Attached files
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 2010 Commission File Number 0-13545
JMB/245 PARK AVENUE ASSOCIATES, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3265541
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ X ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]
Indicate by check mark if the Registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]
Indicate by check mark whether registrant has submitted electronically and
posted on its corporate web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the proceeding 12 months (or such shorter period that the registrant
was required to submit and post such files). Yes [ ] No [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter. Not applicable.
Documents Incorporated by Reference: None.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 1A. Risk Factors . . . . . . . . . . . . . . . . 4
Item 1B. Unresolved Staff Comments. . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . 4
Item 4. [ Reserved ] . . . . . . . . . . . . . . . . 4
PART II
Item 5. Market for the Registrant's
Common Equity, Related Security
Holder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . 4
Item 6. Selected Financial Data. . . . . . . . . . . 5
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 6
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 8
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 9
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 21
Item 9A. Controls and Procedures. . . . . . . . . . . 21
PART III
Item 10. Directors and Executive Officers
of the Registrant. . . . . . . . . . . . . . 22
Item 11. Executive Compensation . . . . . . . . . . . 24
Item 12. Security Ownership of Certain
Beneficial Owners and Management and
Related Security Holder Matters. . . . . . . 25
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 26
Item 14. Principal Accountant Fees and Services . . . 27
PART IV
Item 15. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 28
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 30
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements of JMB/245 Park Avenue Associates, Ltd.
contained in this report. Capitalized terms used herein, but not defined,
have the same meanings as used in the Notes.
The registrant, JMB/245 Park Avenue Associates, Ltd. (the
"Partnership"), is a limited partnership formed in 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois for the original purpose of acquiring and owning an approximate
48.25% interest in 245 Park Avenue Company, a New York general partnership,
("245 Park" or the "Joint Venture") which owned and operated an office
building located at 245 Park Avenue, New York, New York (the "245 Park
Avenue Building"). The Partnership was admitted to the Joint Venture
through the purchase of one of the existing unaffiliated joint venture
partner's interests. The unaffiliated venture partners (the "O&Y
partners") were affiliates of Olympia & York Developments, Ltd. ("O&Y").
On May 7, 1984, the Partnership commenced a private offering of
$124,300,000 in Limited Partnership Interests (the "Interests") pursuant to
a Private Placement Memorandum (the "Private Placement Memorandum") in
accordance with Rules 501-503 and 506 of Regulation D of the Securities Act
of 1933. The offering closed on June 28, 1984. The holders of Interests
(herein after "Holders" or "Holders of Interests") in the Partnership share
in their portion of the benefits of ownership of the Partnership's real
property investment according to the number of Interests held.
As a result of the financial difficulties of the O&Y partners, in
October 1995 each of the O&Y partners and certain other O&Y affiliates (but
not the Joint Venture) filed for bankruptcy protection from creditors under
Chapter 11 of the United States Bankruptcy Code. As a result of the plan
of restructuring (the "Plan"), which became effective on November 21, 1996
("Effective Date"), the Partnership received through JMB 245 Park Avenue
Holding Company, LLC ("245 Park Holding") an approximate 5.4% general
partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"),
formerly known as World Financial Properties, L.P. On December 31, 2002
(the "Redemption Date"), 245 Park Holding entered into a redemption
agreement (the "Partial Redemption") by and among 245 Park Holding, BFP
Property GP Corp. ("BFP, GP") and BFP, LP pursuant to which 245 Park
Holding transferred and BFP, LP thereby redeemed approximately 90% of its
approximate 5.4% interest (the "Redeemed Interest") in BFP, LP. 245 Park
Holding's remaining interest in BFP, LP is approximately .5% thereof,
represented by 567.375 Class A Units (the "Retained Interest"). The
Partnership continued to hold the Retained Interest at December 31, 2010.
The managing general partner of BFP, LP is not affiliated with the
Partnership and, subject to the partnership agreement of BFP, LP and the
JMB Transaction Agreement (discussed below), has full authority to manage
its affairs. 245 Park Holding is a limited liability company in which the
Partnership is a 99% member and BFP, GP, which is an affiliate of the
managing general partner of BFP, LP, is a 1% member.
In connection with the Partial Redemption, the limited partnership
agreement of BFP, LP was amended (the "Amendment") to, among other things,
provide for the right of the Partnership to consent to the nomination of an
independent director to the board of directors of Brookfield Properties
Corporation ("BPC"). The Amendment also generally provides that in the
event either (i) a sale or other disposition of the 245 Park Avenue
Building by BFP, LP results in the recognition by the Partnership of gain
for Federal income tax purposes, or (ii) as a result of a merger or
consolidation of BFP, LP, the Partnership thereafter holds less than one-
half of its Retained Interest in a form which does not give rise to a
material amount of gain for Federal income tax purposes, the Partnership
may elect to sell to BFP, LP, or BFP, LP may elect to redeem from the
Partnership, the Retained Interest at its fair market value (as defined in
the BFP, LP partnership agreement) per Class A Unit, but in no event less
than 80% ($8,790 per Class A Unit), and no greater than 120% ($13,186 per
Class A Unit), of the amount distributed to the Partnership per Class A
Unit in the Partial Redemption.
BFP, LP has the right to sell the BFP 245 Interest and any of its
other assets without the consent of the Partnership. Under certain
circumstances, the Partnership may have obligations for Federal or state
withholding or estimated tax payments on behalf of certain Holders of
Interests. Notwithstanding any such obligations, the Partnership believes
that the Holders of Interests have the ultimate responsibility for the
timely filing of state and Federal tax returns and the payment of all
related taxes, including the reimbursement to the Partnership of all
withholding tax payments or estimated tax payments made on their behalf.
BFP, LP has a substantial amount of indebtedness outstanding. Any
proceeds from the sale of the buildings in which BFP, LP has an interest
would likely be first applied to repayment of the mortgage and other
indebtedness of BFP, LP. In any event, any net proceeds obtained by the
Partnership could then be available to satisfy the Demand Note described
below. Only after such applications would any remaining proceeds be
available to be distributed to the Holders of Interests. Similarly, in the
event of a sale or other disposition of the Retained Interest (including a
redemption pursuant to an election discussed above), the Partnership's
share of the proceeds of such sale or disposition would first be applied to
satisfy the Demand Note. Only after such application would remaining
proceeds, if any, be available to be distributed to the Holders of
Interests. As noted above, the amount of such proceeds on a sale or other
disposition is limited by the terms of the Amendment to between
approximately $4.99 million and $7.48 million.
BFP, LP's principal assets are majority and controlling interests in
office buildings, certain of which are owned subject to ground leases of
the underlying land. At December 31, 2010, these assets included a 51%
interest in the 245 Park Avenue Building (the "BFP 245 Interest").
Persons who are interested in obtaining information concerning BFP,
LP should be aware that BPC files periodic reports and other information,
which includes information about BFP, LP and its assets and operations,
with the U.S. Securities and Exchange Commission ("SEC") pursuant to the
Securities Exchange Act of 1934. BPC's filings with the SEC are available
to the public through the SEC's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system accessible through the SEC's web site at
http://www.sec.gov. Interested persons also may read and copy any report,
statement or other information that BPC has filed with the SEC at its
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or
may call the SEC for more information on obtaining information from the
SEC's public reference rooms. This description is provided for
informational purposes only. The Partnership does not prepare, and is not
responsible for the preparation of, any of BPC's reports or other
information it files with the SEC including, but not limited to, those
concerning the business and financial results of BFP, LP. Those reports
and other information are not intended to be incorporated by reference into
this report on Form 10-K, and the Partnership has no responsibility for the
accuracy of any information included in BPC's reports or other information.
