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, Carlyle Real Estate Limited Partnership - XII (the "Partnership"), is a limited partnership formed in late 1981 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $160,000,000 in Limited Partnership Interests (the "Interests"), to the public pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-76443). A total of 160,000 Interests have been sold to the public at $1,000 per Interest. The offering closed on April 19, 1983. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's real property investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate on or before December 31, 2032. Accordingly, the Partnership intends to hold the real properties it acquires for investment purposes until such time as sale or other disposition appears to be advantageous. Unless otherwise described, the Partnership expects to hold its properties for long-term investment where, due to current market conditions, it is impossible to forecast the expected holding period. At sale of a particular property, the proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investments are subject to competition from similar types of properties (including in certain areas properties owned or advised by affiliates of the General Partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth in the table set forth in Item 2




ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal proceedings.
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 16,456 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 Corporate 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.
Reference is made to Item 6


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On June 21, 1982, the Partnership commenced an offering of $160,000,000 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. All Interests were subscribed and issued between June 21, 1982 and April 19, 1983 from which the Partnership received gross proceeds of $160,000,000.
After deducting selling expenses and other offering costs, the Part- nership had approximately $141,004,000 with which to make investments in income-producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such invest- ments and to satisfy working capital requirements. Portions of the proceeds were utilized to acquire the properties described in Item 1 above.
At December 31, 1994, the Partnership and its consolidated ventures had cash and cash equivalents of approximately $30,504,000. Such funds and short-term investments of approximately $1,945,000 are available for capital improvements, future distributions to partners, and for working capital requirements, including capital improvements and leasing costs currently being incurred at the National City Center Office Building. Certain of the Partnership's investment properties currently operate in overbuilt markets which are characterized by lower occupancies and/or reduced rent levels. The Partnership currently has adequate cash and cash equivalents to maintain the operations of the Partnership. The Partnership has taken steps to preserve its working capital by deciding to suspend distributions from operations to the Limited and General Partners effective as of the first quarter of 1992. The Partnership had also deferred cash distributions and partnership management fees, payable to the Corporate General Partner related to the third and fourth quarters of 1991. In addition, the General Partners and their affiliates had deferred payment of certain property management and leasing fees. In December 1994, the Partnership paid the Corporate General Partner the previously deferred cash distributions, partnership management fees and property management and leasing fees in the amount of $19,666, $33,334 and $3,798,155, respectively, as more fully described in Note 9. In February 1995, the Partnership paid a sales distribution of $23,200,725 ($145 per Interest) to the Limited Partners and $234,351 to the General Partners related to the sale of the Partnership's interest in the First Interstate Center (Notes 7 and 10).
The Partnership and its consolidated ventures have currently budgeted for 1995 approximately $1,216,000 for tenant improvements and other capital expenditures. The Partnership's share of such items in 1995 is currently budgeted to be approximately $1,130,000. Included in this amount is the roof and parking lot at the Permian Mall which are currently in need of repair. To fund the Permian Mall improvements, the Partnership intends to initiate discussions with the mortgage lender regarding a modification to the loan. There can be no assurance that a loan modification can be obtained. Actual amounts expended in 1995 may vary depending on a number of factors including actual leasing activity, results of operations, liquidity considerations and other market conditions over the course of the year. The source of capital for such items and for both short-term and long-term future liquidity and distributions is expected to be through cash generated by the Partnership's investment properties and through the sale of such investments. Due to the Permian Mall improvements and considerations on other properties as discussed below, only the National City Center Office Building is considered to be a significant source of future long-term operational cash generated. In addition, the Partnership does not consider the remaining mortgage note receivable (related to San Mateo Fashion Island) to be a source of future liquidity. Reference is made to Note 7(b). In such regard, reference is made to the Partnership's property specific discussions below and also to the Partnership's disclosure of certain property lease expirations in Item 6. The Partnership's and its Ventures' mortgage obligations are all non-recourse. Therefore, the Partnership and its Ventures are not obligated to pay mortgage indebtedness unless the related property produces sufficient net cash flow from operations or sale.
STONYBROOK APARTMENTS
The mortgages on Stonybrook Apartments II matured October 1, 1994 (Stonybrook Apartments I is not subject to a mortgage loan) with an outstanding balance of approximately $4,807,000 at September 30, 1994. The Partnership refinanced the $4,152,600 first mortgage loan which has been extended to October 1, 1999 at an interest rate of 9.175% per annum. The loan requires monthly interest and principal payments of approximately $35,000 with a balloon payment due at maturity. The Partnership remitted a $40,000 principal payment to the lender, reducing the amount refinanced to $4,112,600. Concurrently, the Partnership paid in full the second mortgage note secured by the property in the amount of $654,800. Accrued and unpaid interest in the amount of $325,485 was forgiven by the lender and is included in extraordinary refinancing loss, net of gain in the accompanying consolidated financial statements. Reference is made to Note 4. The Partnership is currently marketing both phases of the property for sale.
CARRARA
In December 1994, the Partnership redeemed its interest in Carrara Place Limited to the venture for $750,000 in cash at closing (Note 7). As a result of the redemption, the Partnership recognized a gain of $5,404,577 in the accompanying consolidated financial statements. The market and property conditions that preceded the redemption are discussed below.
The lease for Carrara Place Office Building's major tenant, which represented 46% of the building's leasable area and provided for rental payments that were significantly greater than current market rental rates, expired in December 1992. The Denver, Colorado region had been adversely affected by increased competition for tenants as a result of overbuilding in the area. As a result of the current market rental rates, the cash flow generated by the property would have been significantly less than the payments required under the original mortgage note even if the space was re-leased. Further, re-leasing the space required significant re-leasing costs. Additionally, the lease for a tenant occupying approximately 17% of the building's leasable area was scheduled to expire in June 1994. The venture reached an agreement with the tenant to extend their lease for an additional five years. The venture also reached an agreement with a new tenant to occupy approximately 21% of the building's leasable area, with the lease scheduled to expire in August 2004. The Carrara venture initiated discussions with the mortgage lender regarding a modification to the mortgage loan and in September 1993 reached an agreement to modify the loan retroactive to January 1, 1993. Under the modification, the maturity date was extended from June 30, 1994 until January 1, 1998. Interest continued to accrue at 9.875% from January 1, 1993 until January 1, 1998. Effective January 1, 1993, the net cash flow of the property, subject to certain reserves, was paid to the lender and applied toward the payment of accrued and unpaid interest, current interest and principal balance of the loan, respectively. Any capital costs, including re-leasing costs, were to be funded by the lender, subject to their approval, and such costs added to the principal balance of the loan. Approximately $2,699,000 had been funded by the lender as of the date of the redemption.
Concurrent with the modification, the Carrara venture was reorganized such that the Partnership became the sole general partner of the venture, with its venture partner becoming a limited partner of the venture. In addition, the property manager (an affiliate of the unaffiliated venture partner) was replaced effective September 1993. Based upon an analysis of anticipated market conditions, the Partnership had decided not to commit additional funds to the Carrara Place Office Building. There had to be a significant improvement in market and property conditions in order for the value of the property to be greater than the mortgage payoff amount at any point in time, including accrued interest. Therefore, it was unlikely that any significant proceeds would be received by the Partnership in the event the property were sold or refinanced.
In conjunction with the modification, the Carrara venture had agreed to transfer title to the lender if the venture failed to pay the loan in full on the earlier of the extended maturity date or an acceleration of the loan as a result of the occurrence of an event of default (as defined). Such a decision would have resulted in a gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds.
