Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report.
The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a limited partnership formed in 1987 and currently governed under the Revised Uniform Limited Partnership Act of the State of Delaware. The Partnership was formed to own and develop substantially all of the assets of Arvida Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which were acquired by the Partnership from the Seller on September 10, 1987. On September 16, 1987, the Partnership commenced an offering to the public of up to $400,000,000 in Limited Partnership Interests and assignee interests therein ("Interests") pursuant to a Registration Statement on Form S-1 under the Securities Act of 1933 (No. 33-14091). A total of 400,000 Interests were sold to the public (at an offering price of $1,000 per Interest before discounts) and the holders of 400,000 Interests were admitted to the Partnership in October 1987. The offering terminated October 31, 1987. In addition, a holder (an affiliate of the dealer- manager of the public offering) of 4,000 Interests was admitted to the Partnership in October 1987. Subsequent to admittance to the Partnership, no holder of Interests (a "Limited Partner" or "Holder") has made any additional capital contribution. The Limited Partners of the Partnership generally share in their portion of the benefits of ownership of the Partnership's real property investments and other assets according to the number of Interests held.
Pursuant to the Partnership Agreement, the Partnership may continue in existence until December 31, 2087; however, the General Partner shall elect to pursue one of the following courses of action: (i) to cause the Interests to be listed on a national exchange or to be reported by the National Association of Securities Dealers Automated Quotation System at any time on or prior to the date ten years from the termination date of the offering of Interests; (ii) to purchase, or cause JMB Realty Corporation or its affiliates to purchase, ten years from the termination of the offering of Interests, all of the Interests at their then appraised fair market value (as determined by an independent nationally recognized investment banking firm or real estate advisory company); or (iii) to commence a liquidation phase ten years from the termination of the offering of Interests in which all of the Partnership's remaining assets will be sold or disposed of by the end of the fifteenth year from the termination of the offering.
The assets of the Partnership consist principally of interests in land which is in the process of being developed into master-planned residential communities (the "Communities") and, to a lesser extent, commercial and industrial properties; mortgage notes and accounts receivable; certain management and other service contracts; construction, brokerage and other support businesses; real estate assets held for investment; certain club and recreational facilities; and certain cable television businesses serving certain of its Communities. The Partnership is principally engaged in the development of comprehensively planned resort and primary home Communities containing a diversified product mix designed for the middle and upper income segments of the various markets in which the Partnership operates.
The Partnership sells individual residential lots and parcels of partially developed and undeveloped land. The third-party builders and developers to whom the Partnership sells homesites and land parcels are generally smaller local builders who require project specific financing for their developments and whose operations are more susceptible to fluctuations in the availability and terms of financing. In addition, within the Communities, the Partnership constructs, or causes to be constructed, a variety of products, including single-family homes, town- houses and condominiums to be developed for sale, as well as related commercial and recreational facilities. The Communities are located primarily throughout the State of Florida, with Communities also located near Atlanta, Georgia; Highlands, North Carolina and in Orange County, California. Additional undeveloped properties owned by the Partnership in or near its Communities are being considered for development as commercial, office and industrial properties. The Partnership also owns or manages certain club and recreational facilities within certain of its Communities.
Certain assets located in Florida were acquired by the Partnership from the Seller by purchasing a 99.9% interest in a joint venture partnership in which the General Partner acquired the remaining joint venture partnership interest. In addition, other assets are owned by various partnerships, the interests of which are held by certain indirect subsidiaries of the Partnership and by the Partnership.
Arvida Company ("Arvida"), an affiliate of the General Partner, provides certain development and management supervisory personnel to the Partnership for the supervision of all of its projects and operations, subject, in each case, to the overall control of the General Partner on behalf of the Partnership. The Partnership, directly or through certain subsidiaries, provides development and management services to the home ownership associations within the Communities. At December 31, 1994, two of the Partnership's Communities offered cable television systems to certain of their residents, which systems are owned and operated by entities owned by the Partnership.
The business of the Partnership is cyclical in nature and certain aspects of the development of Community projects are to some degree seasonal. The Partnership does not expect that such seasonality will have a material impact on its business. A presentation of information about industry segments, geographic regions or raw materials is not applicable and would not be material to an understanding of the Partnership's business taken as a whole.
The Communities are in various stages of development. The remaining estimated build-out time for the Communities ranges from one year to 10 years. The Partnership generally follows the practice with respect to Communities of (i) developing an overall master plan for the Community, (ii) creating a unifying architectural theme that is consistent with the Community's master plan, (iii) offering a variety of recreational facilities, (iv) imposing architectural standards and other property restrictions on residents and third-party developers, in order to enhance the long-term value of the Community, (v) establishing property owners' associations to maintain compliance with architectural, landscaping and other requirements and to provide for ownership and maintenance of certain facilities, and/or (vi) operating and controlling access to golf, tennis and other recreational facilities.
The Partnership's development approach, individually or by joint venture, is intended to enhance the value of real estate in successive phases. The first step in the development of a property is to design a Community master plan that addresses the appropriate land uses and product mix, including residential, recreational and, where appropriate, commercial and industrial uses. The Partnership then seeks to obtain the necessary regulatory and environmental approvals for the development of the Community in accordance with the master plan. This approval process is a major factor in determining the viability and prospects for profitability of the Partnership's development projects.
The first phase in the regulatory approval process will usually consist of obtaining the proper zoning approvals for the intended development. The Partnership must also comply with state and local laws governing large planned developments which may vary from state to state and community to community. In Florida, for example, land development is subject to the Florida Local Government Comprehensive Planning and Land Development Regulation Act, as administered by the State and implemented by regional, county and municipal authorities. In addition, prior to or contemporaneously with zoning approval, the Partnership, if subject to the applicable filing requirements, must obtain "Development of Regional Impact" ("DRI") approval from the applicable local governmental agency after review and recommendations from the appropriate regional planning agency, with oversight by the Florida State Department of Community Affairs. With the exception of approximately 2,475 acres of Weston (Weston's Increment III), the Partnership has received DRI approval on all of its Florida Properties. Application with respect to Weston's Increment III DRI approval has been filed. The Partnership is also currently seeking a permit to develop 1,156 of the 2,475 gross acres contained in Weston's Increment III, portions of which are environmentally sensitive areas and subject to protection as wetlands. (Reference is made to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of this issue). Receipt of the DRI approval is contingent upon the receipt of this permit. Receipt of DRI approval is also a prerequisite to obtaining zoning, platting, building permits or other approvals required to begin development or construction. Obtaining such approvals can involve substantial periods of time and expense and may result in the loss of desired densities, and approvals may need to be resubmitted if there is any subsequent deviation in current approved plans. The process may also require committing land for public use and payment of substantial impact fees. In addition, state laws generally provide further that a parcel of land cannot be subdivided into distinct segments without having a plat filed and finalized with the local or municipal authority, which will, in general, require the approval of various local agencies, such as environmental and public works departments.
In addition, the Partnership must secure the actual permits for development from applicable Federal (e.g., the Army Corps of Engineers and/or the Environmental Protection Agency with respect to coastal and wetlands developments, including dredging of waterways) and state or local agencies, including construction, dredging, grading, tree removal and water management and drainage district permits. The Partnership may, in the process of obtaining such permits or approvals for platting or construction activities, incur delays or additional expenses; however, such permits and approvals are customarily obtained to permit development. Failure to obtain or maintain necessary approvals, or rejection of submitted plans, would result in an inability to develop the Community as originally planned and would cause the Partnership to reformulate development plans for resubmission, which might result in a failure to increase, or a loss of, market value of the property. The foregoing discussion and the discussion which follows are also generally applicable to the Partnership's commercial and industrial developments.
Upon receipt of all approvals and permits required to be obtained by the Partnership for a specific Community, other than actual approvals or permits for final platting and/or construction activities, the Partnership applies for the permits and other approvals necessary to undertake the construction of infrastructure, including roads, water and sewer lines and amenities such as lakes, clubhouses, golf courses, tennis courts and swimming pools. These expenditures for infrastructure and amenities are generally significant and are usually required early in the development of a Community project, although the Partnership will attempt, to the extent feasible, to develop Communities in a phased manner. See Note 12 for further discussion regarding Tax Increment Financing Entities and their involvement with infrastructure improvements.
Certain of the Florida Communities described below have applied for and have been designated as a Planned Unit Development ("PUD") by the local zoning authority (usually the governing body of the municipality or the county in which the Community is or will be located). Designation as a PUD generally establishes permitted densities (i.e., the number of residential units which may be constructed) with respect to the land covered thereby and, upon receipt, enables the developer to proceed in an orderly, planned fashion. Generally, such PUD approvals permit flexibility between single- unit and multi-unit products since the developer can plan Communities in either fashion as long as permitted densities are not exceeded. As a consequence, developments with PUD status are able to meet changing demand patterns in housing through such flexibility. It should be noted that some of the Communities, while not having received PUD approval, have obtained the necessary zoning approvals to create a planned community development with many of the benefits of PUD approval such as density shifting.
In developing the infrastructure and amenities of its Communities and building its own housing products, the Partnership may function as a general contractor although it may also from time to time hire firms for general contracting work. The Partnership generally follows the practice of hiring subcontractors, architects, engineers and other professionals on a project-by-project basis rather than maintaining in-house capabilities, principally to be able to select the subcontractors and consultants it believes are most suitable for a particular development project and to control fixed overhead costs. Although the General Partner does not expect the Partnership to be faced with any significant material or labor shortages, the construction industry in general has from time to time experienced serious difficulties in obtaining certain construction materials and in having available a sufficiently large and adequately trained work force.
The Partnership's strategy includes the ownership and development of certain commercial and industrial property not located in a Partnership Community. In addition, certain of the Partnership's Communities contain acreage zoned for commercial use, although, except for the Weston Community, such acreage is generally not substantial. On both of such types of properties, the Partnership, individually or with a joint venture partner, may build shopping centers, office buildings and other commercial buildings and may sell land to be so developed.
Certain of the Communities and operations are owned by the Partnership jointly with third parties. Such investments by the Partnership are generally in partnerships or ventures which own and operate a particular property in which the Partnership or an affiliate (either alone or with an affiliate of the General Partner) has an interest.
The principal assets in which interests have been acquired by the Partnership are described in more detail under Item 2



ITEM 2. PROPERTIES
The principal assets being developed or managed by the Partnership are described below. The acreage amounts set forth herein are approximations of the gross acreage of the Communities or other properties referred to or described and are not necessarily indicative of the net developable acreage currently owned by the Partnership or its joint ventures. All of the Partnership's properties are subject to mortgages to secure the repayment of the Partnership's indebtedness as discussed in detail in Note 8.
(a) Palm Beach County, Florida
The Partnership owns property in Broken Sound, a 970-acre Community located in Boca Raton. The Community offers a wide range of residential products built by the Partnership or third-party builders and is in its final stage of development.
(b) Broward County, Florida
The Partnership owns property in Weston, a 7,500-acre Community in its mid stage of development. The Community offers a complete range of housing products built by the Partnership or third-party builders, as well as tennis, swim and fitness facilities, a golf course and an equestrian center. In addition, the Partnership owns commercial properties, most of which are currently undeveloped, located in the Weston Community. Reference is made to Note 12 for a discussion of the Partnership's use of certain tax-exempt financing in connection with the development of the Weston Community.
(c) Sarasota / Tampa, Florida
The Partnership owns property on Longboat Key which is a barrier island on Florida's west coast, approximately four miles from downtown Sarasota and seven miles from Sarasota/Bradenton airport. The property is in its late stage of development. The Partnership also owns property in a Community in the Tampa area known as River Hills Country Club which is a 1,200-acre Community in its mid stage of development. The Partnership owned an interest in The Oaks Community in Sarasota, Florida. The Partnership sold its interest in The Oaks during 1993. Reference is made to Note 8 for a discussion of the sale of the Partnership's interest in The Oaks property and the repayment of the mortgage loan secured by such property.
(d) Jacksonville, Florida
The Partnership owns property in two Communities in Ponte Vedra Beach, Florida, twenty-five miles from downtown Jacksonville, known as Sawgrass Country Club and The Players Club at Sawgrass. These Communities are in their final stages of development. The Partnership also owns property in a 730-acre Community known as the Jacksonville Golf and Country Club which is in its mid stage of development.
(e) Atlanta, Georgia
The Partnership owns properties in the Atlanta, Georgia area known as Water's Edge and Dockside, which are in their mid and final stages of development, respectively.
(f) Highlands, North Carolina
The Partnership owns a 600-acre Community near Highlands, North Carolina known as The Cullasaja Club. The Community is in its mid stage of development. The Partnership previously owned a 50% joint venture interest in this Community; however, during 1992, the Partnership purchased its joint venture partner's 50% interest in the Community. Reference is made to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 7 for further discussion of this joint venture. (g) Other
The Partnership also owns a 20% joint venture interest in a 4,000-acre Community, known as Coto de Caza, located in Southern Orange County, California. The Community is in its mid stage of development. Previously, the Partnership was the managing partner and owned a 50% joint venture interest in the Community; however, during 1992 the Partnership's joint venture partner was reallocated an additional 30% interest in the venture and assumed the role of managing partner in exchange for funding the venture's future cash requirements. Reference is made to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 7 for further discussion of this joint venture.
The Partnership also owns land zoned for commercial use in or near its Communities in Jacksonville, Boca Raton, Atlanta, Georgia and in its Weston Community. The Partnership also owns, either directly or through joint venture interests, various commercial and industrial sites and buildings in Sarasota, Tampa, Ocala, Pompano Beach and Palm Beach County, Florida which are not located in its residential Communities. At December 31, 1994, the joint venture with property in Pompano Beach was encumbered by mortgages in the aggregate principal amount of approximately $4.0 million. Reference is made to Note 11 for further discussion of this venture and its related indebtedness.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Partnership was named a defendant in a number of homeowner lawsuits, certain of which purported to be class actions, that allegedly in part arose out of or related to Hurricane Andrew, which on August 24, 1992 resulted in damage to a former community development known as Country Walk.
The homeowner lawsuits alleged, among other things, that the damage suffered by the plaintiffs' homes and/or condominiums within Country Walk was beyond what could have been reasonably expected from the hurricane and/or was a result of the defendants' alleged defective design, construction, inspection and/or other improper conduct in connection with the development, construction and sales of such homes and condominiums, including alleged building code violations. The various plaintiffs sought varying and, in some cases, unspecified amounts of compensatory damages and other relief. In certain of the lawsuits injunctive relief and/or punitive damages were sought.
Several of these lawsuits alleged that the Partnership was liable, among other reasons, as a result of its own alleged acts of misconduct or as a result of the Partnership's assumption of Arvida Corporation's liabilities in connection with the Partnership's purchase of Arvida Corporation's assets from the Walt Disney Company ("Disney") in 1987, which included certain assets related to the Country Walk development. Pursuant to the agreement to purchase such assets, the Partnership obtained indemnification by Disney for certain liabilities relating to facts or circumstances arising or occurring prior to the closing of the Partnership's purchase of the assets. Over 80% of the Arvida-built homes in Country Walk were built prior to the Partnership's ownership of the Community. Where appropriate, the Partnership has tendered or will tender each of the above-described lawsuits to Disney for defense and indemnification in whole or in part pursuant to the Partnership's indemnification rights. Where appropriate, the Partnership has also tendered these lawsuits to its various insurance carriers for defense and coverage. The Partnership is unable to determine at this time to what extent damages in these lawsuits, if any, against the Partnership, as well as the Partnership's cost of investigating and defending the lawsuits, will ultimately be recoverable by the Partnership either pursuant to its rights of indemnification by Disney or under contracts of insurance.
On August 10, 1993, the Circuit Court of Dade County issued a final order approving the terms of a class action settlement in one of the pending homeowners' lawsuits, which resolved substantial portions of the pending homeowners' lawsuits that had been filed. The settlement, which is designed to resolve claims arising in connection with estate and patio homes and condominiums sold by the Partnership after September 10, 1987, is structured to compensate residents for losses not covered by insurance. Homeowners of approximately 85% of the units in Country Walk have accepted the settlement. The Partnership currently believes that the class action settlement may cost approximately $2.5 million. The settlement is being funded by one of the Partnership's insurers, subject to a reservation of rights. The amount of money, if any, which the insurance company may recover from the Partnership pursuant to its reservation of rights is uncertain.
On February 24, 1994, the Partnership was dismissed from the pending class action homeowner lawsuits pursuant to the class action settlement discussed above. In addition, the Partnership has been informed that Disney and an insurer have reached agreements to settle five of the individual homeowner actions which were tendered by the Partnership to Disney. These Disney settlements were funded without any contribution from the Partnership.
