ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to Consolidated Financial Statements of JMB/245 Park Avenue Associates, Ltd. contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes.
The registrant, JMB/245 Park Avenue Associates, Ltd. (the "Partnership"), is a limited partnership formed in 1983 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois for the original purpose of acquiring and owning an approximate 48.25% interest in 245 Park Avenue Company, a New York general partnership, ("245 Park" or the "Joint Venture") which owned and operated an office building located at 245 Park Avenue, New York, New York. The Partnership was admitted to the Joint Venture through the purchase of one of the existing unaffiliated joint venture partner's interests. The unaffiliated venture partners (the "O&Y partners") were affiliates of Olympia & York Developments, Ltd. ("O&Y"). On May 7, 1984, the Partnership commenced a private offering of $124,300,000 in Limited Partnership Interests (the "Interests") pursuant to a Private Placement Memorandum (the "Private Placement Memorandum") in accordance with Rules 501-503 and 506 of Regulation D of the Securities Act of 1933. The offering closed on June 28, 1984. The holders of Interests (herein after "Holders" or "Holders of Interests") in the Partnership share in their portion of the benefits of ownership of the Partnership's real property investment according to the number of Interests held.
As a result of the financial difficulties of the O&Y partners, in October 1995 each of the O&Y partners and certain other O&Y affiliates (but not the Joint Venture) filed for bankruptcy protection from creditors under Chapter 11 of the United States Bankruptcy Code. As a result of the plan of restructuring (the "Plan"), which became effective on November 21, 1996 ("Effective Date"), the Partnership owned through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding") an approximate 5.4% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The managing general partner of BFP, LP is not affiliated with the Partnership and, subject to the partnership agreement of BFP, LP and the JMB Transaction Agreement (discussed below), has full authority to manage its affairs. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and WFP Property G.P. Corp. ("WFP, GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member.
BFP, LP's principal assets are majority and controlling interests in office buildings, certain of which are owned subject to ground leases of the underlying land.
As a result of transactions noted below, at December 31, 2006, the Partnership holds, through 245 Park Holding, an approximate .5% interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that Brookfield Properties Corporation ("BPC") files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BPC's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BPC has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BPC's reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP.
Those reports and other information are not intended to be incorporated by
reference into this report on Form 10-K, and the Partnership has no responsibility for the accuracy of any information included in BPC's reports or other information.
The Partnership's interest in BFP, LP was pledged as collateral for certain notes payable (collectively "the JMB Notes") which aggregated approximately $89,337,000 in principal and interest at December 31, 2002, (immediately prior to repayment), to JMB Realty Corporation ("JMB"). The security agreements for the JMB Notes required mandatory payment of principal and interest out of any net proceeds received upon the redemption, refinancing or other disposition of, or any distribution made with respect to, the Partnership's interest in BFP, LP.
On December 31, 2002 (the "Redemption Date") 245 Park Holding entered into a redemption agreement (the "Partial Redemption") by and among 245 Park Holding, WFP, GP and BFP, LP pursuant to which 245 Park Holding transferred and BFP, LP thereby redeemed approximately 90% of its approximate 5.4% interest (the "Redeemed Interest"), in BFP, LP, and 245 Park Holding received a distribution of approximately $56,109,000 (the "Redemption Distribution"). 245 Park Holding's remaining interest in BFP, LP is approximately .5%, represented by 567.375 Class A Units (the "Retained Interest"). In accordance with the 245 Park Holding limited liability company agreement, 245 Park Holding distributed approximately $55,548,000 (99% of the Redemption Distribution) to the Partnership and approximately $561,000 (1% of the Redemption Distribution) to WFP, GP. The Partnership received its share of the Redemption Distribution on the Redemption Date and in accordance with the security agreements relating to the JMB Notes, the Partnership then paid to JMB approximately $55,548,000 as repayment toward the JMB Notes. One JMB Note remained after such repayment, which was secured by the Partnership's interest in BFP, LP.
On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes"), whereby the Partnership issued the Replacement Notes payable to JMB that allocated the outstanding principal balance and accrued and unpaid interest under the JMB Note between the Replacement Notes in the amounts of $3,482,284 of principal and $385,345 of accrued and unpaid interest to one Replacement Note ("Replacement Note 1") and $22,017,716 of principal and all other accrued and all unpaid interest totaling $4,645,531 (including all of the default interest of $4,631,375) to the second Replacement Note ("Replacement Note 2"). The division of the JMB Note and its replacement by Replacement Note 1 and Replacement Note 2 resulted in those two notes superseding the JMB Note. The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods will be substantially less. Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
In connection with the Partial Redemption, the limited partnership agreement of BFP, LP was amended (the "Amendment") to, among other things, provide for the right of the Partnership to consent to the nomination of an independent director to the board of directors of BPC. The Amendment also generally provides that in the event either (i) a sale or other disposition of the 245 Park Avenue Building by BFP, LP results in the recognition by the Partnership of gain for Federal income tax purposes, or (ii) as a result of a merger or consolidation of BFP, LP, the Partnership thereafter holds less than one-half of its Retained Interest in a form which does not give rise to a material amount of gain for Federal income tax purposes, the Partnership may elect to sell to BFP, LP, or BFP, LP may elect to redeem from the Partnership, the Retained Interest at its fair market value (as defined in the BFP, LP partnership agreement) per Class A Unit, but in no event less than 80% ($8,790), and no greater than 120% ($13,186), of the Redemption Distribution per Class A Unit in the Partial Redemption.
Under the terms of the Amendment, BFP, LP is obligated to use its commercially reasonable efforts, in any agreement of merger or consolidation entered into by BFP, LP on or before December 2007, to the extent that the consideration is comprised in whole or in part of equity interests, to provide for the Partnership to obtain its share of such equity interests in a form such that the Partnership will not recognize a material amount of gain for Federal income tax purposes. If BFP, LP, having used its commercially reasonable efforts, is unable to provide for the Partnership to receive such an equity interest, BFP, LP must pay to the Partnership, in addition to the Partnership's share of the merger consideration, a cash amount equal to the percentage of the merger consideration in the form of equity multiplied by a number which is $14 million in 2003 and is reduced by $1.5 million per year through the year 2007. Thus, in the event BFP, LP completes such a merger in 2007, the amount of such additional consideration shall be $8 million. Commencing January 1, 2008, any such merger or consolidation effected by BFP, LP, shall not require BFP, LP to pay consideration to the Partnership beyond its share of the proceeds by virtue of the Partnership's ownership interest in 245 Park Holding.
BFP, LP has had the right to sell the 245 Park Avenue property without the consent of the Partnership since January 2000. BFP, LP notified the Partnership that it sold a 49% interest in the 245 Park Avenue property to an unaffiliated third party on October 2, 2003. The Partnership did not receive any proceeds from the sale of the 49% interest in 245 Park Avenue. However, as a result of such transaction, and subject to the terms of the transaction, a substantial amount of gain for Federal and state income tax purposes was allocated to the Holders of Interests without any distribution of cash. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.
BFP, LP has a substantial amount of indebtedness outstanding. Any proceeds from the sale of the buildings in which BFP, LP has an interest would be first applied to repayment of the mortgage and other indebtedness of BFP, LP. In any event, any net proceeds obtained by the Partnership could then be available to satisfy the Demand Note. Only after such applications would any remaining proceeds be available to be distributed to the Holders of Interests. Similarly, in the event of a sale or other disposition of the Retained Interest (including a redemption pursuant to an election discussed above), the Partnership's share of the proceeds of such sale or disposition would first be applied to satisfy the Demand Note. Only after such application would remaining proceeds, if any, be available to be distributed to the Holders of Interests.
It is unlikely that the Holders of Interests ever will receive any further distributions from the Partnership or any further return on their original investment. However, it is expected that Holders of Interests will be allocated a substantial amount of additional gain for Federal and state income tax purposes as a result of transactions which may occur over the remaining term of the Partnership. These transactions include (i) a sale or other disposition of the 245 Park Avenue property or other properties in which BFP, LP owns an interest; (ii) a sale or other disposition of the Partnership's interest in BFP, LP (including a redemption of the Retained Interest); or (iii) a significant reduction in the indebtedness of the 245 Park Avenue property or other indebtedness of the Partnership for Federal and state income tax purposes. Moreover, none of these transactions is expected to result in Holders of Interests receiving any significant cash distributions. The amount of gain for Federal and state income tax purposes to be allocated to a Holder of Interests over the remaining term of the Partnership is expected to be, at a minimum, equal to all or most of the amount of such Holder's deficit capital account for tax purposes. Such gain may be offset by suspended losses from prior years (if any) that have been allocated to the Holder of Interests. The actual tax liability of each Holder of Interests will depend on such Holder's own tax situation.
The Partnership has no employees.
The terms of transactions between the Partnership and the General Partners and their affiliates are set forth in Items 11 and 13 below and in the Notes to the consolidated financial statements, to which reference is hereby made for a description of such transactions.
ITEM 1A.
