ITEM 1. Business
(a)	General Development of Business. Stamford Towers Limited Partnership (the "Partnership") is a Delaware limited partnership which was formed on August 14, 1986. The general partner of the Partnership is Stamford Towers Inc., a Delaware corporation (the "General Partner") and an affiliate of Lehman Brothers Inc. The sole limited partner of the Partnership is Stamford Towers Depositary Corp., a Delaware corporation (the "Assignor Limited Partner") and also an affiliate of Lehman Brothers Inc. The control and management of the Partnership's business and affairs are vested solely in the General Partner.
On November 19, 1986, the Partnership began an offering of 7,826,300 depositary units ("Units") representing assignments of the limited partnership interests in the Partnership. The offering was on a "best efforts" basis through Shearson Lehman Brothers Inc. ("Shearson") at a price of $10 per Unit. On June 30, 1987, a supplement to the prospectus for the offering of the Units was issued for the purpose of updating, modifying and amending certain information contained in the original prospectus.
On July 30, 1987, the Partnership commenced operations with the acceptance of subscriptions for 4,562,075 Units ($45,620,750). The remaining Units were sold pursuant to eight additional Partnership closings occurring on a monthly basis from August 1987 through March 1988. Net proceeds to the Partnership from the public offering of the Units were $71,808,474, after deducting offering and organizational costs and setting aside funds for a working capital reserve.
The Partnership was formed to acquire, construct, develop, own and operate two parcels of land located in Stamford, Connecticut (the "Land") and two commercial office buildings together with ancillary facilities (the "Buildings") constructed thereon which contain 325,416 net rentable square feet (the Land and the Buildings are collectively referred to as the "Project"). See Item 2.

ITEM 2. Properties
On July 30, 1987, the Developer, pursuant to the terms of the Development Agreement, caused its affiliate, a trust controlled by Edward Feldman, to convey the Land to the Partnership. The Land has been developed with two architecturally integrated, eleven-story, multi-tenant office buildings (comprised of four levels of parking and seven levels of office space), one of which contains approximately 192,939 square feet of rentable floor space (the "North Tower"), and the other of which contains approximately 132,477 square feet of rentable floor space (the "South Tower"). The Project is located on two parcels of land, totalling approximately 3.63 acres, in the central business district of Stamford, Connecticut. The Partnership owns no real property other than the Land and the Buildings. A 3,000 square foot cafeteria available for the use of all tenants was completed in December 1990, on the 5th floor of the North Tower.
The Partnership entered into a lease with Citicorp POS Information Services, Inc. ("Citicorp POS") which became effective on May 15, 1990 (the "Lease Agreement"). For information regarding the lease with Citicorp POS, refer to Note 5 "Lease Agreement with Citicorp POS Information Services" of the Notes to the Financial Statements contained in Item 8 of this report. Occupancy at the Project remained at 46% as of December 31, 1994, unchanged from December 31, 1993. In addition to Citicorp POS, there are four other tenants occupying space in the Project. Three of these tenants occupy approximately 12,750 square feet of office space. The fourth tenant occupies approximately 500 square feet of retail space.
According to leasing reports prepared by CB Commercial, the total office inventory available for lease in Stamford, Connecticut was 2.9 million square feet at December 31, 1994. This represents a decline from the prior year and reflects absorption of approximately 200 thousand square feet. The Stamford market remained stable as reflected by the vacancy rate which declined slightly from 20.6% at year-end 1993 to 19.9% at the end of 1994. Average asking gross rental rates for class A office space in Stamford was approximately $22 per square foot. The increase in leasing activity is beginning to reduce the availability of class A space in Stamford and the surrounding areas and may lead to an increase in rental rates during 1995.
One of the most significant developments in Stamford during 1994 was the announcement that Swiss Bank Corporation ("Swiss Bank") would be constructing a 20-story North American headquarters building across the street from the Project. While construction is scheduled to commence in mid-1995 and take several years to complete, Swiss Bank's commitment is evidence of major corporations' continuing interest in Stamford as an alternative to New York. Swiss Bank's plans call for the relocation of approximately 1,300 employees from its current Manhattan location to Stamford by late 1997 or early 1998.
ITEM 3.

ITEM 3. Legal Proceedings
In early 1993, the Partnership received the decision of a five-member arbitration board impaneled to determine numerous disputes between and among the Partnership, the Developer and Gilbane arising from the development and construction of the Project. In their decision, the arbitrators awarded the Partnership approximately $8.1 million in damages and costs on its claims against the Developer and awarded the Developer no amounts on its claims against the Partnership. The arbitrators also awarded Gilbane approximately $2.6 million in damages and costs on its claims against the Developer, and ordered that the Developer hold the Partnership harmless with respect to any mechanics liens filed against the Partnership's property in connection with the Project. The Partnership has obtained a judgment in New York for the full amount of the arbitrator's award against Edlar and Edward Feldman, pursuant to the Guaranty.