Homeowners who affirmatively rejected the offer of settlement by opting out were permitted to continue litigation against the Partnership. The Partnership was and is party to a number of claims brought by condominium and patio homeowners, all of whom have declined to accept the terms of the class action settlement. Some of these actions by those homeowners who have opted out of the settlement have been settled. The aggregate amount of these settlements to date is approximately $414,000. One of the Partnership's insurers has funded these settlements. The amount of money that the insurance company may recover from the Partnership pursuant to any reservation of rights, or otherwise, is uncertain. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter. Currently, the Partnership is involved in five lawsuits with homeowners who have opted out of the original settlement which are pending in the Circuit Court of Dade County and one claim that has not been filed as a lawsuit. The Partnership intends to vigorously defend itself in these matters.
On April 19, 1993, a subrogation claim entitled Village Homes at Country Walk Master Maintenance Association, Inc. v. Arvida Corporation, et al., was filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this suit for the use and benefit of American Reliance Insurance Company ("American Reliance"). In this suit, as amended, plaintiffs seek to recover damages and pre- and post-judgment interest in connection with $10,873,000 American Reliance has allegedly paid, plus amounts it may have to pay in the future, to the condominium association at Country Walk in the wake of Hurricane Andrew. Disney is also a defendant in this suit. The Partnership believes that the amount of this claim that allegedly relates to units it sold is approximately $3,600,000. Plaintiffs also seek a declaratory judgment seeking to hold the Partnership and other defendants responsible for amounts American Reliance must pay in the future to its insureds as additional damages beyond the $10,873,000 previously paid. The Partnership has filed motions directed to the complaint, as amended, and the litigation is in the discovery stage. The Partnership intends to vigorously defend itself.
The Partnership has also been involved in subrogation lawsuits or threatened subrogation actions with Prudential Property and Casualty Company, Travelers Insurance Company ("Travelers"), Allstate Insurance Company ("Allstate") and State Farm Insurance Company. These insurance companies sought to recover damages, costs, and interest in connection with amounts allegedly paid to their insureds living in Country Walk at the time of Hurricane Andrew. The Partnership settled these claims and all settlement proceeds were funded by one of the Partnership's insurance carriers. The aggregate amount of these settlements is approximately $4.3 million. The Allstate and Travelers settlements were funded subject to a reservation of rights by one of the Partnership's insurance carriers. The amount of money the insurance carrier may seek to recover from the Partnership for these and any other settlements it has funded is uncertain. The Partnership is a defendant in and anticipates other subrogation claims by insurance companies which have allegedly paid policy benefits to Country Walk residents. The Partnership intends to defend itself vigorously in all such matters.
The Partnership resolved a claim brought by the Villages of Country Walk Homeowners' Association, Inc., and related entities, for damages to the common elements of the condominium units at Country Walk. A settlement in the amount of $2,740,000 was paid by the Partnership's insurance carriers. A reservation of rights in connection with these claims of approximately $740,000 was issued by one insurance carrier. The extent to which the insurance company may ultimately recover any of these proceeds from the Partnership is unknown. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter.
As noted above, one of the Partnership's insurance carriers has been funding settlements of various litigation related to Hurricane Andrew. In some, but not all, instances, the insurance carrier has provided the Partnership with written reservation of rights letters. The aggregate amount of the settlements funded to date by this carrier is approximately $7.8 million. The extent to which the insurance carrier may recover any of these proceeds from the Partnership is uncertain. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter.
A second amended complaint captioned Berry v. Merrill Lynch, Pierce Fenner & Smith; Arvida/JMB Partners, Limited Partnership; Arvida/JMB Managers, Inc.; JMB Realty Corporation; and Does 1 through 100, was filed in the Superior Court of the State of California in and for the County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a class action on behalf of the named plaintiffs and all other persons or entities in the State of California who bought or acquired, directly or indirectly, limited partnership interests ("Interests") in the Partnership from September 1, 1987 through the present. The second amended complaint in the action alleges, among other things, that the defendants made misrepresentations and concealed various facts, breached fiduciary duties, and violated a contractual covenant of good faith in connection with the sale of Interests in the Partnership. The second amended complaint further alleges that such conduct violated California state law relating to fraud, constructive fraud, breach of fiduciary duty, willful suppression of facts, breach of the covenant of good faith, and conspiracy. Plaintiffs, on behalf of themselves and the purported plaintiff class, seek unspecified compensatory damages, consequential damages, punitive and exemplary damages, recission, interest, costs of the suit, and such other relief as the court may order. In October 1994, after the court denied defendants' demurrers, the defendants answered the second amended complaint denying the material allegations of the complaint and setting forth various affirmative defenses. During March 1995, the court issued an order that it would not entertain any motions for certification of a class. Subsequent thereto, defendants have entered into a settlement in principle in order to put to rest all controversy and to avoid further disruption to defendants' ordinary business operations and the expense, burden and risk of protracted litigation. The settlement is not an admission of liability, which the defendants expressly deny. The amount of the proposed settlement is not expected to be material. The Partnership cannot assume that this settlement in principle will in fact be consummated.
Other than as described above, the Partnership is not subject to any material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Partnership. Reference is made to Note 2 regarding certain other litigation involving the Partnership. Reference is also made to Note 11 for a discussion of certain claims by Merrill Lynch for indemnification by the Partnership and the General Partner against losses and expenses that may be suffered by Merrill Lynch relating to claims for arbitration asserted against it by certain investors in the Partnership.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 1993 and 1994.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1994, there were 25,404 record Holders of Interests of the Partnership. There is no public market for Interests, and it is not anticipated that a public market for Interests will develop. Upon request, the General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the investor.
However, there are restrictions governing the transferability of these Interests as described in "Transferability of Partnership Interests" on pages A-31 to A-33 of the Partnership Agreement and limitations on the rights of assignees of Holders of Interests as described in Sections 3 and 4 of the Assignment Agreement, which are hereby incorporated by reference to Exhibits 3 and 4.0, respectively, of the Partnership's Report on Form 10-K dated March 29, 1993 (File No. 0-16976). Reference is made to Item 1. Business for a discussion of the election to be made by the General Partner with respect to causing Interests to be listed on a national exchange or to be reported by the National Association of Securities Dealers Automated Quotation System, purchasing or causing an affiliate or affiliates to purchase all of the Interests at their then appraised fair market value, or commencing a liquidation of all of the Partnership's assets.
Reference is made to Item 6.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994 and 1993, the Partnership had cash and cash equivalents of approximately $22,024,000 and $20,567,000, respectively. Bank overdrafts, which represent checks in transit, of approximately $1,660,000 at December 31, 1993 were repaid from cash on hand during January 1994. Remaining cash and cash equivalents were available for debt service, working capital requirements and distributions to partners. The source of both short-term and long-term future liquidity is expected to be derived primarily from the sale of housing units, homesites and land parcels and through the Partnership's credit facility, which is discussed below.
As a result of management's efforts to broaden the appeal of the Partnership's Communities through the introduction of new housing products, the implementation of a series of cost reductions, and the upward trends in housing activity that the nation, as well as the markets in which the Partnership's properties are located, have been experiencing, the Partnership was able to generate significant cash flow before debt service during 1994 and 1993. The Partnership utilized this excess cash flow to make scheduled and additional principal repayments on its outstanding debt, as required under the terms of the credit facility agreement, and to increase its cash reserves. Furthermore, in February 1995, the Partnership made a distribution for 1994 of $5,421,680 to its Limited Partners ($13.42 per Interest) and $301,201 to the General Partner and Associate Limited Partners, collectively. During February 1994, the Partnership made a distribution for 1993 of $2,565,433 to its Limited Partners ($6.35 per Interest) and $142,523 to the General Partner and Associate Limited Partners, collectively. As a result of certain restrictions on distributions to partners contained in its credit facility agreement, the Partnership made distributions to its partners in amounts substantially less than the Partnership's income for financial reporting or Federal income tax purposes for the years ended December 31, 1994 and 1993.
Recent rises in interest rates have had and may continue to have an adverse effect on the demand for housing units in 1995. The extent to which this affects the Partnership will depend upon whether interest rates continue to increase or remain relatively consistent with current rates.
At December 31, 1993, the Partnership's credit facility consisted of a term loan in the original amount of $126,805,195, a revolving line of credit facility up to $45 million, an income property term loan in the original amount of $20 million and a $15 million letter of credit facility.
The income property term loan, revolving line of credit and letter of credit facility matured in July, 1994. Although the Partnership's term loan was not scheduled to mature until July 1997, the lender required the Partnership to renew its entire credit facility as a condition of renewing the income property term loan, the revolving line of credit and letter of credit facility.
During November 1994, the Partnership and its lender signed an agreement for a renewal of the entire credit facility agreement. In connection with obtaining this renewal, the Partnership made principal payments on its term loan of $3 million and $9.5 million in July 1994 and December 1994, respectively. The new credit facility consists of a term loan in the original amount of $85,252,520, a revolving line of credit facility up to $20 million, an income property term loan in the original amount of $18,233,326 and a $15 million letter of credit facility. The term loan, the revolving line of credit and the letter of credit facility are secured by recorded mortgages on all otherwise unencumbered real property assets of the Partnership as well as an assignment of all mortgages receivable, equity memberships, certain joint venture interests or joint venture proceeds, and cash balances (with the exception of deposits held in escrow). The income property term loan is secured by the recorded first mortgages on a mixed-use center and an office building in Boca Raton, Florida. All of the notes under the facility are cross- collateralized and cross-defaulted.
The Partnership made scheduled principal payments of $10 million on the term loan in March 1994 and February 1995. In addition, the term loan agreement provides for additional principal payments based upon a specified percentage of available cash flow and upon the sale of certain assets. For the year ended December 31, 1994, the Partnership made such additional term loan payments totalling approximately $12.3 million. Principal payments of $5 million, $10 million and $5 million on the term loan are due in July 1995, February 1996 and July 1996, respectively. The remaining balance outstanding is due in July 1997. Under the income property term loan, principal payments of $0.1 million are required to be paid monthly until March 1996 when the remaining outstanding principal balance will be due. At December 31, 1994, all of the term loan proceeds had been borrowed with a remaining outstanding balance of $73,452,970. The outstanding balances on the revolving line of credit facility, the income property term loan and the letter of credit facility at December 31, 1994 are $0, $17,933,326 and $10,169,823, respectively.
At December 31, 1994, the Partnership has a contract for the sale of its office building located in downtown Boca Raton, Florida known as Mizner Place for approximately $4 million. The sale is expected to close during the second quarter of 1995. The net sales proceeds from such sale will be used to paydown the income property term loan.
The credit facility contains significant restrictions with respect to the payment of distributions to partners, the maintenance of certain loan- to-value ratios, the use of proceeds from the sale of the Partnership's assets, and advances to the Partnership's joint ventures. Other than the uncertainty surrounding the funding of any required joint venture advances, which require the lenders' approval, the Partnership believes that the current and expected future liquidity and capital resources of the Partnership, including its credit facility, generally should be adequate to fund currently expected short-term capital requirements for development and other costs of operations. Although the Partnership's income property term loan, revolving line of credit and letter of credit facility mature in 1996 and its term loan facility matures during 1997, the Partnership also believes that its expected future liquidity and capital resources, including its credit facility, generally should be adequate to fund currently expected long-term capital requirements for development and other costs of operations. At this time, the Partnership anticipates renewing its credit facility with its lender at the time of its maturity. Although there can be no assurance, the Partnership currently believes that it will be able to obtain such a renewal from its lender.
The Partnership has a $28.9 million revolving construction line of credit for the first two buildings and certain amenities within the Partnership's condominium project on Longboat Key, Florida known as Arvida's Grand Bay. This line of credit bears interest at the lender's prime rate (8.0% at December 31, 1994) plus 3/4% per annum and matures in January 1996. At December 31, 1994, approximately $8.8 million was outstanding under this line of credit. The Partnership currently anticipates that this amount will be repaid from the proceeds from the sale of condominium units within the first two buildings.
During the third quarter of 1994, the Partnership commenced home building activities in the Atlanta market with the introduction of housing products in its Waters Edge and Dockside Communities. The Partnership anticipates generating the initial revenues from the closings of these homes in the first quarter of 1995.
Increased housing sales activity associated with management's decision to place more emphasis on the Partnership's home building operations resulted in a significant increase in construction expenditures during 1994 as compared to 1993. This increase in expenditures is the primary cause for the increase in real estate inventories and accounts payable on the accompanying consolidated balance sheets at December 31, 1994 as compared to December 31, 1993.
Certain of the Partnership's property within the Cullasaja Community was financed by a mortgage note which matured on March 1, 1994. The note was collateralized by a first mortgage on certain real estate inventories and 12.5% of the outstanding balance was guaranteed by the Partnership. The Partnership was unable to obtain an extension of the loan, and therefore, on June 29, 1994, purchased the note at par and paid the accrued interest thereon and certain attorney and conveyance fees. The total amount of such payment was approximately $5,278,000. The note and mortgage were subsequently pledged as collateral to the Partnership's lenders under its credit facility.
During 1992 and 1993, the Partnership funded all development and construction costs, as well as certain overheads, incurred on behalf of the two joint ventures in Weston which had been formed to construct homes in that Community. Such amounts were funded in accordance with the development management agreements the Partnership had entered into with these joint ventures. All of these homes had been completed and had virtually closed out by December 31, 1993. As a result, the majority of the amounts previously funded were reimbursed to the Partnership in 1993 and the remaining amounts were reimbursed during 1994. The receipt of these amounts is the primary cause for the increase in payments from joint ventures on the accompanying consolidated statements of cash flows for 1993 as compared to 1992 and 1994. These receipts contributed to the overall increase in cash provided by (used in) investing activities for 1993 as compared to 1992 and 1994.
In addition, the Partnership received approximately $2.6 million in distributions from the two joint ventures in Weston during 1993, as well as $1.1 million and $0.4 million in distributions from its joint venture interests in properties in the Boca Raton and Ocala, Florida areas, respectively. The receipt of these distributions during 1993 contributed to the increase in joint venture distributions (contributions), net, on the accompanying consolidated statements of cash flows for 1993 as compared to 1992 and 1994. Joint venture distributions (contributions), net, for the year ended December 31, 1992 included an approximate $3.1 million loan guarantee payment made in relation to the Partnership's 50% joint venture interest in 31 commercial/industrial acres in Pompano Beach, Florida, as discussed in Note 11. The payment of this amount during 1992 also contributed to the increase in joint venture distributions (contributions), net, for 1993 as compared to 1992. These receipts also contributed to the overall increase in cash provided by (used in) investing activities for 1993 as compared to 1992 and 1994.
The Partnership owned an 80% general partnership interest in The Oaks Community located near Sarasota, Florida. During the fourth quarter of 1991, the Partnership's joint venture partner failed to make capital contributions required to fund ongoing operations and pursuant to the joint venture agreement, was in default of the agreement. The Partnership executed an agreement in August 1993 with its joint venture partner, CIS Oaks, Ltd., ("CIS"), whereby CIS assigned its 20% interest in The Oaks to the Partnership, thereby vesting 100% control of the assets of the joint venture to the Partnership.
The assets of the Oaks joint venture were encumbered by two mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997 and a $3,260,000 loan was scheduled to mature in December 1993. The joint venture had guaranteed $2.7 million of the loans, and the guaranteed amount was with recourse to the Partnership. The joint venture was in default under the terms of these loan agreements as a result of its failure to make principal payments of approximately $1.3 million in January 1993 to release the minimum number of homesite lots as required under these agreements and its failure to pay interest commencing with a payment due in April 1993. The Partnership was able to reach an agreement with its lenders to pay off the existing mortgage loans at a substantial discount from face value. On September 3, 1993, the Partnership paid the joint venture's lenders $6.7 million in full satisfaction of the outstanding mortgage loans, accrued interest and guaranty. This transaction was the cause of the approximate $9.5 million extraordinary gain on the early extinguishment of debt for the year ended December 31, 1993.
Given the finite amount of available capital to the Partnership, the Partnership determined that it was in its best long-term interest to utilize that capital for the development of its other properties and sold its remaining land holdings in The Oaks Community and its interest in The Oaks Club to an unaffiliated third party purchaser for $5.8 million. This sale transaction occurred simultaneously with the repayment of the loans and satisfaction of the mortgages described above. In light of the Partnership's guarantee under the loan agreement of $2.7 million of the outstanding mortgage loans, as well as other factors, these transactions were pursued as the least costly alternative available to the Partnership. These transactions resulted in a minimal net gain for Federal income tax purposes.