ITEM 1A. RISK FACTORS
The Partnership is subject to significant risks, including factors related to its minority position in BFP, LP, its dependency on JMB for continued advances to fund operations, and its past history of operating losses. The Partnership is obligated under a Demand Note which significantly exceeds its assets and there is substantial uncertainty that it has the ability to continue as a going concern. Reference is made to Item 1. Business and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2.
ITEM 2. PROPERTIES
The Partnership owns an indirect, minority interest in properties referred to under Item 1 above to which reference is hereby made. The Partnership's interest in BFP, LP is pledged as collateral for the Demand Note payable to JMB.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending 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 the fourth quarter of 2006.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
As of January 1, 2007, there were 853 record holders of the remaining 952 Interests outstanding in the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Consequently, a Holder may not be able to sell or otherwise liquidate his or her Interests. In addition, the Interests have not been registered under the Securities Act of 1933, as amended, or (with certain exceptions) under state securities laws. Transfers of the Interests must be made in compliance with applicable federal and state securities laws and are subject to the restrictions on transfers set forth in Article 14 (pages 15-17) of the Amended and Restated Agreement of Limited Partnership of the Partnership, which are incorporated herein by reference to Exhibit 99 to this annual report. A sale or other transfer of an Interest may result in material adverse Federal income tax consequences.
The Partnership has not made any distributions since 1989. The Partnership's interest in BFP, LP is pledged as collateral for the Demand Note payable to JMB, which note requires mandatory payment of principal and interest out of (i) any distributions received from BFP, LP, and (ii) any net proceeds received upon the sale, refinancing or other disposition of the Partnership's interest in BFP, LP. Reference is made to the section entitled "Investment in Unconsolidated Venture" in the Notes to the consolidated financial statements and Item 7 for a discussion of the restrictions on the distributions (if any) to the Partnership from BFP, LP.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Capitalized terms used but not defined in this Item 7 have the same meanings as used in Item 1. Business or in the Notes.
The Partnership's future liquidity and ability to continue as a going concern are dependent upon additional advances from JMB Realty Corporation ("JMB") and there is no assurance that such advances will continue to be made. The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
BFP, LP has had the right to sell the 245 Park Avenue property without the consent of the Partnership since January 2000. BFP, LP notified the Partnership that it sold a 49% interest in the 245 Park Avenue property to an unaffiliated third party on October 2, 2003. The Partnership did not receive any proceeds from the sale of the 49% interest in 245 Park Avenue. However, as a result of such transaction, and subject to the terms of the transaction, a substantial amount of gain for Federal and state income tax purposes was allocated to the Holders of Interests without any distribution of cash. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.
The Partnership holds, through 245 Park Holding, an approximate .5% interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that BPC files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BPC's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BPC has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BPC's reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP. Those reports and other information are not intended to be incorporated by reference into this report on Form 10-K, and the Partnership has no responsibility for the accuracy of any information included in BPC's reports or other information.
BFP, LP has a substantial amount of indebtedness outstanding. Any proceeds from the sale of the buildings in which BFP, LP has an interest would be first applied to repayment of the mortgage and other indebtedness of BFP, LP. In any event, any net proceeds obtained by the Partnership could then be available to satisfy the Demand Note. Only after such applications would any remaining proceeds be available to be distributed to the Holders of Interests. Similarly, in the event of a sale or other disposition of the Retained Interest (including a redemption pursuant to an election discussed above), the Partnership's share of the proceeds of such sale or disposition would first be applied to satisfy the Demand Note. Only after such application would remaining proceeds, if any, be available to be distributed to the Holders of Interests.
It is unlikely that the Holders of Interests ever will receive any further distributions from the Partnership or any further return on their original investment. However, it is expected that Holders of Interests will be allocated a substantial amount of additional gain for Federal and state income tax purposes as a result of transactions which may occur over the remaining term of the Partnership. These transactions include (i) a sale or other disposition of the 245 Park Avenue property or other properties in which BFP, LP owns an interest; (ii) a sale or other disposition of the Partnership's interest in BFP, LP (including a redemption of the Retained Interest); or (iii) a significant reduction in the indebtedness of the 245 Park Avenue property or other indebtedness of the Partnership for Federal and state income tax purposes. Moreover, none of these transactions is expected to result in Holders of Interests receiving any significant cash distributions. The amount of gain for Federal and state income tax purposes to be allocated to a Holder of Interests over the remaining term of the Partnership is expected to be, at a minimum, equal to all or most of the amount of such Holder's deficit capital account for tax purposes. Such gain may be offset by suspended losses from prior years (if any) that have been allocated to the Holder of Interests. The actual tax liability of each Holder of Interests will depend on such Holder's own tax situation.
RECENT ACCOUNTING PRONOUNCEMENT
In June 2005, the FASB ratified the consensus reached in EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (EITF 04-5). EITF 04-5 is effective for all newly formed limited partnerships after the consensus was ratified and January 2006 for all existing limited partnership agreements. The Partnership has evaluated the ownership structure of its existing investment in BFP, LP and again has determined that it does not demonstrate control over this entity as defined by EITF 04-5.
RESULTS OF OPERATIONS
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note at December 31, 2006.
The increase in cash and the decrease in interest and other receivables at December 31, 2006 as compared to December 31, 2005 is due primarily to the receipt by the Partnership of previous withholding tax payments made by the Partnership. An additional increase in cash was due to advances totaling $135,000 from JMB during 2006. Such increases in cash were substantially offset by disbursements for fees for professional services and for general and administrative expenses, a portion of which were payable at December 31, 2005.
The increase in demand note payable to an affiliate and the decrease in note payable to an affiliate at December 31, 2006 as compared to December 31, 2005 is due primarily to the rollover of the Replacement Note 1 (with a balance of approximately $3,962,000) into the Demand Note, effective January 2, 2006. An additional increase in demand note payable is the result of fundings totaling $135,000 and interest of approximately $406,000 added to the principal in 2006.
The increase in interest expense for the year ended December 31, 2006 as compared to the year ended December 31, 2005 is due to the rollover of the Partnership's Replacement Note into the Demand Note effective January 2, 2006 and the corresponding increase in the effective interest rate. An additional increase in interest expense is due to additional fundings in 2006 under the Demand Note. The decrease in interest expense for the year ended December 31, 2005 as compared to the year ended December 31, 2004 is due primarily to the JMB Note split in October 2004 and the resulting decrease in the Partnership's indebtedness.
The decreases in professional services for the years ended December 31, 2006 and 2005 as compared to the year ended December 31, 2004 is due primarily to decreases in fees for legal and other services related to the Partnership's investment in BFP, LP.
The decreases in general and administrative expenses for the years ended December 31, 2006 and 2005 as compared to the year ended December 31, 2004 is due primarily to the provision for doubtful receivables recognized in 2004.
INFLATION
Due to the low levels of inflation in recent years and the limited business activity of the Partnership, inflation generally has not had a material effect on it.
USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that are both significant to the overall presentation of the Partnership's financial condition and results of operations and require management to make difficult, complex or subjective judgments. The Partnership made no significant estimates or assumptions for the year ended December 31, 2006 and thus has concluded that there are no critical accounting policies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) and Consolidated Venture
INDEX
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, December 31, 2006 and 2005
Consolidated Statements of Operations, years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows, years ended December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is inapplicable, or the information is presented in the consolidated financial statements or related notes.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Partners JMB/245 Park Avenue Associates, Ltd.:
We have audited the consolidated financial statements of JMB/245 Park Avenue Associates, Ltd., a limited partnership (the "Partnership"), and consolidated venture as listed in the accompanying index. These consolidated financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JMB/245 Park Avenue Associates, Ltd. and consolidated venture as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that JMB/245 Park Avenue Associates, Ltd. will continue as a going concern. As described in the notes to the consolidated financial statements, the Partnership is dependent upon additional advances from JMB under the demand loan. This uncertainty and the fact that the Partnership has a net capital deficiency raise substantial doubt about its ability to continue as a going concern. The General Partners' plans in regard to these matters are also described in the notes to the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
KPMG LLP
Chicago, Illinois March 29, 2007
JMB/245 PARK AVENUE ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006, 2005 AND 2004
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
JMB/245 Park Avenue Associates, Ltd. (the "Partnership"), through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding"), owns an approximate .5% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The ownership is represented by 567.375 Class A Units. BFP, LP is a joint venture that holds equity investments in commercial office buildings, certain of which are owned subject to ground leases of the underlying land.
Business activities consist of rentals to a variety of commercial companies and the ultimate sale or disposition of such real estate. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and WFP Property G.P. Corp. ("WFP, GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned limited liability company, 245 Park Holding. The effect of all transactions between the Partnership and its consolidated venture has been eliminated.
Because the Partnership has no future funding obligations to BFP, LP, is currently not expecting to receive distributions from BFP, LP, has no influence or control over the day-to-day affairs of BFP, LP, and its investment in BFP, LP has been reduced to less than 1%, the Partnership discontinued the application of the equity method of accounting, recorded its investment at zero and no longer recognizes its share of earnings or losses from BFP, LP.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to reflect the Partnership's accounts in accordance with accounting principles generally accepted in the United States of America ("GAAP") and to consolidate the accounts of 245 Park Holding as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership.
