473,896 1/1/2002 38-40 yrs
64,422 0 729,731 794,153 180,607 1/1/2002 38-40 yrs
0 0 635,971 635,971 157,402 1/1/2002 38-40 yrs
106,705 0 1,208,617 1,315,322 299,131 1/1/2002 38-40 yrs
38,805 0 1,016,388 1,055,193 270,975 1/1/2002 38-40 yrs
257,838 0 4,414,646 4,672,484 1,464,453 1/1/2002 38-40 yrs
548,061 0 2,989,091 3,537,152 1,383,430 1/1/2002 38-40 yrs
242,848 0 3,055,569 3,298,417 700,988 1/1/2002 38-40 yrs
607,569 0 3,802,120 4,409,689 1,054,934 1/1/2002 38-40 yrs
261,712 97,050 2,480,017 2,838,779 626,431 1/1/2002 27-40 yrs
16,692 0 0 16,692 0 1/1/2002
15,482 0 0 15,482 0 1/1/2002
171,197 0 2,461,381 2,632,578 806,360 1/1/2002 38-40 yrs
0 0 2,516,348 2,516,348 524,651 1/1/2002 38-40 yrs
0 0 3,103,406 3,103,406 1,096,870 1/1/2002 38-40 yrs
313,727 0 1,629,723 1,943,450 613,320 1/1/2002 40 yrs
19,977 0 0 19,977 0 1/1/2002
0 0 1,760,213 1,760,213 502,803 1/1/2002 38-40 yrs
0 0 7,308,836 7,308,836 2,653,440 1/1/2002 38-40 yrs
0 0 2,446,610 2,446,610 898,904 1/1/2002 38-40 yrs
0 608,625 3,531,942 4,140,567 1,782,891 1/1/2002 27-40 yrs
37,139 0 1,685,071 1,722,210 738,028 1/1/2002 38-40 yrs
0 353,712 2,257,661 2,611,373 1,108,057 1/1/2002 27-40 yrs
47,435 0 0 47,435 0 1/1/2002
15,239 0 0 15,239 0 1/1/2002
416,452 0 2,833,900 3,250,352 624,777 1/1/2002 38-40 yrs
0 320,017 2,042,594 2,362,611 1,002,502 1/1/2002 27-40 yrs
555,800 0 2,156,029 2,711,829 982,461 1/1/2002 38-40 yrs
308,707 0 2,100,707 2,409,414 463,133 1/1/2002 38-40 yrs
97,430 0 819,192 916,622 214,823 1/1/2002 20-40 yrs
103,030 0 866,323 969,353 227,181 1/1/2002 20-40 yrs
112,127 0 942,899 1,055,026 247,263 1/1/2002 20-40 yrs
628,239 0 3,796,188 4,424,427 1,126,514 1/1/2002 40 yrs
123,337 0 1,037,260 1,160,597 272,007 1/1/2002 20-40 yrs
131,033 0 1,102,037 1,233,070 288,996 1/1/2002 20-40 yrs
97,430 0 819,192 916,622 214,823 1/1/2002 20-40 yrs
138,737 0 1,166,885 1,305,622 306,000 1/1/2002 20-40 yrs
108,286 0 907,541 1,015,827 237,990 1/1/2002 20-40 yrs
98,128 0 825,061 923,189 216,362 1/1/2002 20-40 yrs
29,510 0 247,488 276,998 64,901 1/1/2002 20-40 yrs
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Philadelphia, N Broad PA 279,775 185,187 91,723 0 772,059 108
Retail Richboro PA 275,504 182,360 90,321 0 760,258 108
Retail Wayne PA 403,645 267,179 131,965 0 1,113,823 108
Retail Moncks Corner SC 0 118,443 0 0 539,472 0
Retail Chattanooga TN 977,656 697,193 0 369,150 3,423,619 0
Retail Paris TN 647,013 461,403 0 244,304 2,265,754 0
Retail Austin TX 0 0 47,126 0 0 0
Retail Baytown TX 0 0 17,888 0 0 0
Retail Bear Creek TX 0 0 17,859 0 0 0
Retail Carrolton TX 348,651 606,251 0 369,067 2,878,867 0
Retail Dallas TX 496,746 457,920 0 0 3,639,198 0
Retail El Paso TX 0 0 18,500 0 0 0
Retail El Paso TX 0 0 14,599 0 0 0
Retail Fort Worth TX 742,058 938,187 0 532,340 3,692,269 0
Retail Garland TX 1,057,568 727,651 0 130,505 3,334,967 0
Retail Granbury TX 689,136 474,155 0 85,040 2,173,176 0
Retail Grand Prairie TX 991,747 470,902 0 462,315 2,950,860 0
Retail Grand Prairie TX 0 0 16,029 0 0 0
Retail Greenville TX 0 290,427 0 0 1,431,281 0
Retail Greenville TX 0 0 0 0 0 2,012
Retail Hillsboro TX 582,172 400,559 0 71,841 1,835,821 0
Retail Houston TX 682,976 629,594 0 639,638 3,705,420 0
Retail Lubbock TX 0 240,876 0 0 1,509,270 0
Retail Midland TX 506,837 1,239,865 480,935 0 3,272,686 0