However, the General Partner's preliminary investigation indicates that the Developer has no significant assets from which the Partnership's arbitration award could be satisfied. Moreover, Mr. Feldman has advised the Partnership that he has no significant liquid assets from which to satisfy the judgment against him, and that he has outstanding debts to other creditors in the approximate amount of $53,000,000. Mr. Feldman has proposed that his creditors, including the Partnership, enter into a non-judicial workout arrangement whereby his debts might be partially satisfied in the event that his real estate investments appreciate in value in future years. Currently, those investments appear to be over leveraged and without significant market value. The Partnership along with Mr. Feldman's other creditors are in the process of evaluating and potentially proposing alternatives to Mr. Feldman's proposal. Berkshire Bank, one of Mr. Feldman's creditors has thus far not participated in this process.
On February 1, 1991, Gilbane filed a mechanic's lien against the property in the sum of $4,583,481. On August 9, 1991, Gilbane commenced an action entitled Gilbane Building Co. v. Stamford Towers Limited Partnership, et. al., in the Connecticut Superior Court for the Judicial District of Stamford/Norwalk at Stamford (the "Gilbane Action"). The defendants include the Partnership. Gilbane alleges breach of various contracts and unfair trade practices and seeks foreclosure of its mechanic's lien, monetary damages, attorney fees, punitive damages, possession of the premises, and the appointment of a receiver. The Partnership expects to vigorously defend against each of the plaintiff's claims. On May 17, 1993, at the request of the Partnership, Gilbane reduced the amount of the lien to $2,650,018.
On September 21, 1993, Gilbane filed a motion for Partial Summary Judgment as to Liability Only. The Partnership successfully opposed this motion, and the motion was denied by the court on November 4, 1993. On October 28, 1993, the Partnership filed a Motion for Summary Judgment which has not yet been acted upon by the court. On October 21, 1993, the Partnership filed its Answer, Special Defenses and Counterclaims to Gilbane's action. The Partnership's Counterclaim against Gilbane alleges breach of various contracts, unfair trade practices and slander of title. On November 10, 1993, Gilbane filed its reply to Stamford Towers' Special Defenses and Answer to Stamford Towers' Counterclaim and claimed the action to the jury trial list.
On November 3, 1994, the Partnership filed a Request for Leave to File Amended Special Defenses, Counterclaims, Set-Offs and Recoupment. On January 25, 1995, this request was granted by the Court over Gilbane's objection. The Partnership's Amended Counterclaim against Gilbane adds, in addition to the allegations of its original Counterclaim, additional allegations of negligence, breach of warranty, breach of contract, products liability and unfair trade practices. Gilbane has not yet answered the Partnership's Amended Counterclaim. The parties are currently engaged in discovery, and a trial has been tentatively scheduled to begin on August 1, 1995.
On March 7, 1995, Gilbane filed a Motion to Implead Beer Precast Concrete, Ltd., one of Gilbane's subcontractors on the Project. On March 20, 1995, that Motion was granted. As of March 21, 1995, Beer had not yet responded to Gilbane's Third-Party Complaint against them.
ITEM 4.

ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unit Holders at a meeting or otherwise during the fourth quarter in the year for which this report is filed.
PART II
ITEM 5.

ITEM 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters
(a) Market Price Information. There is no established trading market for the Units. The Partnership originally intended to apply to include the Units on NASDAQ or another quoted securities market upon the completion of the lease-up of the Project. However, an application is not anticipated at this time.
(b) Holders. As of December 31, 1994, there were 8,852 Unit Holders.
(c) Distribution of Net Cash Flow. For information regarding the Partnership's policy with respect to distribution of net cash flow, refer to Note 3 "The Partnership Agreement" of the Notes to the Financial Statements contained in Item 8 of this report.
ITEM 6.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Initially, the principal source of the Partnership's liquidity was the proceeds from the offering of Units which was completed in March 1988 and totalled $78,263,000. After paying offering expenses and syndication costs of the Partnership and establishing a working capital reserve, the Partnership had approximately $71,808,474 available to invest in the acquisition of the Land and the construction, lease up and operation of the Buildings. On July 30, 1987, the Partnership acquired the Land for $14,714,483. As of December 31, 1994, $59,155,584 had been invested in the construction of the Buildings and tenant improvements.
The Partnership is currently preserving its funds to lease and operate the Project. Through December 31, 1994, the Partnership's sources of liquidity have been net proceeds from the public offering of the Units, rental payments under the terms of the leases discussed in Item 2, proceeds from the Financing discussed in Item 1 and Note 7, "Mortgage Note Payable", of the Notes to the Financial Statements contained in Item 8

ITEM 8. Financial Statements and Supplementary Data
See Item 14 for a listing of the financial statements and supplementary data filed with this report.
ITEM 9.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
ITEM 10.

ITEM 10. Directors and Executive Officers of the Registrant
The Partnership has no Directors or Executive Officers. The affairs of the Partnership are conducted through the General Partner. Certain officers and directors of the General Partner are now serving (or in the past have served) as officers and directors of entities which act as general partners of a number of real estate limited partnerships which have sought protection under the provisions of the Federal Bankruptcy Code. The partnerships which have filed for bankruptcy petitions own real estate which has been adversely affected by the economic condition in the markets in which the real estate is located and, consequently, the partnerships sought protection of the bankruptcy laws to protect the partnerships' assets from loss through foreclosure.