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of the period. Deficit capital accounts will result, through the remaining duration of the Partnership, in net gain for financial reporting and Federal and state income tax purposes to the General Partners and Limited Partners.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
No provision for Federal or state income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership.
The Partnership's future liquidity and ability to continue as a going concern are dependent upon additional cash advances, evidenced by a demand note ("Demand Note"), from JMB Realty Corporation ("JMB") and there is no assurance that such advances will be made. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
RECENT ACCOUNTING PRONOUNCEMENT
In June 2005, the FASB ratified the consensus reached in EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (EITF 04-5). EITF 04-5 is effective for all newly formed limited partnerships after the consensus was ratified and January 2006 for all existing limited partnership agreements. The Partnership has evaluated the ownership structure of its existing investment in BFP, LP and again has determined that it does not demonstrate control over this entity as defined by EITF 04-5.
INVESTMENT IN UNCONSOLIDATED VENTURE
In December 1983, the Partnership acquired an interest in 245 Park, which owned a 46-story office building located at 245 Park Avenue, New York, New York. The Partnership acquired its approximate 48.25% ownership interest in 245 Park for approximately $63,927,000 from an affiliate of the joint venture partners. In addition to the Partnership, the other partners (the "O&Y partners") of 245 Park included Olympia & York 245 Park Ave. Holding Company, L.P., Olympia & York Equity Company, L.P., and Olympia & York 245 Corp., all of which were affiliates of Olympia & York Developments, Ltd. ("O&Y").
As a result of the financial difficulties of the O&Y partners, in October 1995 each of the O&Y partners and certain other O&Y affiliates (but not the Joint Venture) filed for bankruptcy protection from creditors under Chapter 11 of the United States Bankruptcy Code. As a result of the plan of restructuring (the "Plan"), which became effective on November 21, 1996 ("Effective Date"), the Partnership owned through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding") an approximate 5.4% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The managing general partner of BFP, LP is not affiliated with the Partnership and, subject to the partnership agreement of BFP, LP and the JMB Transaction Agreement (discussed below), has full authority to manage its affairs. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and WFP Property G.P. Corp. ("WFP, GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member.
BFP, LP's principal assets are majority and controlling interests in office buildings, certain of which are owned subject to ground leases of the underlying land.
As a result of transactions noted below, at December 31, 2006, the Partnership holds, through 245 Park Holding, an approximate .5% interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that Brookfield Properties Corporation ("BPC") files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BPC's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BPC has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BPC's reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP.
Those reports and other information are not intended to be incorporated by reference into this report on Form 10-K, and the Partnership has no responsibility for the accuracy of any information included in BPC's reports or other information.
The Partnership's interest in BFP, LP was pledged as collateral for certain notes payable (collectively "the JMB Notes") which aggregated approximately $89,337,000 in principal and interest at December 31, 2002, (immediately prior to repayment), to JMB. The security agreements for the JMB Notes required mandatory payment of principal and interest out of any net proceeds received upon the redemption, refinancing or other disposition of, or any distribution made with respect to, the Partnership's interest in BFP, LP.
On December 31, 2002 (the "Redemption Date") 245 Park Holding entered into a redemption agreement (the "Partial Redemption") by and among 245 Park Holding, WFP, GP and BFP, LP pursuant to which 245 Park Holding transferred and BFP, LP thereby redeemed approximately 90% of its approximate 5.4% interest (the "Redeemed Interest"), in BFP, LP, and 245 Park Holding received a distribution of approximately $56,109,000 (the "Redemption Distribution"). 245 Park Holding's remaining interest in BFP, LP is approximately .5%, represented by 567.375 Class A Units (the "Retained Interest"). In accordance with the 245 Park Holding limited liability company agreement, 245 Park Holding distributed approximately $55,548,000 (99% of the Redemption Distribution) to the Partnership and approximately $561,000 (1% of the Redemption Distribution) to WFP, GP. The Partnership received its share of the Redemption Distribution on the Redemption Date and in accordance with the security agreements relating to the JMB Notes, the Partnership then paid to JMB approximately $55,548,000 as repayment toward the JMB Notes. One JMB Note remained after such repayment, which was secured by the Partnership's interest in BFP, LP.
On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes"), whereby the Partnership issued the Replacement Notes payable to JMB that allocated the outstanding principal balance and accrued and unpaid interest under the JMB Note between the Replacement Notes in the amounts of $3,482,284 of principal and $385,345 of accrued and unpaid interest to one Replacement Note ("Replacement Note 1") and $22,017,716 of principal and all other accrued and all unpaid interest totaling $4,645,531 (including all of the default interest of $4,631,375) to the second Replacement Note ("Replacement Note 2"). The division of the JMB Note and its replacement by Replacement Note 1 and Replacement Note 2 resulted in those two notes superseding the JMB Note. The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods
will be substantially less. Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
BFP, LP has had the right to sell the 245 Park Avenue property without the consent of the Partnership since January 2000. BFP, LP notified the Partnership that it sold a 49% interest in the 245 Park Avenue property to an unaffiliated third party on October 2, 2003. The Partnership did not receive any proceeds from the sale of the 49% interest in 245 Park Avenue. However, as a result of such transaction, and subject to the terms of the transaction, a substantial amount of gain for Federal and state income tax purposes was allocated to the Holders of Interests without any distribution of cash. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.
NOTES PAYABLE TO AN AFFILIATE
Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
Note payable to an affiliate consisted of the following at December 31, 2006 and 2005:
2006 2005 ---------- ---------- Note payable (term loan) bearing interest at 2% per annum, compounded annually; secured by the Partnership's interest in BFP, LP; no payments until December 1998 when the entire principal amount and accrued compounded interest were scheduled to be due (as discussed above); extended, effective January 3, 2001, to January 2, 2006; note split effective October 8, 2004 (as discussed above); note balance rolled into Demand Note effective January 2, 2006 . . . . $ -- 3,482,284 ========== ==========
Accrued and unpaid interest due to an affiliate was $908,639 (of which $405,773 was accrued for 2006) and $502,866 at December 31, 2006 and 2005, respectively.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are generally allocated 94% to the Holders and 6% to the General Partners. Profits from the sale or other disposition of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building or other real property owned by BFP, LP will be allocated to the General Partners in an amount equal to the greater of 1% of such profits or any cash from the proceeds of such sale or other disposition distributed to the General Partners, plus an additional amount of such profits to eliminate deficits, if any, in the General Partners' capital accounts. The remainder of such profits will be allocated to the Holders. All losses from the sale of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building or other real property owned by BFP, LP will be allocated 99% to the Holders and 1% to the General Partners. All such profits or losses will be allocated among the Holders in proportion to the number of Interests held. For Federal income tax purposes, all interest expense recognized on the JMB Notes is allocated to a General Partner.
The General Partners are not required to make any additional capital contributions except under certain limited circumstances upon dissolution and termination of the Partnership. Distributions of "Distributable Cash" (as defined) of the Partnership generally will be made 94% to the Holders of Interest and 6% to the General Partners. Distributions of "Sale Proceeds" or "Financing Proceeds" (as defined) will be made first to the Holders in an amount equal to their contributed capital, next to the General Partners in an amount equal to their capital contributions, and the balance 70% to the Holders and 30% to the General Partners. Distributions would be made to the General Partners and Holders of Interests generally only after the satisfaction of all Partnership liabilities.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Corporate General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of and for the years ended December 31, 2006, 2005 and 2004 are as follows:
UNPAID AT DECEMBER 31, 2006 2005 2004 2006 ------- ------ ------ ------------ Reimbursement (at cost) for accounting services . . . $ 189 -- -- 189 Reimbursement (at cost) for legal services. . . . . . 2,872 4,527 28,754 1,153 Reimbursement (at cost) for portfolio management services. . . . . . . . . . . 4,174 1,938 10,177 1,391 ------- ------ ------ ------ $ 7,235 6,465 38,931 2,733 ======= ====== ====== ======
Any reimbursable amounts currently payable to the General Partners and their affiliates do not bear interest.
Reference is made to the Notes, "Investment in Unconsolidated Venture" and "Notes Payable to an Affiliate" above for a discussion of certain loans and notes payable by the Partnership to JMB and related collateral held by JMB.
SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
---------------------------------------------- At 3/31 At 6/30 At 9/30 At 12/31 ---------- ---------- ---------- ---------- Total income . . . . . . . $ 382 260 2,357 206 ========== ========== ========== ==========
Net loss . . . . . . . . . $ (166,045) (128,451) (135,142) (143,662) ========== ========== ========== ==========
Net loss per Interest. . . $ (163) (126) (133) (142) ========== ========== ========== ==========
---------------------------------------------- At 3/31 At 6/30 At 9/30 At 12/31 ---------- ---------- ---------- ---------- Total income . . . . . . . $ 64 135 89 43,705 ========== ========== ========== ==========
Net loss . . . . . . . . . $ (107,333) (53,689) (53,071) (1,990) ========== ========== ========== ==========
Net loss per Interest. . . $ (105) (52) (52) (3) ========== ========== ========== ==========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during 2006 and 2005.
