ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report.
The registrant, Carlyle Real Estate Limited Partnership - XI (the "Partnership"), is a limited partnership formed in 1981 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $137,500,000 in Limited Partnership Interests (the "Interests") to the public commencing on May 8, 1981 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-70724). A total 137,500 Interests were sold to the public at $1,000 per Interest. The offering closed on May 5, 1982. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's real property investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate on or before December 31, 2031. Accordingly, the Partnership intends to hold the real properties it acquires for investment purposes until such time as sale or other disposition appears to be advantageous. Unless otherwise described, the Partnership expects to hold its properties for long-term investment where, due to current market conditions, it is impossible to forecast the expected holding period. At sale of a particular property, the proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investments are subject to competition from similar types of properties (including, in certain areas, properties owned or advised by affiliates of the General Partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth on a quarterly basis in the table set forth in Item 2

ITEM 2. PROPERTIES
The Partnership owns directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations carried on in and approximate occupancy levels by quarter during fiscal years 1994 and 1993 for the Partnership's investment properties owned during 1994:
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal proceedings, other than ordinary litigation incidental to the business of the Partnership.
ITEM 4.

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

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1994, there were 13,856 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Corporate General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any economic aspects of the transaction, will be subject to negotiation by the investor.
Reference is made to Item 6

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On May 8, 1981, the Partnership commenced an offering of $125,000,000 (subject to increase by up to $12,500,000) in Limited Partnership Interests ("Interests") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. All Interests were subscribed and issued between May 8, 1981 and May 5, 1982 pursuant to the public offering from which the Partnership received gross proceeds of $137,500,000. After deducting selling expenses and other offering costs, the Partnership had approximately $121,936,000 with which to make investments in income- producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such investments and to satisfy working capital requirements. Portions of the proceeds were utilized to acquire the properties described in Item 1 above.
At December 31, 1994, the Partnership and its consolidated ventures had cash and cash equivalents of approximately $2,103,000 and short-term investments of approximately $1,393,000. Such funds are available for future distributions to partners, and for working capital requirements including the Partnership's portion of the anticipated net cash flow deficits at the 767 Third Avenue Office Building and the National City Center Office Building. The Partnership and its consolidated ventures have currently budgeted in 1995 approximately $3,302,000 for tenant improvements and other capital expenditures. The Partnership's share of such items and its share of such similar items for its unconsolidated ventures in 1995 is currently budgeted to be approximately $2,174,000. Actual amounts expended in 1995 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. Certain of the Partnership's investment properties and properties in which the Partnership has a security interest currently operate in overbuilt markets which are characterized by lower than normal occupancies and/or reduced rent levels. Such competitive conditions will contribute to the anticipated net cash flow deficits described above. The sources of capital for such items and for future short-term and long-term liquidity and distributions to partners are expected to be from net cash generated by the Partnership's investment properties and through the sale of such investments. In such regard, reference is made to the Partnership's property specific discussions below and also the Partnership's disclosure of certain property lease expirations in Item 6. The Partnership does not consider the mortgage notes receivable arising from the previous sale of the Partnership's investment property to be a source of future liquidity as collection of any past due or future payments on the Partnership's notes is considered unlikely. Reference is made to Note 7(a). The Partnership's and its Ventures' mortgage obligations are all non-recourse. Therefore, the Partnership and its Ventures are not obligated to pay mortgage indebtedness unless the related property produces sufficient net cash flow from operations or sale.
The Partnership currently has adequate cash and cash equivalents to maintain the operations of the Partnership. However, based upon estimated operations of certain of the Partnership's investment properties, the Partnership decided to suspend distributions to the Limited and General Partners effective as of the second quarter of 1991. In addition, the Partnership has deferred cash distributions and partnership management fees related to the first quarter of 1991 as discussed in Note 9. These amounts, which do not bear interest, are approximately $19,000 and are expected to be paid in future periods.
As described more fully in Note 4(b), the Partnership is seeking or has received mortgage loan modifications on certain of its properties. If the Partnership is unable to secure new or additional modifications to the loans, based upon current market conditions, the Partnership may not commit any significant additional amounts to any of the properties which are incurring, or in the future do incur, operating deficits or deficits to underlying mortgage holders. This would result in the Partnership no longer having an ownership (or security) interest in such properties. Such decisions will be made on a property-by-property basis and may result in a gain to the Partnership for financial reporting and Federal income tax purposes, with no corresponding distributable proceeds.