The Partnership is seeking a permit to develop 1,156 of the 2,475 gross acres contained in Increment III of the Weston Community, portions of which are environmentally sensitive areas and are subject to protection as wetlands. The Partnership's current application for a wetlands permit for Increment III includes proposed wetlands mitigation of 1,319 acres together with construction of schools, parks, roads, sewers and related infrastructure, in addition to residential and commercial development. However, in August 1994, the Environmental Protection Agency (the "EPA") issued a letter to the United States Army Corps of Engineers (the "Corps"), which is the governmental agency responsible for issuing permits involving development of wetlands areas, setting forth the EPA's position that no more than 120 gross acres in Increment III should be permitted to be developed. In addition, the EPA recommended that adequate compensatory mitigation be implemented in connection with such development.
The Partnership believes that the EPA's recommendation is flawed based on scientific evidence, and it continues to pursue issuance of the permit for development of Increment III under the terms and conditions previously set forth in its application. The Corps has not accepted the recommendation of the EPA and has advised the Partnership that it is continuing to consider the Partnership's current application as presently submitted. During October 1994, the Corps performed an independent analysis of the wetlands impact and mitigation. To date, the Partnership has not received a formal response from the Corps regarding the results of this analysis. However, an informal response has been received requesting additional and clarified information regarding certain characteristics of the proposed mitigation plan, which the Partnership is providing.
If the Corps ultimately issues a permit generally on the same terms and conditions as set forth in the Partnership's previously submitted application, the EPA retains certain rights to veto or to seek to elevate the determination to issue a permit to higher governmental officials. Elevation would delay the effectiveness of the permit pending resolution of a final decision on the application for the permit and could result in a decision to uphold, modify or retract issuance of the permit. If the Partnership does not ultimately receive its permit through the administrative process, it may seek a judicial review in federal district court of the denial of the permit. Additionally, the Partnership could initiate an action in the United States Court of Federal Claims seeking a determination that denial of the permit constitutes a "taking" of the Partnership's property for which the Partnership is due just compensation. The pursuit of these legal actions would likely be lengthy.
The Partnership continues to believe that it will ultimately obtain a permit from the Corps to develop Increment III of the Weston Community on substantially the same terms and conditions for which it has currently applied. However, there is no assurance that such permit will in fact be obtained or, if not obtained, that the Partnership would be successful in pursuing the above-mentioned legal actions. In addition, if such a permit were obtained, the Partnership would also need certain other approvals, including state and local approvals, to develop Increment III in accordance with the Partnership's current development plans. If such permits and other approvals are not obtained, the Partnership would be required to revise its development plans for the remaining portions of Increment I and II of the Weston Community, as well as its development plans for Increment III. Such revisions would have a material adverse impact on the timing and amount of net income and net cash flow ultimately realized by the Partnership from the development of the Weston Community.
In June 1993, the Partnership executed an agreement with Equitable South Florida Venture ("Equitable"), the successor in interest to Tishman Speyer/Equitable South Florida Venture, the original purchaser of approximately 390 acres of land in Increment III of the Partnership's Weston Community, whereby, in exchange for $5.0 million, the Partnership repurchased approximately 330 acres of the land and Equitable agreed to relieve the Partnership of the obligations under certain provisions of the Sale and Purchase Agreement dated December 15, 1983, which were assumed by the Partnership in connection with the purchase of the assets of Arvida Corporation in September 1987. Of the agreed upon price of $5 million, $2.5 million was paid at the execution of the agreement in 1993 and the balance of $2.5 million is to be paid in equal annual installments of $500,000 together with interest thereon at 8% per annum. The Partnership made the first of these scheduled payments in May 1994. The unpaid principal balance is secured by a mortgage on certain real estate located in the Weston Community. As part of its efforts to obtain the appropriate development permits discussed in the preceding paragraph, the Partnership has included this land as part of its proposed mitigation plan for the development of Increment III of its Weston Community.
During the first quarter of 1993, the Partnership reached a settlement agreement with its joint venture partner in a property located in Ocala, Florida, whereby in exchange for its partner's 50% interest in the venture, the Partnership agreed to dismiss a lawsuit previously filed against its venture partner for failure to perform in accordance with the terms of a $1,600,000 note which had been issued to the Partnership by the joint venture. This agreement was pursued as a more favorable remedy to other alternatives available to the Partnership. As a result of this transaction, the Partnership changed from the equity method of accounting to the consolidated method of accounting for the joint venture effective March 1, 1993.
The Partnership has been advised by Merrill Lynch that Merrill Lynch has been named a defendant in actions pending in the Eleventh and Seventeenth Judicial Circuit Courts in Dade and Broward Counties, Florida to compel arbitration of claims brought by certain investors of the Partnership representing approximately 5% of the total of 404,000 Interests outstanding. In the actions to compel arbitration, the claimants have advised Merrill Lynch that they, among other things, will seek to file demands for arbitration and claims for unspecified damages based on Merrill Lynch's alleged violations of applicable state and/or Federal securities laws and alleged violations of the rules of the National Association of Securities Dealers, Inc., together with pendent state law claims. Some of these investors have begun the arbitration process. The Partnership believes that Merrill Lynch has resolved some of these claims through litigation and otherwise; and that Merrill Lynch is defending other claims.
Merrill Lynch has asked the Partnership and its General Partner to confirm an obligation of the Partnership and its General Partner to indemnify Merrill Lynch in these claims against all loss, liability, claim, damage and expense, including without limitation attorney's fees and expenses, under the terms of a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with the Partnership relating to the sale of Interests in the Partnership through Merrill Lynch on behalf of the Partnership. The Agency Agreement generally provides that the Partnership and its General Partner shall indemnify Merrill Lynch against losses occasioned by an actual or alleged misstatement or omission of material fact in the Partnership's offering material used in connection with the sale of Interests and suffered by Merrill Lynch in performing its duties under the Agency Agreement, under specified conditions. The Agency Agreement also generally provides, under certain conditions, that Merrill Lynch shall indemnify the Partnership and its General Partner for losses suffered by the Partnership and occasioned by specified conduct by Merrill Lynch in the course of Merrill Lynch's solicitation of subscriptions for, and sale of, Interests. The Partnership is unable to determine at this time the ultimate investment of investors who have filed arbitration claims as to which Merrill Lynch might seek indemnification in the future. At this time, and based upon the information presently available about the arbitration statements of claims filed by some of these investors, the Partnership and its General Partner believe that they have meritorious defenses to demands for indemnification made by Merrill Lynch and intend to vigorously pursue such defenses. In the event Merrill Lynch is entitled to indemnification of its attorney's fees and expenses or other losses and expenses, these amounts may prove to be material. However, no amounts have been accrued at December 31, 1994.
Reference is made to Note 11 regarding the Partnership's financial guarantees pursuant to the terms of a loan agreement for a commercial/industrial joint venture in Pompano Beach, Florida in which the Partnership owns a 50% interest. The Partnership also has certain continuing obligations relative to this joint venture as referred to in such Note.
Reference is made to Item 3. Legal Proceedings of this annual report for a discussion of several lawsuits, in which the Partnership is a defendant, allegedly arising out of or relating to Hurricane Andrew and certain property damage allegedly suffered by the plaintiffs at a previously developed community known as Country Walk.
RESULTS OF OPERATIONS
The results of operations for the years ended December 31, 1994, 1993 and 1992 are primarily attributable to the development and sale or operation of the Partnership's assets. See Note 1 for a discussion regarding the recognition of profit from sales of real estate.
For the year ended December 31, 1994, the Partnership (including its consolidated ventures and its unconsolidated ventures accounted for under the equity method) closed on the sale of 899 housing units, 608 homesite lots and approximately 12 acres of developed and undeveloped residential or commercial/industrial land tracts. This compares to sales closings in 1993 of 626 housing units, 752 homesite lots, approximately 91 acres of developed and undeveloped residential or commercial/industrial land tracts as well as the sales of the Oak Bridge Club and the remaining real estate and equity memberships at The Oaks Community. Sales closings in 1992 were for 320 housing units, 629 homesite lots and approximately 91 acres of developed and undeveloped land tracts. Outstanding contracts ("backlog") as of December 31, 1994 were for 897 housing units, 67 homesites, approximately 36 acres of developed and undeveloped land tracts as well as an office building located in downtown Boca Raton, Florida known as Mizner Place. This compares to a backlog as of December 31, 1993 of 521 housing units, 127 homesites and approximately 47 acres of developed and undeveloped land tracts. The backlog as of December 31, 1992 was for 270 housing units, 86 homesites and approximately 6 acres of developed and undeveloped land tracts. The increasing trend in backlog as compared to prior years is indicative of the improvement in sales activity seen at many of the Partnership's Communities.
The Partnership's Communities are in various stages of development, with estimated remaining build-outs ranging from one to ten years. The Partnership's condominium project on Longboat Key, Florida known as Arvida's Grand Bay, is in its early stage of development. The Weston Community, located in Broward County, Florida, is the Partnership's largest Community and is in its mid stage of development. Also in their mid stages of development are the River Hills Country Club in Tampa, Florida; Jacksonville Golf and Country Club in Jacksonville, Florida; the Water's Edge Community in Atlanta, Georgia and The Cullasaja Club, near Highlands, North Carolina. The Partnership's remaining Communities known as Sawgrass Country Club, in Jacksonville, Florida and Dockside in Atlanta, Georgia are in their final stages of development with anticipated close-outs in 1996. In addition, the Broken Sound Community, located in Boca Raton, Florida, is nearing completion with an anticipated close-out in 1995. Future revenues will be impacted to the extent that there are lower levels of inventories available for sale as these Communities approach or undertake their final phases. In addition, due to the anticipated close-out of the Partnership's higher profit margin products within Broken Sound in 1995, future gross operating profit margins from housing activities are not expected to be as high as recent years' margins.
Revenues from housing and homesite activities are recognized upon the closing of homes built by the Partnership and developed lots, respectively, within the Partnership's Communities. Land and property revenues are generated from the closing of developed and undeveloped residential and/or commercial land tracts, the sale of operating properties as well as gross revenues earned from the sale of equity memberships in the clubs within the Partnership's Boca Raton and Jacksonville, Florida Communities, as well as its Community near Highlands, North Carolina.
Cost of revenues pertaining to the Partnership's housing sales reflect the cost of the acquired assets as well as development and construction expenditures, certain capitalized overhead costs, capitalized interest, real estate taxes and marketing, as well as disposition costs. The costs related to the Partnership's homesite sales reflect the cost of the acquired assets, related development expenditures, certain capitalized overhead costs, capitalized interest and real estate taxes, as well as disposition costs. Land and property costs reflect the cost of the acquired assets, certain development costs and related disposition costs, as well as the cost associated with the sale of equity memberships.
South Florida building code changes, which have been effective since September 1, 1994, have impacted construction requirements in Dade and Broward Counties. These building code changes have resulted in increased construction costs, not all of which are able to be passed through to the home purchasers at this time. As a result, the Partnership anticipates some erosion in its gross operating profit margins from housing and homesite sales during 1995 as compared to 1994.
Housing revenues have continued to increase significantly since 1992. This favorable trend is largely the result of management's decision to place more emphasis on the Partnership's home building operations. This decision has resulted in more housing products offered which are built by the Partnership, in lieu of the Partnership selling land parcels and homesites to unaffiliated third-party builders.
Housing closings increased significantly in Weston during 1994 as compared to 1993 due to the Partnership building more product lines within this Community, as well as the introduction of several value-oriented products in late 1992 and early 1993 which had their initial closings in the third quarter of 1993. The continued success of these products, as well as the success of several new product lines offered in late 1993 and 1994 contributed significantly to the overall increase in housing revenues.
Housing closings and revenues for 1994 also exceeded those for 1993 at the Partnership's Communities in Tampa and Jacksonville, Florida due to the introduction of products which had their initial closings in the fourth quarter of 1993, as well as at the Partnership's Broken Sound Community in Palm Beach County, Florida. Revenues increased at Broken Sound due to the continued sale of products which had their initial closings in the second quarter of 1993, as well as the introduction of a new product in 1993 which had its initial closings in 1994. The favorable variances at Broken Sound were partially offset by reduced revenues in 1994 for several products within that Community due to the close out of those products, as Broken Sound nears its completion.
Revenues at Arvida's Grand Bay on Longboat Key are recognized under the percentage of completion method of accounting. Also contributing to the overall increase in housing revenues for 1994 as compared to 1993 is the initial recognition of revenues for the first building at Arvida's Grand Bay on Longboat Key during 1994. Construction of the second building at Arvida's Grand Bay commenced in August 1994 and is expected to generate its initial closings and revenues in 1995. As of December 31, 1994, approximately 55% of the units within these two buildings had been sold. Sales at Arvida's Grand Bay and the resulting recognition of revenues under the percentage of completion method are the primary cause for the increase in trade and other accounts receivable at December 31, 1994 as compared to December 31, 1993.
The increase in housing revenues for the year ended December 31, 1993 as compared to 1992 was due primarily to increased sales and closing activity at the Partnership's Weston, Broken Sound and Jacksonville Golf & Country Club Communities, as well as the completion and close-out of the Partnership's Marina Bay condominium project on Longboat Key, Florida. The gross operating profit margin from housing sales increased for the year ended December 31, 1993 as compared to 1992 due primarily to the mix of product sold at the Partnership's Weston and Broken Sound Communities. The increase in the margin was also attributable to higher profit margins recognized from the final phase of Marina Bay on Longboat Key, Florida. These closings generated increased revenues due to the desirable location of the final building.
Due to the implementation of the Partnership's decision to place more emphasis on its home building operations, as discussed above, revenues from homesite activities decreased for the year ended December 31, 1994 as compared to 1993. The decrease in homesite revenues in 1994 as compared to 1993 was also due to reduced closings from the Partnership's product offered on Longboat Key, Florida, due to the close out of these lots in 1993. Slow sales at Waters Edge and Dockside also contributed to the unfavorable revenue variance for 1994 as compared to 1993. Sales continue to be slow in these Communities due to weak market demand for the products offered in this particular sub-market in Atlanta.
The increase in the gross operating profit margin from homesite activities for the year ended December 31, 1994 as compared to 1993 was due primarily to adjustments to cost of sales, recorded in the third quarter of 1994, to reflect changes in future development cost estimates for certain of the Partnership's products, primarily in the Weston Community. Current development estimates indicate lower costs to be incurred than were previously anticipated, therefore contributing to this favorable variance.
Revenues from the sale of homesites increased for the year ended December 31, 1993 as compared to the same period in 1992 due primarily to the initial closing of lots in several homesite projects introduced early in 1993 in the Weston Hills Country Club section of the Partnership's Weston Community. Also contributing to the favorable variance was the closing of the remaining lots held for sale by the Partnership on Longboat Key, Florida during September 1993. This favorable variance was partially offset by decreased revenues at the Partnership's Broken Sound Community due to the close-out of the final homesites in that Community in 1992.
Land and property revenues for the year ended December 31, 1993 include approximately $5.8 million and $3.3 million in revenues generated from the sale of the remaining real estate and equity memberships at the Partnership's Oaks Community (see further discussion in Liquidity and Capital Resources above) and the sale of the Oakbridge Club near Jacksonville, Florida, respectively. The inclusion of revenues from these sale closings in 1993 is the primary cause for the decrease in land and property revenues for the year ended December 31, 1994 as compared to 1993, as well as the cause for the increase in land and property revenues for 1993 as compared to 1992. The remaining unfavorable revenue variance for 1994 as compared to 1993 is due to a decrease in the amount of revenues recognized for those land sales closed in previous years which had been deferred for financial reporting purposes, as well as a lower volume of other land sales in the Boca Raton and Jacksonville, Florida and Atlanta, Georgia areas.
Despite the decrease in revenues, the gross operating profit margin generated from land and property activities increased for 1994 due primarily to 1993's margins being negatively impacted by the operating loss incurred on the sale of the remaining real estate and equity memberships at the Partnership's Oaks Community in 1993. The increase in the gross operating profit margin from land and property activities for 1993 as compared to 1992 was due primarily to the increase in the amount of revenues and related profits recognized for sales which had previously been deferred for financial reporting purposes, as well as the profit recognized from the sale of the Oakbridge Club in 1993. These favorable variances were partially offset by the sale of the remaining real estate and equity memberships at the Partnership's Oaks Community in 1993.