The Partnership's interest in BFP, LP was pledged as collateral for
certain notes payable to JMB Realty Corporation ("JMB"), of which one long-
term note ("Replacement Note 1") and one demand note (the "Demand Note")
remained unpaid as of January 1, 2006. The security agreements for such
notes required mandatory payment of principal and interest out of any net
proceeds received upon the redemption, refinancing or other disposition of,
or any distribution made with respect to, the Partnership's interest in
BFP, LP.
Replacement Note 1, which was scheduled to mature in January 2006,
was consolidated into the Demand Note, effective January 2, 2006.
Replacement Note 1 accrued interest at 2% per annum, with interest
compounded annually and included in principal, and had a balance, including
accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded
entirely by cash advances from JMB which totaled $1,387,000 as of
December 31, 2010 ($230,000 of which was funded in 2010) and which,
together with the amount owed and rolled over from Replacement Note 1, are
evidenced by the Demand Note. No additional cash advances have been made
by JMB under the Demand Note in 2011. The Demand Note, which had an
outstanding balance of unpaid principal and accrued interest at
December 31, 2010 of $7,160,255, accrues interest at prime plus 1 percent,
with interest compounded quarterly and included in principal, and is
secured by the Partnership's interest in BFP, LP. JMB is under no
obligation to make further advances and has the right to require repayment
of the Demand Note together with accrued and unpaid interest at any time.
The outstanding balance of the Demand Note at December 31, 2010 is
approximately $7,160,000 million and such Demand Note continues to accrue
interest and be increased in principal amount by additional advances from
JMB. As such amount exceeds the minimum proceeds payable to the
Partnership under the Amendment and is only, at December 31, 2010,
approximately $320,000 less than the maximum amount so payable, it is
unlikely that the Holders of Interests ever will receive any further
significant distributions from the Partnership. However, it is expected
that Holders of Interests will be allocated a substantial amount of
additional gain for Federal and state income tax purposes as a result of
transactions which may occur over the remaining term of the Partnership.
These transactions include (i) a sale or other disposition of the BFP 245
Interest or other properties in which BFP, LP owns an interest; (ii) a sale
or other disposition of the Partnership's interest in BFP, LP (including a
redemption of the Retained Interest); or (iii) a significant reduction in
the indebtedness of the 245 Park Avenue property or other indebtedness of
the Partnership for Federal and state income tax purposes. Moreover, none
of these transactions is expected to result in Holders of Interests
receiving any significant cash distributions. The amount of gain for
Federal and state income tax purposes to be allocated to a Holder of
Interests over the remaining term of the Partnership is expected to be, at
a minimum, equal to all or most of the amount of such Holder's deficit
capital account for tax purposes. Such gain may be offset by suspended
losses from prior years (if any) that have been allocated to the Holder of
Interests. The actual tax liability of each Holder of Interests will
depend on such Holder's own tax situation.
The Partnership has no employees.
The terms of transactions between the Partnership and the General
Partners and their affiliates are set forth in Items 11 and 13 below and in
the Notes to the consolidated financial statements, to which reference is
hereby made for a description of such transactions.
ITEM 1A. RISK FACTORS
The Partnership is subject to significant risks, including factors
related to its minority position in BFP, LP, its dependency on JMB for
continued advances to fund operations, and its past history of operating
losses. The Partnership is obligated under a Demand Note which
significantly exceeds its assets and there is substantial doubt about its
ability to continue as a going concern. Reference is made to Item 1.
Business and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
The Partnership owns an indirect, non controlling interest in
properties referred to under Item 1 above to which reference is hereby
made. The Partnership's interest in BFP, LP is pledged as collateral for
the Demand Note payable to JMB.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal
proceedings.
ITEM 4. [ Reserved ]
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SECURITY
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
As of January 1, 2011, there were 838 record holders of the remaining
929.84 Interests outstanding in the Partnership. To date, holders of 70.16
interests have abandoned such interests. There is no public market for
Interests and it is not anticipated that a public market for Interests will
develop. Consequently, a Holder may not be able to sell or otherwise
liquidate his or her Interests. In addition, the Interests have not been
registered under the Securities Act of 1933, as amended, or (with certain
exceptions) under state securities laws. Transfers of the Interests must
be made in compliance with applicable federal and state securities laws and
are subject to the restrictions on transfers set forth in Article 14 (pages
15-17) of the Amended and Restated Agreement of Limited Partnership of the
Partnership, which are incorporated herein by reference to Exhibit 99 to
this annual report. A sale or other transfer of an Interest may result in
material adverse Federal income tax consequences.
The Partnership has not made any distributions since 1989. The
Partnership's interest in BFP, LP is pledged as collateral for the Demand
Note payable to JMB, which note requires mandatory payment of principal and
interest out of (i) any distributions received from BFP, LP, and (ii) any
net proceeds received upon the sale, refinancing or other disposition of
the Partnership's interest in BFP, LP. Reference is made to the section
entitled "Investment in Unconsolidated Venture" in the Notes to the
consolidated financial statements and Item 7 for a discussion of the
restrictions on the distributions (if any) to the Partnership from BFP, LP.
ITEM 6. SELECTED FINANCIAL DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
DECEMBER 31, 2010, 2009, 2008, 2007 AND 2006
(NOT COVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM)
2010 2009 2008 2007 2006
----------- ----------- ----------- ---------- ----------
Total income. . . . . . . . . $ -- -- 34,209 474 3,205
=========== =========== ========== ========== ==========
Net loss. . . . . . . . . . . $ (493,499) (501,190) (540,368) (691,262) (573,300)
=========== =========== ========== ========== ==========
Net loss per Interest (b) . . $ (495) (503) (539) (685) (566)
=========== =========== ========== ========== ==========
Total assets. . . . . . . . . $ 24,551 12,281 13,419 1,552 11,207
=========== =========== ========== ========== ==========
Demand note payable . . . . . $ 7,160,255 6,638,670 6,137,987 5,558,404 4,882,923
=========== =========== ========== ========== ==========
Notes payable -
long-term (c) . . . . . . . $ -- -- -- -- --
=========== =========== ========== ========== ==========
----------
(a) The above financial information should be read in conjunction with the consolidated financial statements of
the Partnership and the related Notes to the consolidated financial statements appearing elsewhere in this
report.
(b) The net loss per Interest are based upon the number of Interests outstanding at the end of each
period.
(c) Replacement Note 1, which was secured by the Partnership's interest in BFP, LP and was scheduled to mature
in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued
interest at 2% per annum, with interest compounded annually and included in principal, and had a balance,
including accrued interest, of $3,962,194 as of January 2, 2006.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Capitalized terms used but not defined in this Item 7 have the same
meanings as used in Item 1. Business or in the Notes.