NATIONAL CITY CENTER
At the National City Center Office Building located in Cleveland, Ohio, a major tenant (Baker & Hostetler) extended its lease term to 2001, but reduced its space leased by approximately 18,000 square feet as of January 1993. The extended lease requires tenant improvement costs of approximately $92,000 per year through the expiration of the lease with an additional amount to be paid in 1996 of approximately $730,000. These tenant improvement costs will result in the property incurring a slight deficit for 1994. In 1993, the Venture received a lease termination fee of approximately $1,100,000 from another tenant (KPMG Peat Marwick LLP) for vacating approximately 19,700 square feet (which was subsequently leased to National City Bank).
In January 1994, the debt service payments under the existing mortgage increased from 9-5/8% to 11-7/8% until the scheduled maturity of the loan in December 1995. The Venture reached an agreement with the current mortgage lender to refinance the existing mortgage effective April 28, 1994, with an interest rate of 8.5%. The loan will be amortized over 22 years with a balloon payment due on April 20, 2001. In addition, the Venture paid a prepayment penalty of $580,586 based upon the outstanding loan balance at the time of refinancing. The lender required an escrow account of $612,000 to be established at the time of the refinancing for future tenant improvements at the property. The escrowed funds are to be released to the venture upon lender approval of such costs. The lender also required an escrow of the tenant improvement costs related to the Baker & Hostetler lease (as discussed above). The Venture is required to escrow approximately $313,000 per year in 1994 through 1996 and approximately $236,000 per year in 1997 and 1998. The $1,163,524 refundable loan commitment fee paid by the Partnership in 1993 was applied to accrued interest and the prepayment penalty, with the balance of $238,215 refunded to the Partnership in 1994. The Partnership's share of extraordinary loss on extinguishment of debt ($1,000,547) consisting of the prepayment penalty, the unamortized loan discount and unamortized loan fees at the time of refinancing is recorded in the accompanying consolidated financial statements. Real estate taxes payable in 1994 increased due to the expiration of a 25% reduction of a real estate tax abatement that was received when the property was purchased. The remaining 25% abatement expires in 1998 for taxes payable in 1999.
CARLYLE SEATTLE
In May 1994, Carlyle Seattle executed an agreement which issued an option to sell its interest in First Interstate to the unaffiliated venture partner. The agreement provided for the purchase of 49.95% of Carlyle Seattle's interest by October 17, 1994 (for which Carlyle Seattle received a non-refundable deposit of $500,000 on June 30, 1994 and which was subsequently extended until December 22, 1994 with the receipt of an additional $500,000 on September 22, 1994) with an option for the unaffiliated venture partner to purchase the remaining 50.05% Carlyle Seattle interest between one year and two years after the initial sale closing. On December 1, 1994 (initial sale transaction closing) Carlyle Seattle received (from the unaffiliated joint venture partner) $20,276,000 in cash (less non-refundable deposits as described above) for 49.95% of its interest as explained above. The unaffiliated venture partner paid $5,000,000 in cash for the option of the unaffiliated venture partner to purchase the remaining 50.05% of Carlyle Seattle's interest in First Interstate. Additionally, the unaffiliated venture partner loaned Carlyle Seattle $15,000,000 (bearing interest at a rate of 9% per annum with accrued interest and unpaid principal due on January 1, 1997) which is secured by Carlyle Seattle's remaining 50.05% interest. The exercise price for the remaining 50.05% interest is $21,350,000 if the purchase option is exercised one year from the initial closing, increasing up to $22,850,000 at the termination of the option period. The $5,000,000 option purchase price and the balance of unpaid principal and accrued interest on the $15,000,000 Carlyle Seattle loan can be applied toward the exercise price. There can be no assurance that such option will be exercised. At December 31, 1994, Carlyle Seattle has recorded a note payable to the unaffiliated venture partner in the amount of $15,000,000 plus accrued interest and a deferred gain of $5,000,000 for the cash option payment. In connection with the sale transaction, the First Interstate joint venture agreement was amended to cause the joint venture to be converted to a limited partnership in which Carlyle Seattle is the sole limited partner and the unaffiliated venture partner is the sole general partner. The Partnership's share of proceeds from this transaction was approximately $29,522,000 and its share of gain on sale and restructuring was approximately $25,210,000 in 1994.
PERMIAN MALL
The property produced cash flow from operations in 1994, however, significant funds will be required in the near future for major roof and parking lot repairs. In 1995, 15% of the tenant leases are scheduled to expire for which the Partnership is currently seeking renewal of existing leases or replacement tenants. In anticipation of the necessary major repairs and potential re-leasing costs the Partnership has initiated discussions with the mortgage lender regarding a modification to the loan. There can be no assurance that such modification will be obtained.
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.
Though the economy has recently shown signs of improvement and financing is generally becoming more available for certain types of higher- quality properties in healthy markets, real estate lenders are typically requiring a lower loan-to-value ratio for mortgage financing than in the past. This has made it difficult for owners to refinance real estate assets at their current debt levels unless the value of the underlying property has appreciated significantly. As a consequence, and due to the weakness of some of the local real estate markets in which the Partnership's properties operate, the Partnership is taking steps to preserve its working capital. Therefore, the Partnership is carefully scrutinizing the appropriateness of any discretionary expenditures, particularly in relation to the amount of working capital it has available.
By conserving working capital, the Partnership will be in a better position to meet future needs of its properties without having to rely on external financing sources.
Due to the factors discussed above and the general lack of buyers of real estate today, it is likely that the Partnership may hold some of its investment properties longer than originally anticipated in order to maximize the return to the Limited Partners. Also, in light of the current severely depressed real estate markets, it currently appears that the Partnership's goal of capital appreciation will not be achieved. Although the Partnership expects to distribute from sale proceeds some portion of the Limited Partners' original capital, without a dramatic improvement in market conditions the Limited Partners will receive significantly less than their original investment. In addition, in connection with sales or other dispositions (including transfers to lenders) of properties (or interests therein) owned by the Partnership or its joint venture, the Limited Partners may be allocated substantial gain for Federal income tax purposes.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and short-term investments in the aggregate as of December 31, 1994 as compared to December 31, 1993 is primarily due to (i) the Partnership's share of proceeds from the sale of the First Interstate transaction (such proceeds were substantially distributed in February 1995, Note 10) as discussed above and (ii) the Partnership's suspension of cash distributions from operations effective with the first quarter of 1992 as discussed above.
The decrease in loan commitment fee as of December 31, 1994 as compared to December 31, 1993 is due to the application of the loan commitment fee to accrued interest and prepayment penalty related to the April, 1994 refinancing of the mortgage loan at the National City Center Office Building (see Note 4(d)).
The increase in escrow deposits as of December 31, 1994 as compared to December 31, 1993 is primarily due to the April, 1994 refinancing of the National City Center Office Building mortgage loan (see Note 4(d)).
The decrease in investment properties net of accumulated depreciation and deferred expenses as of December 31, 1994 as compared to December 31, 1993 is primarily due to the transactions related to Carrara Place Limited and First Interstate in December, 1994 as discussed above. Such transactions, the payoff of the Stonybrook I mortgage note and the refinancing of the Stonybrook II mortgage note also resulted in the decrease of the current portion and long term debt as of December 31, 1994 as compared to December 31, 1993.
The decreases in accrued rents receivable, accounts payable and other liabilities as of December 31, 1994 as compared to December 31, 1993 is primarily due to the First Interstate transaction.
The decrease in accrued interest at December 31, 1994 as compared to December 31, 1993 is due primarily to the transaction related to Carrara Place Limited (note 7).
The decrease in due to affiliates as of December 31, 1994 as compared to December 31, 1993 is primarily due to the payment of deferred management and leasing fees in December, 1994 (see Note 9).
The note payable and deferred gain at December 31, 1994 relate to the sale and financing of Carlyle Seattle's remaining interest in First Interstate (see Note 7(d)).