Operating properties represents activity from the Partnership's club and hotel operations, commercial properties and certain other operating assets. Revenues generated by the Partnership's operating properties increased for the year ended December 31, 1994 as compared to 1993 primarily due to increased revenues from the Partnership's club operations in Weston and River Hills due to an increase in membership activity. Revenues for 1994 also exceeded those for 1993 at the Partnership's cable operations in Weston. This increase resulted primarily from an increase in the number of cable subscribers within that Community. These favorable revenue variances were partially offset, however, as 1994 revenues do not include any activity from the Oakbridge Club which was sold to an unaffiliated third party in October 1993. Revenues generated by the Partnership's operating properties increased for the year ended December 31, 1993 as compared to 1992 primarily as a result of an increase in membership activity at the Partnership's club facilities in Weston resulting from the overall increase in home sales activity within that Community. In addition, revenues from the Partnership's cable operations in Broken Sound and Weston increased during the year ended December 31, 1993 as compared to 1992 resulting from an increase in the number of cable subscribers within those Communities as well as a change in the cable rate structure. The decrease in the negative net margins since 1992 is due primarily to cost reductions implemented at the Partnership's club and hotel operations coupled with an overall increase in revenues from these operations. The Partnership continually evaluates the operations of its club and hotel facilities and institutes additional cost controls as deemed appropriate.
Brokerage and other operations represents activity from the sale of unaffiliated third-party builders' homes within the Partnership's Communities, activity from resale of real estate inside and outside the Partnership's Communities, proceeds from the Partnership's property management activities as well as fees earned from various management agreements with joint ventures. The increase in revenues and the corresponding increase in the gross operating profit from brokerage and other operations for the year ended December 31, 1993 as compared to 1992 was attributable to an increase in the volume of resale activity, primarily in the Sarasota, Broward County and Palm Beach County, Florida areas, as well as a decrease in the related cost of revenues resulting from a reduction in commissions paid due to a modification of the Partnership's brokerage commission structure.
Selling, general and administrative expenses include all marketing costs, with the exception of those costs capitalized in conjunction with the construction of housing units, and project and general administrative costs. These expenses are net of the marketing fee reimbursements received from third-party builders. Selling, general and administrative expenses increased for the year ended December 31, 1994 as compared to 1993 due to increased project administrative costs at the Partnership's Weston Community and at Arvida's Grand Bay on Longboat Key. These increased costs resulted from increased activity related to these projects in 1994 as compared to 1993. Selling, general and administrative expenses were significantly lower for the year ended December 31, 1993 as compared to 1992. This significant reduction was attributable to the implementation of a series of overhead reductions including the consolidation of certain administrative functions, a reduction in the number of employees and other employee-related expenditures, the implementation of more cost-effective marketing programs, as well as an overall reduction of other administrative expenses. Management continually evaluates the operations of the Partnership and institutes additional cost controls as deemed necessary in order to maximize the Partnership's profits.
Charges to the carrying value of real estate inventories and other assets represent adjustments to the book values of the Partnership's projects based upon the analysis of each projects' estimated selling price in the ordinary course of business less estimated costs of completion, holding and disposal as compared to its recorded carrying value.
The Partnership recorded charges to the carrying value of real estate inventories and other assets for the year ended December 31, 1993 totalling approximately $4.9 million resulting from the adverse impact of reductions in housing prices on future anticipated lot values at the Partnership's Water's Edge and Dockside Communities.
The Partnership recorded charges to the carrying value of real estate inventories and other assets totalling approximately $27.2 million during the year ended December 31, 1992. These charges included approximately $7.4 million to reduce the carrying values of the Partnership's Water's Edge and Dockside Communities and $1.8 million to reduce the carrying value of its River Hills Community. These Communities had been experiencing slower sales absorptions than anticipated due to the pricing of products not being in line with the then current market demand. The charges to the inventory carrying values resulted from the Partnership's plans to offer lower-priced homesite and housing products in these Communities which were more consistent with market demand. In addition, the value of the golf and country club facility at River Hills had been adversely impacted by the introduction of new lower-priced products within the Community, as well as overall economic conditions and the competition from other club facilities within the Tampa, Florida area. As a result, the Partnership recorded an approximate $2.5 million charge to the net book value of the golf course and country club at River Hills during 1992.
In light of the circumstances surrounding The Oaks joint venture as discussed in Liquidity and Capital Resources above, the Partnership, as a matter of prudent accounting practice, recorded a charge to the carrying value of real estate inventories and equity memberships of approximately $2.3 million and $1.0 million, respectively, in the fourth quarter of 1992 to properly reflect the estimated market value of The Oaks property in its then current state of development assuming a bulk sale of the entire property under the market conditions at that time.
The amenities within the Partnership's Jacksonville Golf and Country Club and Broken Sound Communities are conveyed to homeowners through the sale of equity memberships. During 1992, the value of the remaining memberships in Jacksonville Golf and Country Club had been adversely impacted by the introduction of lower-priced products within the Community in response to market conditions as well as competition from other club facilities located in the Jacksonville area. In addition, during 1992, the higher-priced equity memberships at the Broken Sound Club had experienced a slowdown in sales due primarily to the overall slowdown in the economy and the low levels of consumer confidence. As a result of the above, during 1992 the Partnership recorded charges to the carrying values of its equity memberships at Jacksonville Golf and Country Club and Broken Sound Club of approximately $2.2 million and $1.0 million, respectively.
In the fourth quarter of 1992, the Partnership recorded an approximate $0.9 million charge to the net book value of property and equipment to reflect the reduction in the value of a 29,000 square foot office building located in Palm Beach County, Florida. In addition, the Partnership owns interests in a number of commercial joint ventures located throughout Florida. Due to a significant decline in the demand for undeveloped commercial real estate in the markets in which these properties are located, in 1992 the respective joint ventures recorded charges to the carrying values of their real estate inventories. These charges resulted in the Partnership reducing its investments in these joint ventures by approximately $7.4 million to reflect their estimated net realizable values. The balance of the charges to real estate inventories and other assets for the year ended December 31, 1992, which totalled approximately $0.7 million, were recorded to reflect the then current market value of several parcels of undeveloped commercial real estate.
Interest income increased for the year ended December 31, 1994 as compared to 1993 due primarily to an increase in the average amounts invested in 1994 in short-term financial instruments. Interest income decreased for the year ended December 31, 1993 as compared to 1992 primarily due to an overall decrease in the average amounts invested in short-term instruments during 1993 as compared to 1992.
The decrease in equity in earnings (losses) of unconsolidated ventures for the year ended December 31, 1994 as compared to 1993 was due primarily to the reduction in earnings from the two joint ventures in Weston which had been formed during the second half of 1992 to construct homes within that Community. Those homes had been completed and were virtually closed out by December 31, 1993. The 1993 earnings from these joint ventures also contributed to the increase in equity in earnings (losses) of unconsolidated ventures for the year ended December 31, 1993 as compared to 1992. See Liquidity and Capital Resources above and Notes 1 and 7 for further discussion regarding these joint venture interests. The increase in equity in earnings (losses) of unconsolidated joint ventures for the year ended December 31, 1993 as compared to 1992 was also due to the change from the equity to the cost method of accounting for the Partnership's investment in the Coto de Caza joint venture, which resulted in the Partnership no longer recording its ownership share of the loss from the Coto de Caza venture's operations. See Note 7 for further discussion of the change in ownership of the Coto de Caza joint venture.
Interest and real estate taxes decreased for the year ended December 31, 1994 as compared to 1993 due primarily to an overall decrease in the Partnership's average debt balance outstanding, as well as the maturity of both of the Partnership's interest rate swap arrangements during 1994. Interest and real estate taxes decreased for the year ended December 31, 1993 as compared to 1992 due to an overall decrease in the Partnership's average debt balance outstanding and an increase in the amount of real estate inventories which met the requirements for capitalization of these costs.
INFLATION
Although the relatively low rates of inflation in recent years generally have not had a material effect on the Community development business, inflation in future periods can adversely affect the development of Communities generally because of its impact on interest rates. High interest rates not only increase the cost of borrowed funds to developers, but also have a significant effect on the affordability of permanent mortgage financing to prospective purchasers. In addition, any increased costs of materials and labor resulting from high rates of inflation may, in certain circumstances, be passed through to purchasers of real properties through increases in sales prices, although such increases may reduce sales volume. To the extent such cost increases are not passed through to purchasers, there would be a negative impact on the ultimate margins realized by the Partnership.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
INDEX
Reports of Independent Certified Public Accountants
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Partners' Capital Accounts (Deficit) for the years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information is inapplicable or immaterial, or the information is presented in the consolidated financial statements or related notes.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of Arvida/JMB Partners, L.P.
In our opinion, the consolidated statements of operations, changes in partners' capital accounts (deficit) and cash flows for the year ended December 31, 1992 (appearing on pages 28 through 33 of the Arvida/JMB Partners, L.P. (a limited partnership) Form 10-K Annual Report) present fairly, in all material respects, the results of operations and cash flows of Arvida/JMB Partners, L.P. and its subsidiaries for the year ended December 31, 1992, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of Arvida/JMB Partners, L.P. for any period subsequent to December 31, 1992.
Price Waterhouse LLP Miami, Florida March 23, 1993
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of ARVIDA/JMB PARTNERS, L.P.
We have audited the accompanying consolidated balance sheets of Arvida/JMB Partners, L.P. and Consolidated Ventures as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in partners' capital accounts (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Arvida/JMB Partners, L.P. and Consolidated Ventures at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Miami, Florida February 20, 1995
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF ACCOUNTING
Principles of Consolidation
The consolidated financial statements include the accounts of Arvida/JMB Partners, L.P. (the "Partnership") and its consolidated ventures (Note 7). All material intercompany balances and transactions have been eliminated in consolidation. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to those investments where the Partnership's ownership interest is 50% or less, with the exception of the Partnership's investment in the Coto de Caza joint venture which is accounted for in accordance with the cost method of accounting, effective September 15, 1992 (Note 7).
Recognition of Profit from Sales of Real Estate
For sales of real estate, profit is recognized in full when the collectability of the sales price is reasonably assured and the earnings process is virtually complete. When the sale does not meet the require- ments for recognition of income, profit is deferred until such requirements are met. For sales of residential units, profit is recognized at the time of closing or if certain criteria are met, on the percentage-of-completion method.
Real Estate Inventories and Cost of Real Estate Revenues
Real estate inventories are carried at cost, including capitalized interest and property taxes, but not in excess of the net realizable value determined by the evaluation of individual projects. Management's evaluation of net realizable value is based on each projects' estimated selling price in the ordinary course of business less estimated costs of completion, holding and disposal. These estimates are reviewed periodically and compared to each project's recorded book value. Adjustments to book value, as they become necessary, are reported in the period in which they become known. The total cost of land, land development and common costs are apportioned among the projects on the relative sales value method. Costs pertaining to the Partnership's housing, homesite, and land and property revenues reflect the cost of the acquired assets as well as development costs, construction costs, capitalized interest, capitalized real estate taxes and capitalized overheads. Certain marketing costs relating to housing projects, including exhibits and displays, and certain planning and other predevelopment activities, excluding normal period expenses, are capitalized and charged to housing cost of revenues as related units are closed. A warranty reserve is provided as residential units are closed. This reserve is reduced by the cost of subsequent work performed.
Capitalized Interest and Real Estate Taxes
Interest and real estate taxes incurred are capitalized to qualifying assets, principally real estate inventories. Such capitalized interest and real estate taxes are charged to cost of revenues as sales of real estate inventories are recognized. Interest, including the amortization of loan fees, of $11,257,464, $14,786,169 and $17,424,850 was incurred for the years ended December 31, 1994, 1993 and 1992, respectively, of which $8,278,441, $7,738,179 and $4,470,150 was capitalized for the years ended December 31, 1994, 1993 and 1992, respectively. Interest payments, including amounts capitalized, of $12,116,899, $15,125,383 and $15,415,266 were made for the years ended December 31, 1994, 1993 and 1992, respectively. ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Real estate taxes of $8,116,966, $8,870,693 and $9,099,508 were incurred for the years ended December 31, 1994, 1993 and 1992, respectively, of which $4,024,528, $3,179,099 and $2,026,309 were capitalized for the years ended December 31, 1994, 1993 and 1992, respectively. Real estate tax payments of $8,212,002, $8,733,910 and $10,301,400 were made for the years ended December 31, 1994, 1993 and 1992, respectively. The preceding analysis of real estate taxes does not include real estate taxes incurred or paid with respect to the Partnership's club facilities and operating properties as these taxes are included in cost of revenues for operating properties.
Property and Equipment and Other Assets
Property and equipment are carried at cost less accumulated depreciation and are depreciated on the straight-line method over the estimated useful lives of the assets, which range from two to forty years. Provisions for value impairment are recorded with respect to such assets whenever the estimated future cash flows from operations and projected sales proceeds are less than the net carrying value. Expenditures for maintenance and repairs are charged to expense as incurred. Costs of major renewals and improvements which extend useful lives are capitalized.
Other assets are amortized on the straight-line method, which approximates the interest method, over the useful lives of the assets which range from one to five years. Amortization of debt discounts (1992 only) and other assets, excluding loan fees, of approximately $216,000, $247,000 and $1,074,000 was incurred for the years ended December 31, 1994, 1993 and 1992, respectively. Amortization of loan fees, which is included in interest expense, of approximately $388,000, $588,000 and $344,000 was incurred for the years ended December 31, 1994, 1993 and 1992, respectively.
Investments in and Advances to Joint Ventures, Net
In general, the equity method of accounting has been applied in the accompanying consolidated financial statements with respect to those investments for which the Partnership does not have majority control and where the Partnership's ownership interest is 50% or less. The cost method of accounting has been applied in the accompanying consolidated financial statements with respect to the Coto de Caza joint venture, effective September 15, 1992, as a result of the Partnership's decrease in its ownership interest and its joint venture partner's control over the future operations of the Community. The cost method of accounting is used when a limited partner has virtually no influence over venture operations and financial policies. Under the cost method, income is generally recorded only to the extent of distributions received. Reference is made to Note 7 for further discussion of this joint venture.
Investments in the remaining joint ventures are carried at the Partnership's proportionate share of the ventures' assets (not in excess of their net realizable value determined by evaluation of individual projects), net of their related liabilities and adjusted for any basis differences. Basis differences result from the purchase of interests at values which differ from the recorded cost of the Partnership's proportionate share of the joint ventures' net assets.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership periodically advances funds to its joint ventures in which it holds ownership interests when deemed necessary and economically justifiable. Such advances are generally interest bearing and are repayable to the Partnership from amounts earned through joint venture operations.
Equity Memberships
The amenities within certain of the Partnership's Boca Raton and Jacksonville, Florida Communities, as well as its Community near Highlands, North Carolina are conveyed to the respective homeowners through the sale of equity memberships. The amounts recorded as equity memberships in the accompanying Consolidated Balance Sheets represent the accumulation of costs incurred in constructing clubhouses, golf courses, tennis courts and various other related assets, less amounts allocated to memberships sold not in excess of their net realizable value determined by evaluations of individual amenities. Equity membership revenues and related cost of revenues are included in land and property in the accompanying Consolidated Statements of Operations.
Partnership Records
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments where applicable to reflect the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. The net effect of these items is summarized as follows:
Reference is made to Note 14 for further discussion of the allocation of profits and losses to the General Partner, Associated Limited Partners and Limited Partners.
The net income (loss) per Limited Partnership Interest is based upon the number of Limited Partnership Interests outstanding at the end of each period.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 financial statements to conform to the 1994 presentation.
Income Taxes
No provision for state or Federal income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain instances, the Partnership has been required under applicable state law to remit directly to the state tax authorities amounts representing withholding on applicable taxable income allocated to partners.
(2) INVESTMENT PROPERTIES
The Partnership's assets consist principally of interests in land which is in the process of being developed into master-planned residential Communities (the "Communities") and, to a lesser extent, commercial properties; mortgage notes and accounts receivable; management and other service contracts; construction, brokerage and other support activities; real estate assets held for investment; club and recreational facilities; and cable television businesses serving certain of its Communities.
The Partnership's Communities are in various stages of development, with estimated remaining build-outs ranging from one to ten years. The Partnership's condominium project on Longboat Key, Florida known as Arvida's Grand Bay, is in its early stage of development. The Weston Community, located in Broward County, Florida is the Partnership's largest Community and is in its mid stage of development. Also in their mid stages of development are the River Hills Country Club in Tampa, Florida; Jacksonville Golf and Country Club in Jacksonville, Florida; the Water's Edge Community in Atlanta, Georgia and The Cullasaja Club, near Highlands, North Carolina. The Partnership's remaining Communities known as Sawgrass Country Club, in Jacksonville, Florida and Dockside in Atlanta, Georgia are in their final stages of development with anticipated close-outs in 1996. In addition, the Broken Sound Community, located in Boca Raton, Florida, is nearing completion with an anticipated close-out in 1995. Future revenues will be impacted to the extent that there are lower levels of inventories available for sale as these Communities approach or undertake their final phases.