The Partnership's future liquidity and ability to continue as a going
concern are dependent upon additional advances from JMB and there is no
assurance that such advances will continue to be made. This uncertainty
and the fact that the Partnership has a net capital deficiency raise
substantial doubt about the Partnership's ability to continue as a going
concern. Replacement Note 1, which was due in January 2006, and which was
secured by the Partnership's interest in BFP, LP, was rolled into the
Demand Note effective January 2, 2006. The unpaid principal and accrued
interest balance of Replacement Note 1 at January 2, 2006 was $3,962,194.
The operations of the Partnership since 2004 have been funded entirely by
cash advances from JMB which totaled $1,387,000 as of December 31, 2010
($230,000 of which was funded in 2010) and which, together with the amount
owed and rolled over from Replacement Note 1, are evidenced by the Demand
Note. No additional cash advances have been made by JMB under the Demand
Note in 2011. The Demand Note, which had an outstanding balance of unpaid
principal and accrued interest at December 31, 2010 of $7,160,255, accrues
interest at prime plus 1 percent, with interest compounded quarterly and
included in principal, and is secured by the Partnership's interest in BFP,
LP. JMB is under no obligation to make further advances and has the right
to require repayment of the Demand Note together with accrued and unpaid
interest at any time.
BFP, LP has the right to sell the BFP 245 Interest and any of its
other assets without the consent of the Partnership. Under certain
circumstances, the Partnership may have obligations for Federal or state
withholding or estimated tax payments on behalf of certain Holders of
Interests. Notwithstanding any such obligations, the Partnership believes
that the Holders of Interests have the ultimate responsibility for the
timely filing of state and Federal tax returns and the payment of all
related taxes, including the reimbursement to the Partnership of all
withholding tax payments or estimated tax payments made on their behalf.
The Partnership holds, through 245 Park Holding, an approximate .5%
interest in BFP, LP. Persons who are interested in obtaining information
concerning BFP, LP should be aware that BPC files periodic reports and
other information, which includes information about BFP, LP and its assets
and operations, with the U.S. Securities and Exchange Commission ("SEC")
pursuant to the Securities Exchange Act of 1934. BPC's filings with the
SEC are available to the public through the SEC's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system accessible through the
SEC's web site at http://www.sec.gov. Interested persons also may read and
copy any report, statement or other information that BPC has filed with the
SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549, or may call the SEC for more information on obtaining information
from the SEC's public reference rooms. This description is provided for
informational purposes only. The Partnership does not prepare, and is not
responsible for the preparation of, any of BPC's reports or other
information it files with the SEC including, but not limited to, those
concerning the business and financial results of BFP, LP. Those reports
and other information are not intended to be incorporated by reference into
this report on Form 10-K, and the Partnership has no responsibility for the
accuracy of any information included in BPC's reports or other information.
BFP, LP has a substantial amount of indebtedness outstanding. Any
proceeds from the sale of the buildings in which BFP, LP has an interest
would likely be first applied to repayment of the mortgage and other
indebtedness of BFP, LP. In any event, any net proceeds obtained by the
Partnership could then be available to satisfy the Demand Note. Only after
such applications would any remaining proceeds be available to be
distributed to the Holders of Interests. Similarly, in the event of a sale
or other disposition of the Retained Interest (including a redemption
pursuant to an election discussed above), the Partnership's share of the
proceeds of such sale or disposition would first be applied to satisfy the
Demand Note. Only after such application would remaining proceeds, if any,
be available to be distributed to the Holders of Interests.
It is unlikely that the Holders of Interests ever will receive any
significant portion of their original investment. However, it is expected
that Holders of Interests will be allocated a substantial amount of
additional gain for Federal and state income tax purposes as a result of
transactions which may occur over the remaining term of the Partnership.
These transactions include (i) a sale or other disposition of the BFP 245
Interest or other properties in which BFP, LP owns an interest; (ii) a sale
or other disposition of the Partnership's interest in BFP, LP (including a
redemption of the Retained Interest); or (iii) a significant reduction in
the indebtedness of the 245 Park Avenue property or other indebtedness of
the Partnership for Federal and state income tax purposes. Moreover, none
of these transactions is expected to result in Holders of Interests
receiving any significant cash distributions. The amount of gain for
Federal and state income tax purposes to be allocated to a Holder of
Interests over the remaining term of the Partnership is expected to be, at
a minimum, equal to all or most of the amount of such Holder's deficit
capital account for tax purposes. Such gain may be offset by suspended
losses from prior years (if any) that have been allocated to the Holder of
Interests. The actual tax liability of each Holder of Interests will
depend on such Holder's own tax situation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2009, the FASB issued guidance related to variable interest
entities, to eliminate certain scope exceptions previously permitted,
provide additional guidance for determining whether an entity is a variable
interest entity, and require companies to more frequently reassess whether
they must consolidate variable interest entities. The guidance also
replaces the quantitative approach to determining the primary beneficiary
of a variable interest entity with a requirement for an enterprise to
perform a qualitative analysis to determine whether the enterprise's
variable interest or interests give it a controlling financial interest in
a variable interest entity. The guidance is effective for periods
beginning after November 15, 2009. Upon adoption, the Partnership
evaluated its interest in BFP, LP in light of the amendments described
above. Based on the evaluation, the Partnership concluded that
consolidation of the entity is not required.
RESULTS OF OPERATIONS
The operations of the Partnership since 2005 have been funded
entirely by cash advances from JMB which totaled $1,387,000 as of
December 31, 2010 ($230,000 of which was funded in 2010) and which,
together with the amount owed and rolled over from Replacement Note 1, are
evidenced by the Demand Note at December 31, 2010.
Advances totaling $230,000 were made by JMB in 2010. A significant
portion of such advances was disbursed for fees for professional services
and for general and administrative expenses, a portion of which were
payable at December 31, 2010.
The increase in demand note payable to an affiliate at December 31,
2010 as compared to December 31, 2009 is due primarily to fundings totaling
$230,000 and interest of approximately $292,000 added to the principal in
2010.
The increase in interest expense for the year ended December 31, 2010
as compared to the year ended December 31, 2009 is due to fundings totaling
$230,000 added to the principal in 2010. The decrease in interest expense
for the year ended December 31, 2009 as compared to the year ended
December 31, 2008 is due primarily to significant decreases in the
effective interest rate in 2009 and 2008.
The decrease in fees for professional services for the year ended
December 31, 2010 as compared to the year ended December 31, 2009 is due
primarily to lower fees for tax services. The increase in fees for
professional services for the year ended December 31, 2009 as compared to
the year ended December 31, 2008 is due primarily to higher fees for tax
and audit services and for initial costs related to compliance with the
Sarbanes-Oxley Act of 2002.
The decrease in general and administrative expenses for the year
ended December 31, 2010 as compared to the years ended December 31, 2009
and 2008 is due primarily to reduced costs for accounting services.
INFLATION
Due to the low levels of inflation in recent years and the limited
business activity of the Partnership, inflation generally has not had a
material effect on the Partnership.
USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Critical accounting policies are those that are both significant to the
overall presentation of the Partnership's financial condition and results
of operations and require management to make difficult, complex or
subjective judgments. The Partnership made no significant estimates or
assumptions for the year ended December 31, 2010 and thus has concluded
that there are no critical accounting policies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
INDEX
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, December 31, 2010 and 2009
Consolidated Statements of Operations, years ended
December 31, 2010, 2009 and 2008
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 2010, 2009 and 2008
Consolidated Statements of Cash Flows, years ended
December 31, 2010, 2009 and 2008
Notes to Consolidated Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is
inapplicable, or the information is presented in the consolidated financial
statements or related notes.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Partners
JMB/245 Park Avenue Associates, Ltd.:
We have audited the consolidated financial statements of JMB/245 Park
Avenue Associates, Ltd., a limited partnership (the "Partnership"), and
consolidated venture as listed in the accompanying index. These
consolidated financial statements are the responsibility of the General
Partners of the Partnership. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with 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 financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by the General Partners of the Partnership, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB/245 Park Avenue Associates, Ltd. and consolidated venture as of
December 31, 2010 and 2009, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 2010, in conformity with U.S. generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that JMB/245 Park Avenue Associates, Ltd. will continue as a going
concern. As discussed in the notes to the consolidated financial
statements, the Partnership is dependent upon additional advances from JMB
under the demand loan. This uncertainty and the fact that the Partnership
has a net capital deficiency raise substantial doubt about its ability to
continue as a going concern. The General Partners' plans in regard to
these matters are also described in the notes to the financials. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ KPMG LLP
Chicago, Illinois
March 14, 2011
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009
ASSETS
------
2010 2009
------------ ------------
Current assets:
Cash and cash equivalents . . . . . . $ 24,551 12,281
------------ ------------
Total assets. . . . . . . . . $ 24,551 12,281
============ ============
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Accounts payable. . . . . . . . . . . $ 11,210 27,026
Demand note payable to an affiliate,
including accrued interest
of $2,290,971 in 2010 and
$1,999,386 in 2009. . . . . . . . . 7,160,255 6,638,670
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . 7,171,465 6,665,696
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . 26,664,247 26,664,247
Cumulative cash distributions . . (480,000) (480,000)
Cumulative net losses . . . . . . (10,997,338) (10,967,728)
------------ ------------
15,186,909 15,216,519
------------ ------------
Limited partners (930 and 937
interests at December 31,
2010 and 2009, respectively):
Capital contributions,
net of offering costs . . . . . 113,057,394 113,057,394
Cumulative cash distributions . . (7,520,000) (7,520,000)
Cumulative net losses . . . . . . (127,871,217) (127,407,328)
------------ ------------
(22,333,823) (21,869,934)
------------ ------------
Total partners' capital
accounts (deficits) . . . . (7,146,914) (6,653,415)
------------ ------------
$ 24,551 12,281
============ ============
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
2010 2009 2008
---------- ---------- ----------
Income:
Interest and
other income. . . . . $ -- -- 34,209
---------- ---------- ----------
Expenses:
Interest. . . . . . . . 291,585 270,683 354,583
Professional services . 117,988 131,853 107,219
General and
administrative. . . . 83,926 98,654 112,775
---------- ---------- ----------
493,499 501,190 574,577
---------- ---------- ----------
Net loss. . . . . . . $ (493,499) (501,190) (540,368)
========== ========== ==========
Net loss per limited
partnership
interest. . . . . . $ (495) (503) (539)
========== ========== ==========
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
CASH NET OF CASH
CONTRI- NET DISTRIBU- OFFERING NET DISTRIBU-
BUTIONS LOSS TIONS TOTAL COSTS LOSS TIONS TOTAL
----------- ----------- -------- ----------- ----------- ------------ ----------- -----------
Balance
(deficits)
Decem-
ber 31,
2007 . . .$26,664,247 (10,905,235) (480,000) 15,279,012 113,057,394 (126,428,263) (7,520,000) (20,890,869)
Net loss. . -- (32,422) -- (32,422) -- (507,946) -- (507,946)
----------- ----------- -------- ----------- ----------- ------------ ---------- -----------
Balance
(deficits)
Decem-
ber 31,
2008 . . . 26,664,247 (10,937,657) (480,000) 15,246,590 113,057,394 (126,936,209) (7,520,000) (21,398,815)
Net loss. . -- (30,071) -- (30,071) -- (471,119) -- (471,119)
----------- ----------- -------- ----------- ----------- ------------ ---------- -----------
Balance
(deficits)
Decem-
ber 31,
2009 . . . 26,664,247 (10,967,728) (480,000) 15,216,519 113,057,394 (127,407,328) (7,520,000) (21,869,934)
Net loss. . -- (29,610) -- (29,610) -- (463,889) -- (463,889)
----------- ----------- -------- ----------- ----------- ------------ ---------- -----------
Balance
(deficits)
Decem-
ber 31,
2010 . . .$26,664,247 (10,997,338) (480,000) 15,186,909 113,057,394 (127,871,217) (7,520,000) (22,333,823)
=========== =========== ======== =========== =========== ============ ========== ===========
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
2010 2009 2008
---------- ---------- ----------
Cash flows from
operating activities:
Net loss. . . . . . . . . . . . $ (493,499) (501,190) (540,368)
Changes in:
Interest and other
receivables . . . . . . . . -- 1,307 (300)
Accounts payable. . . . . . . (15,816) (631) (27,348)
Interest payable to
an affiliate. . . . . . . . 291,585 270,683 354,583
---------- ---------- ----------
Net cash used in
operating activities. . (217,730) (229,831) (213,433)
---------- ---------- ----------
Cash flows from
financing activities:
Fundings of demand
note payable. . . . . . . . . 230,000 230,000 225,000
---------- ---------- ----------
Net cash provided by
financing activities. . 230,000 230,000 225,000
---------- ---------- ----------
Net increase in cash. . . 12,270 169 11,567
Cash, beginning of year . 12,281 12,112 545
---------- ---------- ----------
Cash, end of year . . . . $ 24,551 12,281 12,112
========== ========== ==========
See accompanying notes to consolidated financial statements.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
(A LIMITED PARTNERSHIP)
and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010, 2009 AND 2008
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
JMB/245 Park Avenue Associates, Ltd. (the "Partnership"), through JMB
245 Park Avenue Holding Company, LLC ("245 Park Holding"), owns an
approximate .5% general partner interest in Brookfield Financial
Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties,
L.P. The ownership is represented by 567.375 Class A Units. BFP, LP is a
limited partnership that holds equity investments in commercial office
buildings, certain of which are owned subject to ground leases of the
underlying land. Business activities consist primarily of rentals to a
variety of commercial companies and the ultimate sale or disposition of
such real estate. 245 Park Holding is a limited liability company in which
the Partnership is a 99% member and BFP Property GP Corp. ("BFP, GP"),
which is an affiliate of the managing general partner of BFP, LP, is a 1%
member. The accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned limited liability
company, 245 Park Holding. The effect of all transactions between the
Partnership and its consolidated venture has been eliminated.
Because the Partnership has no future funding obligations to BFP, LP,
has not received distributions from BFP, LP and has no indication from BFP,
LP that it intends to make distributions in the future, has no influence or
control over the day-to-day affairs of BFP, LP, and its investment in BFP,
LP has been reduced to less than 1%, the Partnership discontinued the
application of the equity method of accounting, recorded its investment at
zero and no longer recognizes its share of earnings or losses from BFP, LP.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to reflect the Partnership's
accounts in accordance with U.S. generally accepted accounting principles
("GAAP") and to consolidate the accounts of 245 Park Holding as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership.
