IDS Life Account RE (the Account) is a segregated asset account of IDS Life Insurance Company (IDS Life) under Minnesota law. A registration statement under the Securities Act of 1933 relative to the deferred variable annuity contracts (the Contracts) issued by the Account became effective on August 6, 1987. The assets of the Account are held for the exclusive benefit of contract owners and are not chargeable with liabilities arising out of any other business conducted by IDS Life.
Because the Account values its real property investments at estimated fair values, no provision for depreciation expense is recorded.
Each day the Account will record estimated income and expenses attributable to real estate related assets. Periodically, adjustments to reflect the difference between estimates and actual income and expenses will be made.
The Account pays a mortality and expense risk fee to IDS Life which is accrued daily and is equal, on an annual basis, to 1.00 percent of the average daily asset value, as defined, of the Account. The mortality risk is IDS Life's guarantee to make retirement payments according to the terms of the Contract, no matter how long annuitants live. The expense risk portion of the fee is paid to IDS Life for its guarantee that the various fees paid by the Account to IDS Life will not be increased in the future. For the years ended December 31, 1994, 1993 and 1992, the Account paid IDS Life a mortality and expense risk fee of $502,607, $549,250 and $649,173, respectively. The Account also pays IDS Life an asset management fee equal, on an annual basis, to 1.25 percent of the average daily asset value, as defined, of the Account. A portion of this fee, equal to 0.95 percent of the average daily asset value, is paid by IDS Life to the Investment Adviser. The total fee may be adjusted upward to a maximum of 1.50 percent depending upon the performance of the Account's real property investments as measured against the FRC Property Index. The performance-related portion of the fee is calculated and recorded on an annual basis when the FRC Property Index is released each year for the preceding calendar year. The performance fee paid by the Account in 1994 for 1993 was $137,299. The performance fee paid by the Account in 1993 for 1992 was $87,287. The performance fee paid by the Account in 1992 for 1991 was $177,202. Any performance fee adjustment will be paid to the Investment Adviser. For the years ended December 31, 1994, 1993 and 1992, the Account paid total asset management fees of $765,557, $773,849 and $988,698, respectively.
IDS Life will receive from the Account an acquisition and mortgage placement fee equal to 3.75 percent of the total cash to be paid or advanced by the Account (net of any borrowings in the case of real property investments) in connection with each real property investment, mortgage loan or land sale-leaseback investment made by the Account. A portion of this fee, equal to 3.50 percent, will be paid to the Investment Adviser in consideration for its services in connection with the acquisition or placement of real estate related investments of the Account. No acquisition and mortgage placement fees were paid in 1994, 1993 and 1992.
The Account contributed approximately $12,008,000 to N/S Associates as its capital contribution. The percentage interest of the Account in N/S Associates is 5.92 percent. In connection with the purchase of the shopping malls, the Account paid to IDS Life and the Investment Adviser their respective portions of the acquisition fee amounting to approximately $450,000.
The Account, through Monmouth Associates, acquired an interest in the land underlying a shopping center in Eatontown, New Jersey known as Monmouth Mall. The mall is located on approximately 90 acres of land, of which Monmouth Associates owns approximately 88.5 acres, subject to the rights of one of the department store tenants to acquire the land underlying its store and the improvements thereon for nominal consideration. The remaining acres are owned by 2 department stores. Monmouth Associates acquired its interest in the land for a purchase price of approximately $13,500,000.
In addition, Monmouth Associates made a first leasehold participating mortgage loan in the original principal amount of $128,920,000 to the Borrower/Lessee which is secured by the leasehold real estate and the improvements thereon. The current loan amount is $127,670,000. The loan has a term of 15 years, which may be extended from time to time at the option of Monmouth Associates for up to an additional 20 years. The loan provides for monthly payments of base interest at a base rate of approximately 5.98 percent per annum for the first two loan years, approximately 7.97 percent per annum for the third loan year and approximately 5.00 percent per annum for each loan year thereafter. The first leasehold mortgage also provides for quarterly payments of contingent interest, payable out of the excess, if any, of substantially all of the gross receipts from the shopping center received by the Borrower/Lessee over certain base amounts, equal to the sum of (x) the difference between the amount of interest payable on the loan at the "applicable rate" and that payable at the base rate described above, increased until paid at the applicable rate (such amount as so increased herein called the "interest shortfall amount"), plus (y) 45 percent of the balance of such excess gross receipts remaining after deducting the aggregate amount paid at such time of the rent shortfall amount under the ground lease and the interest shortfall amount under the first leasehold mortgage loan. The "applicable rate" under the loan is 5.98 percent per annum for the first two loan years, 7.97 percent per annum for the next three loan years and 8.97 percent per annum for each loan year thereafter. In addition, upon a joint sale or refinancing of the land and improvements or at maturity of the leasehold mortgage loan, Monmouth Associates is entitled to receive certain participations in the proceeds from such sale or refinancing after payment of its investment in the land and/or repayment of the principal amount of the leasehold mortgage loan. In April 1992, Monmouth Associates discontinued the accrual of contingent interest on the leasehold mortgage loan as a result of uncertainty as to the collectibility of such contingent interest in light of the previous decrease in the estimated value of Monmouth Mall. In addition, no contingent rent was accrued under the ground lease for 1994, 1993 or 1992.