On August 27, 1991, the General Partner, on behalf of the Partnership, initiated a lawsuit in the Circuit Court of Cook County (County Department, Chancery Division), Illinois against The Walt Disney Company ("Disney"). The litigation arises out of the Partnership's acquisition of substantially all of the real estate and other assets of Arvida Corporation, a subsidiary of Disney, in September 1987. In the complaint filed on its behalf, the Partnership alleges that under the terms of the contract with Disney for the acquisition, the purchase price of the assets was to be reduced by the amount of certain payments made prior to the closing (the "Closing") of the transaction out of funds of Arvida Corporation in order to satisfy certain obligations that were not assumed by the Partnership. The complaint also alleges that the contract entitles the Partnership to (i) reimbursement by Disney for amounts advanced by the Partnership to pay certain other claimed
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
obligations of Arvida Corporation, including certain post-Closing adjustments, in connection with the acquisition and (ii) indemnification by Disney for additional costs and expenses incurred by the Partnership subsequent to the Closing in order to remedy certain environmental conditions that existed prior to the Closing. The complaint further alleges that the Partnership has made various demands on Disney for payment of these amounts and that Disney has refused to make such payments. The Partnership seeks declaratory judgments that the Partnership is entitled to a purchase price reduction from Disney and reimbursement or indemnification by Disney for amounts advanced or costs and expenses incurred by the Partnership for certain obligations of Arvida Corporation, together with interest on all such amounts and costs. During the second quarter of 1992, the Partnership received approximately $0.8 million in settlement of portions of this claim. There is no assurance as to what amounts, if any, the Partnership will recover as a result of the litigation with regard to the remaining open issues under the initially filed complaint. During July 1993, Disney filed an answer denying the substantive allegations of the Partnership's complaint and raising various affirmative defenses. The Partnership believes Disney's defenses are without merit and will continue to pursue its claims. In addition, Disney has filed a three count counterclaim in which it seeks among other things: a complete accounting of liabilities allegedly assumed but not discharged by the Partnership to ascertain whether certain funds, not to exceed $2.9 million, are due Disney in accordance with the purchase agreement; an unspecified amount of damages exceeding $500,000 allegedly representing workers compensation and warranty payments made by Disney, which Disney alleges are obligations of the Partnership; an accounting for funds disbursed from a claims pool in the amount of $3,000,000 established by the parties; and attorney fees and costs. The Partnership believes it has meritorious defenses to these counterclaims and will defend itself vigorously against them.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
At December 31, 1994 and 1993, cash and cash equivalents primarily consisted of U.S. Government obligations with original maturities of three months or less, money market demand accounts and repurchase agreements, the cost of which approximated market value. Cash and cash equivalents include treasury bills generally being held to maturity with original maturities of three months or less of approximately $1,777,000 and $3,900,000 at December 31, 1994 and 1993, respectively. Included in restricted cash are amounts restricted under various escrow agreements. Credit risk associated with cash, cash equivalents and restricted cash is considered low due to the high quality of the financial institutions in which these assets are held.
(4) MORTGAGES RECEIVABLE
Mortgages receivable generally range in maturity from one to three years, certain of which are collateralized by liens on the property sold and bear interest with stated rates up to 10% per annum. All mortgages receivable with below market rates are discounted at the market rate prevailing at the date of issue or purchase. The resulting effective interest rates on mortgages receivable range from approximately 9% to 15% - per annum. The outstanding principal balances of mortgages receivable at December 31, 1994 and 1993 are summarized as follows:
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1994 1993 ------------ ----------
Total gross mortgages receivable . . .$ 2,078,433 3,958,649 Unamortized discount and valuation allowances . . . . . . . . (984,210) (1,017,688) ------------ ----------
Mortgages receivable, net . . . .$ 1,094,223 2,940,961 ============ ==========
(5) REAL ESTATE INVENTORIES
Real estate inventories at December 31, 1994 and 1993 are summarized as follows:
1994 1993 ------------ ----------
Land held for future development or sale . . . . . . . . . . . . . . . .$ 16,132,750 24,259,509 Community development inventory: Work in progress and land improvements. . . . . . . . . 155,287,977 137,048,514 Completed inventory. . . . . . . . . 36,453,711 27,371,129 ------------ -----------
Real estate inventories . . . . .$207,874,438 188,679,152 ============ ===========
The Partnership recorded charges to the carrying value of real estate inventories and other assets for the year ended December 31, 1993 totalling approximately $4.9 million resulting from the adverse impact of reductions in housing prices on future anticipated lot values at the Partnership's Water's Edge and Dockside Communities.
The Partnership recorded charges to the carrying value of real estate inventories and other assets totalling approximately $27.2 million during the year ended December 31, 1992. These charges included approximately $7.4 million to reduce the carrying values of the Partnership's Water's Edge and Dockside Communities and $1.8 million to reduce the carrying value of its River Hills Community. These Communities had been experiencing slower sales absorptions than anticipated due to the pricing of products not being in line with the then current market demand. The charges to the inventory carrying values resulted from the Partnership's plans to offer lower-priced homesite and housing products in these Communities which were more consistent with market demand.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In addition, in light of the circumstances surrounding The Oaks joint venture as discussed in detail in Note 8, the Partnership, as a matter of prudent accounting practice, recorded a charge to the carrying value of real estate inventories of approximately $2.3 million in 1992 to properly reflect the estimated market value of The Oaks Property in its then current state of development assuming a bulk sale of the entire property under the market conditions at that time. An additional $0.7 million charge to the carrying value of real estate inventories was recorded during 1992 to reflect the then current market value of several parcels of undeveloped commercial real estate.
(6) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1993 are summarized as follows:
1994 1993 ------------ ----------
Land . . . . . . . . . . . . . . . .$ 6,566,045 6,566,045 Land improvements. . . . . . . . . . 18,258,457 18,214,258 Buildings. . . . . . . . . . . . . . 52,101,080 51,166,841 Equipment and furniture. . . . . . . 21,765,981 19,024,112 Construction in progress . . . . . . 4,595,610 1,281,936 ------------ ------------
Total . . . . . . . . . . . . . 103,287,173 96,253,192
Accumulated depreciation. . . . (34,172,614) (29,263,615) ------------ ------------
Property and equipment, net . .$ 69,114,559 66,989,577 ============ ============
During 1992, the value of the golf and country club facility at River Hills had been adversely impacted by the introduction of new lower-priced products within the Community, as well as overall economic conditions and the competition from other club facilities within the Tampa, Florida area. As a result, the Partnership recorded an approximate $2.5 million charge to the net book value of the golf course and country club at River Hills for the year ended December 31, 1992. In addition, during 1992, the Partnership recorded an approximate $0.9 million charge to the net book value of property and equipment to reflect the reduction in the value of a 29,000 square foot office building located in Palm Beach County, Florida. These charges are included in charges to the carrying value of real estate inventories and other assets on the accompanying Consolidated Statements of Operations for the year ended December 31, 1992.
Depreciation expense of approximately $4,953,000, $5,397,000 and $6,133,000 was incurred for the years ended December 31, 1994, 1993 and 1992, respectively.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(7) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET
The Partnership has numerous investments in real estate joint ventures with ownership interests ranging from 20% to 50%. The Partnership's joint venture interests accounted for under the equity method are as follows:
LOCATION OF NAME OF VENTURE % OF OWNERSHIP PROPERTY --------------- -------------- ------------
Arvida Boose Joint Venture 50 Florida
Arvida Corporate Park Associates 50 Florida
Arvida Pompano Associates Joint Venture 50 Florida
H.A.E. Joint Venture 33-1/3 Florida
Mizner Court Associates Joint Venture 50 Florida
Mizner Tower Associates Joint Venture 50 Florida
Ocala 202 Joint Ventures 50 Florida
Tampa 301 Associates Joint Venture 50 Florida
Windmill Lake Estates Associates Joint Venture 50 Florida
Arvida/RBG I Joint Venture 40 Florida
Arvida/RBG II Joint Venture 40 Florida
The following is combined summary information of joint ventures accounted for under the equity method. The 1993 summary information presented is not comparable to the 1992 information due to the consolidation of the AOK Group Joint Venture effective March 1, 1993. See further discussion below regarding the Partnership's accounting for these joint venture interests.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership owns interest in a number of commercial joint ventures located throughout Florida. Due to a significant decline in the demand for undeveloped commercial real estate in the markets in which these properties are located, in 1992 the respective joint ventures recorded charges to the carrying values of their real estate inventories. These charges resulted in the Partnership reducing its investments in these joint ventures by approximately $7.4 million to reflect their estimated net realizable values. These charges are included in charges to the carrying value of real estate inventories and other assets on the accompanying Consolidated Statements of Operations for the year ended December 31, 1992.
The Partnership's share of net income (loss) is based upon its ownership interest in numerous investments in joint ventures which are accounted for in accordance with the equity method of accounting. Equity in earnings (losses) of unconsolidated ventures represents the Partnership's share of each venture's net income (loss), and may reflect a component of purchase price adjustments included in the Partnership's basis. Such adjustments are generally amortized to income in relation to the cost of revenue of the underlying real estate assets. These factors contribute to the differential in the Partnership's proportionate share of the net income (loss) of the joint ventures and its equity in earnings (losses) of unconsolidated ventures as well as to the basis differential between the Partnership's investments in joint ventures and its equity in underlying net assets, as shown above.
There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership. In addition, under certain circumstances, either pursuant to the joint venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash advances or contributions to certain of the ventures.
The Coto de Caza joint venture had utilized the maximum amount available under its operating line of credit and had been seeking alternative financing sources to fund the significant additional cash necessary to continue development of the project and to fund the venture's other operating costs. In the interim, the Partnership and its joint venture partner had each advanced, net of reimbursements, approximately $4.1 million to the venture through December 31, 1992. Interest earned on such advances of approximately $1,212,000 was unpaid as of December 31, 1994. Due to the reallocation of the Partnership's interest in the Coto de Caza joint venture effective September 15, 1992, the Partnership has provided an allowance for doubtful accounts with regard to the interest earned and unpaid at December 31, 1994 on advances previously made by the Partnership. Given the weak market conditions in Orange County, California and the continued lack of development financing available from traditional lending sources, it was unlikely that the joint venture would be able to secure additional financing in the near term. The joint venture partner was willing to continue to advance funds to meet the venture's operating needs. Given the finite amount of available capital, the Partnership determined that it was in its best long-term interest to utilize that capital for the development of its other properties rather than commit additional funds for the development of the Coto de Caza Community. As a
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
result, the venture partner has funded the venture's cash deficits in their entirety since June 1, 1992. As an alternative to funding future capital requirements, the Partnership and its joint venture partner agreed to amend the joint venture agreement and reallocate ownership interests. In exchange for funding the venture's future operating needs, the venture partner was reallocated an additional 30% interest in the venture, and assumed the role of managing general partner. As such, the venture partner has control over the future operations of the Community, including the timing and extent of its development. The Partnership retains a 20% limited partnership interest and is entitled to receive distributions from net cash flow, after repayment of third party loans and advances made by the venture partners, up to an amount agreed upon by the Partnership and its joint venture partner. Certain specified costs and liabilities incurred prior to the reallocation will continue to be shared equally by the Partnership and its joint venture partner. This agreement was pursued as a more favorable alternative to the provisions included in the previously existing joint venture agreement for reallocation of partnership interests should both partners not advance equal funds to the venture. As a result of the Partnership's decrease in its ownership interest, and its joint venture partner's control over the future operations of the Community, commencing on September 15, 1992, the Partnership accounts for its share of the operations of the Coto de Caza joint venture in accordance with the cost method of accounting.
During 1992, the Partnership sold 60% of its interest in two land parcels located in its Weston Community to unaffiliated third-party purchasers. Subsequent to these transactions, the Partnership and the purchasers each contributed their interests in these land parcels to joint ventures established for the purpose of developing housing products within Weston. The Partnership entered into development management agreements with these joint ventures. Pursuant to the terms of these agreements, the Partnership agreed to fund all development and construction costs, as well as certain overheads, incurred on behalf of the joint venture projects. Amounts funded are reimbursed by the joint ventures from sales revenues generated by each joint venture. Amounts advanced by the Partnership to each respective joint venture earned interest at 8.5% for the first year and prime plus 2% per annum thereafter. During 1993, one of the joint ventures obtained third-party, project specific financing to fund its development and construction activities. In accordance with the provisions of this financing agreement, the Partnership had been reimbursed the majority of amounts previously advanced to the joint venture as of December 31, 1993 and the remaining amounts were reimbursed during 1994. Due to significant sales activity, amounts previously advanced to the Partnership's other joint venture were reimbursed in full during 1993. All of the homes built by these joint ventures have been completed and closed as of December 31, 1994.
During the first quarter of 1993, the Partnership reached a settlement agreement with AOK Group, its joint venture partner in a property located in Ocala, Florida, whereby in exchange for its joint venture partner's 50% interest in the venture, the Partnership agreed to dismiss a lawsuit previously filed against its joint venture partner for failure to perform in accordance with the terms of a $1,600,000 note which had been issued to the Partnership by the joint venture. This agreement was pursued as a more favorable remedy to other alternatives available to the Partnership. As a result of this transaction, the Partnership changed from the equity method of accounting to the consolidated method of accounting for the joint venture effective March 1, 1993. This transaction resulted in an increase in the Partnership's total assets of approximately $324,000.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership incurs certain general and administrative expenses which are paid by the Partnership on behalf of the joint ventures in which it holds interests. The Partnership receives reimbursements from the joint ventures for such costs. For the years ended December 31, 1994 and 1993, the Partnership was entitled to receive approximately $378,000 and $343,000, respectively, from certain of the joint ventures in which it holds interests. At December 31, 1994, approximately $28,600 was owed to the Partnership, of which approximately $5,000 was received as of March 15, 1995.
(8) NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable at December 31, 1994 and 1993 are summarized as follows:
1994 1993 ------------ ------------ Term loan credit facility of $85,252,250 and $126,805,195 bearing interest at approxi- mately 8.7% and 5.6% per annum at December 31, 1994 and 1993, respectively (A). . . . . . . . $ 73,452,970 108,262,248
Income property term loan of $18,233,326 and $20,000,000, bearing interest at approxi- mately 8.6% and 5.6% per annum at December 31, 1994 and 1993, respectively (A). . . . . . . . 17,933,326 18,933,328
Revolving line of credit of $20,000,000 and $45,000,000 at December 31, 1994 and 1993, respectively (A). . . . . . . . . . . -- --
Other notes and mortgages payable (B). . . . . . . . . . . . . 23,761,229 20,575,416 ------------ ------------
Total. . . . . . . . . . . . $115,147,525 147,770,992 ============ ============
(A) At December 31, 1993, the Partnership's credit facility consisted of a term loan in the original amount $126,805,195, a revolving line of credit facility up to $45 million, an income property term loan in the original amount of $20 million and a $15 million letter of credit facility.
The income property term loan, revolving line of credit and letter of credit facility matured in July, 1994. Although the Partnership's term loan was not scheduled to mature until July 1997, the lender required the Partnership to renew its entire credit facility as a condition of renewing the income property term loan, the revolving line of credit and letter of credit facility.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During November 1994, the Partnership and its lender signed an agreement for a renewal of the entire credit facility agreement. In connection with obtaining this renewal, the Partnership made principal payments on its term loan of $3 million and $9.5 million in July 1994 and December 1994, respectively. The new credit facility consists of a term loan in the original amount of $85,252,520, a revolving line of credit facility up to $20 million, an income property term loan in the original amount of $18,233,326 and a $15 million letter of credit facility. The term loan, the revolving line of credit and the letter of credit facility are secured by recorded mortgages on all otherwise unencumbered real property assets of the Partnership, as well an assignment of all mortgages receivable, equity memberships, certain joint venture interests or joint venture proceeds and cash balances (with the exception of deposits held in escrow). The income property term loan is secured by the recorded first mortgages on a mixed-use center and an office building in Boca Raton, Florida. All of the notes under the facility are cross-collateralized and cross-defaulted.
At December 31, 1994, the term loan, the revolving line of credit and the income property term loan bear interest based, at the Partnership's option, on one of the lenders' prime rate plus 1.25% per annum or the relevant London Inter-Bank Offering Rate (LIBOR) plus 2.50% per annum. At December 31, 1993, $75 million of the Partnership's outstanding credit facility was under two interest rate swap arrangements. However, one of the interest rate swap arrangements matured in February 1994 and the remaining interest rate swap arrangement matured in October 1994. For the year ended December 31, 1994, the effective interest rate for the combined term loan, income property term loan and revolving line of credit facility was approximately 8.5% per annum. This rate includes the effect of the interest rate swap arrangements.