The net earnings (loss) per limited partnership interest is based
upon the number of limited partnership interests outstanding at the end of
the period. Deficit capital accounts will remain through the duration of
the Partnership. Upon termination of the Partnership, a net gain will be
attributed to the General Partners and Limited Partners for financial
reporting and Federal and state income tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.
The Partnership's future liquidity and ability to continue as a going
concern is dependent upon additional cash advances from JMB Realty
Corporation ("JMB") and there is no assurance that such advances will be
made. JMB's advances, as well as consolidated balances from prior notes,
are evidenced by a demand note (the "Demand Note"), dated December 1, 2004,
which Demand Note is secured by the Partnership's indirect interest in BFP,
LP. JMB is under no obligation to make further advances and has the right
to require repayment of the Demand Note together with accrued and unpaid
interest at any time. This uncertainty and the fact that the Partnership
has a net capital deficiency raise substantial doubt about the
Partnership's ability to continue as a going concern.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2009, the FASB issued guidance related to variable interest
entities, to eliminate certain scope exceptions previously permitted,
provide additional guidance for determining whether an entity is a variable
interest entity, and require companies to more frequently reassess whether
they must consolidate variable interest entities. The guidance also
replaces the quantitative approach to determining the primary beneficiary
of a variable interest entity with a requirement for an enterprise to
perform a qualitative analysis to determine whether the enterprise's
variable interest or interests give it a controlling financial interest in
a variable interest entity. The guidance is effective for periods
beginning after November 15, 2009. Upon adoption, the Partnership
evaluated its interest in BFP, LP in light of the amendments described
above. Based on the evaluation, the Partnership concluded that
consolidation of the entity is not required.
INVESTMENT IN UNCONSOLIDATED VENTURE
In December 1983, the Partnership acquired an approximate 48.25%
interest in 245 Park Avenue Company, a New York general partnership ("245
Park" or the "Joint Venture), which owned and operated a 46-story office
building located at 245 Park Avenue, New York, New York. The Partnership
was admitted to the Joint Venture through the purchase of one of the
existing unaffiliated joint venture partner's interests for approximately
$63,927,000. The unaffiliated venture partners (the "O&Y partners") were
affiliates of Olympia & York Developments, Ltd. ("O&Y").
As a result of the financial difficulties of the O&Y partners, in
October 1995 each of the O&Y partners and certain other O&Y affiliates (but
not the Joint Venture) filed for bankruptcy protection from creditors under
Chapter 11 of the United States Bankruptcy Code. As a result of the plan
of restructuring (the "Plan"), which became effective on November 21, 1996
("Effective Date"), the Partnership received through JMB 245 Park Avenue
Holding Company, LLC ("245 Park Holding") an approximate 5.4% general
partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"),
formerly known as World Financial Properties, L.P. On December 31, 2002
(the "Redemption Date"), 245 Park Holding entered into a redemption
agreement (the "Partial Redemption") by and among 245 Park Holding, BFP
Property GP Corp. ("BFP, GP") and BFP, LP pursuant to which 245 Park
Holding transferred and BFP, LP thereby redeemed approximately 90% of its
approximate 5.4% interest (the "Redeemed Interest") in BFP, LP. 245 Park
Holding's remaining interest in BFP, LP is approximately .5% thereof,
represented by 567.375 Class A Units (the "Retained Interest"). The
Partnership continued to hold the Retained Interest at December 31, 2010.
The managing general partner of BFP, LP is not affiliated with the
Partnership and, subject to the partnership agreement of BFP, LP and the
JMB Transaction Agreement, has full authority to manage its affairs.
In connection with the Partial Redemption, the limited partnership
agreement of BFP, LP was amended (the "Amendment") to, among other things,
provide for the right of the Partnership to consent to the nomination of an
independent director to the board of directors of BPC. The Amendment also
generally provides that in the event either (i) a sale or other disposition
of the 245 Park Avenue Building by BFP, LP results in the recognition by
the Partnership of gain for Federal income tax purposes, or (ii) as a
result of a merger or consolidation of BFP, LP, the Partnership thereafter
holds less than one-half of its Retained Interest in a form which does not
give rise to a material amount of gain for Federal income tax purposes, the
Partnership may elect to sell to BFP, LP, or BFP, LP may elect to redeem
from the Partnership, the Retained Interest at its fair market value (as
defined in the BFP, LP partnership agreement) per Class A Unit, but in no
event less than 80% ($8,790 per Class A Unit), and no greater than 120%
($13,186 per Class A Unit), of the amount distributed to the Partnership
per Class A Unit in the Partial Redemption.
BFP, LP has the right to sell any of its assets without the consent
of the Partnership. Under certain circumstances, the Partnership may have
obligations for Federal or state withholding or estimated tax payments on
behalf of certain Holders of Interests. Notwithstanding any such
obligations, the Partnership believes that the Holders of Interests have
the ultimate responsibility for the timely filing of state and Federal tax
returns and the payment of all related taxes, including the reimbursement
to the Partnership of all withholding tax payments or estimated tax
payments made on their behalf.
BFP, LP has a substantial amount of indebtedness outstanding. Any
proceeds from the sale of the buildings in which BFP, LP has an interest
would likely be first applied to repayment of the mortgage and other
indebtedness of BFP, LP. In any event, any net proceeds obtained by the
Partnership could then be available to satisfy the Demand Note described
below. Only after such applications would any remaining proceeds be
available to be distributed to the Holders of Interests. Similarly, in the
event of a sale or other disposition of the Retained Interest (including a
redemption pursuant to an election discussed above), the Partnership's
share of the proceeds of such sale or disposition would first be applied to
satisfy the Demand Note. Only after such application would remaining
proceeds, if any, be available to be distributed to the Holders of
Interests. As noted above, the amount of such proceeds on a sale or other
disposition is limited by the terms of the Amendment to between
approximately $4.99 million and $7.48 million.
BFP, LP's principal assets are majority and controlling interests in
office buildings, certain of which are owned subject to ground leases of
the underlying land. At December 31, 2010, these assets included a 51%
interest in the 245 Park Avenue Building (the "BFP 245 Interest").
Persons who are interested in obtaining information concerning BFP,
LP should be aware that Brookfield Properties Corporation ("BPC") files
periodic reports and other information, which includes information about
BFP, LP and its assets and operations, with the U.S. Securities and
Exchange Commission ("SEC") pursuant to the Securities Exchange Act of
1934. BPC's filings with the SEC are available to the public through the
SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system
accessible through the SEC's web site at http://www.sec.gov. Interested
persons also may read and copy any report, statement or other information
that BPC has filed with the SEC at its Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549, or may call the SEC for more
information on obtaining information from the SEC's public reference rooms.
This description is provided for informational purposes only. The
Partnership does not prepare, and is not responsible for the preparation
of, any of BPC's reports or other information it files with the SEC
including, but not limited to, those concerning the business and financial
results of BFP, LP. Those reports and other information are not intended
to be incorporated by reference into this report on Form 10-K, and the
Partnership has no responsibility for the accuracy of any information
included in BPC's reports or other information.