The decrease in rental income and mortgage and other interest and property operating expenses for the year ended December 31, 1994 as compared to the year ended December 31, 1993 is primarily due to the second mortgage lender's realization upon its security represented by the Country Square apartments in February, 1993, the sale of the Sierra Pines and Crossing Apartments in July 1993 (see Note 7) and to the change to the equity method of accounting for First Interstate effective December 1, 1994 (see Note 1). In addition, rental income decreased due to a $1,100,000 termination fee received in January 1993 at the National City Center Office Building and due to decreased rental income at the First Interstate Center resulting from decreased rental rates. The decrease in rental income, mortgage and other interest, and property operating expenses for the year ended December 31, 1993 compared to the year ended December 31, 1992 is primarily due to the second mortgage lender's realization upon its security represented by the Country Square apartments and the sale of the Sierra Pines and Crossing Apartments in July 1993 and decreased occupancy at the Carrara Place Office Building. The decrease in rental income is partially offset by the lease termination fee received in 1993 at the National City Center Office building, as discussed above.
The increase in interest income for the year ended December 31, 1994 compared to the year ended December 31, 1993 is primarily due to the increases in the rate of interest earned on and an increased average balance of U.S. Government obligations. The decrease in interest income for the year ended December 31, 1993 compared to the year ended December 31, 1992 is primarily due to a decrease in the interest income recognized on the mortgage note receivable for San Mateo Fashion Island.
The decrease in depreciation for the year ended December 31, 1994 compared to the year ended December 31, 1993 is primarily due to the second mortgage lender's realization upon its security represented by the Country Square apartments in February, 1993 and the sale of the Sierra Pines and Crossing Apartments in July 1993 and to the change to the equity method of accounting for First Interstate effective December 1, 1994 (see Note 7).
The increase in Partnership's share of operations of unconsolidated venture for the year ended December 31, 1993 as compared to December 31, 1992 is due to the transfer of title to the property to the lender of the Yerba Buena West Office Building in June 1992.
The provision for value impairment for the year ended December 31, 1992 is due to the Partnership recording a provision to reduce the net carrying value of the Sierra Pines Apartments, based upon a proposed sales price.
The decrease in venture partners' share of ventures' operations for the year ended December 31, 1994 compared to the year ended December 31, 1993 and the corresponding decrease in venture partners' deficits in ventures for the year ended December 31, 1994 compared to the year ended December 31, 1993 is primarily due to the sale of the Partnership's interest in Carrara Place Limited and the First Interstate transaction as discussed above.
The gain on sale or dispositions, net of venture partners' share for the year ended December 31, 1994 is due to the redemption of the Partnership's interest in Carrara Place Limited and partial sale and restructuring of First Interstate (see Note 7). The gain on the sale or disposition of investment properties for the year ended December 31, 1993 is due to the second mortgage lender's realization upon its security represented by the Country Square apartments in February 1993 and the gain on sale of the Sierra Pines and Crossing Apartments in July 1993. The gain on the sale or disposition of investment properties for the year ended December 31, 1992 is due to the transfer of title to the property to the lender of the Yerba Buena West Office Building in June 1992. In addition, the lenders of Arbor Town Apartments - I and Arbor Town Apartments - II realized upon their security and took title to the properties in December 1992.
The extraordinary loss for the year ended December 31, 1994 is primarily due to the discount and deferred mortgage expense write-offs and the prepayment penalty related to the National City Center mortgage refinancing. These losses are netted against the forgiveness of accrued interest associated with the Stonybrook Apartments II refinancing (see Note 4).
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
To the extent that inflation in future periods does have an adverse impact on property operating expenses, the effect will generally be offset by amounts recovered from tenants, as many of the long-term leases at the Partnership's commercial properties have escalation clauses covering increases in the cost of operating and maintaining the properties as well as real estate taxes. Therefore, there should be little effect on operating earnings if the properties remain substantially occupied. In addition, substantially all of the leases at the Partnership's shopping center investment contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
Future inflation may also cause capital appreciation of the Partnership's investment properties over a period of time to the extent that rental rates and replacement costs of properties increase.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations, years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Partners' Capital Accounts (Deficit), years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
SCHEDULE --------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII:
We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - XII (a limited partnership) and consolidated ventures as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlyle Real Estate Limited Partnership - XII and consolidated ventures at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois March 27, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts of the Partnership and its ventures Carlyle Seattle Associates ("Carlyle Seattle") (note 7), Stonybrook Partners Limited Partnership ("Stonybrook"), Carrara Place Limited ("Carrara") (note 7), Carlyle Carrollton Associates ("Carlyle Carrollton") (note 7), and Carlyle/National City Associates ("Carlyle/National City"), Carlyle Seattle's venture, Wright-Carlyle Seattle ("First Interstate") (note 7) and Carlyle Carrollton's venture, Country Square, Ltd. ("Country Square") (note 7). The effect of all transactions between the Partnership and the ventures has been eliminated.
The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's interest in Carlyle Yerba Buena Limited Partnership ("Yerba Buena"), through the date of its disposition (note 3(c)) and First Interstate, effective December 1, 1994, due to the sale of 49.95% of Carlyle Seattle's interest (note 7). Accordingly, the accompanying consolidated financial statements do not include the accounts of entities accounted for under the equity method.
The Partnership records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to present the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such adjustments are not recorded on the records of the Partnership. The net effect of these items is summarized as follows:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The net earnings (loss) per limited partnership interest is based upon the limited partnership interests outstanding at the end of each year (160,005). Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial reporting and income tax purposes.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from unconsolidated ventures are considered cash flow from operating activities only to the extent of the Partnership's cumulative share of net earnings. In addition, the Partnership records amounts held in U.S. Government obligations and certificates of deposit at cost which approximates market. Therefore, for the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($30,086,428 and none held at December 31, 1994 and 1993, respectively) as cash equivalents with any remaining amounts reflected as short-term investments being held to maturity.
Deferred expenses are comprised principally of deferred leasing commissions and deferred lease assumption costs which are amortized over the lives of the related leases and deferred mortgage costs which are amortized over the term of the related notes.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in minimum lease payments over the term of the lease, the Partnership accrues rental income for the full period of occupancy on a straight-line basis.
Statement of Financial Accounting Standards No. 107, ("SFAS 107"),"Disclosures about Fair Value of Financial Instruments", requires entities with total assets exceeding $150 million at December 31, 1992 to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement 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 classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. The debt, with a carrying balance of $79,735,096, has been calculated to have an SFAS 107 value of $69,365,789 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment, and the inability to obtain comparable financing due to previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such calculated debt amounts reported. (See note 4.) The Partnership has no other significant financial instruments.
During 1992, the Partnership entered into a contract (that was subsequently terminated) to sell the Sierra Pines Apartments subject to certain contingencies. Based upon the proposed sales price, the Partnership would not have recovered the net carrying value of the investment property. The Partnership, therefore, as a matter of prudent accounting practice, made a provision for value impairment on such investment property of $2,682,822. Such provision was recorded in September 1992, to effectively reduce the net carrying value of the investment property, based upon the proposed sale price. The Sierra Pines Apartments was sold in July 1993 (note 7(c)).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 law to remit directly to the taxing authorities amounts representing withholding from distributions paid to partners.