Summary information for the Account of its investments in Unconsolidated Joint Ventures for the years ended December 31, 1994 and 1993 is as follows:
The Account paid $15,222,278 for the apartment complex in cash at closing, excluding closing costs and prorations. In connection with the acquisition of the property, the Account paid a prepayment charge at closing of $92,221 to the lender that held the mortgage loan on the property. The Account also paid to IDS Life and the Investment Adviser their respective portions of the acquisition fee amounting to $274,834. At the time of the acquisition it was anticipated that an additional amount of approximately $1,450,000 would be used by the Account to pay the cost of upgrading kitchens and bathrooms and certain other upgrades and capital improvements at the complex. The renovation project was subsequently increased to include replacing certain carpets in units as they were renovated and to increase the number of units that received certain upgrades. The renovation project was completed during 1992 at an aggregate cost of approximately $1,900,000. To date the Account has paid IDS Life and the Investment Adviser their respective portions of the acquisition fee amounting to $18,000 in connection with the renovation project. In November 1989, the Account obtained a loan from an institutional lender in the principal amount of $8,000,000 secured by a first mortgage on the property. At December 31, 1994, the current balance of the mortgage loan encumbering the property was approximately $7,852,000. The loan has a term of seven years and bears interest at a rate of 9.50 percent per annum. The loan required monthly payments of interest only during the first three loan years and thereafter is amortizable over a 27-year schedule through monthly payments of principal and interest aggregating $824,400 per annum until November 1996, when the remaining principal balance and any accrued and unpaid interest of approximately $7,704,000 is due and payable.
In March 1994, the Account obtained a short-term revolving line of credit for up to $10 million from IDS Life to pay for contract surrenders and other obligations under the Contracts. The line of credit is for a one-year term and is automatically renewed at each anniversary for an additional one-year term subject to termination by one party giving 30 days' prior written notice of termination to the other party. Borrowings under the line of credit must be made in increments (or multiples) of $100,000. Outstanding borrowings under the line of credit bear interest at a floating rate equal to the 30-day London Interbank Offered Rate (LIBOR), adjusted on a monthly basis. The line of credit requires monthly payments of interest only until the earlier of maturity or termination of the line of credit, when the entire outstanding principal plus any accrued and unpaid interest on the line of credit will be due and payable. Outstanding principal may be repaid in whole or in part in increments (or multiples) of $100,000, together with any accrued and unpaid interest thereon, at any time without premium or penalty. Borrowings under the line of credit are generally unsecured, although IDS Life has a right of set off for outstanding borrowings against any deposits or credits of the Account held by IDS Life. At December 31, 1994, $2,100,000 was outstanding on the line of credit at a rate of 6.125% per annum.
As discussed in Note 1, the combined financial statements include assets and liabilities stated at market values which have been estimated by the Investment Adviser. Such market value estimates involve subjective judgments and the actual market values can only be determined by negotiation between independent third parties.
Chicago, Illinois March 15, 1995 IDS LIFE ACCOUNT RE OF IDS LIFE INSURANCE COMPANY N/S Associates, Monmouth Associates and 1225 Investment Corporation Unconsolidated Joint Ventures of IDS Life Account RE
The ventures have implemented Statement of Accounting Standards No. 95 "Statement of Cash Flows" which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The ventures record amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the ventures' policy is to consider all such amounts held with original maturities of three months or less ($5,989,000 and $3,774,000 at December 31, 1994 and 1993, respectively) as cash equivalents with any remaining amounts reflected as short-term investments. Short-term investments (generally with original maturities of one year or less) are being held to maturity and are held at amortized cost which approximates market.