ITEM 9A. CONTROLS AND PROCEDURES
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of the Securities Exchange Act of 1934 (the "Exchange Act") promulgated thereunder, the principal executive officer and the principal financial officer of the Partnership have evaluated the effectiveness of the Partnership's disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and the principal financial officer have concluded that the Partnership's disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in this report was recorded, processed, summarized and reported within the time period specified in the applicable rules and form of the Securities and Exchange Commission for this report. The Partnership's disclosure controls and procedures do not include the disclosure controls and procedures of BFP, LP, which the Partnership has no ability to control.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Corporate General Partner of the Partnership, JMB Park Avenue, Inc., an Illinois corporation, is a wholly-owned subsidiary of JMB Investment Holdings - I, Inc., a Delaware corporation. All of the outstanding shares of stock of JMB Investment Holdings - I, Inc. are owned, indirectly, by JMB Realty Corporation, a Delaware corporation ("JMB") in the business of real estate investment. Substantially all of the shares of JMB are owned, directly or indirectly, by certain of its current and former officers and directors, members of their families and their affiliates. The Corporate General Partner has responsibility for all aspects of the Partnership's operations, subject to the requirement that the sale of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building, unless required by the terms of the BFP, LP venture agreement, must be approved by the Associate General Partner of the Partnership, Park Associates, L.P., an Illinois limited partnership with JMB Park Avenue, Inc. as the sole general partner. The limited partners of the Associate General Partner are generally JMB, current or former officers and directors of JMB, their affiliates and current or former officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that affiliates of the General Partners are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership by affiliates of the General Partners, including administrative services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership or its investment properties under certain circumstances, including for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell (or consent to the sale of) investment property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations. The General Partners and their affiliates may also have a conflict of interest with respect to matters relating to the remaining JMB Demand Note, including, among other things, the enforcement of repayment of that note and the remedies available to JMB in the event of a default under that note, as well as with respect to matters concerning whether to continue to advance funds to the Partnership to permit it to pay its expenses. Reference is made to the discussions under "Investment in Unconsolidated Venture" and "Notes Payable to an Affiliate" in the Notes for further information concerning the term loan and demand notes.
The names, current positions and length of service therein of the director and executive officers of the Corporate General Partner of the Partnership are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Gary Nickele Vice President 12/18/90 Patrick J. Meara President and Director 12/22/00 H. Rigel Barber Vice President 03/26/84 Gailen J. Hull Vice President 03/26/84
There is no family relationship among any of the foregoing director or officers. The foregoing director has been elected to serve a term until the annual meeting of the Corporate General Partner to be held on August 14, 2007. All of the foregoing officers have been elected to serve terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on August 14, 2007. There are no arrangements or understandings between or among any of said director or officers and any other person pursuant to which any director or officer was elected as such.
The foregoing director and officers are also officers and/or directors of JMB and various companies affiliated with JMB.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership includes the following:
Gary Nickele (age 54) is Executive Vice President and General Counsel of JMB and an officer and/or director of various JMB affiliates. Mr. Nickele has been associated with JMB since February 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Patrick J. Meara (age 44) has been a Senior Vice President of JMB since January 1997. Prior to becoming President and Director of the Corporate General Partner, Mr. Meara was a Vice President of the Corporate General Partner from August 8, 2000 to December 22, 2000. He is also an officer and/or director of various other JMB affiliates. He has been associated with JMB, JMB Institutional Realty Corporation or their affiliates since 1987. Mr. Meara is a Certified Public Accountant.
H. Rigel Barber (age 58) is Executive Vice President and Chief Executive Officer of JMB and an officer of various JMB affiliates. Mr. Barber has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 58), in addition to being a Vice President of JMB Park Avenue, Inc., has acted as the Chief Financial Officer of the Partnership since August 2002. He also is Senior Vice President and, since August 2002, Chief Financial Officer of JMB and an officer of various JMB affiliates. Mr. Hull has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
The Partnership is a limited partnership organized under the laws of the State of Illinois, and the rights of its partners and Holders of Interests are governed by its Partnership Agreement. Moreover, the Interests are not publicly traded. In view of these facts, as well as the limited business activity of the Partnership, the Corporate General Partner has determined that it is not necessary for the Partnership to have either an "audit committee financial expert" or a "code of ethics" as those terms are defined in the rules and regulations of the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the Corporate General Partner receive no direct remuneration in such capacities from the Partnership. The General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Holders of Interests, and a share of profits or losses as described under the section entitled "Partnership Agreement" in the Notes. No such cash distributions were paid to the General Partners in 2006. The General Partners are expected to be allocated loss for tax purposes in 2006.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Partnership Agreement, the Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. Such transactions may involve conflicts of interest for the General Partners or their affiliates, including, among others, those discussed in Item 10. Directors and Executive Officers above. Various relationships of the Partnership to the Corporate General Partner (and its director and executive officers) and its affiliates are also set forth above in Item 10.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses and out-of-pocket expenses relating to the administration of the Partnership and operation of the Partnership's real property investments. There were no such reimbursable expenses in 2006.
The General Partners and their affiliates are entitled to reimbursements of salary and salary related expenses for legal, accounting and certain other services. Such reimbursements will not exceed the lesser of the actual cost of such services or the amount which the Partnership would be required to pay independent parties for comparable services. Affiliates of the General Partners were entitled to reimbursements for such expenses in the amount of $7,235 and $6,465 in 2006 and 2005, respectively, of which $2,733 was payable at December 31, 2006.
At December 31, 2003, the Partnership was indebted to JMB Realty Corporation ("JMB") under the JMB Note for an aggregate amount of $30,131,375 (consisting of $25,500,000 of principal and $4,631,375 of accrued and unpaid interest, including default interest.) On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes") payable to JMB so that the outstanding principal balance and accrued and unpaid interest under the JMB Note was allocated between the Replacement Notes. One of the Replacement Notes ("Replacement Note 1") received a principal balance of $3,482,284 and accrued and unpaid interest of $385,345. The other Replacement Note ("Replacement Note 2") received a principal balance of $22,017,716 and all other accrued and unpaid interest from the JMB Note totaling $4,645,531 (including all of the default interest of $4,631,375). The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods will be substantially less. All accounts and interests of the Corporate General Partner in the Partnership are adjusted to reflect this contribution of capital.
Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership has not adopted any pre-approval policies and procedures. All audit and permitted non-audit services are approved by the sole director of the Corporate General Partner of the Partnership before the service is undertaken.
The aggregate fees billed for professional services by KPMG LLP for 2006 and 2005 for these various services were:
Type of Fees 2006 2005 - ------------ -------- --------
Audit Fees . . . . . . . . . . . . . . . . . $ 37,000 35,500 Tax Fees . . . . . . . . . . . . . . . . . . 24,000 23,000 -------- -------- $ 61,000 58,500 ======== ========
In the above table, in accordance with the SEC's definitions and rules, "audit fees" are fees the Partnership paid KPMG LLP for professional services for the audit of the Partnership's consolidated financial statements included in Form 10-K and review of financial statements included in Form 10-Qs, and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements; "tax fees" are fees for tax compliance, tax advice and tax planning.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
(1) Financial Statements (See Index to Financial Statements and Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership of the Partnership is hereby incorporated by reference to Exhibit 3-A to the Partnership's Report for June 30, 2002 on Form 10-Q (File No. 0-13545) dated August 21, 2002.
3-B. Amendment to the Amended and Restated Agreement of Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is hereby incorporated by reference to Exhibit 3-B to the Partnership's Form 10-Q Report for March 31, 1995 (File No. 0-13545) filed May 11, 1995.
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago is hereby incorporated by reference to Exhibit 4-B to the Partnership's Registration Statement on Form 10 (as amended) of the Securities Exchange Act of 1934 (File No. 0-13545) filed on April 29, 1985.
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4-V to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation detailing amendments to the term loans, are hereby incorporated herein by reference to Exhibit 4-Y to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates, Ltd. to Continental Illinois Bank of Chicago (Continental) detailing the transactions for which the Partnership would obtain Continental's consent, are hereby incorporated herein by reference to Exhibit 4-Z to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4 AA to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation is hereby incorporated herein by reference to Exhibit 4-B to the Partnership's Report for March 31, 2001 on Form 10-Q (File No. 0-13545) dated May 9, 2001.
4-G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996 is hereby incorporated by reference to the Partnership's Report for November 21, 1996 on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-B. Consent and Substitution of Collateral dated November 21, 1996 is hereby incorporated herein by reference to Exhibit 10-E to the Partnership's Report for March 31, 1997 on Form 10-Q (File No. 0-13545) filed on May 9, 1997.
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P., dated December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.1 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. dated as of December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.2 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
21. List of Subsidiaries of the Partnership.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002.
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership is filed herewith.