(2) INVESTMENT PROPERTIES
The Partnership has acquired, either directly or through joint ventures, ten apartment complexes, four office buildings, and two enclosed shopping malls. During 1984, the Partnership sold its interest in the Arbor Town Apartments-I and the Arbor Town Apartments-II complexes. Subsequently, in 1992, the lenders on the Arbor Town Apartments-I and Arbor Town Apartments-II complexes realized upon their security and obtained title to the properties resulting in the Partnership no longer having a security interest in the properties (note 4(d)). In 1986, the Partnership conveyed its interest in the Presidio West Apartments-II and sold its interest in the San Mateo shopping center. In 1990, the Partnership disposed of its interest in the Timberline Apartments and sold its interest in the Meadows Southwest Apartments. In 1991, the Partnership, through its joint venture, disposed of its interest in the Summerfield/Oakridge Apartments. In 1992, the Yerba Buena venture transferred title to the property to the lender (note 3(c)). In 1993, the Partnership sold its interest in the Sierra Pines Apartments and The Crossing Apartments, and disposed of its interest in the Country Square Apartments (note 7). In 1994, the Partnership redeemed its interest in Carrara Place Limited (note 7). Also in 1994, Carlyle Seattle sold 49.95% of its interest in and issued an option to sell its remaining 50.05% interest in the First Interstate venture (note 7). The four properties owned at December 31, 1994 were completed and in operation.
Depreciation on the operating properties has been provided over estimated useful lives of 5 to 30 years using the straight-line method.
All investment properties are pledged as security for long-term debt, for which there is no recourse to the Partnership.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
Provisions for value impairment are recorded with respect to the investment properties whenever the estimated future cash flows from a property's operations and projected sale are less than the property's net carrying value.
(3) VENTURE AGREEMENTS
(a) General
The Partnership, at December 31, 1994, is a party to three operating joint venture agreements. Pursuant to such agreements, the Partnership made aggregate capital contributions of $101,530,662 (including Carrara Place Limited in which the Partnership redeemed its interest in 1994). In general, the joint venture partners, who are either the sellers (or their affiliates) of the property investments being acquired, or parties which have contributed an interest in the property being developed, or were subsequently admitted to the ventures, make no cash contributions to the ventures, but their retention of an interest in the property, through the joint venture, is taken into account in determining the purchase price of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the Partnership's interest, which is determined by arm's-length negotiations. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash contributions to the ventures.
The Partnership has acquired, through the above ventures, one apartment complex and two office buildings. In some instances, the properties were acquired (as completed) for a fixed purchase price. In other instances, properties were developed by the ventures and, in those instances, the contributions of the Partnership were generally fixed. The joint venture partners (who were primarily responsible for constructing the properties) contributed any excess of cost over the aggregate amount available from Partnership contributions and financing and, to the extent such funds exceeded the aggregate costs, were to retain such excess. The venture properties have been financed under various long-term debt arrangements as described in note 4.
Two of the ventures' properties produced net cash receipts during 1994, one in 1993. In general, operating profits and losses are shared in the same ratio as net cash receipts. If there are no net cash receipts, substantially all profits or losses are allocated in accordance with the partners' respective economic interests. The Partnership generally has preferred positions (related to the Partnership's cash investment in the ventures) with respect to distribution of sale or refinancing proceeds from the ventures.
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.
(b) First Interstate Center
On December 1, 1994, Carlyle Seattle sold 49.95% of its interest in First Interstate (note 7(d)).
During 1982, the Partnership acquired, through a joint venture ("First Interstate") between an affiliated joint venture ("Carlyle Seattle") described below and the developer, a fee ownership of improvements and a leasehold interest in an office building in Seattle, Washington. Carlyle Seattle is a joint venture between the Partnership and Carlyle Real Estate Limited Partnership-X ("C-X"), an affiliated partnership sponsored by the Corporate General Partner of the Partnership. Under the terms of the First Interstate venture agreement, Carlyle Seattle made initial cash contributions aggregating $30,000,000.
The terms of the Carlyle Seattle venture agreement provide that all the capital contributions will be made in the proportion of 73.3% by the Partnership and 26.7% by C-X. The initial required contribution by the Partnership to the Carlyle Seattle venture was $22,000,000. The Carlyle Seattle venture agreement further provides that all of the venture's share of First Interstate's annual cash flow, sale or refinancing proceeds, operating profits and losses, and tax items will be allocated 73.3% to the Partnership and 26.7% to C-X.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
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Prior to the sale transaction, Carlyle Seattle was generally entitled to receive a preferred distribution (on a cumulative basis) of annual cash flow equal to 8% of its capital contributions to First Interstate. venture. Cash flow in excess of this preferred distribution was distributable to the First Interstate joint venture partner up to the next $400,000 and any remaining annual cash flow was distributable 50% to Carlyle Seattle and 50% to the First Interstate joint venture partner. Operating deficits, if any, were shared 50% by Carlyle Seattle and 50% by the First Interstate joint venture partner. Operating profits or losses of the First Interstate joint venture generally were allocated in the same ratio as the allocation of annual cash flow, however, the joint venture partner was to be allocated not less than 25% of such profits and losses.
In connection with the transaction, the First Interstate Venture Agreement has been amended to convert Carlyle Seattle's remaining general partnership interest to a limited partnership interest. Additionally, the amendment states that no profits, income or gain shall be allocable to Carlyle Seattle except to the extent that Carlyle Seattle receives distributions from First Interstate and operating losses shall be allocated to the extent of Carlyle Seattle's positive capital account balance and thereafter at 25.025%. The amended Venture Agreement provides that any distributions to Carlyle Seattle are subordinate to the joint venture partner's preferred return (as defined). It is not anticipated that any distributions will be made to Carlyle Seattle from operations subsequent to the initial sale transaction. Immediately after the execution of the amendment to the Venture Agreement, the unaffiliated venture partner conveyed its general partnership interest to its affiliate and First Interstate was recapitalized. The recapitalization involved the refinancing and replacement of the first mortgage loan. The replacement debt is payable in monthly installments of interest only at a rate of 7.88% per annum, and matures on December 1, 2001 when all unpaid principal and accrued interest becomes due. Additionally, effective December 1, 1994, the equity method of accounting has been applied with respect to Carlyle Seattle's interest in First Interstate as Carlyle Seattle's interest has decreased to less than 50% and converted to a limited partnership interest.
The office building is managed by an affiliate of the First Interstate joint venture partner for a fee computed at 2% of base and percentage rents.
(c) Yerba Buena West Office Building
In June 1992, Carlyle Yerba Buena Limited Partnership ("Yerba Buena") transferred title to the property to the lender in return for an opportunity to share in future sale or refinancing proceeds above certain levels. In order for the joint venture to share in future sale or refinancing proceeds, however, there must be a significant improvement in current market and property operating conditions resulting in a significant increase in value of the property. In addition, through June 1998, the joint venture has right of first opportunity to purchase the property if the lender chooses to sell. An affiliate of the Partnership's Corporate General Partner had been managing and leasing the property for the lender. In December 1994, the affiliate was replaced as manager and leasing agent for the property. As a result of the transfer of title to the lender as discussed above, the Partnership no longer has an ownership interest in the property and recognized a gain of $2,261,223 and $1,350,845 in 1992 for financial reporting and Federal income tax purposes, respectively, with no corresponding distributable proceeds.
(d) Carrara
In December 1994, the Partnership redeemed its interest in Carrara Place Limited to the venture (note 7(e)).
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The Carrara joint venture agreement provided that operating profits and losses of the venture were to be allocated 50% to the venture and 50% to the venture partner. Commencing July 1, 1994, operating profits or losses were allocated 100% to the Partnership. Gain arising from the sale or other disposition of the property would be allocated to the venture partner or partners then having a deficit balance in its or their respective capital accounts in accordance with the terms of the venture agreement. Any additional gain would be allocated in accordance with the distribution of sales proceeds. The lease for Carrara Place Office Building's major tenant, which represented 46% of the building's leasable area and provided for rental payments that were significantly greater than current market rental rates, expired in December 1992 and the tenant vacated. The Carrara venture initiated discussions with the mortgage lender regarding a modification to the mortgage loan.