On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of its domestic retail brokerage and asset management businesses to Smith Barney, Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to this sale, Shearson changed its name to Lehman Brothers Inc. ("Lehman"). The transaction did not affect the ownership of the Partnership or the General Partner.
Set forth below are the names, ages, positions and offices held, and a brief account of the business experience during the past five years of each Director and Executive Officer of the General Partner and the Assignor Limited Partner as of December 31, 1994. Each such officer and director holds a similar position in the General Partner and the Assignor Limited Partner.
Name Age Office
Regina M. Hertl 36 President Rocco F. Andriola 36 Vice President, Director and Chief Financial Officer
Regina M. Hertl is a First Vice President of Lehman Brothers in its Diversified Asset Group and is responsible for the investment management of commercial and residential real estate, and a venture capital portfolio. From January 1988 through December 1988, Ms. Hertl was Vice President of the Real Estate Accounting Group within the Controller's Department of Shearson Lehman Brothers. From September 1986 through December 1987, she was an Assistant Vice President responsible for real estate accounting analysis within the Controller's Department at Shearson. From September 1981 to September 1986, Ms. Hertl was employed by the accounting firm of Coopers & Lybrand. Ms. Hertl, who is a Certified Public Accountant, graduated from Manhattan College in 1981 with a B.S. degree in Accounting.
Rocco F. Andriola is a Senior Vice President of Lehman Brothers in its Diversified Asset Group. Since joining Lehman Brothers in 1986, Mr. Andriola has been involved in a wide range of restructuring and asset management activities involving real estate and other direct investment transactions. From 1986-89, Mr. Andriola served as a Vice President in the Corporate Transactions Group of Shearson Lehman Brothers' office of the general counsel. Prior to joining Lehman Brothers, Mr. Andriola practiced corporate and securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola received a B.A. degree from Fordham University, a J.D. degree from New York University School of Law, and an LL.M degree in Corporate Law from New York University's Graduate School of Law.
ITEM 11.

ITEM 11. Executive Compensation
The Directors and Officers of the General Partner and the Assignor Limited Partner do not receive any salaries or other compensation from the Partnership or the Assignor Limited Partner.
The General Partner is entitled to varying percentages of Net Cash Flow distributed in any fiscal year and to varying percentages of the Net Proceeds of capital transactions. See Item 5 hereof for a description of such arrangements.
ITEM 12.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1994, the only entity known by the Partnership to be the beneficial owner of more than five percent of the Units was Chrysler Master Pension Trust, U/A/D 5/28/56, 12,000 Chrysler Drive, Highland Park, Michigan, which was the beneficial owner of 450,000 Units or approximately 5.74% of the total outstanding Units.
As of December 31, 1994, neither the General Partner nor any of its officers or directors held any Units.
ITEM 13.

ITEM 13. Certain Relationships and Related Transactions
The General Partner or its affiliates earned fees and compensation in connection with the syndication, acquisition, and organization services rendered to the Partnership. As of December 31, 1994, $127,921 remained unpaid.
Under the terms of the Partnership Agreement, the General Partner and certain affiliates may be reimbursed by the Partnership for certain operational expenses, including but not limited to audit, appraisal, legal and tax preparation fees as well as costs of data processing. The Shareholder Services Group provides partnership accounting and investor relations services for the Registrant. Prior to May 1993, these services were provided by an affiliate of the General Partner. The Registrant's transfer agent and certain tax reporting services are provided by Service Data Corporation, an unaffiliated company. For the amounts paid to affiliates for the three years ended December 31, 1994, see Note 4 "Transactions with Related Parties" of the Notes to the Financial Statements included in Item 8 of this report.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Schedules.
Page Report of Independent Auditors
Balance Sheets at December 31, 1994 and 1993
Statements of Operations for the years ended December 31, 1994, 1993 and 1992
Statements of Partners' Capital (Deficit) for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Schedule III - Real Estate and Accumulated Depreciation
No other schedules are presented because the information is not applicable or is included in the Financial Statements or the notes thereto.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1994.
(c) Exhibits
Subject to Rule 12b-32 of the Securities and Exchange Act of 1934 regarding incorporation by reference, listed below are the exhibits which are filed as part of this report:
3. The Partnership's Amended and Restated Agreement of Limited Partnership, dated as of November 1, 1986, is hereby incorporated by reference to Exhibit A to the Prospectus contained in Registration Statement No. 33-8105, which registration statement (the "Registration Statement") was declared effective by the SEC on November 19, 1986.
4. The form of Unit Certificate is hereby incorporated by reference to Exhibit 4.1 to the Registration Statement.
10.1 Subscription Agreement and Signature Page is included as Exhibits B and C to the Prospectus contained in the Registration Statement, and is incorporated herein by reference.
10.2 Escrow Agreement between the Partnership and United States Trust Company of New York is hereby incorporated by reference to Exhibit 10.3 to the Registration Statement.
10.3 Property Management Agreement between the Partnership and Feldman Realty relating to the Project is hereby incorporated by reference to Exhibit 10.3 to the Registration Statement.
10.4 Supervisory Leasing and Management Agreement between the Partnership and the Manager relating to the Project is hereby incorporated by reference to Exhibit 10.4 to the Registration Statement.