(b) No report on Form 8-K was filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 2006 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc. Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Vice President Date: March 29, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc. Corporate General Partner
PATRICK J. MEARA By: Patrick J. Meara, President and Director Chief Executive Officer Date: March 29, 2007
GAILEN J. HULL By: Gailen J. Hull, Vice President Chief Financial Officer and Principal Accounting Officer Date: March 29, 2007
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE ------------- 3-A. Amended and Restated Agreement of Limited Partnership of the Partnership. Yes
3-B. Amendment to the Amended Limited Partnership Agreement of Partnership of JMB/245 Park Avenue Associates, Ltd. Yes
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago. Yes
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates to Continental Illinois Bank of Chicago (Continental) Yes
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4.G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation Yes
4.H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. Yes
4.I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 Yes
4.J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 Yes
DOCUMENT INCORPORATED BY REFERENCE -------------
4.K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. Yes
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996. Yes
10-B. Consent and Substitution of Collateral dated November 21, 1996 Yes
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P. Yes
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. Yes
21. List of Subsidiaries of the Partnership. No
31.1. Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
31.2. Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. No
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership No
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Capitalized terms used but not defined in this Item 7 have the same meanings as used in Item 1. Business or in the Notes.
The Partnership's future liquidity and ability to continue as a going concern are dependent upon additional advances from JMB Realty Corporation ("JMB") and there is no assurance that such advances will continue to be made. The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
BFP, LP has had the right to sell the 245 Park Avenue property without the consent of the Partnership since January 2000. BFP, LP notified the Partnership that it sold a 49% interest in the 245 Park Avenue property to an unaffiliated third party on October 2, 2003. The Partnership did not receive any proceeds from the sale of the 49% interest in 245 Park Avenue. However, as a result of such transaction, and subject to the terms of the transaction, a substantial amount of gain for Federal and state income tax purposes was allocated to the Holders of Interests without any distribution of cash. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.
The Partnership holds, through 245 Park Holding, an approximate .5% interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that BPC files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BPC's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BPC has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BPC's reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP. Those reports and other information are not intended to be incorporated by reference into this report on Form 10-K, and the Partnership has no responsibility for the accuracy of any information included in BPC's reports or other information.
BFP, LP has a substantial amount of indebtedness outstanding. Any proceeds from the sale of the buildings in which BFP, LP has an interest would be first applied to repayment of the mortgage and other indebtedness of BFP, LP. In any event, any net proceeds obtained by the Partnership could then be available to satisfy the Demand Note. Only after such applications would any remaining proceeds be available to be distributed to the Holders of Interests. Similarly, in the event of a sale or other disposition of the Retained Interest (including a redemption pursuant to an election discussed above), the Partnership's share of the proceeds of such sale or disposition would first be applied to satisfy the Demand Note. Only after such application would remaining proceeds, if any, be available to be distributed to the Holders of Interests.
It is unlikely that the Holders of Interests ever will receive any further distributions from the Partnership or any further return on their original investment. However, it is expected that Holders of Interests will be allocated a substantial amount of additional gain for Federal and state income tax purposes as a result of transactions which may occur over the remaining term of the Partnership. These transactions include (i) a sale or other disposition of the 245 Park Avenue property or other properties in which BFP, LP owns an interest; (ii) a sale or other disposition of the Partnership's interest in BFP, LP (including a redemption of the Retained Interest); or (iii) a significant reduction in the indebtedness of the 245 Park Avenue property or other indebtedness of the Partnership for Federal and state income tax purposes. Moreover, none of these transactions is expected to result in Holders of Interests receiving any significant cash distributions. The amount of gain for Federal and state income tax purposes to be allocated to a Holder of Interests over the remaining term of the Partnership is expected to be, at a minimum, equal to all or most of the amount of such Holder's deficit capital account for tax purposes. Such gain may be offset by suspended losses from prior years (if any) that have been allocated to the Holder of Interests. The actual tax liability of each Holder of Interests will depend on such Holder's own tax situation.
RECENT ACCOUNTING PRONOUNCEMENT
In June 2005, the FASB ratified the consensus reached in EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (EITF 04-5). EITF 04-5 is effective for all newly formed limited partnerships after the consensus was ratified and January 2006 for all existing limited partnership agreements. The Partnership has evaluated the ownership structure of its existing investment in BFP, LP and again has determined that it does not demonstrate control over this entity as defined by EITF 04-5.
RESULTS OF OPERATIONS
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note at December 31, 2006.
The increase in cash and the decrease in interest and other receivables at December 31, 2006 as compared to December 31, 2005 is due primarily to the receipt by the Partnership of previous withholding tax payments made by the Partnership. An additional increase in cash was due to advances totaling $135,000 from JMB during 2006. Such increases in cash were substantially offset by disbursements for fees for professional services and for general and administrative expenses, a portion of which were payable at December 31, 2005.
The increase in demand note payable to an affiliate and the decrease in note payable to an affiliate at December 31, 2006 as compared to December 31, 2005 is due primarily to the rollover of the Replacement Note 1 (with a balance of approximately $3,962,000) into the Demand Note, effective January 2, 2006. An additional increase in demand note payable is the result of fundings totaling $135,000 and interest of approximately $406,000 added to the principal in 2006.
The increase in interest expense for the year ended December 31, 2006 as compared to the year ended December 31, 2005 is due to the rollover of the Partnership's Replacement Note into the Demand Note effective January 2, 2006 and the corresponding increase in the effective interest rate. An additional increase in interest expense is due to additional fundings in 2006 under the Demand Note. The decrease in interest expense for the year ended December 31, 2005 as compared to the year ended December 31, 2004 is due primarily to the JMB Note split in October 2004 and the resulting decrease in the Partnership's indebtedness.
The decreases in professional services for the years ended December 31, 2006 and 2005 as compared to the year ended December 31, 2004 is due primarily to decreases in fees for legal and other services related to the Partnership's investment in BFP, LP.
The decreases in general and administrative expenses for the years ended December 31, 2006 and 2005 as compared to the year ended December 31, 2004 is due primarily to the provision for doubtful receivables recognized in 2004.
INFLATION
Due to the low levels of inflation in recent years and the limited business activity of the Partnership, inflation generally has not had a material effect on it.
USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that are both significant to the overall presentation of the Partnership's financial condition and results of operations and require management to make difficult, complex or subjective judgments. The Partnership made no significant estimates or assumptions for the year ended December 31, 2006 and thus has concluded that there are no critical accounting policies.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB/245 PARK AVENUE ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) and Consolidated Venture
INDEX
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets, December 31, 2006 and 2005
Consolidated Statements of Operations, years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows, years ended December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is inapplicable, or the information is presented in the consolidated financial statements or related notes.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Partners JMB/245 Park Avenue Associates, Ltd.:
We have audited the consolidated financial statements of JMB/245 Park Avenue Associates, Ltd., a limited partnership (the "Partnership"), and consolidated venture as listed in the accompanying index. These consolidated financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JMB/245 Park Avenue Associates, Ltd. and consolidated venture as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that JMB/245 Park Avenue Associates, Ltd. will continue as a going concern. As described in the notes to the consolidated financial statements, the Partnership is dependent upon additional advances from JMB under the demand loan. This uncertainty and the fact that the Partnership has a net capital deficiency raise substantial doubt about its ability to continue as a going concern. The General Partners' plans in regard to these matters are also described in the notes to the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
KPMG LLP
Chicago, Illinois March 29, 2007
JMB/245 PARK AVENUE ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) and Consolidated Venture
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006, 2005 AND 2004
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
JMB/245 Park Avenue Associates, Ltd. (the "Partnership"), through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding"), owns an approximate .5% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The ownership is represented by 567.375 Class A Units. BFP, LP is a joint venture that holds equity investments in commercial office buildings, certain of which are owned subject to ground leases of the underlying land.
Business activities consist of rentals to a variety of commercial companies and the ultimate sale or disposition of such real estate. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and WFP Property G.P. Corp. ("WFP, GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned limited liability company, 245 Park Holding. The effect of all transactions between the Partnership and its consolidated venture has been eliminated.
Because the Partnership has no future funding obligations to BFP, LP, is currently not expecting to receive distributions from BFP, LP, has no influence or control over the day-to-day affairs of BFP, LP, and its investment in BFP, LP has been reduced to less than 1%, the Partnership discontinued the application of the equity method of accounting, recorded its investment at zero and no longer recognizes its share of earnings or losses from BFP, LP.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to reflect the Partnership's accounts in accordance with accounting principles generally accepted in the United States of America ("GAAP") and to consolidate the accounts of 245 Park Holding as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership.
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of the period. Deficit capital accounts will result, through the remaining duration of the Partnership, in net gain for financial reporting and Federal and state income tax purposes to the General Partners and Limited Partners.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
No provision for Federal or state income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership.
The Partnership's future liquidity and ability to continue as a going concern are dependent upon additional cash advances, evidenced by a demand note ("Demand Note"), from JMB Realty Corporation ("JMB") and there is no assurance that such advances will be made. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
RECENT ACCOUNTING PRONOUNCEMENT
In June 2005, the FASB ratified the consensus reached in EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (EITF 04-5). EITF 04-5 is effective for all newly formed limited partnerships after the consensus was ratified and January 2006 for all existing limited partnership agreements. The Partnership has evaluated the ownership structure of its existing investment in BFP, LP and again has determined that it does not demonstrate control over this entity as defined by EITF 04-5.