Concurrent with the modification (note 4(b)), the Carrara venture reorganized such that the Partnership became the sole general partner of the venture, with its venture partner becoming a limited partner of the venture. In addition, the property manager (an affiliate of the unaffiliated venture partner) was replaced effective September 1993. Based upon an analysis of current and anticipated market conditions, the Partnership had decided not to commit additional funds to the Carrara Place Office Building. There had to be a significant improvement in market and property conditions in order for the value of the property to be greater than the mortgage pay off amount at any point in time, including accrued interest. Therefore, it was unlikely that any significant proceeds would be received by the Partnership from a sale of the property or that the mortgage loan could be refinanced when it became due.
In conjunction with the modification, the venture had agreed to transfer title to the lender if the venture failed to pay the loan in full on the earlier of the extended maturity date or an acceleration of the loan as a result of the occurrence of an event of default (as defined).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
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Included in the above total long-term debt is $2,055,549 at December 31, 1993 which represents mortgage interest accrued but not currently payable pursuant to the terms of the notes (as modified).
Five year maturities of long-term debt (exclusive of amortization of discount) are as follows:
1995 . . . . . . . . . . $1,683,440 1996 . . . . . . . . . . 1,843,475 1997 . . . . . . . . . . 2,018,223 1998 . . . . . . . . . . 2,204,089 1999 . . . . . . . . . . 6,285,213 ==========
(b) Debt Modifications
The Partnership modified the $5,800,000 second mortgage note secured by the Country Square apartment complex in Carrollton, Texas effective June 1, 1989. The pay rate was raised from 4% per annum to 5% per annum (payable in monthly installments of interest only) through December 1, 1992. Interest accrued and was deferred at a rate of 11% per annum from June 1, 1989 through December 31, 1990 and 12% per annum from January 1, 1991 through December 31, 1992; payable each April 30 to the extent of any annual cash flow (as defined) or upon the earlier of subsequent sale of the property or the January 1, 1993 maturity of the note. The lender notified the Partnership that it would not modify the existing terms of the second mortgage. The Partnership was unable to secure new or additional modifications or extensions to the loan. On February 2, 1993, the second mortgage lender concluded proceedings to realize upon its security and took title to the property. As a result, the Partnership recognized a gain for financial reporting purposes of $1,520,734 and a gain for Federal income tax purposes of $5,633,431 in 1993 with no corresponding distributable proceeds.
Effective January 1, 1993, the mortgage note secured by the Carrara Place Office Building was modified. Under the modification, the maturity date was extended from June 30, 1994 until January 1, 1998. Interest continued to accrue at 9.875% from January 1, 1993 until maturity. Effective January 1, 1993, the net cash flow of the property (after the required minimum interest payments of $8,333 monthly or $100,000 annually), subject to certain reserves including a $350,000 operating reserve to fund deficits, was to be paid to the lender and applied toward the payment of accrued and unpaid interest, current interest and principal balance of the loan, respectively. Any capital costs, including re-leasing costs, were to be funded by the lender, (subject to their approval) and added to the principal balance of the loan.
In conjunction with the modification, the venture had agreed to transfer title to the lender if the venture failed to pay the loan in full on the earlier of the extended maturity date or an acceleration of the loan as a result of the occurrence of an event of default (as defined) (note 7(e)). CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(c) Sierra Pines and Crossings Apartments
Effective December 27, 1990, the Partnership obtained replacement loans from an institutional lender to retire in full satisfaction, at an aggregated discount, the previously modified existing long-term mortgage notes secured by the Sierra Pines Apartments and the Crossings Apartments. The new lender required the establishment of escrow accounts, of approximately $253,000 and $291,000, to be used toward the purchase of capital items at the Sierra Pines Apartments and the Crossings Apartments, respectively. As of the date of sale (see note 7(c)) approximately $62,000 and $6,000 were used for such purposes for the respective properties. The new mortgage loans, which were cross-collateralized, required interest only payments at 9.5% plus contingent interest (as defined) until January 1, 1999, when the remaining balance was payable. In 1993 and 1992, $176,334 and $145,029 were paid for 1992 and 1991 contingent interest, respectively for the properties. $107,945 was paid in 1993 for 1993 contingent interest for both properties through the date of sale. In the event that these properties were sold before the maturity date of the loan, the lender was to receive additional interest of 6% of the mortgage principal and, in general, the higher of 65% of the sale proceeds (as defined) or ten times the highest contingent interest (as defined) amount in any of the three full fiscal years preceding the sale. In 1993, the Partnership sold its interest in the Sierra Pines Apartments and The Crossing Apartments (see note 7(c)).
(d) National City Center Office Building
In January 1994, the debt service payments under the existing mortgage for the National City Center Office Building increased from 9-5/8% to 11- 7/8% until the scheduled maturity of the loan in December 1995. Carlyle/National City reached an agreement with the current mortgage lender to refinance the existing mortgage effective April 28, 1994, with an interest rate of 8.5%. The loan will be amortized over 22 years with a balloon payment due on April 10, 2001. Carlyle/National City paid a refundable loan commitment fee of $1,163,524 in 1993 in conjunction with the refinancing. The fee was applied to accrued interest and the prepayment penalty of $580,586 based on the outstanding mortgage balance at the time of refinancing, with the balance of $238,215 refunded to Carlyle/National City in 1994. In addition, the lender required an escrow account of $612,000 to be established at the inception of the refinancing for future tenant improvements costs at the property. The escrowed funds are to be released to the venture upon lender approval of such costs. The lender also required an escrow of the tenant improvement costs related to the Baker & Hostetler lease (as discussed above). The Venture is required to escrow approximately $313,000 per year in 1994 through 1996 and approximately $236,000 per year in 1997 and 1998. The Partnership's share of extraordinary loss on extinguishment of debt ($1,000,547) consisting of the prepayment penalty, the unamortized loan discount and unamortized loan fees at the time of refinancing is recorded in the accompanying consolidated financial statements.
(e) Stonybrook Apartments
The mortgages on Stonybrook Apartments II matured October 1, 1994 (Stonybrook Apartments I is not subject to a mortgage loan) with an outstanding balance of approximately $4,807,000 at September 30, 1994. The Partnership refinanced the $4,152,600 first mortgage loan and extended the maturity date to October 1, 1999 at an interest rate of 9.175% per annum. The loan requires monthly interest and principal payments of approximately
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
$35,000 with a balloon payment due at maturity. The Partnership remitted a $40,000 principal payment to the lender, reducing the amount refinanced to $4,112,600. Concurrently, the Partnership paid in full the second mortgage note secured by the property in the amount of $654,800. Accrued and unpaid interest in the amount of $325,485 was forgiven by the lender and is reflected as an extraordinary item in the accompanying consolidated financial statements.
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or other disposition of investment properties will be allocated first to the General Partners in an amount equal to the greater of the amount distributable to the General Partners as sale or refinancing proceeds from sale or other disposition of investment properties (as described below) or 1% of the profits from the sale or refinancing. Losses from the sale or other disposition of investment properties will be allocated 1% to the General Partners. The remaining sale or other disposition of investment properties profits and losses will be allocated to the Limited Partners.