Under the term loan agreement, the Partnership made scheduled principal payments of $10 million in March 1994 and February 1995. In addition, the term loan agreement provides for additional principal repayments based upon a specified percentage of available cash flow and upon the sale of certain assets. For the year ended December 31, 1994, the Partnership made such additional term loan payments totalling approximately $12.3 million. Principal repayments of $5 million, $10 million and $5 million on the term loan are due in July 1995, February 1996 and July 1996, respectively. The remaining balance outstanding is due in July 1997. Under the income property term loan, principal payments of $0.1 million are required to be paid monthly until March 1996 when the remaining outstanding principal balance will be due. The revolving line of credit and letter of credit facility mature in December 1995 and July 1995, respectively. At March 15, 1995, all of the term loan proceeds had been borrowed with a remaining balance of $51,046,932. The balances outstanding on the revolving line of credit facility, the income property term loan and the letter of credit facility at March 15, 1995 are $9,000,000, $17,633,326 and $9,497,064, respectively.
At December 31, 1994, the Partnership has a contract for the sale of its office building located in downtown Boca Raton, Florida known as Mizner Place for approximately $4 million. The sale is expected to close during the second quarter of 1995. The net sales proceeds from such sale will be used to paydown the income property term loan.
The credit agreement contains significant restrictions with respect to the payment of distributions to partners, the maintenance of certain loan- to-value ratios, the use of proceeds from the sale of the Partnership's assets and advances to the Partnership's joint ventures.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Loan fees incurred in connection with the restructuring of the Partnership's credit facility have been capitalized and are being amortized over the lives of the loans included in the credit facility using the straight-line method, which approximates the interest method.
(B) Other notes and mortgages payable are collateralized by certain real estate inventories, property and equipment and certain investments with a net book value of approximately $25.6 million at December 31, 1994. These notes and mortgage notes have a weighted average annual effective interest rate of approximately 8.6% and 7.2% at December 31, 1994 and 1993, respectively, and mature in varying amounts through 2017.
Certain of the Partnership's property within the Cullasaja Community was financed by a mortgage note which matured on March 1, 1994. The note was collateralized by a first mortgage on certain real estate inventories and 12.5% of the outstanding balance was guaranteed by the Partnership. The Partnership was unable to obtain an extension of the loan, and therefore, on June 29, 1994, purchased the note at par and paid the accrued interest thereon and certain attorney and conveyance fees. The total amount of such payment was approximately $5,278,000. The note and mortgage were subsequently pledged as collateral to the Partnership's lender under its credit facility.
The Partnership owned an 80% general partnership interest in The Oaks Community located near Sarasota, Florida. The Partnership's joint venture partner was in default under the terms of the joint venture agreement due to its failure to make capital contributions to fund ongoing operations. In August 1993, the Partnership's joint venture partner assigned its 20% interest in The Oaks to the Partnership thereby vesting 100% control of the joint venture assets in the Partnership.
The assets of The Oaks joint venture were encumbered by two mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997 and a $3,260,000 loan was scheduled to mature in December 1993. The joint venture had guaranteed $2.7 million of the loans, and the guaranteed amount was with recourse to the Partnership. The joint venture was in default under the terms of these loan agreements as a result of its failure to make principal payments of approximately $1.3 million in January 1993 to release the minimum number of homesite lots as required under these agreements and its failure to pay interest commencing with a payment due in April 1993. The Partnership was able to reach an agreement with the lenders to pay off the existing mortgage loans at a substantial discount from face value. On September 3, 1993, the Partnership paid the joint venture's lenders $6.7 million in full satisfaction of the outstanding mortgage loans, accrued interest and guaranty. This transaction was the cause of the approximate $9.5 million extraordinary gain on the early extinguishment of debt as of December 31, 1993.
Given the finite amount of available capital to the Partnership, the Partnership determined that it was in its best long-term interest to utilize that capital for the development of its other properties and sold its remaining land holdings in The Oaks Community and its interest in The Oaks Club to an unaffiliated third party purchaser for $5.8 million. This transaction occurred simultaneously with the repayment of the loans and satisfaction of the mortgages described above. In light of the Partnership's guarantee under the loan agreement of $2.7 million of the outstanding mortgage loans, as well as other factors, the above transactions were pursued as the least costly alternative available to the Partnership. These transactions resulted in a minimal net gain for Federal income tax purposes. ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Following is a schedule of the maturities of notes and mortgages payable at December 31, 1994.
1995 . . . . . . . . . . . . . . . $ 19,545,010 1996 . . . . . . . . . . . . . . . 47,865,545 1997 . . . . . . . . . . . . . . . 43,952,970 1998 . . . . . . . . . . . . . . . 500,000 1999 . . . . . . . . . . . . . . . -- Thereafter . . . . . . . . . . . . 3,284,000 ------------ Total notes and mortgages payable. . . . . . $115,147,525 ============
(9) EQUITY MEMBERSHIPS
Equity memberships represent the accumulation of costs incurred in constructing club houses, golf courses, tennis courts and various other related assets, less amounts allocated to memberships sold, not in excess of their net realizable values determined by evaluation of individual amenities. These amenities are conveyed to homeowners through the sale of equity memberships.
During 1992, the value of the memberships remaining at Jacksonville Golf & Country Club had been adversely impacted by the introduction of lower-priced products within the Community in response to market conditions as well as competition from other club facilities located in the Jacksonville area. In addition, during 1992, the higher-priced equity memberships at the Broken Sound Club had experienced a slowdown in sales due primarily to an overall slowdown in the economy and the low levels of consumer confidence at that time. As a result of the above, during 1992, the Partnership recorded charges to the carrying values of its equity memberships at Jacksonville Golf & Country Club and Broken Sound Club of approximately $2.2 million and $1.0 million, respectively. In addition, equity memberships for the year ended December 31, 1992 also include a $1.0 million reduction in the value of The Oaks Country Club's equity memberships in light of the circumstances surrounding The Oaks Country Club as discussed further in Note 8. These charges are included in charges to the carrying value of real estate inventories and other assets on the accompanying Consolidated Statement of Operations for the year ended December 31, 1992.
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The Partnership receives reimbursements from or reimburses other affiliates of the General Partner engaged in real estate activities for certain general and administrative costs including, and without limitation, salary and salary-related costs relating to work performed by employees of the Partnership and certain out-of-pocket expenditures incurred on behalf of such affiliates. For the year ended December 31, 1994, the total of such costs incurred by the Partnership on behalf of these affiliates totalled approximately $505,300. Approximately $29,000 was outstanding at December 31, 1994, all of which was received as of March 15, 1995. For the year ended December 31, 1993 and 1992, the Partnership was entitled to receive reimbursements of approximately $171,000 and $129,000, respectively.
In accordance with the Partnership Agreement, the General Partner and Associate Limited Partners have deferred a portion of their distributions of net cash flow from the Partnership totaling approximately $936,000 as of December 31, 1994. This amount does not bear interest and is expected to be paid in future periods subject to certain restrictions contained in the Partnership's credit facility agreement.
Arvida Company ("Arvida"), pursuant to an agreement with the Partner- ship, provides development, construction, management and other personnel and services to the Partnership for all of its projects and operations. Pursuant to such agreement, the Partnership shall reimburse Arvida for all of its out-of-pocket expenditures (including salary and salary-related costs), subject to certain limitations. The total of such costs for the years ended December 31, 1994, 1993 and 1992 was approximately $6,802,300, $6,686,100 and $6,622,800, respectively, of which approximately $52,800 was unpaid as of December 31, 1994 and all of which was paid as of March 15, 1995.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited partnership affiliated with the General Partner) each employ project related and administrative personnel who perform services on behalf of both partnerships. In addition, certain out-of-pocket expenditures related to such services and other general and administrative costs are incurred and charged to each partnership as appropriate. The Partnership receives reimbursements from or reimburses Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-related costs). For the year ended December 31, 1994, the Partnership was entitled to receive approximately $1,338,900 from Arvida/JMB Partners, L.P.-II. At December 31, 1994, approximately $120,800 was outstanding, all of which was received as of March 15, 1995. In addition, for the year ended December 31, 1994, the Partnership was obligated to reimburse Arvida/JMB Partners, L.P.-II approximately $537,700. At December 31, 1994, approximately $72,000 was unpaid, all of which was paid as of March 15, 1995. The net reimbursements paid to the Partnership for the years ended December 31, 1993 and 1992 were approximately $1,263,100 and $236,000, respectively.
The Partnership pays for certain general and administrative costs on behalf of its clubs, homeowners associations and maintenance associations. The Partnership receives reimbursements from the affiliates for such costs.
For the year ended December 31, 1994, the Partnership was entitled to receive approximately $594,200 from its affiliates. At December 31, 1994, approximately $381,000 was owed to the Partnership, of which approximately $48,800 was received as of March 15, 1995. The net reimbursements paid to the Partnership for the years ended December 31, 1993 and 1992 were approximately $366,400 and $2,327,200, respectively.
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The Partnership periodically incurs salary and salary-related costs on behalf of an affiliate of the General Partner of the Partnership. The Partnership was entitled to receive approximately $118,000 for such costs for the year ended December 31, 1994, all of which was outstanding as of December 31, 1994 and March 15, 1995.
(11) COMMITMENTS AND CONTINGENCIES
As security for performance of certain development obligations, the Partnership is contingently liable under standby letters of credit and bonds for approximately $10,169,800 and $7,589,000, respectively, at December 31, 1994. As of December 31, 1993, the Partnership was contingently liable under standby letters of credit and bonds for approximately $11,651,000 and $11,146,000, respectively. In addition, certain joint ventures in which the Partnership holds an interest are also contingently liable under bonds for approximately $1,020,000 and $1,089,000 at December 31, 1994 and 1993, respectively.
The Partnership leases certain building space for its management offices, sales offices and other facilities, as well as certain equipment. The building and equipment leases expire over the next two to nine years. Minimum future rental commitments under non-cancelable operating leases having a remaining term in excess of one year as of December 31, 1994 are as follows:
1995 . . . . . . . . . . . $1,468,954 1996 . . . . . . . . . . . 1,207,618 1997 . . . . . . . . . . . 582,522 1998 . . . . . . . . . . . 399,109 1999 . . . . . . . . . . . 180,579 Thereafter . . . . . . . . 261,626 ----------
$4,100,408 ==========
Rental expense of $2,001,171, $2,063,568 and $2,320,028 was incurred for the years ended December 31, 1994, 1993 and 1992, respectively.
The Partnership is named a defendant in a number of homeowner lawsuits, certain of which purported to be class actions, that allegedly in part arose out of or related to Hurricane Andrew, which on August 24, 1992 resulted in damage to a former community development known as Country Walk.
The homeowner lawsuits alleged, among other things, that the damage suffered by the plaintiffs' homes and/or condominiums within Country Walk was beyond what could have been reasonably expected from the hurricane and/or was a result of the defendants' alleged defective design, construction, inspection and/or other improper conduct in connection with the development, construction and sales of such homes and condominiums, including alleged building code violations. The various plaintiffs sought varying and, in some cases, unspecified amounts of compensatory damages and other relief. In certain of the lawsuits injunctive relief and/or punitive damages are sought.
Several of these lawsuits allege that the Partnership was liable, among other reasons, as a result of its own alleged acts of misconduct or as a result of the Partnership's assumption of Arvida Corporation's liabilities in connection with the Partnership's purchase of Arvida Corporation's assets from Disney in 1987, which included certain assets
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related to the Country Walk development. Pursuant to the agreement to purchase such assets, the Partnership obtained indemnification by Disney for certain liabilities relating to facts or circumstances arising or occurring prior to the closing of the Partnership's purchase of the assets.
Over 80% of the Arvida-built homes in Country Walk were built prior to the Partnership's ownership of the Community. Where appropriate, the Partnership has tendered or will tender each of the above-described lawsuits to Disney for defense and indemnification in whole or in part pursuant to the Partnership's indemnification rights. Where appropriate, the Partnership has also tendered these lawsuits to its various insurance carriers for defense and coverage. The Partnership is unable to determine at this time to what extent damages in these lawsuits, if any, against the Partnership, as well as the Partnership's cost of investigating and defending the lawsuits, will ultimately be recoverable by the Partnership either pursuant to its rights of indemnification by Disney or under contracts of insurance.
On August 10, 1993, the Circuit Court of Dade County issued a final order approving the terms of a class action settlement in one of the pending homeowners' lawsuits which resolved substantial portions of the pending homeowners' lawsuits that had been filed. The settlement, which is designed to resolve claims arising in connection with estate and patio homes and condominiums sold by the Partnership after September 10, 1987, is structured to compensate residents for losses not covered by insurance. Homeowners of approximately 85% of the units in Country Walk have accepted the settlement. The Partnership currently believes that the class action settlement may cost approximately $2.5 million. The settlement is being funded by one of the Partnership's insurers, subject to a reservation of rights. The amount of money, if any, which the insurance company may recover from the Partnership pursuant to its reservation of rights is uncertain. Due to this uncertainty, the accompanying Consolidated Financial Statements do not reflect an accrual for such costs.
Homeowners who affirmatively rejected the offer of settlement by opting out were permitted to continue litigation against the Partnership. The Partnership was and is party to a number of claims brought by condominium and patio homeowners, all of whom have declined to accept the terms of the class action settlement. Some of these actions by those homeowners who have opted out of the settlement have been settled. The aggregate amount of these settlements to date is approximately $414,000. One of the Partnership's insurers has funded these settlements. The amount of money that the insurance company may recover from the Partnership pursuant to any reservation of rights, or otherwise, is uncertain. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter. Currently, the Partnership is involved in five lawsuits with homeowners who have opted out of the original settlement which are pending in the Circuit Court of Dade County and one claim that has not been filed as a lawsuit. The Partnership intends to vigorously defend itself in these matters.
On February 24, 1994, the Partnership was dismissed from the pending class action homeowner lawsuits pursuant to the class action settlement discussed above. In addition, the Partnership has been informed that Disney and an insurer have reached agreements to settle five of the individual homeowner actions which were tendered by the Partnership to Disney. These Disney settlements were funded without any contribution from the Partnership.
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On April 19, 1993, a subrogation claim entitled Village Homes at Country Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this suit for the use and benefit of American Reliance Insurance Company ("American Reliance"). In this suit, as amended, plaintiffs seek to recover damages and pre- and post-judgment interest in connection with $10,873,000 American Reliance has allegedly paid, plus amounts it may have to pay in the future, to the condominium association at Country Walk in the wake of Hurricane Andrew. Disney is also a defendant in this suit. The Partnership believes that the amount of this claim that allegedly relates to units it sold is approximately $3,600,000. Plaintiffs also seek a declaratory judgement seeking to hold the Partnership and other defendants responsible for amounts American Reliance must pay in the future to its insureds as additional damages beyond the $10,873,000 previously paid. The Partnership has filed motions directed to the complaint, as amended, and the litigation is in the discovery stage. The Partnership intends to vigorously defend itself.
The Partnership has also been involved in subrogation lawsuits or threatened subrogation actions with Prudential Property and Casualty Company, Travelers Insurance Company ("Travelers"), Allstate Insurance Company ("Allstate") and State Farm Insurance Company. These insurance companies sought to recover damages, costs and interest in connection with amounts allegedly paid to their insureds living in Country Walk at the time of Hurricane Andrew. The Partnership settled these claims and all settlement proceeds were funded by one of the Partnership's insurance carriers. The aggregate amount of these settlements is approximately $4.3 million. The Allstate and Travelers settlements were funded subject to a reservation of rights by one of the Partnership's insurance carriers. The amount of money the insurance carrier may seek to recover from the Partnership for these and any other settlements it has funded is uncertain. The Partnership is a defendant in and anticipates other subrogation claims by insurance companies which have allegedly paid policy benefits to Country Walk residents. The Partnership intends to defend itself vigorously in all such matters.
The Partnership resolved a claim brought by the Villages of Country Walk Homeowners' Association, Inc., and related entities, for damages to the common elements of the condominium units at Country Walk. A settlement in the amount of $2,740,000 was paid by the Partnership's insurance carriers. A reservation of rights in connection with these claims of approximately $740,000 was issued by one insurance carrier. The extent to which the insurance company may ultimately recover any of these proceeds from the Partnership is unknown. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter.
As noted above, one of the Partnership's insurance carriers has been funding settlements of various litigation related to Hurricane Andrew. In some, but not all, instances, the insurance carrier has provided the Partnership with written reservation of rights letters. The aggregate amount of the settlements funded to date by this carrier is approximately $7.8 million. The extent to which the insurance carrier may recover any of these proceeds from the Partnership is uncertain. Therefore, the accompanying Consolidated Financial Statements do not reflect any accruals related to this matter.