INVESTMENT IN UNCONSOLIDATED VENTURE
In December 1983, the Partnership acquired an interest in 245 Park, which owned a 46-story office building located at 245 Park Avenue, New York, New York. The Partnership acquired its approximate 48.25% ownership interest in 245 Park for approximately $63,927,000 from an affiliate of the joint venture partners. In addition to the Partnership, the other partners (the "O&Y partners") of 245 Park included Olympia & York 245 Park Ave. Holding Company, L.P., Olympia & York Equity Company, L.P., and Olympia & York 245 Corp., all of which were affiliates of Olympia & York Developments, Ltd. ("O&Y").
As a result of the financial difficulties of the O&Y partners, in October 1995 each of the O&Y partners and certain other O&Y affiliates (but not the Joint Venture) filed for bankruptcy protection from creditors under Chapter 11 of the United States Bankruptcy Code. As a result of the plan of restructuring (the "Plan"), which became effective on November 21, 1996 ("Effective Date"), the Partnership owned through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding") an approximate 5.4% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The managing general partner of BFP, LP is not affiliated with the Partnership and, subject to the partnership agreement of BFP, LP and the JMB Transaction Agreement (discussed below), has full authority to manage its affairs. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and WFP Property G.P. Corp. ("WFP, GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member.
BFP, LP's principal assets are majority and controlling interests in office buildings, certain of which are owned subject to ground leases of the underlying land.
As a result of transactions noted below, at December 31, 2006, the Partnership holds, through 245 Park Holding, an approximate .5% interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that Brookfield Properties Corporation ("BPC") files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BPC's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BPC has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BPC's reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP.
Those reports and other information are not intended to be incorporated by reference into this report on Form 10-K, and the Partnership has no responsibility for the accuracy of any information included in BPC's reports or other information.
The Partnership's interest in BFP, LP was pledged as collateral for certain notes payable (collectively "the JMB Notes") which aggregated approximately $89,337,000 in principal and interest at December 31, 2002, (immediately prior to repayment), to JMB. The security agreements for the JMB Notes required mandatory payment of principal and interest out of any net proceeds received upon the redemption, refinancing or other disposition of, or any distribution made with respect to, the Partnership's interest in BFP, LP.
On December 31, 2002 (the "Redemption Date") 245 Park Holding entered into a redemption agreement (the "Partial Redemption") by and among 245 Park Holding, WFP, GP and BFP, LP pursuant to which 245 Park Holding transferred and BFP, LP thereby redeemed approximately 90% of its approximate 5.4% interest (the "Redeemed Interest"), in BFP, LP, and 245 Park Holding received a distribution of approximately $56,109,000 (the "Redemption Distribution"). 245 Park Holding's remaining interest in BFP, LP is approximately .5%, represented by 567.375 Class A Units (the "Retained Interest"). In accordance with the 245 Park Holding limited liability company agreement, 245 Park Holding distributed approximately $55,548,000 (99% of the Redemption Distribution) to the Partnership and approximately $561,000 (1% of the Redemption Distribution) to WFP, GP. The Partnership received its share of the Redemption Distribution on the Redemption Date and in accordance with the security agreements relating to the JMB Notes, the Partnership then paid to JMB approximately $55,548,000 as repayment toward the JMB Notes. One JMB Note remained after such repayment, which was secured by the Partnership's interest in BFP, LP.
On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes"), whereby the Partnership issued the Replacement Notes payable to JMB that allocated the outstanding principal balance and accrued and unpaid interest under the JMB Note between the Replacement Notes in the amounts of $3,482,284 of principal and $385,345 of accrued and unpaid interest to one Replacement Note ("Replacement Note 1") and $22,017,716 of principal and all other accrued and all unpaid interest totaling $4,645,531 (including all of the default interest of $4,631,375) to the second Replacement Note ("Replacement Note 2"). The division of the JMB Note and its replacement by Replacement Note 1 and Replacement Note 2 resulted in those two notes superseding the JMB Note. The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods
will be substantially less. Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
BFP, LP has had the right to sell the 245 Park Avenue property without the consent of the Partnership since January 2000. BFP, LP notified the Partnership that it sold a 49% interest in the 245 Park Avenue property to an unaffiliated third party on October 2, 2003. The Partnership did not receive any proceeds from the sale of the 49% interest in 245 Park Avenue. However, as a result of such transaction, and subject to the terms of the transaction, a substantial amount of gain for Federal and state income tax purposes was allocated to the Holders of Interests without any distribution of cash. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.
NOTES PAYABLE TO AN AFFILIATE
Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
Note payable to an affiliate consisted of the following at December 31, 2006 and 2005:
2006 2005 ---------- ---------- Note payable (term loan) bearing interest at 2% per annum, compounded annually; secured by the Partnership's interest in BFP, LP; no payments until December 1998 when the entire principal amount and accrued compounded interest were scheduled to be due (as discussed above); extended, effective January 3, 2001, to January 2, 2006; note split effective October 8, 2004 (as discussed above); note balance rolled into Demand Note effective January 2, 2006 . . . . $ -- 3,482,284 ========== ==========
Accrued and unpaid interest due to an affiliate was $908,639 (of which $405,773 was accrued for 2006) and $502,866 at December 31, 2006 and 2005, respectively.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are generally allocated 94% to the Holders and 6% to the General Partners. Profits from the sale or other disposition of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building or other real property owned by BFP, LP will be allocated to the General Partners in an amount equal to the greater of 1% of such profits or any cash from the proceeds of such sale or other disposition distributed to the General Partners, plus an additional amount of such profits to eliminate deficits, if any, in the General Partners' capital accounts. The remainder of such profits will be allocated to the Holders. All losses from the sale of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building or other real property owned by BFP, LP will be allocated 99% to the Holders and 1% to the General Partners. All such profits or losses will be allocated among the Holders in proportion to the number of Interests held. For Federal income tax purposes, all interest expense recognized on the JMB Notes is allocated to a General Partner.
The General Partners are not required to make any additional capital contributions except under certain limited circumstances upon dissolution and termination of the Partnership. Distributions of "Distributable Cash" (as defined) of the Partnership generally will be made 94% to the Holders of Interest and 6% to the General Partners. Distributions of "Sale Proceeds" or "Financing Proceeds" (as defined) will be made first to the Holders in an amount equal to their contributed capital, next to the General Partners in an amount equal to their capital contributions, and the balance 70% to the Holders and 30% to the General Partners. Distributions would be made to the General Partners and Holders of Interests generally only after the satisfaction of all Partnership liabilities.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Corporate General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of and for the years ended December 31, 2006, 2005 and 2004 are as follows:
UNPAID AT DECEMBER 31, 2006 2005 2004 2006 ------- ------ ------ ------------ Reimbursement (at cost) for accounting services . . . $ 189 -- -- 189 Reimbursement (at cost) for legal services. . . . . . 2,872 4,527 28,754 1,153 Reimbursement (at cost) for portfolio management services. . . . . . . . . . . 4,174 1,938 10,177 1,391 ------- ------ ------ ------ $ 7,235 6,465 38,931 2,733 ======= ====== ====== ======
Any reimbursable amounts currently payable to the General Partners and their affiliates do not bear interest.
Reference is made to the Notes, "Investment in Unconsolidated Venture" and "Notes Payable to an Affiliate" above for a discussion of certain loans and notes payable by the Partnership to JMB and related collateral held by JMB.
SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
---------------------------------------------- At 3/31 At 6/30 At 9/30 At 12/31 ---------- ---------- ---------- ---------- Total income . . . . . . . $ 382 260 2,357 206 ========== ========== ========== ==========
Net loss . . . . . . . . . $ (166,045) (128,451) (135,142) (143,662) ========== ========== ========== ==========
Net loss per Interest. . . $ (163) (126) (133) (142) ========== ========== ========== ==========
---------------------------------------------- At 3/31 At 6/30 At 9/30 At 12/31 ---------- ---------- ---------- ---------- Total income . . . . . . . $ 64 135 89 43,705 ========== ========== ========== ==========
Net loss . . . . . . . . . $ (107,333) (53,689) (53,071) (1,990) ========== ========== ========== ==========
Net loss per Interest. . . $ (105) (52) (52) (3) ========== ========== ========== ==========
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during 2006 and 2005.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of the Securities Exchange Act of 1934 (the "Exchange Act") promulgated thereunder, the principal executive officer and the principal financial officer of the Partnership have evaluated the effectiveness of the Partnership's disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and the principal financial officer have concluded that the Partnership's disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in this report was recorded, processed, summarized and reported within the time period specified in the applicable rules and form of the Securities and Exchange Commission for this report. The Partnership's disclosure controls and procedures do not include the disclosure controls and procedures of BFP, LP, which the Partnership has no ability to control.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Corporate General Partner of the Partnership, JMB Park Avenue, Inc., an Illinois corporation, is a wholly-owned subsidiary of JMB Investment Holdings - I, Inc., a Delaware corporation. All of the outstanding shares of stock of JMB Investment Holdings - I, Inc. are owned, indirectly, by JMB Realty Corporation, a Delaware corporation ("JMB") in the business of real estate investment. Substantially all of the shares of JMB are owned, directly or indirectly, by certain of its current and former officers and directors, members of their families and their affiliates. The Corporate General Partner has responsibility for all aspects of the Partnership's operations, subject to the requirement that the sale of all or substantially all of the Partnership's indirect interest in BFP, LP or of all or substantially all of the 245 Park Avenue office building, unless required by the terms of the BFP, LP venture agreement, must be approved by the Associate General Partner of the Partnership, Park Associates, L.P., an Illinois limited partnership with JMB Park Avenue, Inc. as the sole general partner. The limited partners of the Associate General Partner are generally JMB, current or former officers and directors of JMB, their affiliates and current or former officers of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that affiliates of the General Partners are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership by affiliates of the General Partners, including administrative services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership or its investment properties under certain circumstances, including for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell (or consent to the sale of) investment property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations. The General Partners and their affiliates may also have a conflict of interest with respect to matters relating to the remaining JMB Demand Note, including, among other things, the enforcement of repayment of that note and the remedies available to JMB in the event of a default under that note, as well as with respect to matters concerning whether to continue to advance funds to the Partnership to permit it to pay its expenses. Reference is made to the discussions under "Investment in Unconsolidated Venture" and "Notes Payable to an Affiliate" in the Notes for further information concerning the term loan and demand notes.