An amendment to the Partnership Agreement, effective January 1, 1991, generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event that would cause the deficit balance in absolute amount in the Capital Account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of Profits to the General Partners shall be increased to the extent necessary to cause the deficit balance in the Capital Account of the General Partners to be no less than their respective shares of the Partnership's indebtedness (as defined) after such event. In general, the effect of this amendment is to allow the deferral of the recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu- tions except under certain limited circumstances upon dissolution and termination of the Partnership. Distributions of "net cash receipts" of the Partnership will be allocated 90% to the Limited Partners and 10% to the General Partners (of which 6.25% constitutes a management fee to the Corporate General Partner for services in managing the Partnership). Distributions of "sale proceeds" and "financing proceeds" are to be allocated 99% to the Limited Partners and 1% to the General Partners until receipt by the Limited Partners of their initial contributed capital plus a stipulated return thereon. Thereafter, distributions of "sale proceeds" and "financing proceeds" are to be allocated to the General Partners until the General Partners have received an amount equal to 3% of the gross sales prices of any properties sold, then the balance 85% to the Limited Partners and 15% to the General Partners.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) MANAGEMENT AGREEMENTS
The Partnership has entered into agreements with sellers or affiliates of the sellers for the operation and management of several properties. Such agreements provided that, during the term of these agreements, the managers paid all expenses of the properties and retained the excess, if any, of cash revenues from operations over costs and expenses, as defined, as a management fee. Upon termination of the agreements, an affiliate of the General Partners assumed management under agreements providing for management fees calculated at a percentage of the gross income from the properties. In December 1994, one of the affiliated property managers sold substantially all of its assets 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 is acting as the property manager of the National City Center Office Building and Stonybrook Apartments.
(7) SALE OF INVESTMENT PROPERTIES
(a) Arbor Town Apartments-I and Arbor Town Apartments-II
During November 1984, the Partnership concurrently sold the land and related improvements of the Arbor Town Apartments-I and Arbor Town Apartments-II located in Arlington, Texas for $15,500,000, consisting of $3,100,000 in cash and $12,400,000 of wrap-around notes receivable. The purchase wrap-around notes were subject to existing mortgage notes.
The sale was accounted for by the installment method whereby the gain on sale of $2,724,491 (net of discount on the notes receivable of $890,413) was recognized as collections of principal were received. Beginning with 1987, the Partnership adopted the cost recovery method. No profit was recognized by the Partnership in 1992 and 1991.
The Partnership did not receive the scheduled interest only payments of approximately $2,000,000 on the wrap-around notes receivable from January 1988 through May 1989 and, therefore, the Partnership did not make the corresponding scheduled monthly payments on the underlying indebtedness. The buyer voluntarily filed for protection under Chapter 11 of the United States Bankruptcy Code in May 1988. In April 1989, the United States Bankruptcy Court approved a plan of reorganization, whereby scheduled payments on the wrap-around notes receivable and related underlying mortgage notes payable were allowed to be modified by the buyer.
Under the terms of the Bankruptcy Reorganization Plan, the Partnership's wrap-around notes receivable and underlying non-recourse mortgage notes payable remained outstanding. The buyer subsequently negotiated the modification of the underlying non-recourse mortgage notes payable directly with the lenders while the wrap-around notes receivable had been modified to the extent the Partnership had agreed that the buyer make payments directly to the lender. These modifications modified the terms of the original underlying loan agreements resulting in permanent interest expense reductions. For financial reporting purposes, these interest expense reductions had been offset by adjustments to the wrap-around notes receivable. No reserve for collectibility had been established previously due to the existence of deferred gain exceeding the net equity in the wrap- around notes receivable, with the underlying indebtedness being non- recourse to the Partnership. The Partnership recognized interest income on the wrap-around notes receivable only to the extent interest had been paid
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
by the buyer on the modified underlying indebtedness. In December 1992, the lenders concluded proceedings to realize upon their security and obtained title to the properties resulting in the Partnership no longer having a security interest in the properties. Although the Partnership received no cash proceeds from the transfer of its security interest; it did, however, recognize a gain for financial reporting purposes and a loss for Federal income tax purposes in 1992 of $1,556,577 and $275,509, respectively.
(b) San Mateo Fashion Island
On December 31, 1986, the Partnership sold its right, title and interest in the land, leasehold interest and related improvements of the San Mateo Fashion Island shopping center for $44,202,559 and recognized profit in full of $9,528,813. The sale price consisted of $950,000 in cash at closing, the assumption of the existing mortgage note having an unpaid principal balance of $39,302,559 (for financial reporting purposes the principal balance was $28,895,264) and an additional promissory note in the amount of $3,950,000 ($950,000 paid in March 1988) secured by a subordinated deed of trust on the property. In addition to the sale price, the Partnership received $7,600,000 from the venture partner during 1986 under the terms of the venture agreement.
During the first quarter of 1992, the Partnership was advised by the buyer (in which the Corporate General Partner has an interest) that it had initiated discussions directly with the first mortgage lender regarding a modification to the first mortgage note. The buyer is currently making reduced payments to the first mortgage lender and had discontinued making payments to the Partnership as of March 1992. Due to uncertainty regarding the value of the underlying collateral, the Partnership reserved for the entire outstanding principal balance and accrued interest ($3,720,000) on the note receivable as of December 31, 1994 and 1993 in the accompanying consolidated financial statements. In addition, the entire outstanding principal balance and accrued interest was written off for Federal income tax purposes in 1992.
(c) Sierra Pines and Crossing Apartments
On July 29, 1993, the Partnership sold the land, buildings, related improvements and personal property of the Sierra Pines and Crossing Apartments located in Houston, Texas. The purchaser is not affiliated with the Partnership or its General Partners and the sale price was determined by arm's-length negotiations. The sale prices of the land, buildings, related improvements and personal property for Sierra Pines and Crossing Apartments were $4,880,000 and $9,535,000, respectively. A portion of the cash proceeds was utilized to retire the first mortgage notes with outstanding balances of $4,380,000 and $7,600,000, respectively, secured by the properties. The Partnership paid additional interest of $1,230,923 in the aggregate in connection with the retirement of the mortgage notes. The Partnership received in connection with these sales, after additional interest and normal costs of sale, a net amount of cash of approximately $950,000 (including $288,000 in advisory fees) in the aggregate. As a result of these sales, the Partnership recognized gains for financial reporting purposes in 1993 of $44,030 and $2,526,916, respectively, and recognized a gain for Federal income tax purposes in 1993 of $1,510,727 and $6,164,118, respectively.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(d) First Interstate
In May 1994, Carlyle Seattle executed an agreement which issued an option to sell its interest in First Interstate to the unaffiliated venture partner. The agreement provided for the purchase of 49.95% of Carlyle Seattle's interest by October 17, 1994 (for which Carlyle Seattle received a non-refundable deposit of $500,000 on June 30, 1994 and which was subsequently extended until December 22, 1994 with the receipt of an additional $500,000 on September 22, 1994) with an option for the unaffiliated venture partner to purchase the remaining 50.05% Carlyle Seattle interest between one year and two years after the initial sale closing. On December 1, 1994 (initial sale transaction closing), Carlyle Seattle received (from the unaffiliated joint venture partner) $20,276,000 cash (less non-refundable deposits as described above) for 49.95% of its interest as explained above. The unaffiliated venture partner paid, $5,000,000 cash for the option of the unaffiliated venture partner to purchase the remaining 50.05% of Carlyle Seattle's interest in the First Interstate. Additionally, the unaffiliated venture partner loaned $15,000,000 (bearing interest at a rate of 9% per annum with accrued interest and unpaid principal due on January 1, 1997) and is secured by Carlyle Seattle's remaining 50.05% interest. The exercise price for the remaining 50.05% interest is $21,350,000 if the purchase option is exercised one year from the initial closing, increasing up to $22,850,000 at the termination of the option period. The $5,000,000 option purchase price paid at the initial closing and the balance of unpaid principal and accrued interest on the $15,000,000 Carlyle Seattle loan can be applied toward the exercise price. There can be no assurance that such option will be exercised. At December 31, 1994, Carlyle Seattle has recorded a note payable to the unaffiliated venture partner in the amount of $15,000,000 plus accrued interest and a deferred gain of $5,000,000 for the cash option payment. See note 3(b) for a discussion of the restructuring of the First Interstate joint venture. The Partnership's share of proceeds from this transaction was approximately $29,522,000. Carlyle Seattle recognized a gain of $34,583,869 (of which the Partnership's share is $25,210,324) for financial reporting purposes in 1994 and a gain of $83,565,440 (of which the Partnership's share is $61,224,798) for Federal income tax purposes in 1994.