A second amended complaint captioned Berry v. Merrill Lynch, Pierce Fenner & Smith; Arvida/JMB Partners, Limited Partnership; Arvida/JMB Managers, Inc.; JMB Realty Corporation; and Does 1 through 100, was filed in the Superior Court of the State of California in and for the County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a class
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action on behalf of the named plaintiffs and all other persons or entities in the State of California who bought or acquired, directly or indirectly, limited partnership interests ("Interests") in the Partnership from September 1, 1987 through the present. The second amended complaint in the action alleges, among other things, that the defendants made misrepresentations and concealed various facts, breached fiduciary duties, and violated a contractual covenant of good faith in connection with the sale of Interests in the Partnership. The second amended complaint further alleges that such conduct violated California state law relating to fraud, constructive fraud, breach of fiduciary duty, willful suppression of facts, breach of the covenant of good faith, and conspiracy. Plaintiffs, on behalf of themselves and the purported plaintiff class, seek unspecified compensatory damages, consequential damages, punitive and exemplary damages, recission, interest, costs of the suit, and such other relief as the court may order. In October 1994, after the court denied defendants' demurrers, defendants answered the second amended complaint denying the material allegations of the complaint and setting forth various affirmative defenses. During March 1995, the court issued an order that it would not entertain any motions for certification of a class. Subsequent thereto, defendants have entered into a settlement in principle in order to put to rest all controversy and to avoid further disruption to defendants' ordinary business operations and the expense, burden and risk of protracted litigation. The settlement is not an admission of liability, which the defendants expressly deny. The amount of the proposed settlement is not expected to be material. The Partnership cannot assume that this settlement in principle will in fact be consummated.
In addition, the Partnership has been advised by Merrill Lynch that Merrill Lynch has been named a defendant in actions pending in the Eleventh and Seventeenth Judicial Circuit Courts in Dade and Broward Counties, Florida to compel arbitration of claims brought by certain investors of the Partnership representing approximately 5% of the total 404,000 Interests outstanding. Merrill Lynch has asked the Partnership and its General Partner to confirm an obligation of the Partnership and its General Partner to indemnify Merrill Lynch in these claims against all loss, liability, claim, damage and expense, including without limitation attorneys' fees and expenses, under the terms of a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with the Partnership relating to the sale of Interests through Merrill Lynch on behalf of the Partnership. In the actions to compel arbitration, the claimants have advised Merrill Lynch that they will seek to file demands for arbitration and claims for unspecified damages against Merrill Lynch based on Merrill Lynch's alleged violation of applicable state and/or federal securities laws and alleged violations of the rules of the National Association of Securities Dealers, Inc., together with pendent state law claims. Some of these investors have begun the arbitration process. The Partnership believes that Merrill Lynch has resolved some of these claims through litigation and otherwise; and that Merrill Lynch is defending other claims. The Agency Agreement generally provides that the Partnership and its General Partner shall indemnify Merrill Lynch against losses occasioned by an actual or alleged misstatement or omission of material fact in the Partnership's offering materials used in connection with the sale of Interests and suffered by Merrill Lynch in performing its duties under the Agency Agreement, under certain specified conditions. The Agency Agreement also generally provides, under certain conditions, that Merrill Lynch shall indemnify the Partnership and its General Partner for losses suffered by the Partnership and occasioned by certain specified conduct by Merrill Lynch in the course
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of Merrill Lynch's solicitation of subscriptions for Interests. The Partnership is unable to determine at this time the ultimate investment of investors who have filed arbitration claims as to which Merrill Lynch might seek indemnification in the future. At this time, and based upon the information presently available about the arbitration statements of claims filed by some of these investors, the Partnership and its General Partner believe that they have meritorious defenses to demands for indemnification made by Merrill Lynch and intend to vigorously pursue such defenses. In the event Merrill Lynch is entitled to indemnification of its attorney's fees and expenses or other losses and expenses, these amounts may prove to be material.
The Partnership is also a defendant in several actions brought against it arising in the normal course of business. It is the belief of the General Partner, based on knowledge of facts and advice of counsel, that the claims made against the Partnership in such actions will not result in any material adverse effect on the Partnership's consolidated financial position or results of operations.
The Partnership owns a 50% joint venture interest in 31 commercial/ industrial acres in Pompano Beach, Florida, which is encumbered by a mortgage loan in the principal amount of approximately $4 million at December 31, 1994. As a result of the Partnership's previous determination that the development of the land was no longer economically profitable, during April 1992, the Partnership and its joint venture partner each tendered payment in the amount of approximately $3.1 million to the lender for their respective shares of the guarantee payment required under the loan agreement and certain other holding costs, the majority of which reduced the outstanding mortgage loan to its current balance. The venture also intended at that time to convey title to the property to the lender; however, such conveyance is pending until resolution of certain general development obligations of the venture as well as certain environmental issues. The Partnership had been negotiating with the lender regarding the scope of the development work required to be done. Negotiations with the lender were unsuccessful, and the lender has filed a lawsuit with the Broward County Circuit Court in which the lender asserts, among other things, that the mortgage loan is with recourse to the joint venture partners as a result of the partners' failure to perform in accordance with the terms of the loan agreement. The lender is demanding payment of the outstanding loan balance plus interest thereon. The Partnership believes this claim is without merit and is vigorously defending the lawsuit. With respect to the environmental issues, the previous owner remains obligated to undertake the clean up pursuant to, among other things, a surviving obligation under the purchase and sale agreement. The clean-up began in July 1994, and the first phase of the remedial action plan was completed in October 1994. Further action plans are now underway. If the previous owner is unable to fulfill all its obligations as they relate to this environmental issue, the venture and ultimately the Partnership may be obligated for such costs. Should this occur, the Partnership does not anticipate the cost of this clean-up to be material to its operations.
The Partnership is seeking a permit to develop 1,156 of the 2,475 gross acres contained in Increment III of the Weston Community, portions of which are environmentally sensitive areas and are subject to protection as wetlands. The Partnership's current application for a wetlands permit for Increment III includes proposed wetlands mitigation of 1,319 acres together with construction of schools, parks, roads, sewers and related infrastructure, in addition to residential and commercial development. However, in August 1994, the Environmental Protection Agency (the "EPA") issued a letter to the United States Army Corps of Engineers (the "Corps"),
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which is the governmental agency responsible for issuing permits involving development of wetlands areas, setting forth the EPA's position that no more than 120 gross acres in Increment III should be permitted to be developed. In addition, the EPA recommended that adequate compensatory mitigation be implemented in connection with such development.
The Partnership believes that the EPA's recommendation is flawed based on scientific evidence, and it continues to pursue issuance of the permit for development of Increment III on the terms and conditions previously set forth in its application. The Corps has not accepted the recommendation of the EPA and has advised the Partnership that it is continuing to consider the Partnership's current application as presently submitted. During October 1994, the Corps performed an independent analysis of the wetlands impact and mitigation. To date, the Partnership has not received a formal response from the Corps regarding the results of this analysis. However, an informal response has been received requesting additional and clarified information regarding certain characteristics of the proposed mitigation plan, which the Partnership is providing.
If the Corps ultimately issues a permit generally on the same terms and conditions as set forth in the Partnership's previously submitted application, the EPA retains certain rights to veto or to seek to elevate the determination to issue a permit to higher governmental officials. Elevation would delay the effectiveness of the permit pending resolution of a final decision on the application for the permit and could result in a decision to uphold, modify or retract issuance of the permit. If the Partnership does not ultimately receive its permit through the administrative process, it may seek a judicial review in federal district court of the denial of the permit. Additionally, the Partnership could initiate an action in the United States Court of Federal Claims seeking a determination that denial of the permit constitutes a "taking" of the Partnership's property for which the Partnership is due just compensation. The pursuit of these legal actions would likely be lengthy.
The Partnership continues to believe that it will ultimately obtain a permit from the Corps to develop Increment III of the Weston Community on substantially the same terms and conditions for which it has currently applied. However, there is no assurance that such permit will in fact be obtained or, if not obtained, that the Partnership would be successful in pursuing the above-mentioned legal actions. In addition, if such a permit were obtained, the Partnership would also need certain other approvals, including state and local approvals, to develop Increment III in accordance with the Partnership's current development plans. If such permits and other approvals are not obtained, the Partnership would be required to revise its development plans for the remaining portions of Increment I and II of the Weston Community, as well as its development plans for Increment III. Such revisions would have a material adverse impact on the timing and amount of net income and net cash flow ultimately realized by the Partnership from the development of the Weston Community.
The Partnership may be responsible for funding certain other ancillary activities for related entities in the ordinary course of business which the Partnership does not currently believe will have any material adverse effect on its consolidated financial position or results of operations.
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(12) TAX INCREMENT FINANCING ENTITIES
In connection with the development of the Partnership's Weston Community, bond financing is utilized to construct certain on-site and off- site infrastructure improvements, including major roadways, lakes, other waterways and pump stations, which the Partnership would otherwise be obligated to finance and construct as a condition to obtain certain approvals for the project. This bond financing is obtained by The Indian Trace Community Development District ("District"), a local government district operating in accordance with Chapter 190 of the Florida Statutes. Under this program, the Partnership is not obligated directly to repay the bonds. Rather, the bonds are expected to be fully serviced by special assessment taxes levied on the property, which effectively collateralizes the obligation to pay such assessments. While the owner of the property, the Partnership is responsible to pay the special assessment taxes until land parcels are sold. At such point, the liability for the assessments related to parcels sold will be borne by the purchasers through a tax assessment on their property. These special assessment taxes are designed to cover debt service on the bonds, including principal and interest payments, as well as the operating and maintenance budgets of the District.
The use of this type of bond financing is a common practice for major land developers in South Florida.
The District issued $64,660,000 of variable rate bonds in November 1989 and $31,305,000 of variable rate bonds in July 1991. These bonds mature in various years commencing in May 1991 through May 2011. At December 31, 1994, the amount of bonds issued and outstanding totalled $87,085,000. For the twelve months ended December 31, 1994, the Partnership paid special assessments related to these bonds of approximately $5.0 million.
In order to reduce the exposure of variable rate debt, the District pursued a new bond issuance. During March 1995, the District issued approximately $99 million of bonds. These bonds mature in various years commencing May 1999 through May 2011. The proceeds from this offering were used to refund the outstanding 1989 and 1991 bonds described above, as well as to fund the issuance costs incurred in connection with this offering and deposits to certain reserve accounts for future bond debt service requirements.
(13) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 ("SFAS 107") - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107 requires entities with total assets exceeding $150 million for fiscal years ending after December 15, 1992 to disclose the SFAS 107 values of all financial assets and liabilities for which it is practicable to estimate. Value is defined in SFAS 107 as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments approximates SFAS 107 value at December 31, 1994 and 1993.
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(14) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement (and subject to Section 4.2F which allocates Profits, as defined, to the General Partner and Associate Limited Partners), profits or losses of the Partnership will be allocated as follows: (i) profits will be allocated such that the General Partner and the Associate Limited Partners will be allocated profits equal to the amount of cash flow distributed to them for such fiscal period with the remainder allocated to the Limited Partners, except that in all events, the General Partner shall be allocated at least 1% of profits and (ii) losses will be allocated 1% to the General Partner, 1% to the Associate Limited Partners and 98% to the Limited Partners.
In the event profits to be allocated in any given year do not equal or exceed cash distributed to the General Partner and the Associate Limited Partners for such year, the allocation of profits will be as follows: The General Partner and the Associate Limited Partners will be allocated profits equal to the amount of cash flow distributed to them for such year.
The Limited Partners will be allocated losses such that the sum of amounts allocated to the General Partner, Associate Limited Partners, and Limited Partners equals the profit for the given year.
Section 4.2F of the Partnership Agreement requires the allocation of Profits (as defined) to the General Partner and Associate Limited Partners in order to take account of a current or anticipated reduction in the Partnership's indebtedness and certain other circumstances. In accordance with Section 4.2F of the Partnership Agreement, for financial reporting and Federal income tax purposes for the year ended December 31, 1992, the General Partner and Associate Limited Partners received allocations of Profits in addition to their respective allocations, pursuant to the other allocation provisions of the Partnership Agreement, of the Partnership's loss, as adjusted for such allocation of Profits. The amount of Profits, net of such loss, allocated to the General Partner and Associate Limited Partner, collectively, for tax and financial reporting purposes for 1992 was approximately $9,230,000 and $20,836,000, respectively. As the Partnership had net income for financial reporting and Federal income tax purposes for the years ended December 31, 1994 and 1993, an allocation of Profits to the General Partner and Associate Limited Partners in accordance with Section 4.2F of the Partnership Agreement was not required for these years. In future periods in which the Partnership incurs a loss, the General Partner and Associate Limited Partners may be allocated Profits pursuant to Section 4.2F equivalent to the amount of loss (as adjusted for such allocation of Profits), if any, allocable to them for financial reporting and Federal income tax purposes.
For the years ended December 31, 1994 and 1993, the Partnership had net income for financial reporting and Federal income tax purposes, however, no cash distributions were made during 1993. In accordance with Section 4.2A of the Partnership Agreement, the amount of net income allocated, collectively, to the General and Associated Limited Partners for financial reporting and tax purposes for the year ended December 31, 1994 was approximately $589,000 and $149,000, respectively. This allocation was based on 1994 cash distributions made to the Associate Limited Partners and an allocation of 1% of profits to the General Partners in accordance with Section 4.2A of the Partnership Agreement. In accordance with Section 4.2A of the Partnership Agreement, the amount of net income allocated, collectively, to the General and Associate Limited Partners for tax and financial reporting purposes for the year ended December 31, 1993 was approximately $19,000 and $293,000, respectively.
ARVIDA/JMB PARTNERS, L.P. (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
In general, and subject to certain limitations, the distribution of Cash Flow (as defined) after the initial admission date is allocated 90% to the Holders of Interests and 10% to the General Partner and the Associate Limited Partners (collectively) until the Holders of Interests have received cumulative distributions of Cash Flow equal to a 10% per annum return (non-compounded) on their Adjusted Capital Investments (as defined) plus the return of their Capital Investments; provided, however, that 4.7369% of the 10% amount otherwise distributable to the General Partner and Associate Limited Partners (collectively) will be deferred, and such amount will be paid to the Holders of Interests, until the Holders of Interests receive Cash Flow distributions equal to a cumulative, non- compounded amount of 12% per annum of their Capital Investments (as defined). This deferral provision is in place until the Holders of Interests receive total cash distributions equal to their Capital Investments. Any deferred amounts owed to the General Partner and Associate Limited Partners (collectively) will be distributable to them out of Cash Flow otherwise distributable to the Holders of Interests at such time as such Holders have received a 12% per annum cumulative, non- compounded return on their Capital Investments (as defined) or in any event, to the extent of one-half of Cash Flow otherwise distributable to the Holders of Interests at such time as they have received total distributions of Cash Flow equal to their Capital Investments (as defined).
Thereafter, all distributions of Cash Flow will be made 85% to the Holders of Interests and 15% to the General Partner and the Associate Limited Partners (collectively); provided, however, that the General Partner and the Associate Limited Partners (collectively) shall be entitled to receive an additional share of Cash Flow otherwise distributable to the Holders of Interests equal to the lesser of an amount equal to 2% of the cumulative gross selling prices of any interests in real property of the Partnership (subject to certain limitations) or 13% of the aggregate distributions of Cash Flow to all parties pursuant to this sentence.
(15) Management Agreements - Other Than Ventures
Certain of the Partnership's properties are managed by affiliates of the General Partner or their assignees for fees computed as a percentage of certain receipts of the properties. In December 1994, one of the affiliated property managers sold substantially all of its assets and assigned its interest in its management contracts to an unaffiliated third party. In addition, certain of the management personnel of the property manager became management personnel of the purchaser and its affiliates. The successor to the affiliated property manager's assets is acting as the property manager of the Partnership's Mizner Place office building as well as the office and retail components of the Partnership's mixed-use center known as Arvida Parkway Center after the sale on the same terms that existed prior to the sale.
(16) Subsequent Events
(a) During January 1995, the Partnership remitted each Limited Partner's share of a North Carolina non-resident withholding tax on behalf of each of the Limited Partners. Such payment was deemed a distribution to the Limited Partners for 1995. The total of such payment made on behalf of the Limited Partners was $26,784 (approximately $.07 per Interest). A distribution of $1,488 was paid at that time to the General Partner and Associate Limited Partners, collectively.
(b) During February 1995, the Partnership paid a distribution of $5,421,680 to the Limited Partners ($13.42 per Interest) and $301,201 to the General Partner and Associate Limited Partners, collectively.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes or disagreements with auditors during 1994.