The Partnership's interest in BFP, LP was pledged as collateral for
certain notes payable to JMB, of which one long-term note ("Replacement
Note 1") and one demand note (the "Demand Note") remained unpaid as of
January 1, 2006. Reference is made to Notes Payable to an Affiliate below.
The security agreements for such notes required mandatory payment of
principal and interest out of any net proceeds received upon the
redemption, refinancing or other disposition of, or any distribution made
with respect to, the Partnership's interest in BFP, LP.
The outstanding balance of the Demand Note at December 31, 2010 is
approximately $7.160 million and such Demand Note continues to accrue
interest and be increased in principal amount by additional advances from
JMB. As such amount exceeds the minimum proceeds payable to the Partnership
under the Amendment and is only, at December 31, 2010, approximately
$320,000 less than the maximum amount so payable, it is unlikely that the
Holders of Interests ever will receive any further significant
distributions from the Partnership. However, it is expected that Holders
of Interests will be allocated a substantial amount of additional gain for
Federal and state income tax purposes as a result of transactions which may
occur over the remaining term of the Partnership. These transactions
include (i) a sale or other disposition of the BFP 245 Interest or other
properties in which BFP, LP owns an interest; (ii) a sale or other
disposition of the Partnership's interest in BFP, LP (including a
redemption of the Retained Interest); or (iii) a significant reduction in
the indebtedness of the 245 Park Avenue property or other indebtedness of
the Partnership for Federal and state income tax purposes. Moreover, none
of these transactions is expected to result in Holders of Interests
receiving any significant cash distributions. The amount of gain for
Federal and state income tax purposes to be allocated to a Holder of
Interests over the remaining term of the Partnership is expected to be, at
a minimum, equal to all or most of the amount of such Holder's deficit
capital account for tax purposes. Such gain may be offset by suspended
losses from prior years (if any) that have been allocated to the Holder of
Interests. The actual tax liability of each Holder of Interests will
depend on such Holder's own tax situation.
NOTES PAYABLE TO AN AFFILIATE
Replacement Note 1, which was secured by the Partnership's interest
in BFP, LP and was scheduled to mature in January 2006, was consolidated
into the Demand Note, effective January 2, 2006. Replacement Note 1
accrued interest at 2% per annum, with interest compounded annually and
included in principal, and had a balance, including accrued interest, of
$3,962,194 as of January 2, 2006.
The operations of the Partnership since 2005 have been funded
entirely by cash advances from JMB which totaled $1,387,000 as of
December 31, 2010 ($230,000 of which was funded in 2010) and which,
together with the amount owed and rolled over from Replacement Note 1, are
evidenced by the Demand Note. No additional cash advances were made by JMB
under the Demand Note in 2011. The Demand Note, which had an outstanding
balance of unpaid principal and accrued interest at December 31, 2010 of
$7,160,255, accrues interest at prime plus 1 percent, with interest
compounded quarterly and included in principal, and is secured by the
Partnership's interest in BFP, LP. JMB is under no obligation to make
further advances and has the right to require repayment of the Demand Note
together with accrued and unpaid interest at any time.
Accrued and unpaid interest due to an affiliate was $2,290,971 (of
which $291,585 was accrued for 2010) and $1,999,386 at December 31, 2010
and 2009, respectively.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are generally allocated 94% to
the Holders and 6% to the General Partners. Profits from the sale or other
disposition of all or substantially all of the Partnership's indirect
interest in BFP, LP or of all or substantially all of the 245 Park Avenue
office building or other real property owned by BFP, LP will be allocated
to the General Partners in an amount equal to the greater of 1% of such
profits or any cash from the proceeds of such sale or other disposition
distributed to the General Partners, plus an additional amount of such
profits to eliminate deficits, if any, in the General Partners' capital
accounts. The remainder of such profits will be allocated to the Holders.
All losses from the sale of all or substantially all of the Partnership's
indirect interest in BFP, LP or of all or substantially all of the BFP 245
Interest or other interests in real property owned by BFP, LP will be
allocated 99% to the Holders and 1% to the General Partners. All such
profits or losses will be allocated among the Holders in proportion to the
number of Interests held. For Federal income tax purposes, all interest
expense recognized on the Demand Note is allocated to a General Partner.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. Distributions of "Distributable Cash"
(as defined) of the Partnership generally will be made 94% to the Holders
of Interest and 6% to the General Partners. Distributions of "Sale
Proceeds" or "Financing Proceeds" (as defined) will be made first to the
Holders in an amount equal to their contributed capital, next to the
General Partners in an amount equal to their capital contributions, and the
balance 70% to the Holders and 30% to the General Partners. Distributions
would be made to the General Partners and Holders of Interests generally
only after the satisfaction of all Partnership liabilities, including, but
not limited to, the Demand Note.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's real property investments. Fees,
commissions and other expenses required to be paid by the Partnership to
the General Partners and their affiliates as of and for the years ended
December 31, 2010, 2009 and 2008 are as follows:
UNPAID AT
DECEMBER 31,
2010 2009 2008 2010
------- ------ ------ ------------
Reimbursement (at cost)
for accounting services. . $ -- -- 553 --
Reimbursement (at cost)
for financial reporting
services . . . . . . . . . 26,729 15,663 -- 6,000
Reimbursement (at cost)
for legal services . . . . 2,951 2,419 2,315 2,000
Reimbursement (at cost)
for portfolio management
services . . . . . . . . . 8,710 9,968 6,829 2,000
------- ------ ------ ------
$38,390 28,050 9,697 10,000
======= ====== ====== ======
Any reimbursable amounts currently payable to the General Partners
and their affiliates do not bear interest.
Reference is made to the Notes, "Investment in Unconsolidated
Venture" and "Notes Payable to an Affiliate" above for a discussion of
certain loans and notes payable by the Partnership to JMB and related
collateral held by JMB.
SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
2010
--------------------------------------------
At 3/31 At 6/30 At 9/30 At 12/31
---------- ---------- ---------- ----------
Total income. . . . . . $ -- -- -- --
========== ========== ========== ==========
Net loss. . . . . . . . $ (162,540) (113,214) (124,289) (93,456)
========== ========== ========== ==========
Net loss per Interest . $ (163) (114) (124) (94)
========== ========== ========== ==========
2009
--------------------------------------------
At 3/31 At 6/30 At 9/30 At 12/31
---------- ---------- ---------- ----------
Total income. . . . . . $ -- -- -- --
========== ========== ========== ==========
Net loss. . . . . . . . $ (168,069) (121,509) (93,264) (118,348)
========== ========== ========== ==========
Net loss per Interest . $ (168) (121) (93) (121)
========== ========== ========== ==========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
2010 and 2009.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The principal executive officer and the principal financial officer
of the Partnership have evaluated the effectiveness of the Partnership's
disclosure controls and procedures as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") as of the
end of the period covered by this report. Based on such evaluation, the
principal executive officer and the principal financial officer have
concluded that the Partnership's disclosure controls and procedures were
effective.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Partnership's management is responsible for establishing and
maintaining adequate internal control over financial reporting as such term
is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision
and with the participation of management including the principal executive
officer and the principal financial officer management conducted an
evaluation of the effectiveness of internal control over financial
reporting based on the framework in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can only provide reasonable assurances
with respect to financial statement preparation and presentation.