(e) Carrara
In December 1994, the Partnership redeemed its interest in Carrara Place Limited for $750,000 in cash at closing. As a result of the redemption, the Partnership recognized a gain of $5,404,577 for financial reporting purposes and $12,141,105 for Federal income tax purposes in 1994.
(8) LEASES
(a) As Property Lessor
At December 31, 1994 the Partnership and its consolidated ventures' principal assets are one apartment complex, one enclosed shopping mall and two office buildings. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding cost of land, is depreciated over the estimated useful life.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Leases with commercial tenants range in term from one to thirty years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide additional rent based upon percentages of tenants' sales volumes. With respect to the Partnership's shopping center investment, a substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector. Apartment complex leases in effect at December 31, 1994 are generally for a term of one year or less and provide for annual rents of approximately $1,956,000.
Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1994:
Shopping mall: Cost. . . . . . . . . . . . $ 24,767,200 Accumulated depreciation. . (8,401,619) ------------ 16,365,581 ------------ Office buildings: Cost. . . . . . . . . . . . 89,472,492 Accumulated depreciation. . (27,206,294) ------------ 62,266,198 ------------ Apartment complex: Cost. . . . . . . . . . . . 8,060,815 Accumulated depreciation. . (3,738,289) ------------ 4,322,526 ------------ Total. . . . . . . . . . $ 82,954,305 ============
Minimum lease payments, including amounts representing executory costs (e.g., taxes, maintenance, insurance) and any related profit in excess of specific reimbursements, to be received in the future under the above commercial operating lease agreements, are as follows:
1995 . . . . . . . . . . . $ 13,645,829 1996 . . . . . . . . . . . 11,609,375 1997 . . . . . . . . . . . 10,791,221 1998 . . . . . . . . . . . 10,356,002 1999 . . . . . . . . . . . 10,193,636 Thereafter . . . . . . . . 54,675,218 ------------ Total. . . . . . . . . $111,271,281 ============
(b) As Property Lessee
First Interstate owned a net leasehold interest (which was scheduled to expire in 2052) in the land underlying the Seattle, Washington office building, subject to a 20-year extension. The lease provided for an annual rent of $670,000 and has been determined to be an operating lease (note 7(d)).
Concurrent with the sale transaction, an affiliate of the new general partner in First Interstate purchased the land underlying the office building and terminated the related ground lease.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(9) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1994 and for the years ended December 31, 1994, 1993 and 1992 are as follows:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
The General Partners and their affiliates had deferred through June 30, 1988 payment of certain property management and leasing fees. In addition, the Partnership deferred the General Partners' cash distribution and management fee of $19,666 and $33,334, respectively, for the third and fourth quarters of 1991. In December 1994 the Partnership paid deferred property management and leasing fees, cash distributions and management fees of $3,798,155, $19,666 and $33,334, respectively.
(10) SUBSEQUENT EVENT - Distributions
In February 1995, the Partnership paid a sales distribution of $23,200,725 ($145 per Interest) to the Limited Partners and $234,351 to the General Partners.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during fiscal year 1994 and 1993.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. JMB, as the Corporate General Partner, has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, Realty Associates-XII, L.P., an Illinois limited partnership with JMB as the sole general partner. The Associate General Partner shall be directed by a majority in interest of its limited partners (who are generally officers, directors and affiliates of JMB or its affiliates) as to whether to provide its approval of any sale of real property (or any interest therein) of the Partnership. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director and executive officer and certain officers of the Corporate General Partner are as follows:
SERVED IN NAME OFFICE OFFICE SINCE ---- ------ ------------
Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73
SERVED IN NAME OFFICE OFFICE SINCE ---- ------ ------------
H. Rigel Barber Chief Executive Officer and 8/01/93 Executive Vice President 1/02/87 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Jeffrey R. Rosenthal Managing Director-Corporate 4/22/91 Chief Financial Officer 8/01/93 Douglas H. Cameron Executive Vice President 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Ira J. Schulman Executive Vice President 6/01/88 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve one-year terms until the annual meeting of the Corporate General Partner to be held on June 7, 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 Corporate General Partner to be held on June 7, 1995. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB 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-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 Income-XIII"). Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P. ("Arvida")), 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")). Most of such directors and officers are also partners of certain partnerships which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle- XVII, JMB Income-VI, JMB Income-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 business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 57) is an individual general partner of JMB Income-IV and JMB Income-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 is 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 an individual general partner of JMB Income-IV and JMB Income-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.
Burton E. Glazov (age 56) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 53) has been associated with JMB since July, 1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 61) (President and Director of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 48) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also served as a Trustee of Amli Residential Property Trust, a publicly-traded real estate investment trust that invests in multi-family properties. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 45) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 47) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993. Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Jeffrey R. Rosenthal (age 43) has been associated with JMB since December, 1987. He is a Certified Public Accountant.
Douglas H. Cameron (age 45) is Executive Vice President of JMB. Mr. Cameron has been associated with JMB since April, 1977. Prior to joining JMB, Mr. Cameron was Managing Director of Capital Markets-Property Sales from June, 1990. He holds a Masters degree in Business Administration from the University of Southern California.
Gary Nickele (age 42) 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.
Ira J. Schulman (age 43) has been associated with JMB since February, 1983. He holds a Masters degree in Business Administration from the University of Pittsburgh.
Gailen J. Hull (age 46) 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) has been associated with JMB since March, 1973. He is a Certified Public Accountant.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General 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 in Notes 5 and 9. The Partnership deferred the General Partner's cash distribution and deferred management fees related to the third and fourth quarters of 1991. In December 1994, the Partnership paid the General Partner the previously deferred cash distribution and management fees. The General Partners received a share of the Partnership's long-term capital gain for tax purposes aggregating $5,250,527 in 1994. In addition, the General Partners received a share of the Partnership's operating losses aggregating $539,886. Such losses may benefit the General Partners to the extent that such losses may be offset against taxable income from the Partnership or other sources.
The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. The relationship of the Corporate General Partner (and its directors and officers) to its affiliates is set forth above in Item 10.
JMB Properties Company, an affiliate of the Corporate General Partner, provided property management services to the Partnership for all or part of 1994 for the Stonybrook Apartments - I & II in Tucson, Arizona, the Permian Mall in Odessa, Texas and National City Center Office Building in Cleveland, Ohio at fees calculated at a percentage of gross income from the properties. In 1994, such affiliate earned property management fees amounting to $1,251,080 for such services, all of which were paid as of December 31, 1994. As set forth in the Prospectus of the Partnership, the Corporate General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area (but in no event at rates greater than specified in the Prospectus), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General Partner, earned insurance brokerage commissions in 1994 aggregating approximately $39,097, all of which were paid in 1994 in connection with the providing of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage provided.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses or out-of-pocket expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. In 1994, the Corporate General Partner of the Partnership was due reimbursement for such out-of-pocket expenses in the amount of $85,037, of which $1,833 was unpaid as of December 31, 1994.
Additionally, the General Partners may be reimbursed for salaries and direct expenses of officers and employees of the Corporate General Partner and its affiliates while directly engaged in the administration of the Partnership and in the operation of the Partnership's real property investments. In 1994, such costs were $159,099. The General Partners earned no disbursement agent fees in 1993.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above (see Note 3(c) to the accompanying Notes to Consolidated Financial Statements).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits.