On November 30, 1993, the General Partner of the Partnership approved the engagement of Ernst & Young LLP as the Partnership's independent auditors for the fiscal year ending December 31, 1993 to replace the firm of Price Waterhouse who were dismissed as auditors of the Partnership effective November 30, 1993. The reports of Price Waterhouse on the Partnership's consolidated financial statements for the years ended December 31, 1992 and 1991 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audits of the Partnership's financial statements for the above-mentioned years and in the subsequent interim period, there were no disagreements with Price Waterhouse on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Price Waterhouse would have caused Price Waterhouse to make reference to the matter in their report. The change in accountants was previously reported in the Partnership's Report on Form 8-K dated December 8, 1993, which is incorporated by reference as Exhibit 99.2 to this report, describing the change in the Partnership's independent auditors.
PART III
ITEM 10.



ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership is Arvida/JMB Managers, Inc., a Delaware corporation, all of whose outstanding shares of stock are owned by JMB Service Bureau, Inc., an Illinois corporation, 76% of the outstanding shares of which are owned by JMB Realty Corporation ("JMB"), a Delaware corporation, and the remaining 24% of which are owned by 900 Partners Investments, an Illinois general partnership whose partners include certain officers and directors of JMB and its affiliates. Arvida/JMB Managers, Inc. was substituted as general partner of the Partnership as a result of a merger on March 30, 1990 of an affiliated corporation that was the then general partner of the Partnership into Arvida/JMB Managers, Inc., which, as the surviving corporation of such merger, continues as General Partner. All references herein to "General Partner" include Arvida/JMB Managers, Inc. and its predecessor, as appropriate. The General Partner has responsibility for all aspects of the Partnership's operations. Arvida/JMB Associates, an Illinois general partnership, of which certain officers and affiliates of JMB are partners and Arvida/JMB Limited Partnership, an Illinois limited partnership, of which Arvida/JMB Associates is the general partner, are the Associate Limited Partners of the Partnership. Various relationships of the Partnership to the General Partner and its affiliates are described under the caption "Conflicts of Interest" at pages 21-24 of the Prospectus, which description is hereby incorporated herein by reference to Exhibit 99.1 to this report.
The director, executive officers and certain other officers of the General Partner of the Partnership are as follows:
SERVED IN NAME OFFICE OFFICE SINCE ---- ------ ------------
Judd D. Malkin Chairman 04/08/87 Neil G. Bluhm President 04/08/87 Ernest M. Miller, Jr. Vice President 04/09/87 H. Rigel Barber Vice President 04/08/87 Ira J. Schulman Vice President 04/09/87 Gailen J. Hull Vice President 04/09/87 Howard Kogen Vice President and Treasurer 04/08/87 Gary Nickele Vice President, General Counsel 04/08/87 and Director 12/18/90 James D. Motta Vice President 04/09/87 John Grab Vice President 04/09/87
There is no family relationship among any of the foregoing director or officers. The foregoing director has been elected to serve a one-year term until the annual meeting of the General Partner to be held on August 8, 1995. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the General Partner to be held on August 8, 1995. There are no arrangements or understandings between or among any of said director or officers and any other person pursuant to which any director or officer was selected as such.
The foregoing director and certain of the officers are also officers and/or directors of various affiliated companies, including JMB, which is the corporate general partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle- XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB- XIII"). Most of the foregoing director and officers are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). The director and most of such officers are also partners, directly or indirectly, of certain partnerships (the "Associate Partnerships") which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB-VII, JMB Income-VIII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. The foregoing director and officers are partners, indirectly through other partnerships, of one of the Associate Limited Partners of the Partnership and of the Associate Limited Partner of Arvida-II.
The business experience during the past five years of the director and such officers of the Corporate General Partner of the Partnership includes the following:
Judd D. Malkin (age 57) is Chairman of the Board of JMB, an officer and/or director of various JMB affiliates and a partner, directly or indirectly, of the Associate Partnerships. He is also an individual general partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers, and a director of Catellus Development Corporation, a major diversified real estate development company. He is a Certified Public Accountant.
Neil G. Bluhm (age 57) is President and a director of JMB and an officer and/or director of various JMB affiliates and a partner, directly or indirectly, of the Associate Partnerships. He is also an individual general partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Ernest M. Miller, Jr. (age 52) has been President and Chief Executive Officer of Arvida since February 1989. Mr. Miller will resign as President and Chief Executive Officer of Arvida effective March 31, 1995. Commencing April 1, 1995, Mr. Miller will serve as Chairman of Arvida through December 31, 1995.
H. Rigel Barber (age 45) is Chief Executive Officer and Executive Vice President of JMB, an officer of various JMB affiliates and a partner, directly or indirectly, of various Associate Partnerships. Mr. Barber has been associated with JMB since March, 1982. He received a J.D. Degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Ira J. Schulman (age 43) is Executive Vice President of JMB, an officer of various JMB affiliates and a partner, directly or indirectly, of various Associate Partnerships. He holds a Masters Degree in Business Administration from the University of Pittsburgh.
Gailen J. Hull (age 46) is a Senior Vice President of JMB, an officer of various JMB affiliates and a partner, directly or indirectly, of various Associate Partnerships. Mr. Hull has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 59) is Senior Vice President and Treasurer of JMB, an officer of various JMB affiliates and a partner, directly or indirectly, of various Associate Partnerships. Mr. Kogen has been associated with JMB since March, 1973. He is a Certified Public Accountant.
Gary Nickele (age 42) is Executive Vice President, Secretary and General Counsel of JMB, an officer of various JMB affiliates and a partner, directly or indirectly, of various Associate Partnerships. Mr. Nickele has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
James D. Motta (age 38) is Executive Vice President and Chief Operating Officer of Arvida. Prior thereto, he was President-Community Development Division of Arvida (August, 1993 - April, 1994), President- Southeast Division of Arvida (July, 1992 to July, 1993) and President-South Florida Division of Arvida (January, 1989 to July, 1992). Effective April 1, 1995, Mr. Motta will become President and Chief Executive Officer of Arvida.
John R. Grab (age 38) is Vice President and General Manager - Club/Hotel Operations of Arvida. Prior thereto, he was Vice President and Project General Manager - Weston Hills of Arvida (October 1990 to October 1993) and Vice President and Project General Manager - Jacksonville Golf & Country Club of Arvida (June 1988 to October 1990). He is a Certified Public Accountant. He received his B.S. in Accounting from St. Leo College.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the General Partner receive no current or proposed direct remuneration in such capacities from the Partnership. The General Partner and the Associate Limited Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses as described under the caption "Cash Distributions and Allocations of Profit and Losses" at pages 61 to 64 of the Prospectus and at pages A-9 to A-16 of the Partnership Agreement, which descriptions are incorporated herein by reference to Exhibit 99.1, to this report. Reference is also made to Notes 1 and 14 for a description of such distributions and allocations. The General Partner and the Associate Limited Partners, collectively, received a cash distribution in 1994 of $142,523. Under certain circumstances they will be entitled to approximately $936,000 which has been deferred through December 31, 1994. Such payment is subject to certain restrictions contained in the Partnership Agreement and the Partnership's credit facility. Pursuant to the Partnership Agreement, the General Partner and Associate Limited Partners were allocated profits for tax purposes for 1994 of approximately $149,000. Reference is made to Note 14 for further discussion of this allocation.
The Partnership is permitted to engage in various transactions involving the General Partner and its affiliates, as described under the captions "Management of the Partnership" at pages 56 to 59, "Conflicts of Interest" at pages 21-24 of the Prospectus and "Rights, Powers and Duties of the General Partner" at pages A-16 to A-28 of the Partnership Agreement, which descriptions are hereby incorporated herein by reference to Exhibit 99.1 to this report. The relationships of the General Partner (and its director and executive officers and certain other officers) and its affiliates to the Partnership are set forth above in Item 10.
Arvida is reimbursed fully for all of its out-of-pocket expenditures (including salary and salary-related expenses) incurred while supervising the development and management of the Partnership's properties and other operations, subject to the limitation that such reimbursement may not exceed 5% of the aggregate gross revenues from the business of the Partnership. In 1994, such expenses were approximately $6,802,300, of which approximately $52,800 was unpaid as of December 31, 1994.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited partnership affiliated with the General Partner) each employ project related and administrative personnel who perform services on behalf of both partnerships. In addition, certain out-of-pocket expenditures related to such services and other general and administrative expenses, including certain insurance premiums, are incurred and allocated to each partnership as appropriate. The Partnership receives reimbursements from or reimburses Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-related expenses). The Partnership was entitled to receive approximately $1,338,900 from Arvida/JMB Partners, L.P.-II for such costs and services incurred in 1994, approximately $120,800 of which was outstanding as of December 31, 1994. In addition, the Partnership was obligated to reimburse Arvida/JMB Partners, L.P.-II approximately $537,700 for the year ended December 31, 1994, of which approximately $72,000 was unpaid at December 31, 1994.
The Partnership periodically incurs salary and salary-related costs on behalf of an affiliate of the General Partner of the Partnership. The Partnership was entitled to receive approximately $118,000 for such costs for the year ended December 31, 1994, all of which was outstanding as of December 31, 1994.
JMB Insurance Agency, Inc., an affiliate of the General Partner, earned and received insurance brokerage commissions in 1994 of approximately $299,000 in connection with providing insurance coverage for certain of the properties of the Partnership, all of which were paid as of December 31, 1994. Such commissions are at rates set by insurance companies for the classes of coverage provided.
The General Partner of the Partnership or its affiliates are entitled to property management fees and may be reimbursed for their direct expenses or out-of-pocket expenses relating to the administration of the Partnership and the acquisition, development, ownership, supervision, and operation of the Partnership assets. In 1994, the General Partner of the Partnership or its affiliates were due reimbursement for such direct or out-of-pocket expenses and property management fees in the amount of approximately $163,000, all of which was paid as of December 31, 1994. Additionally, the General Partner and its affiliates are entitled to reimbursements for legal and accounting services. Such costs for 1994 were approximately $128,600, of which $58,200 was paid as of December 31, 1994.
The Partnership was also entitled to receive reimbursements from affiliates of the General Partner for certain general and administrative expenses including, and without limitation, salary and salary-related expenses relating to work performed by employees of the Partnership and certain out-of-pocket expenditures incurred on behalf of such affiliates. The Partnership was owed approximately $505,300 for such costs and services incurred in 1994, approximately $476,300 of which was received as of December 31, 1994.
Amounts payable by the Partnership to the General Partner and its affiliates do not bear interest.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own bene- ficially more than 5% of the outstanding Interests of the Partnership.
(b) The General Partner and its officers and director own the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE BENEFICIAL OF BENEFICIAL PERCENT TITLE OF CLASS OWNER OWNERSHIP OF CLASS -------------- ---------- ----------------- --------
Limited Partnership General Partner 10 Interests Less Interests and its officers than 1% and director as a group
---------------
No officer or director of the General Partner of the Partnership possesses a right to acquire beneficial ownership of Interests of the Partnership.
All of the outstanding shares of the General Partner of the Partnership are owned by an affiliate of its officers and director as set forth above in Item 10.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the General Partner, affiliates or their management other than those described in Items 10, 11 and 12 above.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements. (See Index to Financial Statements filed with this annual report on Form 10-K).
2. Exhibits.
3. Amended and Restated Agreement of Limited Partnership.**
4.0 Assignment Agreement by and among the General Partner, the Initial Limited Partner and the Partnership.**
4.1 Amended and Restated Credit Agreement dated October 7, 1992, among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited Partnership and Chemical Bank and Nationsbank of Florida, N.A. is herein incorporated by reference to Exhibit No. 4.4 to the Partnership's Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.2 Security Agreement dated as of October 7, 1992 made by Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership and Weston Hills Country Club Limited Partnership (as "grantors") in favor of Chemical Bank and Nationsbank of Florida, N.A. (as "lenders") is herein incorporated by reference to Exhibit No. 4.5 to the Partnership's Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.3 Pledge Agreement dated as of October 7, 1992 among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership and Weston Hills Country Club Limited Partnership (as "pledgors") and Chemical Bank and Nationsbank of Florida, N.A. (as "lenders") is herein incorporated by reference to Exhibit No. 4.6 to the Partnership's Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.4 Various mortgages and other security interests dated October 7, 1992 related to the assets of Arvida/JMB Partners, Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited Partnership which secure loans under the Amended and Restated Credit Agreement referred to in Exhibit 4.1 are herein incorporated by reference to Exhibit No. 4.7 the Partnership's Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.7. $24,000,000 Consolidated Revolving Promissory Note dated January 14, 1994 by and between Arvida Grand Bay Limited Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand Bay Limited Partnership-V and Arvida Grand Bay Limited Partnership-VI and Barnett Bank of Broward County, N.A. ***
4.8. Amended and Restated Mortgage and Security Agreement dated January 14, 1994 by and between Arvida Grand Bay Limited Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand Bay Limited Partnership-V, Arvida Grand Bay Limited Partnership-VI and Arvida Grand Bay Properties, Inc. and Barnett Bank of Broward County, N.A. ***
4.9. Construction Loan Agreement dated January 14, 1994 by and between Arvida Grand Bay Limited Partnership-I and Arvida Grand Bay Properties, Inc. and Barnett Bank of Broward County, N.A. ***
4.10. Second Amended and Restated Credit Agreement dated November 29, 1994, among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited Partnership and Chemical Bank and Nationsbank of Florida, N.A. is filed herewith.
4.11. Affirmation and Amendment of Security Documents dated November 29, 1994, among Arvida/JMB Partners, Arvida/JMB Partners, L.P., Southeast Florida Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited Partnership and Chemical Bank is filed herewith.
4.12. Modification of Mortgage and Security Agreement and Other loan Documents dated November 29, 1994, among Arvida/JMB Partners, Weston Hills Country Club Limited Partnership and Chemical Bank is filed herewith.
4.13. Modification of First Mortgage and Security Agreement and Other Loan Documents dated November 29, 1994, among Arvida/JMB Partners, Center Office Partners, Center Retail Partners, Center Hotel Limited Partnership and Chemical Bank is filed herewith.
10.1. Agreement between the Partnership and The Walt Disney Company dated January 29, 1987 is hereby incorporated by reference to Exhibit 10.2 to the Partnership's Registration Statement on Form S-1 (File No. 33- 14091) under the Securities Act of 1933 filed on May 7, 1987.
10.2. Management, Advisory and Supervisory Agreement is hereby incorporated by reference to Exhibit 10.2 to the Partnership's Form 10-K (File No. 0-16976) dated March 27, 1991.
10.3. Letter Agreement, dated as of September 10, 1987, between the Partnership and The Walt Disney Company, together with exhibits and related documents.*
10.4. Joint Venture Agreement dated as of September 10, 1987, of Arvida/JMB Partners, a Florida general partnership. *
21. Subsidiaries of the Registrant.
99.1. Pages 21-24, 56-59, 61-64, A-9 to A-28, A-31 to A-33, and B-2 of the Partnership's Prospectus dated September 16, 1987 are filed herewith.
99.2. A copy of Registrant's Form 8-K report (File No. 0-16976) dated December 6, 1993 is filed herewith.
* Previously filed with the Securities and Exchange Commission as Exhibits 10.4 and 10.5, respectively, to the Partnership's Registration Statement (as amended) on Form S-1 (File No. 33-14091) under the Securities Act of 1933 filed on September 11, 1987 and incorporated herein by reference.
** Previously filed with the Securities and Exchange Commission as Exhibits 3 and 4, respectively, to the Partnership's Form 10- K Report (File No. 0-16976) filed on March 27, 1990 and hereby incorporated herein by reference.
*** Previously filed with the Securities and Exchange Commission as Exhibits 4.7, 4.8 and 4.9, respectively, to the Partnership's Form 10-K Report (File No. 0-16976) filed on March 24, 1994 and hereby incorporated herein by reference.
The Partnership agrees to furnish to the Securities and Exchange Commission upon request a copy of each instrument with respect to long-term indebtedness of the Partnership and its consolidated subsidiaries, the authorized principal amount of which is 10% or less than the total assets of the Partnership and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
No Reports on Form 8-K were required or 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 1994 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARVIDA/JMB PARTNERS, L.P.
BY: Arvida/JMB Managers, Inc. (The General Partner)
GAILEN J. HULL By: Gailen J. Hull Vice President Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
BY: Arvida/JMB Managers, Inc. (The General Partner)
NEIL G. BLUHM By: Neil G. Bluhm, President (Principal Executive Officer) Date: March 27, 1995
JUDD D. MALKIN By: Judd D. Malkin, Chairman (Principal Financial Officer) Date: March 27, 1995
GARY NICKELE By: Gary Nickele, Vice President, General Counsel and Director Date: March 27, 1995
GAILEN J. HULL By: Gailen J. Hull, Vice President (Principal Accounting Officer) Date: March 27, 1995