No provision for State or Federal income taxes has been made for N/S Associates or Monmouth Associates as the liability for such taxes, if any, is expected to be that of the venture partners rather than the venture. 1225 Investment Corporation has elected and qualifies to be treated as a real estate investment trust for Federal income tax purposes. The Corporation had no Federal income tax liabilities for taxable years ended December 31, 1994, 1993 and 1992.
Certain reclassifications have been made to the 1993 and 1992 financial statements to conform with the 1994 presentation.
Mortgage notes payable consist of the following at December 31, 1994 and 1993:
1994 1993 9.125% mortgage note due January 1, 2008 secured by Northridge Mall; payable in monthly installments of principal and interest of $165,000, reference is made to Note 6 (a) $15,058,000 15,631,000
8.42% mortgage note due October 1, 2001, secured by Southridge Mall; payable in monthly installments of principal and interest of $158,000, reference is made to Note 6 (a) 15,506,000 16,075,000
6.5% mortgage note, due March 1, 1998, secured by 1225 Connecticut Avenue; payable in monthly installments of $35,000 (including interest); in January 1994 the principal balance was refinanced -- 1,695,000
1995 $20,046,882 1996 19,281,728 1997 17,960,772 1998 16,005,720 1999 14,154,051 Thereafter 61,845,875
1225 Investment Corporation had entered into a management agreement with JMB Properties Company. During December 1994, JMB Properties Company assigned the management agreement to Heitman Washington D.C. Properties, Ltd. ("Office Manager"). The Office Manager is entitled to receive a fee of 2.5% of gross receipts from the operations of the Property. Management fees earned by the Office Manager are included in property operating expenses and aggregated approximately $196,000 and $176,000 for the years ended December 31, 1994 and 1993, respectively.
On February 28, 1995, the Trustees authorized and paid a cash distribution to the partners aggregating $4,000,000. Each partner received its proportionate share based on its respective ownership percentage.
In February 1995, 1225 Investment Corporation paid a dividend of $1,125,000 ($20 per share) to the shareholders of record as of December 31, 1994. Schedule III
Part 1 - Participation in Mortgage Part 2 - Interest Earned on Loan on Real Estate at Close of Year on Participation in Mortgage
1992 $ 119,650,000 $ 130,688,000 $ -- $ 3,028,000 $ 7,964,000
Balance at the beginning of year........... $ 119,650,000 $ 119,650,000 $ 118,000,000
Changes during year: Additional fundings...................... 9,318,000 -- 1,650,000 Unrealized depreciation.................. (9,814,000) -- --
Schedule IV IDS LIFE ACCOUNT RE of IDS LIFE INSURANCE COMPANY N/S Associates, Monmouth Associates and 1225 Investment Corporation Unconsolidated Joint Ventures of IDS Life Account RE
Rents due and accrued at end of period Retail Properties: Northridge Mall, Milwaukee, WI $ 403,000 Southridge Mall, Greendale, WI $ 1,682,000 Office Building: 1225 Connecticut Ave., Washington, D.C. $ 51,000 Ground Lease: Monmouth Mall, Eatontown, NJ $ -- $ 2,136,000
(A) The aggregate cost of real estate owned at December 31, 1994 for Federal Income tax purposes was approximately $325,380,000.
Louis C. Fornetti, 45: Director, IDS Life, since March 1994; Senior Vice President and Director, American Express Financial Corporation (AEFC), since February 1985.
David R. Hubers, 52: Director, IDS Life, since September 1989; President and Chief Executive Officer, AEFC, since August 1993, and Director since January 1984. Senior Vice President, Finance and Chief Financial Officer, AEFC, from January 1984 to August 1993.
Richard W. Kling, 54: Director, IDS Life, since February 1984; President, IDS Life, since March 1994; Executive Vice President, Marketing and Products, from January 1988 to March 1994. Senior Vice President, AEFC, since May 1994. Director of IDS Life Series Fund, Inc. and manager of IDS Life Variable Annuity Funds A & B.
Janis E. Miller, 43: Director and Executive Vice President, Variable Assets since March 1994; Vice President, AEFC, since June 1990; Director, Mutual Funds Product Development and Marketing, AEFC, from May 1987 to May 1990. Director of IDS Life Series Fund, Inc. and manager of IDS Life Variable Annuity Funds A and B.