10.5 Demand Promissory Note from Shearson to the General Partner is hereby incorporated by reference to Exhibit 10.5 to the Registration Statement.
10.6 Contract of Sale, as amended to date, relating to the land portion of the Project and all exhibits thereto is included as Exhibit L to the Development Agreement, and is hereby incorporated herein by reference to Exhibit 10.6 to the Registration Statement.
10.7 Development Agreement between the Developer and the Partnership is hereby incorporated by reference to Exhibit 10.7 to the Registration Statement.
10.8 Guaranty of the Developer's obligations is hereby incorporated by reference to Exhibit 10.8 to the Registration Statement.
10.9 Form of Letter Agreement between Edward Feldman and the Partnership relating to the Guaranty is hereby incorporated by reference to Exhibit 10.9 to the Registration Statement.
10.10 Modification of Development Agreement between the Developer and the Partnership is hereby incorporated by reference to Exhibit 10.10 to the Registration Statement.
10.11 Commitment Letter from Shearson Lehman Brothers Holdings Inc. to the Partnership is hereby incorporated by reference to Exhibit 10.11 to the Registration Statement.
10.12 Agreement Regarding Securities Law Liability between Developer, Feldman Realty & Management Corp., Edward Feldman, Shearson, Registrant and the General Partner is hereby incorporated by reference to Exhibit 10.14 to the Registration Statement.
10.13 Modification of Supervisory Leasing and Management Agreement between the Partnership and the Manager is hereby incorporated by reference to Exhibit 10.15 to the Registration Statement.
10.14 Commercial Revolving Loan Agreement between the Partnership and People's Bank dated July 19, 1990 is hereby incorporated by reference to Exhibit 10.14 to the Partnership's report on Form 10-K for the year ended December 31, 1990.
10.15 Modification of Loan Agreement, Mortgage, Collateral Assignment of Leases and Other Loan Documents, between the Partnership and Peoples Bank, dated February 17, 1994, is hereby incorporated by reference to Exhibit 10.15 to the Partnership's report on Form 10-K for the year ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 30, 1995 STAMFORD TOWERS LIMITED PARTNERSHIP
BY: Stamford Towers, Inc. General Partner
BY: /S/ Rocco F. Andriola Name: Rocco F. Andriola Title: Director, Chief Financial Officer and Vice President
STAMFORD TOWERS DEPOSITARY CORP.
BY: /S/ Rocco F. Andriola Name: Rocco F. Andriola Title: Director, Chief Financial Officer and Vice President
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 in the capabilities and on the dates indicated.
STAMFORD TOWERS, INC. and STAMFORD TOWERS DEPOSITARY CORP. General Partner
Date: March 30, 1995 BY: /S/ Rocco F. Andriola Rocco F. Andriola Vice President, Director and Chief Financial Officer
Date: March 30, 1995 BY: /S/ Regina Hertl Regina Hertl President
Report of Independent Auditors
General and Limited Partners Stamford Towers Limited Partnership
We have audited the accompanying balance sheets of Stamford Towers Limited Partnership as of December 31, 1994 and 1993, and the related statements of operations, partners' capital (deficit), and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Note 2 to the financial statements discusses the Partnership's real estate investments and Note 5 discusses the Partnership's lease agreement with its major tenant.
In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Stamford Towers Limited Partnership at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts January 25, 1995
Balance Sheets December 31, 1994 and 1993
Assets 1994 1993
Real estate investments, at cost: Land $ 14,714,483 $ 14,714,483 Buildings and improvements 52,537,022 52,365,750 Tenant improvements 6,618,562 6,590,665 Furniture, fixtures and equipment 372,541 372,541
74,242,608 74,043,439 Less-accumulated depreciation (12,226,266) (9,585,930)
62,016,342 64,457,509
Cash and cash equivalents 5,768,902 6,552,078 Restricted cash 89,294 82,592
5,858,196 6,634,670
Accounts receivable 103,201 70,970 Deferred rent receivable 2,381,869 2,408,725 Deferred charges, net of accumulated amortization of $445,587 in 1994 and $322,034 in 1993 309,496 295,427 Prepaid expenses, net of accumulated amortization of $636,235 in 1994 and $487,246 in 1993 320,021 461,219
Total Assets $ 70,989,125 $ 74,328,520
Liabilities and Partners' Capital
Liabilities: Accounts payable and accrued expenses $ 857,084 $ 888,450 Interest payable 95,400 142,876 Due to affiliates 159,091 164,160 Revolving loan payable 15,407,772 14,951,320
Total Liabilities 16,519,347 16,146,806
Partners' Capital (Deficit):	 General Partner (173,287) (136,168) Limited Partners 54,643,065 58,317,882
Total Partners' Capital 54,469,778 58,181,714
Total Liabilities and Partners' Capital $ 70,989,125 $ 74,328,520
See accompanying notes to the financial statements.