Retail Texarkana TX 0 383,733 89,804 0 1,719,229 20,590
Retail Bountiful UT 183,069 470,695 0 0 3,363,558 0
Retail Sandy UT 141,006 355,899 0 0 1,585,726 0
Retail Herndon VA 0 0 17,741 0 0 0
Retail Staunton VA 0 317,474 127,681 0 1,445,996 0
Retail Bothell WA 50,506 185,806 0 0 1,136,801 0
Retail Edmonds WA 0 208,279 0 0 1,305,028 0
Retail Everett WA 770,522 730,920 210,463 0 3,377,702 17,827
Retail Federal Way WA 589,576 439,162 210,776 0 2,372,179 0
Retail Graham WA 938,027 445,395 0 437,273 2,790,997 0
Retail Kent WA 437,827 1,071,049 415,452 0 2,827,087 0
Retail Milton WA 1,058,715 502,700 0 493,533 3,150,107 0
Retail Port Orchard WA 38,455 141,469 0 0 865,542 0
Retail Puyallup WA 0 0 15,117 0 0 0
Retail Redmond WA 1,052,283 499,646 0 490,535 3,130,967 0
Retail Spokane WA 808,057 383,682 0 376,686 2,404,286 0
Retail Spokane WA 113,584 417,859 355,128 0 2,556,552 0
Retail Woodinville WA 121,550 306,791 0 0 1,366,924 0
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
91,831 0 772,059 863,890 202,462 1/1/2002 20-40 yrs
90,429 0 760,258 850,687 199,368 1/1/2002 20-40 yrs
132,073 0 1,113,823 1,245,896 292,085 1/1/2002 20-40 yrs
0 0 539,472 539,472 133,519 1/1/2002 38-40 yrs
0 369,150 3,423,619 3,792,769 1,457,994 1/1/2002 27-40 yrs
0 244,304 2,265,754 2,510,058 964,902 1/1/2002 27-40 yrs
47,126 0 0 47,126 0 1/1/2002
17,888 0 0 17,888 0 1/1/2002
17,859 0 0 17,859 0 1/1/2002
0 369,067 2,878,867 3,247,934 1,154,074 1/1/2002 25-40 yrs
0 0 3,639,198 3,639,198 1,337,070 1/1/2002 38-40 yrs
18,500 0 0 18,500 0 1/1/2002
14,599 0 0 14,599 0 1/1/2002
0 532,340 3,692,269 4,224,609 1,836,571 1/1/2002 27-40 yrs
0 130,505 3,334,967 3,465,472 842,382 1/1/2002 29-40 yrs
0 85,040 2,173,176 2,258,216 548,924 1/1/2002 29-40 yrs
0 462,315 2,950,860 3,413,175 1,448,277 1/1/2002 27-40 yrs
16,029 0 0 16,029 0 1/1/2002
0 0 1,431,281 1,431,281 1,055,356 1/1/2002 40 yrs
2,012 0 0 2,012 0 5/1/2003
0 71,841 1,835,821 1,907,662 463,713 1/1/2002 29-40 yrs
0 639,638 3,705,420 4,345,058 1,871,355 1/1/2002 27-40 yrs
0 0 1,509,270 1,509,270 649,028 1/1/2002 40 yrs
480,935 0 3,272,686 3,753,621 721,514 1/1/2002 38-40 yrs
110,394 0 1,719,229 1,829,623 339,153 1/1/2002 38-40 yrs
0 0 3,363,558 3,363,558 1,572,905 1/1/2002 40 yrs
0 0 1,585,726 1,585,726 405,980 1/1/2002 38-40 yrs
17,741 0 0 17,741 0 1/1/2002
127,681 0 1,445,996 1,573,677 357,881 1/1/2002 38-40 yrs
0 0 1,136,801 1,136,801 552,817 1/1/2002 40 yrs
0 0 1,305,028 1,305,028 561,200 1/1/2002 40 yrs
228,290 0 3,377,702 3,605,992 1,106,547 1/1/2002 38-40 yrs
210,776 0 2,372,179 2,582,955 677,610 1/1/2002 38-40 yrs
0 437,273 2,790,997 3,228,270 1,369,819 1/1/2002 27-40 yrs
415,452 0 2,827,087 3,242,539 623,275 1/1/2002 38-40 yrs
0 493,533 3,150,107 3,643,640 1,546,069 1/1/2002 27-40 yrs
0 0 865,542 865,542 420,906 1/1/2002 40 yrs
15,117 0 0 15,117 0 1/1/2002
0 490,535 3,130,967 3,621,502 1,536,676 1/1/2002 27-40 yrs
0 376,686 2,404,286 2,780,972 1,180,022 1/1/2002 27-40 yrs
355,128 0 2,556,552 2,911,680 1,243,229 1/1/2002 40 yrs
0 0 1,366,924 1,366,924 349,962 1/1/2002 38-40 yrs
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Cheyenne WY 0 219,756 50,959 0 984,564 20,590
Retail Evanston WY 0 408,458 99,826 0 1,187,469 0
Retail Evanston - Cons WY 0 795,305 194,371 0 2,662,995 0