3-A. The Prospectus of the Partnership dated June 21, 1982, as supplemented on August 24, 1982, October 21, 1982, November 1, 1982, December 22, 1982 and February 18, 1983, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Copies of pages 6-14, 137-139, A-6 to A-11 and A-13 to A-19 are incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-76443) dated June 21, 1982.
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, is incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-76443) dated June 21, 1982.
4-A. Mortgage loan agreement between Wright-Carlyle Seattle and The Prudential Insurance Company dated October 16, 1985, relating to the First Interstate Center is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0- 12433) dated March 19, 1993.
4-B. Mortgage loan agreement between Carlyle/National City Associates and New York Life Insurance Company dated November 15, 1983, relating to the National City Center Office Building is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
10-A.Acquisition documents including the venture agreement relating to the purchase by the Partnership of an interest in the First Interstate Center in Seattle, Washington are hereby incorporated by reference to the Partnership's prospectus on Form S-11 (File No. 2-76443), dated June 21, 1982.
10-B.Acquisition documents including the venture agreement relating to the purchase by the Partnership of an interest in the National City Center Office Building in Cleveland, Ohio are hereby incorporated by reference to the Partnership's Report on Form 8-K, dated August 8, 1983.
10-C.Bargain and Sale Deed relating to the Partnership's disposition of the Timberline Apartments in Denver, Colorado, dated July 25, 1990 is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
10-D.Sale documents and exhibits thereto relating to the Partnership's sale of the Meadows Southwest Apartments in Houston, Texas are hereby incorporated herein by reference to the Partnership's Report on Form 8-K (File No. 0-12433), dated January 11, 1991 by reference.
10-E.Non-Merger Quit Claim Deeds relating to the Partnership's disposition of the Summerfield/ Oakridge Apartments in Aurora, Colorado, dated January 7, 1991 are hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
99.1.The Partnership's Report on Form 8-K (File No. 0- 12433) describing the sale transaction of First Interstate Center dated December 14, 1994 is filed herewith.
99.2.The Partnership's Report on Form 8-K (File No. 0- 12433) describing the sale of the Partnership's interest in Carrara Place Limited dated December 22, 1994 is filed herewith.
___________
Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the SEC upon request.
(b) The following reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
(i) The Partnership's report on Form 8-K dated December 14, 1994 for December 1, 1994 (describing the sale transaction of First Interstate) was filed.
(ii) The Partnership's report on Form 8-K dated December 22, 1994 for December 8, 1994 (describing the sale of the Partnership's interest in Carrara Place Limited) was filed.
No annual report for the year 1994 or proxy material 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 Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Senior 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: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Director Date: March 27, 1995
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 27, 1995
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 27, 1995
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 27, 1995
JEFFREY R. ROSENTHAL* By: Jeffrey R. Rosenthal, Chief Financial Officer Principal Financial Officer Date: March 27, 1995
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 27, 1995
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 27, 1995
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 27, 1995
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 27, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ----
3-A. Pages 6-14, 137-139, A-6 to A-11 and A-13 to A-19 of the Prospectus of the Partnership dated June 21, 1982, as supplemented on August 24, 1982, October 21, 1982, November 1, 1982, December 22,1982 and February 28, 1983Yes
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus Yes
4-A. Mortgage loan agreement related to the First Interstate Center Yes
4-B. Mortgage loan agreement related to the National City Center Office Building Yes
10-A. Acquisition documents related to First Interstate Center Yes
10-B. Acquisition documents related to National City Center Office Building Yes
10-C. Bargain and Sale Deed related to Timberline Apartments Yes
10-D. Sale documents related to the Meadows Southwest Apartments Yes
10-E. Non-Merger Quit Claim Deeds related to the Summerfield/Oakridge Apartments Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
99.1. Form 8-K for First Interstate Center No
99.2. Form 8-K for Carrara Place Office Building No


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above (see Note 3(c) to the accompanying Notes to Consolidated Financial Statements).
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).
(2) Exhibits.
3-A. The Prospectus of the Partnership dated June 21, 1982, as supplemented on August 24, 1982, October 21, 1982, November 1, 1982, December 22, 1982 and February 18, 1983, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Copies of pages 6-14, 137-139, A-6 to A-11 and A-13 to A-19 are incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-76443) dated June 21, 1982.
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, is incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-76443) dated June 21, 1982.
4-A. Mortgage loan agreement between Wright-Carlyle Seattle and The Prudential Insurance Company dated October 16, 1985, relating to the First Interstate Center is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0- 12433) dated March 19, 1993.
4-B. Mortgage loan agreement between Carlyle/National City Associates and New York Life Insurance Company dated November 15, 1983, relating to the National City Center Office Building is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
10-A.Acquisition documents including the venture agreement relating to the purchase by the Partnership of an interest in the First Interstate Center in Seattle, Washington are hereby incorporated by reference to the Partnership's prospectus on Form S-11 (File No. 2-76443), dated June 21, 1982.
10-B.Acquisition documents including the venture agreement relating to the purchase by the Partnership of an interest in the National City Center Office Building in Cleveland, Ohio are hereby incorporated by reference to the Partnership's Report on Form 8-K, dated August 8, 1983.
10-C.Bargain and Sale Deed relating to the Partnership's disposition of the Timberline Apartments in Denver, Colorado, dated July 25, 1990 is hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
10-D.Sale documents and exhibits thereto relating to the Partnership's sale of the Meadows Southwest Apartments in Houston, Texas are hereby incorporated herein by reference to the Partnership's Report on Form 8-K (File No. 0-12433), dated January 11, 1991 by reference.
10-E.Non-Merger Quit Claim Deeds relating to the Partnership's disposition of the Summerfield/ Oakridge Apartments in Aurora, Colorado, dated January 7, 1991 are hereby incorporated by reference to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-12433) dated March 19, 1993.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
99.1.The Partnership's Report on Form 8-K (File No. 0- 12433) describing the sale transaction of First Interstate Center dated December 14, 1994 is filed herewith.
99.2.The Partnership's Report on Form 8-K (File No. 0- 12433) describing the sale of the Partnership's interest in Carrara Place Limited dated December 22, 1994 is filed herewith.
___________
Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the SEC upon request.
(b) The following reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
(i) The Partnership's report on Form 8-K dated December 14, 1994 for December 1, 1994 (describing the sale transaction of First Interstate) was filed.
(ii) The Partnership's report on Form 8-K dated December 22, 1994 for December 8, 1994 (describing the sale of the Partnership's interest in Carrara Place Limited) was filed.
No annual report for the year 1994 or proxy material 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 Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Senior 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: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Director Date: March 27, 1995
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 27, 1995
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 27, 1995
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 27, 1995
JEFFREY R. ROSENTHAL* By: Jeffrey R. Rosenthal, Chief Financial Officer Principal Financial Officer Date: March 27, 1995
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 27, 1995
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 27, 1995
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 27, 1995
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 27, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ----
3-A. Pages 6-14, 137-139, A-6 to A-11 and A-13 to A-19 of the Prospectus of the Partnership dated June 21, 1982, as supplemented on August 24, 1982, October 21, 1982, November 1, 1982, December 22,1982 and February 28, 1983Yes
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus Yes
4-A. Mortgage loan agreement related to the First Interstate Center Yes
4-B. Mortgage loan agreement related to the National City Center Office Building Yes
10-A. Acquisition documents related to First Interstate Center Yes
10-B. Acquisition documents related to National City Center Office Building Yes
10-C. Bargain and Sale Deed related to Timberline Apartments Yes
10-D. Sale documents related to the Meadows Southwest Apartments Yes
10-E. Non-Merger Quit Claim Deeds related to the Summerfield/Oakridge Apartments Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
99.1. Form 8-K for First Interstate Center No
99.2. Form 8-K for Carrara Place Office Building No