Statements of Operations For the years ended December 31, 1994, 1993 and 1992
Income 1994 1993 1992
Rental $ 2,486,730 $ 2,392,211 $ 2,359,242 Interest 192,911 182,101 259,422 Other 293,767 224,612 206,317
Total Income 2,973,408 2,798,924 2,824,981
Expenses
Depreciation and amortization 2,912,878 2,860,958 3,113,557 Property operating 2,313,161 2,380,642 2,000,089 Interest 1,188,986 1,627,333 1,440,519 Professional fees 146,489 188,344 239,111 Partnership service fees 99,724 113,572 131,973 General and administrative 24,106 15,769 79,833
Total Expenses 6,685,344 7,186,618 7,005,082
Net Loss $ (3,711,936) $ (4,387,694) $ (4,180,101)
Net Loss Allocated:
To the General Partner $ (37,119) $ (43,877) $ (41,801) To the Limited Partners (3,674,817) (4,343,817) (4,138,300)
$ (3,711,936) $ (4,387,694) $ (4,180,101)
Per limited partnership unit (7,826,300 outstanding) $ (.47) $ (.56) $ (.53)
See accompanying notes to the financial statements.
Statements of Partners' Capital (Deficit) For the years ended December 31, 1994, 1993 and 1992
General Partner's Limited Total Capital Partners' Partners' (Deficit) Capital Capital
Balance at December 31, 1991 $ (50,490) $ 66,799,999 $ 66,749,509 Net loss (41,801) (4,138,300) (4,180,101)
Balance at December 31, 1992 (92,291) 62,661,699 62,569,408 Net loss (43,877) (4,343,817) (4,387,694)
Balance at December 31, 1993 (136,168) 58,317,882 58,181,714 Net loss (37,119) (3,674,817) (3,711,936)
Balance at December 31, 1994 $ (173,287) $ 54,643,065 $ 54,469,778
See accompanying notes to the financial statements.
Statements of Cash Flows For the years ended December 31, 1994, 1993 and 1992
Cash Flows from Operating Activities: 1994 1993 1992
Net loss $ (3,711,936) $ (4,387,694) $ (4,180,101) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 2,912,878 2,860,958 3,113,557 Increase (decrease) in cash arising from changes in operating assets and liabilities: Restricted cash (6,702) (2,079) 683,294 Accounts receivable (32,231) (10,355) (14,475) Deferred rent receivable 26,856 (704,396) (698,375) Prepaid expenses (7,791) (61,729) (1,062) Accounts payable and accrued expenses (31,366) 144,701 (325,240) Due to affiliates (5,069) (587) 2,596 Interest payable (47,476) 15,859 17,486
Net cash used for operating activities (902,837) (2,145,322) (1,402,320)
Cash Flows from Investing Activities:
Additions to real estate assets (199,169) (152,409) (436,314)
Net cash used for investing activities (199,169) (152,409) (436,314)
Cash Flows from Financing Activities:
Borrowings under the revolving loan payable 456,452 1,638,635 1,847,184 Deferred Charges (137,622) -- --
Net cash provided by financing activities 318,830 1,638,635 1,847,184
Net increase (decrease) in cash and cash equivalents (783,176) (659,096) 8,550 Cash and cash equivalents at beginning of year 6,552,078 7,211,174 7,202,624
Cash and cash equivalents at end of year $ 5,768,902 $ 6,552,078 $ 7,211,174
Supplemental Disclosure:
Write-off of excess Real Estate Tax Capitalization $ -- $ -- $ 223,078
Cash paid for Interest $ 949,390 $ -- $ --
See accompanying notes to the financial statements.
Notes to the Financial Statements December 31, 1994, 1993 and 1992
1. Organization and Business Stamford Towers Limited Partnership (the "Partnership"), a Delaware limited partnership, was formed on August 14, 1986 for the purpose of acquiring two parcels of land, aggregating 3.63 acres, located in Stamford, Connecticut and developing, owning and operating two class A office buildings (the "Buildings") to be constructed thereon (collectively the "Project"). The Buildings contain approximately 325,000 square feet of rentable space.
The general partner of the Partnership is Stamford Towers, Inc. (the "General Partner") is an affiliate of Lehman Brothers Inc. (see below).
Construction of the Buildings commenced in July 1987. However, certificates of occupancy were not received from the City of Stamford until February 6, 1990, representing a substantial delay from the originally scheduled completion date of February 1989. Moreover, during the course of construction, substantial cost overruns were incurred. The Partnership initiated an arbitration proceeding against Edlar, Inc., a Delaware corporation, ("Edlar") in order to establish Edlar's responsibility for certain cost overruns, delays, expenses and liquidated damages in connection with the construction phase of the Project. In January 1993, the arbitrators issued their decision which, in substance, awards the Partnership approximately $8.1 million in damages and costs against Edlar. However, the General Partner's preliminary investigation indicates that Edlar has no significant assets from which the Partnership's arbitration award could be satisfied. Moreover, Edward Feldman, the principal of E dlar, has advised the Partnership that he has no significant, liquid assets from which to satisfy the judgment against him pursuant to his personal guaranty of Edlar's obligation to the Partnership. Mr. Feldman has proposed that his creditors, including the Partnership, enter into a non-judicial workout arrangement whereby his debts might be partially satisfied in the event that his real estate investments appreciate in value in future years. Currently, those investments appear to be over leveraged and without significant market value. The Partnership is in the process of evaluating Mr. Feldman's proposal. (see Note 9).