The lender of the existing long-term mortgage notes secured by the Scotland Yard-Phase I and II, South Point, and El Dorado View apartment complexes required the establishment of an escrow account, initially of approximately $980,000 in the aggregate, to be used towards the purchase of major capital items at the apartment complexes. The lender also required $150,000 of the proceeds from the sale of the South Point Apartments, as more fully discussed in Note 7(f), to be added to the escrow account. As of December 31, 1994, the Partnership has been reimbursed from the escrow account approximately $959,000 for capital improvements at the above- referenced apartment complexes. Additionally, the lender has the right to call the remaining loans at any time after January 1, 1996. In this regard, the Partnership is currently marketing the Scotland Yard Phase I and II and the El Dorado View apartment complexes for sale. If the Partnership is unsuccessful in selling the properties prior to January 1, 1996 and the lender exercises its right to call the loans, the Partnership would recognize a gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds. Reference is made to Note 4(c).
Wood Forest Glen Apartments
During 1991, the Partnership continued to negotiate with the lender to further modify the long-term mortgage note secured by the Wood Forest Glen Apartments. During these negotiations, the Partnership continued to pay debt service at the previously modified terms through December 1990 and, effective January 1991, began to pay debt service on a cash flow basis. In December 1991, the Partnership was notified that the lender sold its mortgage note to a third party. The Partnership pursued discussions with the new lender concerning modifications to the mortgage loan and a possible sale of the property. The Partnership was not successful in securing such modifications; however, in April 1992, the Partnership sold its interest in the property to the new lender for approximately $213,000 in excess of the existing mortgage balance. As a result of the sale, the Partnership recognized a gain on sale in 1992 of $6,470,625 and $7,058,574 for financial reporting and Federal income tax purposes, respectively. Reference is made to Note 4(b).
Bitter Creek Apartments
During February 1992, the Bitter Creek venture received an additional modification to the long-term mortgage notes. The venture was required to pay down approximately $436,000 of the principal balance of the mortgage loan in exchange for the lender forgiving all deferred interest and extending the term of the modification. The Partnership's share of the required principal payment was approximately $58,000. The new modified interest accrual and payment rate averaging 7% for the period June 15, 1991 to June 9, 1992 was based upon the lender's prime rate. The additional mortgage modification provided that payments of interest be paid monthly and the principal balance and any accrued interest be due and payable on December 15, 1992.
On June 9, 1992, the venture sold the land and related assets of the Bitter Creek apartment complex for $10,250,000 in cash (before selling costs and prorations). A major portion of the sales proceeds was utilized to retire the related underlying mortgage note of approximately $9,064,000. The Partnership and the venture partner received approximately $339,000 and $681,000, respectively, from the sale of the property after deducting expenses in connection with the sale and the mortgage loan retirement. The Partnership recognized a gain in 1992 of $142,967 and $2,808,159 for financial reporting and Federal income tax purposes, respectively. Reference is made to Note 7(e).
767 Third Avenue Office Building
Occupancy at the property is 89% at December 31, 1994, up from 83% in 1993. The 767 Third Avenue venture is aggressively marketing the remaining vacant space. The Partnership is obligated to fund its share of the net cash flow deficits resulting from costs associated with any leasing activity at the property.
During 1991 and 1992, the leases for approximately 67% of the space at the 767 Third Avenue Office Building expired (substantially all of which have been released as of December 1994 but at lower effective rents). During the first quarter of 1994, a tenant vacated a portion of its space (approximately 6,450 square feet or 2% of the building's leasable space) prior to its lease expiration of January 1997. The venture reached an agreement with the tenant whereby the lease obligation was terminated in return for an $800,000 payment to the venture. This space was subsequently released to a new tenant. Vacancy rates in Midtown Manhattan (the sub- market for this property) remain high and the increased competition for tenants has resulted in lower effective rental rates (contract rates less the amortization of tenant improvements and free rent concessions). The adverse market conditions and the negative impact of effective rental rates are expected to continue over the next few years. While this building is in a premier location, it has been adversely impacted by the lower effective rental rates upon leasing and by releasing costs. In order to reduce debt service payments during the tenant turnover period, the 767 Third Avenue joint venture obtained from the existing lender, in May 1992, a replacement mortgage loan bearing a substantially lower interest rate than the original loan. In connection with the replacement mortgage loan, 767 Third Avenue was required to fund $8,000,000 into an escrow account to fund any future leasing costs and debt shortfalls resulting from anticipated tenant turnover. At the inception of the escrow agreement, the venture was allowed to reduce the required reserve contributions by approximately $2,600,000 to reflect certain leasing costs that had already been incurred. The Partnership's joint venture partner loaned $5,000,000 to the joint venture in order to fund the net escrow reserve account. The Partnership purchased a 50% interest in this loan in June 1993. Reference is made to Note 4(b). In 1993, the reserve account was depleted and the venture (by way of partner contributions) continues to fund required leasing costs and debt service shortfalls. During 1994, the venture partner approached the Partnership regarding purchasing the Partnership's 50% interest in 767 Third Avenue. However, upon review of the proposed terms, the Partnership did not believe the offer to be in its best interest and the offer was rejected.