----------------------------------------------------------------------------------------
58,193,603 68,569,747 15,698,738 12,154,681 326,239,480 963,107
----------------------------------------------------------------------------------------
Other Jonesboro AZ 0 0 17,184 0 0 0
Other Sun City AZ 0 0 53,755 0 1,698,893 20,833
Other Colton CA 0 7,210,793 1,974,116 0 20,756,195 0
Other El Segundo CA 73,247,246 0 0 3,801,120 100,873,472 1,428,379
Other Irvine CA 0 0 0 0 0 1,000,000
Other Long Beach CA 17,729,816 2,997,042 0 6,375,556 30,034,817 0
Other Palo Alto CA 9,108,505 3,466,140 0 0 26,957,521 0
Other Ft Collins CO 0 0 62,458 0 1,973,910 20,833
Other Orlando FL 857,579 1,533,623 0 0 9,128,285 0
Other North Berwick ME 7,764,829 3,219,973 274,873 0 22,304,939 0
Other Carlsbad NM 0 0 49,505 0 1,565,013 20,833
Other Saugerties NY 0 0 32,120 0 2,100,435 0
Other N Myrtle Beach SC 0 267,219 0 0 1,577,826 0
Other Franklin TN 2,920,574 0 0 0 8,805,302 0
Other Memphis TN 3,833,418 2,332,005 0 0 19,233,942 0
Other Corpus Christi TX 0 0 60,757 0 1,923,062 20,833
Other El Paso TX 0 0 40,030 0 1,265,089 20,834
Other Lewisville TX 0 1,890,726 1,952,399 0 15,502,972 0
Other McAllen TX 0 0 36,013 0 1,138,486 20,834
Other Round Rock TX 0 0 16,164 0 0 0
Other Victoria TX 0 0 59,995 0 1,896,077 20,833
Other Windsor WI 1,153,382 2,681,113 0 0 13,985,024 0
----------------------------------------------------------------------------------------
116,615,349 25,598,634 4,629,369 10,176,676 282,721,260 2,574,212
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
478,585,587 263,072,158 27,250,005 43,997,423 1,548,659,698 4,922,349
----------------------------------------------------------------------------------------
NK Remainder 353,630
----------------------------------------------------------------------------------------
Total from Continuing Operations 478,939,217 263,072,158 27,250,005 43,997,423 1,548,659,698 4,922,349
----------------------------------------------------------------------------------------
Discontinued Operations:
----------------------------------------------------------------------------------------
Office Bedford TX 0 4,361,020 0 0 12,542,065 2,555,275
----------------------------------------------------------------------------------------
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
71,549 0 984,564 1,056,113 194,225 1/1/2002 38-40 yrs
99,826 0 1,187,469 1,287,295 417,421 1/1/2002 20-40 yrs
194,371 0 2,662,995 2,857,366 936,102 1/1/2002 20-40 yrs
- --------------------------------------------------------------------------
16,661,845 12,154,681 326,239,480 355,056,006 124,184,984
- --------------------------------------------------------------------------
17,184 0 0 17,184 0 1/1/2002
74,588 0 1,698,893 1,773,481 430,875 1/1/2002 38-40 yrs
1,974,116 0 20,756,195 22,730,311 10,637,425 1/1/2002 20-40 yrs
1,428,379 3,801,120 100,873,472 106,102,971 38,876,344 1/1/2002 26-40 yrs
1,000,000 0 0 1,000,000 0 1/1/2003
0 6,375,556 30,034,817 36,410,373 14,378,909 1/1/2002 27-40 yrs
0 0 26,957,521 26,957,521 9,674,984 1/1/2002 40 yrs
83,291 0 1,973,910 2,057,201 500,624 1/1/2002 38-40 yrs
0 0 9,128,285 9,128,285 3,808,502 1/1/2002 38-40 yrs
274,873 0 22,304,939 22,579,812 10,205,906 1/1/2002 38-40 yrs