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic retail brokerage and asset management businesses to Smith Barney, Harris Upham & Co. Incorporated. Subsequent to the sale, Shearson Lehman Brothers Inc. changed its name to Lehman Brothers Inc. The transaction did not affect the ownership of the general partner.
The Partnership will terminate on December 31, 2036 unless dissolved sooner as provided within the Agreement.
2. Significant Accounting Policies
Cash Equivalents - Cash equivalents consist of short-term highly liquid investments which have maturities of three months or less from the date of purchase. Substantially all the Partnership's cash balances are invested with an affiliate of the General Partner.
Offering Costs - Offering costs of $6,454,526 are non-amortizable and have been deducted from the limited partners' capital.
Deferred Charges - Costs incurred in connection with obtaining mortgage financing are included in deferred charges. These costs are amortized over the life of the related mortgage loan.
Leasing Commissions - Leasing commissions included in prepaid expenses are being amortized over the term of the non-cancelable portions of the leases.
Deferred Rent Receivable - Deferred rent receivable consists of rental income which is recognized on a straight-line basis over the non-cancelable portion of the leases which will not be received until later periods as a result of rental concessions.
Real Estate Investments - Real estate investments, which consist of buildings and improvements, tenant improvements and furniture, fixtures and equipment, are recorded at cost less accumulated depreciation. Cost of the buildings includes the initial purchase price of the property plus closing costs, acquisition and legal fees and capital improvements. Depreciation on the buildings and improvements is computed using the straight-line method based on estimated useful lives of 35 years. Tenant improvements are depreciated by the straight-line method over the terms of the related leases. Furniture, fixtures and equipment are depreciated over their estimated useful lives.
The current estimated value of the real estate investments as of December 31, 1994 is comparable to 1993, however, down significantly from prior years. This decline in value has resulted in a current market value that is lower than what is expected over the long term holding period for the investment. The real estate investments will be carried at cost less accumulated depreciation unless facts and circumstances arise in future periods that indicate the carrying value of the real estate investments is permanently impaired.
Income Taxes - No provision for income taxes has been made in the financial statements since such taxes are the responsibility of the individual partners rather than that of the Partnership.
3. The Partnership Agreement Pursuant to the terms of the Partnership Agreement, all net income from operations of the Partnership will be allocated in substantially the same manner as cash distributions from operations. All net losses from operations of the Partnership generally will be allocated 99% to the limited partners and 1% to the General Partner.
Distributions of net cash flow from operations, if any, as defined in the Partnership Agreement, shall be made to the partners quarterly during each year on the basis of 99% to the limited partners and 1% to the General Partner until the limited partners have received their Preferred Return (14% per annum), as defined in the Partnership Agreement, and then 90% to the limited partners and 10% to the General Partner. Cash distributions from operations will be reduced to the extent of any debt service payable with respect to the financing (see Note 7).
Upon sale or an interim capital transaction, net proceeds will be distributed after the close of the calendar quarter in which such a sale or capital transaction occurs. Such net proceeds will first be distributed 99% to the limited partners and 1% to the General Partner until the limited partners receive their Preferred Return Arrearage and Unrecovered Capital, as defined in the Partnership Agreement, with any remaining proceeds to be distributed 90% to the limited partners and 10% to the General Partner.
Upon sale or an interim capital transaction, net gains will first be allocated to the extent of net proceeds distributed to the limited partners and General Partner from related transactions, then to the limited partners and General Partner in proportion to their respective negative balances in their capital accounts; then the remainder of such net gains should be allocated to the extent possible so that the positive balances in the capital accounts of the limited partners and the General Partner are in the proportions of 90% and 10%, respectively. Tax losses from sale or an interim capital transaction will be allocated to the limited partners and General Partner in proportion to their respective positive balances in their capital accounts after such allocation, the remainder of the tax losses should be allocated to the extent possible so that the negative balances in the capital accounts of the limited partners and General Partner are in the proportions of 90% and 10%, respectively.
All net gains and tax losses in connection with the sale of all or substantially all of the assets of the Partnership or any other event causing a dissolution of the Partnership shall be allocated in substantially the same manner as net gains and tax losses from sale or an interim capital transaction.
If, as a result of the dissolution of the Partnership, the capital account of the General Partner is less than zero, the General Partner shall contribute to the Partnership an amount equal to the lesser of the deficit balance in its capital account or the excess of one and one one-hundredth percent of the total capital contribution of the limited partners over the total capital contributions previously made by the General Partner to the Partnership.
4. Transactions with Related Parties The General Partner earned fees and compensation in connection with organization, syndication and acquisition services rendered to the Partnership. As of December 31, 1994, $127,921 of these amounts remain accrued and unpaid.
Under the terms of the Partnership Agreement, the Partnership reimburses the General Partner, at cost, for the performance of certain administrative services provided by a third party. For the years ended December 31, 1994, 1993 and 1992, costs of such services were $51,044, $55,375, and $73,057, respectively. At December 31, 1994 and 1993, $31,027 and $36,239, respectively, were due to the General Partner for the performance of these services.