The names, current positions and length of service therein of the director and executive officers of the Corporate General Partner of the Partnership are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Gary Nickele Vice President 12/18/90 Patrick J. Meara President and Director 12/22/00 H. Rigel Barber Vice President 03/26/84 Gailen J. Hull Vice President 03/26/84
There is no family relationship among any of the foregoing director or officers. The foregoing director has been elected to serve a term until the annual meeting of the Corporate General Partner to be held on August 14, 2007. All of the foregoing officers have been elected to serve terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on August 14, 2007. There are no arrangements or understandings between or among any of said director or officers and any other person pursuant to which any director or officer was elected as such.
The foregoing director and officers are also officers and/or directors of JMB and various companies affiliated with JMB.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership includes the following:
Gary Nickele (age 54) is Executive Vice President and General Counsel of JMB and an officer and/or director of various JMB affiliates. Mr. Nickele has been associated with JMB since February 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Patrick J. Meara (age 44) has been a Senior Vice President of JMB since January 1997. Prior to becoming President and Director of the Corporate General Partner, Mr. Meara was a Vice President of the Corporate General Partner from August 8, 2000 to December 22, 2000. He is also an officer and/or director of various other JMB affiliates. He has been associated with JMB, JMB Institutional Realty Corporation or their affiliates since 1987. Mr. Meara is a Certified Public Accountant.
H. Rigel Barber (age 58) is Executive Vice President and Chief Executive Officer of JMB and an officer of various JMB affiliates. Mr. Barber has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 58), in addition to being a Vice President of JMB Park Avenue, Inc., has acted as the Chief Financial Officer of the Partnership since August 2002. He also is Senior Vice President and, since August 2002, Chief Financial Officer of JMB and an officer of various JMB affiliates. Mr. Hull has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
The Partnership is a limited partnership organized under the laws of the State of Illinois, and the rights of its partners and Holders of Interests are governed by its Partnership Agreement. Moreover, the Interests are not publicly traded. In view of these facts, as well as the limited business activity of the Partnership, the Corporate General Partner has determined that it is not necessary for the Partnership to have either an "audit committee financial expert" or a "code of ethics" as those terms are defined in the rules and regulations of the Securities and Exchange Commission.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the Corporate General Partner receive no direct remuneration in such capacities from the Partnership. The General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Holders of Interests, and a share of profits or losses as described under the section entitled "Partnership Agreement" in the Notes. No such cash distributions were paid to the General Partners in 2006. The General Partners are expected to be allocated loss for tax purposes in 2006.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Partnership Agreement, the Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. Such transactions may involve conflicts of interest for the General Partners or their affiliates, including, among others, those discussed in Item 10. Directors and Executive Officers above. Various relationships of the Partnership to the Corporate General Partner (and its director and executive officers) and its affiliates are also set forth above in Item 10.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses and out-of-pocket expenses relating to the administration of the Partnership and operation of the Partnership's real property investments. There were no such reimbursable expenses in 2006.
The General Partners and their affiliates are entitled to reimbursements of salary and salary related expenses for legal, accounting and certain other services. Such reimbursements will not exceed the lesser of the actual cost of such services or the amount which the Partnership would be required to pay independent parties for comparable services. Affiliates of the General Partners were entitled to reimbursements for such expenses in the amount of $7,235 and $6,465 in 2006 and 2005, respectively, of which $2,733 was payable at December 31, 2006.
At December 31, 2003, the Partnership was indebted to JMB Realty Corporation ("JMB") under the JMB Note for an aggregate amount of $30,131,375 (consisting of $25,500,000 of principal and $4,631,375 of accrued and unpaid interest, including default interest.) On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes") payable to JMB so that the outstanding principal balance and accrued and unpaid interest under the JMB Note was allocated between the Replacement Notes. One of the Replacement Notes ("Replacement Note 1") received a principal balance of $3,482,284 and accrued and unpaid interest of $385,345. The other Replacement Note ("Replacement Note 2") received a principal balance of $22,017,716 and all other accrued and unpaid interest from the JMB Note totaling $4,645,531 (including all of the default interest of $4,631,375). The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods will be substantially less. All accounts and interests of the Corporate General Partner in the Partnership are adjusted to reflect this contribution of capital.
Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership has not adopted any pre-approval policies and procedures. All audit and permitted non-audit services are approved by the sole director of the Corporate General Partner of the Partnership before the service is undertaken.
The aggregate fees billed for professional services by KPMG LLP for 2006 and 2005 for these various services were:
Type of Fees 2006 2005 - ------------ -------- --------
Audit Fees . . . . . . . . . . . . . . . . . $ 37,000 35,500 Tax Fees . . . . . . . . . . . . . . . . . . 24,000 23,000 -------- -------- $ 61,000 58,500 ======== ========
In the above table, in accordance with the SEC's definitions and rules, "audit fees" are fees the Partnership paid KPMG LLP for professional services for the audit of the Partnership's consolidated financial statements included in Form 10-K and review of financial statements included in Form 10-Qs, and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements; "tax fees" are fees for tax compliance, tax advice and tax planning.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
(1) Financial Statements (See Index to Financial Statements and Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership of the Partnership is hereby incorporated by reference to Exhibit 3-A to the Partnership's Report for June 30, 2002 on Form 10-Q (File No. 0-13545) dated August 21, 2002.
3-B. Amendment to the Amended and Restated Agreement of Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is hereby incorporated by reference to Exhibit 3-B to the Partnership's Form 10-Q Report for March 31, 1995 (File No. 0-13545) filed May 11, 1995.
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago is hereby incorporated by reference to Exhibit 4-B to the Partnership's Registration Statement on Form 10 (as amended) of the Securities Exchange Act of 1934 (File No. 0-13545) filed on April 29, 1985.
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4-V to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation detailing amendments to the term loans, are hereby incorporated herein by reference to Exhibit 4-Y to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates, Ltd. to Continental Illinois Bank of Chicago (Continental) detailing the transactions for which the Partnership would obtain Continental's consent, are hereby incorporated herein by reference to Exhibit 4-Z to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4 AA to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation is hereby incorporated herein by reference to Exhibit 4-B to the Partnership's Report for March 31, 2001 on Form 10-Q (File No. 0-13545) dated May 9, 2001.
4-G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996 is hereby incorporated by reference to the Partnership's Report for November 21, 1996 on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-B. Consent and Substitution of Collateral dated November 21, 1996 is hereby incorporated herein by reference to Exhibit 10-E to the Partnership's Report for March 31, 1997 on Form 10-Q (File No. 0-13545) filed on May 9, 1997.
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P., dated December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.1 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. dated as of December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.2 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
21. List of Subsidiaries of the Partnership.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002.
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership is filed herewith.
(b) No report on Form 8-K was filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 2006 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc. Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Vice President Date: March 29, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc. Corporate General Partner
PATRICK J. MEARA By: Patrick J. Meara, President and Director Chief Executive Officer Date: March 29, 2007
GAILEN J. HULL By: Gailen J. Hull, Vice President Chief Financial Officer and Principal Accounting Officer Date: March 29, 2007
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE ------------- 3-A. Amended and Restated Agreement of Limited Partnership of the Partnership. Yes
3-B. Amendment to the Amended Limited Partnership Agreement of Partnership of JMB/245 Park Avenue Associates, Ltd. Yes
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago. Yes
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates to Continental Illinois Bank of Chicago (Continental) Yes
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4.G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation Yes
4.H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. Yes
4.I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 Yes
4.J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 Yes
DOCUMENT INCORPORATED BY REFERENCE -------------
4.K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. Yes
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996. Yes
10-B. Consent and Substitution of Collateral dated November 21, 1996 Yes
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P. Yes
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. Yes
21. List of Subsidiaries of the Partnership. No
31.1. Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
31.2. Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. No
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership No
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Partnership Agreement, the Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership. Such transactions may involve conflicts of interest for the General Partners or their affiliates, including, among others, those discussed in Item 10. Directors and Executive Officers above. Various relationships of the Partnership to the Corporate General Partner (and its director and executive officers) and its affiliates are also set forth above in Item 10.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses and out-of-pocket expenses relating to the administration of the Partnership and operation of the Partnership's real property investments. There were no such reimbursable expenses in 2006.