70,338 0 1,565,013 1,635,351 396,920 1/1/2002 38-40 yrs
32,120 0 2,100,435 2,132,555 1,476,458 1/1/2003 15-40 yrs
0 0 1,577,826 1,577,826 420,658 1/1/2002 38-40 yrs
0 0 8,805,302 8,805,302 2,879,776 1/1/2002 38-40 yrs
0 0 19,233,942 19,233,942 8,864,690 1/1/2002 30-40 yrs
81,590 0 1,923,062 2,004,652 487,728 1/1/2002 38-40 yrs
60,864 0 1,265,089 1,325,953 320,853 1/1/2002 38-40 yrs
1,952,399 0 15,502,972 17,455,371 6,322,154 1/1/2002 38-40 yrs
56,847 0 1,138,486 1,195,333 288,744 1/1/2002 38-40 yrs
16,164 0 0 16,164 0 1/1/2002
80,828 0 1,896,077 1,976,905 480,884 1/1/2002 38-40 yrs
0 0 13,985,024 13,985,024 5,452,591 1/1/2002 38-40 yrs
- --------------------------------------------------------------------------
7,203,581 10,176,676 282,721,260 300,101,517 115,905,025
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
32,172,354 43,997,423 1,548,659,698 1,624,829,475 592,032,474
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
32,172,354 43,997,423 1,548,659,698 1,624,829,475 592,032,474
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
2,555,275 0 12,542,065 15,097,340 4,876,493 1/1/2002 38-40 yrs
- --------------------------------------------------------------------------
THE NEWKIRK LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
At December 31, 2004
Cost capitalized
subsequent to
Initial Cost to Registrant acquistion
---------------------------------------------------------
Land/Building
Land Building and and
Description Location Encumbrances Land Estates Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage Contract Right
Retail Mesa, McKellips AZ 0 34,376 12,986 0 126,532 0
Retail Atascadero CA 0 62,758 23,708 0 231,002 0
Retail Beaumont CA 0 59,585 24,197 0 219,322 0
Retail Paso Robles CA 0 64,344 24,308 0 236,842 0
Retail Farmington NM 0 30,850 11,655 0 113,554 0
Retail Las Vegas, Bonan NV 0 48,479 18,315 0 178,442 0
Retail Dallas, Jefferson TX 0 45,129 17,050 0 166,114 0
Retail El Paso, Alameda TX 0 40,017 15,118 0 147,296 0
Retail El Paso, Dyer TX 0 35,257 13,320 0 129,776 0
Retail Lubbock, 82nd TX 0 42,485 16,050 0 156,380 0
Retail Rockdale TX 36,425 126,802 134,651 0 1,049,237 0
Retail Taylor TX 62,070 169,683 181,808 0 1,266,242 0
Retail Woodville TX 34,949 121,662 129,192 0 1,006,705 0
----------------------------------------------------------------------------------------
133,444 881,427 622,358 0 5,027,444 0
----------------------------------------------------------------------------------------
Other Flagstaff AZ 0 0 63,079 0 1,993,639 20,834
Other New Kingston PA 5,466,250 3,967,524 0 0 14,879,873 0
----------------------------------------------------------------------------------------
5,466,250 3,967,524 63,079 0 16,873,512 20,834
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Total from Discontinued Operations 5,599,694 9,209,971 685,437 0 34,443,021 2,576,109
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
TOTALS $484,538,911 $272,282,129 $27,935,442 $43,997,423 $1,583,102,719 $7,498,458
========================================================================================
As of December 31, 2004
- --------------------------------------------------------------------------------------------------
Land Building and Accumulated Date
Land Estates Improvements Total Depreciation Acquired Life