James A. Mitchell, 53: Chairman of the Board since March 1994; Chief Executive Officer since November 1986; President from July 1984 to March 1994; Executive Vice President, AEFC, since March 1994; Director, AEFC, since July 1984; Senior Vice President, AEFC, from July 1984 to March 1994.
Morris Goodwin Jr., 43: Vice President and Treasurer since March 1994; Vice President and Corporate Treasurer, AEFC, since July 1989; Chief Financial Officer and Treasurer, American Express Trust Company, from January 1988 to July 1989.
William A. Stoltzmann, 46: Vice President, General Counsel and Secretary since 1985.
The directors, executive officers and certain other offices of JMB Realty Corporation (JMB), the managing partner of the Investment Adviser, are listed below. Many of such persons are also officers and/or directors of numerous affiliated companies of JMB and/or partners of certain partnerships (herein collectively referred to as the Associate Partnerships) which are partners, directly or indirectly, in publicly offered real estate limited partnerships sponsored by JMB.
Judd D. Malkin, 57, Chairman and Director of JMB, is a director of Urban Shopping Centers, Inc., an affiliate of JMB engaged in the business of owning, managing and developing shopping centers, an officer and/or director of various other JMB affiliates and a partner of the Associate Partnerships. Until December 1994, he was also a Trustee of JMB Group Trust I, JMB Group Trust II, JMB Group Trust III, JMB Group Trust IV and JMB Group Trust V, which until that time had been advised by an affiliate of the Investment Adviser. Mr. Malkin has been associated with JMB since October 1969. Mr. Malkin also is a Director of Catellus Development Corporation, a major diversified real estate development company. He is a Certified Public Accountant.
Neil G. Bluhm, 57, President and Director of JMB, is a director of Urban Shopping Centers, Inc., an affiliate of JMB engaged in the business of owning, managing and developing shopping centers, an officer and/or director of various other JMB affiliates and a partner of the Associate Partnerships. Until December 1994, he was also a Trustee of JMB Group Trust I, JMB Group Trust II, JMB Group Trust III, JMB Group Trust IV and JMB Group Trust V, which until that time has been advised by an affiliate of the Investment Adviser. Mr. Bluhm has been associated with JMB since August 1970. He is a member of the Bar of the State of Illinois and is a Certified Public Accountant.
John G. Schreiber, 48, Director of JMB, is also a director of Urban Shopping Centers, Inc., an affiliate of JMB engaged in the business of owning, managing and developing shopping centers, and was, until December 1990, Executive Vice President of JMB. Mr. Schreiber has been associated with JMB since December 1970. 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. Mr. Schreiber also serves as a Trustee of Amli Residential Property Trust, a publicly-traded real estate investment trust that invests in multi-family properties. He is also a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. He holds a master's degree in business administration from the Harvard University Graduate School of Business.
A. Lee Sacks, 61, Director of JMB, is President and Director of JMB Insurance Agency, Inc. and a partner of various Associate Partnerships. Mr. Sacks has been associated with JMB since December 1972.
H. Rigel Barber, 46, Chief Executive Officer and Executive Vice President of JMB, is an officer of various JMB affiliates and a partner of various Associate Partnerships. Mr. Barber has been associated with JMB since March 1982. He holds a law degree from the Northwestern University Law School and is a member of the Bar of the State of Illinois.
Gary Nickele, 42, Executive Vice President and General Counsel of JMB, is an officer and/or director of various JMB affiliates and a partner of various Associate Partnerships. Mr. Nickele has been associated with JMB since February 1984. He holds a law degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig, age 47, Executive Vice President and Chief Operating Officer of JMB, is an officer of various JMB affiliates and a partner of various Associate Partnerships. Mr. Emig has been associated with JMB since December 1979. He holds a master's degree in business administration from the Harvard University Graduate School of Business.
Douglas Cameron, age 45, Executive Vice President of JMB, is an officer of various JMB affiliates and a partner of various Associate Partnerships. Mr. Cameron has been associated with JMB since April 1977. He holds a master's degree in business administration from the University of Southern California.
The Account incurred asset management fees for the year ended December 31, 1994 of $765,557 of which $614,775 was paid to the Investment Adviser and the remainder to IDS Life. Asset management fees incurred for the year ended December 31, 1993 was $773,849, of which $609,074 was paid to the Investment Adviser and the remainder to IDS Life.