Based on the Partnership's evaluation under the framework in Internal
Control - Integrated Framework, management concluded that its internal
control over financial reporting was effective as of December 31, 2010.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Corporate General Partner of the Partnership, JMB Park Avenue,
Inc., an Illinois corporation, is a wholly-owned subsidiary of JMB
Investment Holdings - I, Inc., a Delaware corporation. All of the
outstanding shares of stock of JMB Investment Holdings - I, Inc. are owned,
indirectly, by JMB Realty Corporation, a Delaware corporation ("JMB") in
the business of real estate investment. Substantially all of the shares of
JMB are owned, directly or indirectly, by certain of its current and former
officers and directors, members of their families and their affiliates.
The Corporate General Partner has responsibility for all aspects of the
Partnership's operations, subject to the requirement that the sale of all
or substantially all of the Partnership's indirect interest in BFP, LP,
unless required by the terms of the BFP, LP venture agreement, must be
approved by the Associate General Partner of the Partnership, Park
Associates, L.P., an Illinois limited partnership with JMB Park Avenue,
Inc. as the sole general partner. The limited partners of the Associate
General Partner are generally JMB, current or former officers and directors
of JMB, their affiliates and current or former officers of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that affiliates of the General Partners are engaged in a
range of real estate activities. Certain services have been and may in the
future be provided to the Partnership by affiliates of the General
Partners, including administrative services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership or its investment properties under certain
circumstances, including for tenants for properties and/or for the sale of
properties. Because the timing and amount of cash distributions and
profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell (or consent to the sale of) investment
property, the establishment and maintenance of reasonable reserves, the
timing of expenditures and the allocation of certain tax items under the
Partnership Agreement, the General Partners may have a conflict of interest
with respect to such determinations. The General Partners and their
affiliates may also have a conflict of interest with respect to matters
relating to the remaining JMB Demand Note, including, among other things,
the enforcement of repayment of that note and the remedies available to JMB
in the event of a default under that note, as well as with respect to
matters concerning whether to continue to advance funds to the Partnership
to permit it to pay its expenses. Reference is made to the discussions
under "Investment in Unconsolidated Venture" and "Notes Payable to an
Affiliate" in the Notes for further information concerning the term loan
and demand note.
The names, current positions and length of service therein of the
director and executive officers of the Corporate General Partner of the
Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Gary Nickele Vice President 12/18/90
Patrick J. Meara President and Director 12/22/00
H. Rigel Barber Vice President 03/26/84
Gailen J. Hull Vice President 03/26/84
There is no family relationship among any of the foregoing director
or officers. The foregoing director has been elected to serve a term until
the annual meeting of the Corporate General Partner to be held on August 9,
2011. All of the foregoing officers have been elected to serve terms until
the first meeting of the Board of Directors held after the annual meeting
of the Corporate General Partner to be held on August 10, 2010. There are
no arrangements or understandings between or among any of said director or
officers and any other person pursuant to which any director or officer was
elected as such.
The foregoing director and officers are also officers and/or
directors of JMB and various companies affiliated with JMB.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership
includes the following:
Gary Nickele (age 58) is Executive Vice President and General Counsel
of JMB and an officer and/or director of various JMB affiliates. Mr.
Nickele has been associated with JMB since February 1984. He holds a J.D.
degree from the University of Michigan Law School and is a member of the
Bar of the State of Illinois.
Patrick J. Meara (age 48) has been a Senior Vice President of JMB
since January 1997. Prior to becoming President and Director of the
Corporate General Partner, Mr. Meara was a Vice President of the Corporate
General Partner from August 8, 2000 to December 22, 2000. He is also an
officer and/or director of various other JMB affiliates. He has been
associated with JMB, JMB Institutional Realty Corporation or their
affiliates since 1987. Mr. Meara is a Certified Public Accountant.
H. Rigel Barber (age 62) is Executive Vice President and Chief
Executive Officer of JMB and an officer of various JMB affiliates.
Mr. Barber has been associated with JMB since March, 1982. He holds a J.D.
degree from the Northwestern Law School and is a member of the Bar of the
State of Illinois.
Gailen J. Hull (age 62), in addition to being a Vice President of JMB
Park Avenue, Inc., has acted as the Chief Financial Officer of the
Partnership since August 2002. He also is Senior Vice President and, since
August 2002, Chief Financial Officer of JMB and an officer of various JMB
affiliates. Mr. Hull has been associated with JMB since March, 1982. He
holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
The Partnership is a limited partnership organized under the laws of
the State of Illinois, and the rights of its partners and Holders of
Interests are governed by its Partnership Agreement. Moreover, the
Interests are not publicly traded. In view of these facts, as well as the
limited business activity of the Partnership, the Corporate General Partner
has determined that it is not necessary for the Partnership to have either
an "audit committee financial expert" or a "code of ethics" as those terms
are defined in the rules and regulations of the Securities and Exchange
Commission.
ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the Corporate General Partner
receive no direct remuneration in such capacities from the Partnership.
The General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Holders of Interests, and a
share of profits or losses as described under the section entitled
"Partnership Agreement" in the Notes. No such cash distributions were paid
to the General Partners in 2010. The General Partners are expected to be
allocated losses for tax purposes in 2010.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY HOLDER MATTERS
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner, its executive officers and director and the Associate General Partner
beneficially own the following Interests of the Partnership.
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
-------------- ---------- ----------------- --------
Limited Partnership Corporate General .5 Interests less than
Interests Partner, its (1) 1%
executive officers
and director and
the Associate
General Partner
as a group
(1) Includes .5 Interest owned by an executive officer for which he has sole investment and voting power.
No executive officer or director of the Corporate General Partner of the Partnership possesses a right to
acquire beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
(d) The Partnership has no compensation plans or individual compensation arrangements under which equity
securities of the Partnership are authorized for issuance to any person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Partnership Agreement, the Partnership is permitted
to engage in various transactions involving affiliates of the Corporate
General Partner of the Partnership. Such transactions may involve
conflicts of interest for the General Partners or their affiliates,
including, among others, those discussed in Item 10 above. Various
relationships of the Partnership to the Corporate General Partner (and its
director and executive officers) and its affiliates are also set forth
above in Item 10.
The General Partners of the Partnership or their affiliates may be
reimbursed for their direct expenses and out-of-pocket expenses relating to
the administration of the Partnership and operation of the Partnership's
real property investments. There were no such reimbursable expenses in
2010.
The General Partners and their affiliates are entitled to
reimbursements of salary and salary related expenses for legal, accounting
and certain other services. Such reimbursements will not exceed the lesser
of the actual cost of such services or the amount which the Partnership
would be required to pay independent parties for comparable services.
Affiliates of the General Partners were entitled to reimbursements for such
expenses in the amount of $38,390 and $28,050 in 2010 and 2009,
respectively, of which $10,000 was payable at December 31, 2010.
At January 1, 2006, the Partnership was indebted to JMB Realty
Corporation ("JMB") under Replacement Note 1 and the Demand Note for an
aggregate amount of $4,107,189 (consisting of $3,704,284 of principal and
$402,905 of accrued and unpaid interest).