- --------------------------------------------------------------------------------------------------
12,986 0 126,532 139,518 36,521 4/1/2003 35-40 yrs
23,708 0 231,002 254,710 66,674 4/1/2003 35-40 yrs
24,197 0 219,322 243,519 63,303 1/1/2002 20-40 yrs
24,308 0 236,842 261,150 68,360 4/1/2003 35-40 yrs
11,655 0 113,554 125,209 32,775 4/1/2003 35-40 yrs
18,315 0 178,442 196,757 51,504 4/1/2003 35-40 yrs
17,050 0 166,114 183,164 47,945 4/1/2003 35-40 yrs
15,118 0 147,296 162,414 42,514 4/1/2003 35-40 yrs
13,320 0 129,776 143,096 37,457 4/1/2003 35-40 yrs
16,050 0 156,380 172,430 45,136 4/1/2003 35-40 yrs
134,651 0 1,049,237 1,183,888 339,306 1/1/2002 40 yrs
181,808 0 1,266,242 1,448,050 630,614 1/1/2002 38-40 yrs
129,192 0 1,006,705 1,135,897 325,223 1/1/2002 40 yrs
- --------------------------------------------------------------------------
622,358 0 5,027,444 5,649,802 1,787,332
- --------------------------------------------------------------------------
83,913 0 1,993,639 2,077,552 457,324 4/1/2003 35-40 yrs
0 0 14,879,873 14,879,873 3,047,428 1/1/2002 38-40 yrs
- --------------------------------------------------------------------------
83,913 0 16,873,512 16,957,425 3,504,752
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
3,261,546 0 34,443,021 37,704,567 10,168,577
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
$35,433,900 $43,997,423 $1,583,102,719 $1,662,534,042 $602,201,051
==========================================================================
The aggregate cost for federal income tax purposes was approximately
$1,500,000,000.
NEWKIRK MASTER LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(amounts in thousands)
The following is a reconciliation of real estate assets and accumulated
depreciation:
Year ended Year ended Year ended
December 31, December 31, December 31,
2004 2003 2002
---------- ---------- ----------
Real Estate
Balance at beginning of year $1,702,077 $1,716,568 $ --
Assets contributed in the exchange -- -- 1,890,357
Additions during the year:
Land & land estates 2,557 5,611 2,904
Buildings & improvements 4,538 91,724 --
---------- ---------- ----------
1,709,172 1,813,903 1,893,261
Less: Reclassification to discontinued operations
and disposition of assets 84,343 111,826 176,693
---------- ---------- ----------
Balance at end of year $1,624,829 $1,702,077 $1,716,568
========== ========== ==========
Accumulated Depreciation
Balance at beginning of year $ 572,840 $ 512,678 $ --
Accumulated depreciation contributed in
the exchange -- -- 542,619
Additions charged to operating expenses 39,231 42,983 37,172
Additions for property purchases -- 51,474
---------- ---------- ----------
612,071 607,135 579,791
Less: Reclassification to discontinued operations
and disposition of assets 20,039 34,295 67,113
---------- ---------- ----------
Balance at end of year $ 592,032 $ 572,840 $ 512,678
========== ========== ==========
Exhibit Index
Exhibit No. Description
- ----------- -----------
31.1 Certificates of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certificates of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's Certificate, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Chief Financial Officer's Certificate, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.