The General Partners and their affiliates are entitled to reimbursements of salary and salary related expenses for legal, accounting and certain other services. Such reimbursements will not exceed the lesser of the actual cost of such services or the amount which the Partnership would be required to pay independent parties for comparable services. Affiliates of the General Partners were entitled to reimbursements for such expenses in the amount of $7,235 and $6,465 in 2006 and 2005, respectively, of which $2,733 was payable at December 31, 2006.
At December 31, 2003, the Partnership was indebted to JMB Realty Corporation ("JMB") under the JMB Note for an aggregate amount of $30,131,375 (consisting of $25,500,000 of principal and $4,631,375 of accrued and unpaid interest, including default interest.) On October 8, 2004, the Partnership and JMB entered into an agreement to split the JMB Note (which had an unpaid principal and accrued and deferred interest balance at October 8, 2004 of approximately $30,531,000) into two separate replacement notes (the "Replacement Notes") payable to JMB so that the outstanding principal balance and accrued and unpaid interest under the JMB Note was allocated between the Replacement Notes. One of the Replacement Notes ("Replacement Note 1") received a principal balance of $3,482,284 and accrued and unpaid interest of $385,345. The other Replacement Note ("Replacement Note 2") received a principal balance of $22,017,716 and all other accrued and unpaid interest from the JMB Note totaling $4,645,531 (including all of the default interest of $4,631,375). The security, interest rate and maturity date for the Replacement Notes remained unchanged from those under the JMB Note.
Through a series of transactions, JMB assigned and contributed Replacement Note 2 to JMB Park Avenue, Inc., which is an indirect, wholly owned subsidiary of JMB and the Corporate General Partner of the Partnership. Effective October 8, 2004, the Corporate General Partner and the Partnership entered into an Assignment and Contribution Agreement, pursuant to which the Corporate General Partner assigned and contributed Replacement Note 2 to the Partnership as an additional, voluntary contribution of capital. This resulted in the release of the Partnership from liability for repayment of Replacement Note 2 (with aggregate principal and interest of $26,663,247). Due to the decrease in the Partnership's outstanding indebtedness, interest accruals in future periods will be substantially less. All accounts and interests of the Corporate General Partner in the Partnership are adjusted to reflect this contribution of capital.
Replacement Note 1, which is secured by the Partnership's interest in BFP, LP and was scheduled to mature in January 2006, was rolled into the Demand Note, effective January 2, 2006. Replacement Note 1 accrued interest at 2% per annum, with interest compounded annually and included in principal, and had a balance, including accrued interest, of $3,962,194 as of January 2, 2006.
The operations of the Partnership since 2004 have been funded entirely by cash advances from JMB which totaled $492,000 as of December 31, 2006 and which, together with the amount rolled over from Replacement Note 1, are evidenced by the Demand Note. The Demand Note accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership has not adopted any pre-approval policies and procedures. All audit and permitted non-audit services are approved by the sole director of the Corporate General Partner of the Partnership before the service is undertaken.
The aggregate fees billed for professional services by KPMG LLP for 2006 and 2005 for these various services were:
Type of Fees 2006 2005 - ------------ -------- --------
Audit Fees . . . . . . . . . . . . . . . . . $ 37,000 35,500 Tax Fees . . . . . . . . . . . . . . . . . . 24,000 23,000 -------- -------- $ 61,000 58,500 ======== ========
In the above table, in accordance with the SEC's definitions and rules, "audit fees" are fees the Partnership paid KPMG LLP for professional services for the audit of the Partnership's consolidated financial statements included in Form 10-K and review of financial statements included in Form 10-Qs, and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements; "tax fees" are fees for tax compliance, tax advice and tax planning.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
(1) Financial Statements (See Index to Financial Statements and Supplementary Data filed with this report).
(2) Exhibits.
3-A. Amended and Restated Agreement of Limited Partnership of the Partnership is hereby incorporated by reference to Exhibit 3-A to the Partnership's Report for June 30, 2002 on Form 10-Q (File No. 0-13545) dated August 21, 2002.
3-B. Amendment to the Amended and Restated Agreement of Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is hereby incorporated by reference to Exhibit 3-B to the Partnership's Form 10-Q Report for March 31, 1995 (File No. 0-13545) filed May 11, 1995.
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago is hereby incorporated by reference to Exhibit 4-B to the Partnership's Registration Statement on Form 10 (as amended) of the Securities Exchange Act of 1934 (File No. 0-13545) filed on April 29, 1985.
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4-V to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation detailing amendments to the term loans, are hereby incorporated herein by reference to Exhibit 4-Y to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates, Ltd. to Continental Illinois Bank of Chicago (Continental) detailing the transactions for which the Partnership would obtain Continental's consent, are hereby incorporated herein by reference to Exhibit 4-Z to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation, are hereby incorporated herein by reference to Exhibit 4 AA to the Partnership's Form 10-Q Report for September 30, 1995, (File No. 0-13545) filed on November 9, 1995.
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation is hereby incorporated herein by reference to Exhibit 4-B to the Partnership's Report for March 31, 2001 on Form 10-Q (File No. 0-13545) dated May 9, 2001.
4-G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for Septem- ber 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
4-K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996 is hereby incorporated by reference to the Partnership's Report for November 21, 1996 on Form 8-K (File No. 0-13545) filed on December 6, 1996.
10-B. Consent and Substitution of Collateral dated November 21, 1996 is hereby incorporated herein by reference to Exhibit 10-E to the Partnership's Report for March 31, 1997 on Form 10-Q (File No. 0-13545) filed on May 9, 1997.
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P., dated December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.1 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. dated as of December 31, 2002 is hereby incorporated herein by reference to Exhibit 10.2 to the Partnership's Report for December 31, 2002 on Form 8-K (File No. 0-13545) filed on January 15, 2003.
21. List of Subsidiaries of the Partnership.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002.
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership is filed herewith.
(b) No report on Form 8-K was filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 2006 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB/245 PARK AVENUE ASSOCIATES, LTD.
By: JMB Park Avenue, Inc. Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Vice President Date: March 29, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Park Avenue, Inc. Corporate General Partner
PATRICK J. MEARA By: Patrick J. Meara, President and Director Chief Executive Officer Date: March 29, 2007
GAILEN J. HULL By: Gailen J. Hull, Vice President Chief Financial Officer and Principal Accounting Officer Date: March 29, 2007
JMB/245 PARK AVENUE ASSOCIATES, LTD.
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE ------------- 3-A. Amended and Restated Agreement of Limited Partnership of the Partnership. Yes
3-B. Amendment to the Amended Limited Partnership Agreement of Partnership of JMB/245 Park Avenue Associates, Ltd. Yes
4-A. Loan agreement dated June 27, 1984 between JMB/245 Park Avenue Associates and Continental Illinois National Bank and Trust Company of Chicago. Yes
4-B. $25,000,000 Second Amended and Restated Promissory Note and related documents dated August 1, 1995 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4-C. Fourth Amendment to Loan Documents dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-D. Consent Agreement dated December 29, 1983 from JMB/245 Park Avenue Associates to Continental Illinois Bank of Chicago (Continental) Yes
4-E. Third Amended and Restated Security Agreement dated August 1, 1995 between JMB/245 Park Avenue Associates, Ltd. and JMB Realty Corporation Yes
4-F. Amendment No. 1 to $25,000,000 Second Amended and Restated Promissory Note made effective January 3, 2001 between JMB/245 Park Avenue Associates and JMB Realty Corporation Yes
4.G Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation Yes
4.H Note Split Agreement, dated October 8, 2004, by and between JMB Realty Corporation and JMB/245 Park Avenue Associates, Ltd. Yes
4.I Replacement Note #1 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $3,482,283.71 Yes
4.J Replacement Note #2 to Second Amended and Restated Promissory Note, dated October 8, 2004, in the original principal amount of $22,017,716.29 Yes
DOCUMENT INCORPORATED BY REFERENCE -------------
4.K Assignment and Contribution Agreement, dated October 8, 2004, by and between JMB Park Avenue, Inc. and JMB/245 Park Avenue Associates, Ltd. Yes
10-A. Limited Liability Company Agreement of JMB 245 Park Avenue Holding Company, LLC dated as of November 12, 1996. Yes
10-B. Consent and Substitution of Collateral dated November 21, 1996 Yes
10-C. Redemption Agreement between JMB 245 Park Avenue Holding Company, LLC, WFP Property G.P. Corp. and Brookfield Financial Properties, L.P. Yes
10-D. Fourth Amended and Restated Agreement of Limited Partnership of Brookfield Financial Properties, L.P. Yes
21. List of Subsidiaries of the Partnership. No
31.1. Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
31.2. Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended. No
32. Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. No
99. Article 14 (pages 15-17) of the Partnership's Amended and Restated Agreement of Limited Partnership No