5. Lease Agreement with Citicorp POS Information Services The Partnership entered into a lease with Citicorp POS Information Services ("Citicorp POS") on May 15, 1990 (the "Lease Agreement"). Citicorp POS leased approximately 136,000 rentable square feet of the North Tower, representing 41% of the Project. The lease term is for eleven years with the option to cancel after June, 1996. If the option to cancel is elected, Citicorp POS will be required to pay a substantial penalty to the Partnership. Using occupancy percentages at December 31, 1994, if Citicorp POS vacated the premises, only 14% of the Project would remain rented. Under the Lease Agreement, the Partnership is recording a minimum annual rental revenue of $2,197,196, calculated on a straight-line basis, during the non-cancelable term of the lease. Citicorp POS's performance of its obligation under the terms of its lease is guaranteed by Citicorp.
In December, 1992, Citicorp POS discontinued operations, vacated the space and assigned the Lease Agreement to Citicorp North America, Inc. ("Citicorp N.A."). As of December 1994, substantially all of the space is occupied by Citicorp N.A. and its affiliates.
During 1994, 1993 and 1992, Citicorp and other tenants, have reimbursed the Partnership for tenant electricity, overtime heating and air conditioning charges and certain other operating expenses, in accordance with their respective lease agreements, in the total amount of $288,472, $220,012, and $165,009, respectively. These amounts have been included in other income on the statement of operations.
6. Future Minimum Lease Rental Payments Future minimum rental payments (excluding cancellation penalties) to be received under the non-cancelable portion of the existing operating leases as of December 31, 1994 are as follows:
1995 $ 3,767,596 1996 2,289,122 1997 280,993 1998 283,741 1999 254,927 Thereafter 687,953
$ 7,564,332
7. Mortgage Note Payable On July 19, 1990, the Partnership closed a loan with People's Bank ("People's") to provide mortgage financing to the Partnership. As part of this loan, the Partnership paid People's a fee equal to one and one-half percent of the aggregate loan amount. The mortgage note payable was a $25 million, seven year, non-recourse first mortgage loan with an 11.5% fixed interest rate for the first five years which was set at three percent over the five year United States treasury security rate at loan closing.
On February 17, 1994, the Partnership entered into a loan modification agreement with People's (the "Loan Modification"). The Loan Modification: (i) reduced the interest rate on the loan from 11.5% to 7.43% commencing February 1, 1994 and continuing until the first adjustment date on July 19, 1995; (ii) reduced the principal balance of the loan from $25 million to $24,449,795; and (iii) eliminated the interest reserve line item. Payments of interest are due monthly in arrears and are required to be paid from the Partnership's own funds. Loan proceeds may continue to be used on an "as needed" basis to fund all other approved line items. Payment of the outstanding principal amount is due at the end of the seven year term. The loan may be prepaid in whole or in part at any time without penalty. As of December 31, 1994, the principal balance of the loan was $15,407,772 plus interest payable of $95,400 for a total balance of $15,503,172.
During 1994, the Partnership drew down on the loan $456,452 for capital expenditures and interest expenses. In 1993 and 1992, the Partnership drew down on the loan $1,611,474 and $1,423,023, respectively, for interest expense only.
8. Reconciliation of Net Loss to Tax Loss For the year ended December 31, 1994, net loss reported in the financial statements exceeded the tax loss by $28,358. For the years ended December 31, 1993 and 1992 the tax loss exceeded the net loss reported in the financial statements by $730,926 and $453,806, respectively. These differences are due to the differences between the tax basis and financial statement basis of buildings and improvements and the use of accelerated methods of depreciating real estate for tax purposes as compared to the straight-line method used for financial statement purposes. In addition, rental income is recorded on a straight-line basis over the terms of the leases for financial statement purposes, and is reportable for tax purposes when received or receivable.
9. Arbitration Proceedings with the Developer In late January of 1989, the Partnership initiated an arbitration proceeding against Edlar in order to establish Edlar's responsibility for certain cost overruns, delays, expenses and liquidated damages in connection with the construction phase of the Stamford Towers office project (the "Project"). Subsequently, the arbitration was consolidated with a separate arbitration between Edlar and the Project's construction manager, Gilbane Building Company ("Gilbane").
In January 1993, the arbitrators issued their decision which, in substance, awards the Partnership approximately $8.1 million in damages and costs against Edlar and awards Gilbane approximately $2.6 million in damages and costs against Edlar. In addition, the arbitrators ordered Edlar to hold the Partnership harmless with respect to (i) the mechanic's lien filed by Gilbane against the Partnership, which is presently the subject of an action in Connecticut state court and (ii) any similar liens filed by subcontractors who worked on the project. The arbitrators further found that the Partnership properly terminated Edlar under the Development Agreement. That finding has the effect of eliminating the residual interest in the Project of Edlar's affiliate, Feldco, Inc. Edlar was not awarded any amounts on its claims against the Partnership or Gilbane. The Partnership has entered judgment against both Edlar and Edward Feldman, pursuant to his personal guaranty of Edlar's obligation to t he Partnership, for the full amount of the arbitration award.
Based on preliminary investigation by the General Partner, it appears that Edlar has no significant assets from which to satisfy the arbitration award. Moreover, based on the General Partner's discussions with Edward Feldman concerning his proposal for a non-judicial workout, it would appear that his assets, consisting largely of illiquid real estate investments, are insufficient to satisfy his substantial outstanding obligations to his creditors, including the Partnership.