Replacement Note 1, which was secured by the Partnership's interest
in BFP, LP and was scheduled to mature in January 2006, was consolidated
into the Demand Note, effective January 2, 2006. Replacement Note 1
accrued interest at 2% per annum, with interest compounded annually and
included in principal, and had a balance, including accrued interest, of
$3,962,194 as of January 2, 2006.
The operations of the Partnership since 2005 have been funded
entirely by cash advances from JMB which totaled $1,387,000 as of
December 31, 2010 ($230,000 of which was funded in 2010) and which,
together with the amount owed and rolled over from Replacement Note 1, are
evidenced by the Demand Note. No additional cash advances were made by JMB
under the Demand Note in 2011. The Demand Note, which had an outstanding
balance of unpaid principal and accrued interest at December 31, 2010 of
$7,160,255, accrues interest at prime plus 1 percent, with interest
compounded quarterly and included in principal, and is secured by the
Partnership's interest in BFP, LP. JMB is under no obligation to make
further advances and has the right to require repayment of the Demand Note
together with accrued and unpaid interest at any time.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership has not adopted any pre-approval policies and
procedures. All audit and permitted non-audit services are approved by the
sole director of the Corporate General Partner of the Partnership before
the service is undertaken.
The aggregate fees billed for professional services by KPMG LLP for
2010 and 2009 for these various services were:
Type of Fees 2010 2009
------------ -------- --------
Audit Fees. . . . . . . . . . . . . . . . $ 44,250 44,250
Tax Fees. . . . . . . . . . . . . . . . . 34,070 41,916
-------- --------
$ 78,320 86,166
======== ========
In the above table, in accordance with the SEC's definitions and
rules, "audit fees" are fees the Partnership paid KPMG LLP for professional
services for the audit of the Partnership's consolidated financial
statements included in Form 10-K and review of financial statements
included in Form 10-Qs, and for services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements; "tax fees" are fees for tax compliance, tax advice and tax
planning.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
(1) Financial Statements (See Index to Financial Statements and
Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership
of the Partnership is hereby incorporated by
reference to Exhibit 3-A to the Partnership's Report
for June 30, 2002 on Form 10-Q (File No. 0-13545)
dated August 21, 2002.
3-B. Amendment to the Amended and Restated Agreement of
Limited Partnership of JMB/245 Park Avenue
Associates, Ltd. by and between JMB Park Avenue, Inc.
and Park Associates, L.P. dated January 1, 1994 is
hereby incorporated by reference to Exhibit 3-B to
the Partnership's Form 10-Q Report for March 31, 1995
(File No. 0-13545) filed May 11, 1995.
4-A. Security Agreement, dated May 7, 2001, by JMB/245
Park Avenue Associates, Ltd. in favor of JMB Realty
Corporation is hereby incorporated herein by
reference to the Partnership's Report for Septem-
ber 30, 2004 on Form 10-Q (File No. 0-13545) dated
November 10, 2004.
4-B. Note Split Agreement, dated October 8, 2004, by and
between JMB Realty Corporation and JMB/245 Park
Avenue Associates, Ltd. is hereby incorporated herein
by reference to the Partnership's Report for Septem-
ber 30, 2004 on Form 10-Q (File No. 0-13545) dated
November 10, 2004.
4-C. Replacement Note #1 to Second Amended and Restated
Promissory Note, dated October 8, 2004, in the
original principal amount of $3,482,283.71 is hereby
incorporated herein by reference to the Partnership's
Report for September 30, 2004 on Form 10-Q (File No.
0-13545) dated November 10, 2004.
4-D. Promissory Note, payable on demand, dated December 1,
2004, in the original amount of $172,000, is hereby
incorporated herein by reference to the Partnership's
Report for December 1, 2004 on Form 8-K (File No. 0-
13545), dated December 7, 2004.
10-A. Limited Liability Company Agreement of JMB 245 Park
Avenue Holding Company, LLC dated as of November 12,
1996 is hereby incorporated by reference to the
Partnership's Report for November 21, 1996 on
Form 8-K (File No. 0-13545) filed on December 6,
1996.
10-B. Redemption Agreement between JMB 245 Park Avenue
Holding Company, LLC, WFP Property G.P. Corp. and
Brookfield Financial Properties, L.P., dated
December 31, 2002 is hereby incorporated herein by
reference to Exhibit 10.1 to the Partnership's Report
for December 31, 2002 on Form 8-K (File No. 0-13545)
filed on January 15, 2003.
10-C. Fourth Amended and Restated Agreement of Limited
Partnership of Brookfield Financial Properties, L.P.
dated as of December 31, 2002 is hereby incorporated
herein by reference to Exhibit 10.2 to the
Partnership's Report for December 31, 2002 on Form
8-K (File No. 0-13545) filed on January 15, 2003.
21. List of Subsidiaries of the Partnership.
31.1 Certification of Chief Executive Officer Pursuant
to Rule 13a-14(a)/Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer Pursuant
to Rule 13a-14(a)/Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended.
32. Certifications of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1850,
as adopted pursuant to section 906 of the Sarbanes-
Oxley Act of 2002.
99. Article 14 (pages 15-17) of the Partnership's Amended
and Restated Agreement of Limited Partnership is
filed herewith.
(b) No report on Form 8-K was filed since the beginning of the last
quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 2010 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc.
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 14, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc.
Corporate General Partner
PATRICK J. MEARA
By: Patrick J. Meara, President and Director
Chief Executive Officer
Date: March 14, 2010
GAILEN J. HULL
By: Gailen J. Hull, Vice President
Chief Financial Officer
and Principal Accounting Officer
Date: March 14, 2010
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE
-------------
3-A. Amended and Restated Agreement of
Limited Partnership of the
Partnership. Yes
3-B. Amendment to the Amended and Restated
Limited Partnership Agreement of
Partnership of JMB/245 Park Avenue
Associates, Ltd. Yes
4-A. Security Agreement, dated May 7, 2001,
by JMB/245 Park Avenue Associates, Ltd.
in favor of JMB Realty Corporation Yes
4-B. Note Split Agreement, dated October 8,
2004, by and between JMB Realty
Corporation and JMB/245 Park Avenue
Associates, Ltd. Yes
4-C. Replacement Note #1 to Second Amended
and Restated Promissory Note, dated
October 8, 2004, in the original principal
amount of $3,482,283.71 Yes
4-D. Promissory Note, dated December 1, 2004,
by and between JMB/245 Park Avenue
Associates and JMB Realty Corporation Yes
10-A. Limited Liability Company Agreement of
JMB 245 Park Avenue Holding Company, LLC
dated as of November 12, 1996. Yes
10-B. Redemption Agreement between JMB 245
Park Avenue Holding Company, LLC, WFP
Property G.P. Corp. and Brookfield
Financial Properties, L.P. Yes
10-C. Fourth Amended and Restated Agreement
of Limited Partnership of Brookfield
Financial Properties, L.P. Yes
21. List of Subsidiaries of the Partnership. No
31.1. Certification of Chief Executive
Officer Pursuant to Rule 13a-14(a)/
Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended. No
31.2. Certification of Chief Financial
Officer Pursuant to Rule 13a-14(a)/
Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended. No
32. Certifications of Chief Executive
Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1850,
as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. No
99. Article 14 (pages 15-17) of the
Partnership's Amended and Restated
Agreement of Limited Partnership N