10. Litigation On February 1, 1991, the construction manager at the Project, Gilbane, filed a mechanic's lien against the Project in the sum of $4,583,481. On August 9, 1991, Gilbane commenced an action entitled Gilbane Building Co. v. Stamford Towers Limited Partnership, et. al., in the Connecticut Superior Court for the Judicial District of Stamford/Norwalk at Stamford (the "Gilbane Action"). The defendants include the Partnership. Gilbane alleges breach of various contracts and unfair trade practices and seeks foreclosure of its mechanic's lien, monetary damages, attorney fees, punitive damages, possession of the premises, and the appointment of a receiver. On May 17, 1993, at the request of the Partnership, Gilbane reduced the amount of the lien to $2,650,018.
On September 21, 1993, Gilbane filed a motion for Partial Summary Judgment as to Liability Only. The Partnership successfully opposed this motion, and the motion was denied by the court on November 4, 1993. On October 28, 1993, the Partnership filed a Motion for Summary Judgment which has not yet been acted upon by the court. On October 21, 1993, the Partnership filed its Answer, Special Defences and Counterclaims to Gilbane's action. The Partnership's Counterclaim against Gilbane alleges breach of various contracts, unfair trade practices and slander of title. On November 10, 1993, Gilbane filed its Reply to Stamford Towers' Special Defenses and Answer to Stamford Towers' Counterclaim and claimed the action to the jury trial list.
On November 3, 1994, the Partnership filed a Request for Leave to File Amended Special Defenses, Counterclaims, Set-Offs and Recoupment. On January 25, 1995, this Request was granted by the Court over Gilbane's objection. The Partnership's Amended Counterclaim against Gilbane adds, in addition to the allegations of its original Counterclaim, additional allegations of negligence, breach of warranty, breach of contract, products liability and unfair trade practices. Gilbane has not yet answered the Partnership's Amended Counterclaim. The parties are currently engaged in discovery, and a trial has been tentatively scheduled to begin on August 1, 1995. The Partnership expects to vigorously defend against each of Gilbane's claims.
On December 31, 1990, a subcontractor of the Project, Moliterno Stone Sales, Inc. ("Moliterno") filed a mechanic's lien against the Property in the sum of $155,936. On December 11, 1991, Moliterno filed a cross-claim against the Partnership in the Gilbane Action. Moliterno seeks foreclosure on its mechanic's lien and monetary damages, along with possession of the premises. An application to discharge Moliterno's mechanic's lien was filed by the Partnership on April 30, 1993. The Partnership expects to vigorously defend against Moliterno's claim.
STAMFORD TOWERS LIMITED PARTNERSHIP Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Cost Capitalized Initial Subsequent Cost to Partnership (A) To Acquisition
Buildings and Buildings and Description Encumbrances Land Improvements Improvements
Office Buildings:
North Tower Stamford, CT $ 9,244,663 $ 8,828,690 $ 31,289,872 $ 7,404,213
South Tower Stamford, CT 6,163,109 5,885,793 20,859,915 197,203
$ 15,407,772 $ 14,714,483 $ 52,149,787 $ 7,601,416
STAMFORD TOWERS LIMITED PARTNERSHIP Schedule III - Real Estate and Accumulated Depreciation (continued)
December 31, 1994
Gross Amount at Which Carried at Close of Period (B, C)
Buildings and Accumulated Description Land Improvements Total Depreciation
Office Buildings:
North Tower Stamford, CT $ 8,828,690 $ 38,560,238 $ 47,388,928 $ 9,276,328
South Tower Stamford, CT 5,885,793 20,967,887 26,853,680 2,949,938
$ 14,714,483 $ 59,528,125 $ 74,242,608 $ 12,226,266
STAMFORD TOWERS LIMITED PARTNERSHIP Schedule III - Real Estate and Accumulated Depreciation (continued)
December 31, 1994
Life on which Depreciation Date Date in Latest Construction Construction Income Statements Description Complete Began is Computed
Office Buildings:
North Tower Stamford, CT February 1990 August 1987 5-35 years
South Tower Stamford, CT February 1990 August 1987 5-35 years
(A) The initial cost to the Partnership represents the original purchase price of the properties. (B) For Federal income tax purposes, the aggregate cost of real estate at December 31, 1994 and 1993 is $74,649,569 and $74,450,400, respectively. (C) For Federal income tax purposes, the amount of accumulated depreciation at December 31, 1994 and 1993 is $9,267,837 and $7,328,080, respectively.
A reconciliation of the carrying amount of real estate and accumulated depreciation for the years ended December 31, 1994, 1993 and 1992:
Real Estate investments: 1994 1993 1992
Beginning of year $ 74,043,439 $ 73,891,030 $ 73,677,794 Additions 199,169 152,409 436,314 Less retirements -- -- (223,078)
End of year $ 74,242,608 $ 74,043,439 $ 73,891,030
Accumulated Depreciation:
Beginning of year $ 9,585,930 $ 6,957,448 $ 4,376,639 Depreciation expense 2,640,336 2,628,482 2,580,809
End of year $ 12,226,266 $ 9,585,930 $ 6,957,448