824 Market Street
Occupancy at the 824 Market Street Office building located in Wilmington, Delaware had risen to 56% during 1994, up from 49% at December 31, 1993. The 824 Market Street venture was aggressively seeking replacement tenants for the vacant space; however, competition had risen significantly due to new office building development in the area over the last few years and the contraction of tenants in the financial services industry, resulting in lower effective rental rates. In order to reduce debt service payments during the tenant turnover period, the venture had negotiated with the first mortgage lender for a possible modification to the mortgage note. Such negotiations were unsuccessful and the venture received a notice of default. Accordingly, for financial reporting purposes, the underlying debt of approximately $13,515,000 was reflected as a current liability in the accompanying consolidated financial statements at December 31, 1993. The first mortgage lender commenced proceedings to realize upon its security and was the successful bidder at the foreclosure sale held in October 1994. The deed was conveyed to the first mortgage lender on December 12, 1994. As a result of the disposition of the property, the Partnership recognized a gain in 1994 for financial reporting and Federal income tax purposes of $3,689,195 and $6,805,134, respectively, with no corresponding distributable proceeds.
Riverfront Office Building
On August 28, 1990, the Riverfront joint venture acquired additional financing by way of a $5,800,000 fourth mortgage note in order to fund the costs associated with leasing vacant space. As of the date of this report, the joint venture has received approximately $5,730,000 in proceeds. The balance of the proceeds, a $70,000 engineering holdback, is payable to the joint venture upon completion of certain structural repairs, the extent of which are being negotiated with the lender but which are not expected to exceed the holdback amount. Though physical occupancy at the property increased from 85% at December 31, 1993 to 95% at December 31, 1994, average rent paying occupancy decreased due to (i) a major tenant, (vacating approximately 25% of the building in July 1992 due to a downsizing of its operations) continuing to pay rent through the remaining terms of its leases which expired in April 1993 and (ii) a second major tenant downsizing its operations in April 1993 by approximately 36,000 square feet or 11% of the building and receiving a rent reduction of approximately 23% on its remaining leased space. The property began operating at a deficit in 1992 and, as a result, debt service payments since July 1992 were made on a delayed basis. At December 31, 1994, the February 1993 through December 1994 debt service payments are delinquent by approximately $6,724,000. Accordingly, the loan balances of approximately $34,298,000 have been reflected as a current liability in the consolidated financial statements. In order to reduce debt service payments, the joint venture has initiated discussions with the lender to negotiate possible modifications to the mortgage notes. In this regard, the joint venture has entered into a non-binding letter of intent with the existing lender for a restructure of its mortgage loans. The proposed terms of the loan restructure would retroactively reduce the interest rate payable on the loans and reduce the term of the loan from its present maturity date of September 2018 to December 2007. The loans (which currently bear interest at rates ranging from 10% to 14% per annum) would bear interest at 6% per annum for the period January 1, 1993 through December 31, 1997. Thereafter, the interest rate per annum shall be the greater of the rate derived using the "Coverage Formula" (as defined) or 7% from January 1, 1998 to December 31, 1999; 8.25% from January 1, 2000 to December 31, 2002; and 9% from January 1, 2003 to December 31, 2007. In addition, the lender is entitled to earn a minimum internal rate of return of 10.5% per annum calculated over the restructured loan term. The proposed loan restructure would also require that net cash flow after debt service and capital be paid into an escrow account controlled by the lender to be used for operating shortfalls and costs associated with additional leasing as approved by the lender. In addition, the property operates under a ground lease and the joint venture has not made the scheduled ground lease payments since February 1993. The ground lessor is a general partner of the venture partner. At December 31, 1994, the total amount of ground lease payments in arrears is approximately $343,000. In this regard, the proposed loan restructure discussed above would provide for the waiver of any and all ground lease payments since the first missed payment in February 1993 until the earlier of any future mortgage loan prepayment date (resulting from a sale or refinancing of the property) or December 31, 2007. The proposed loan restructure also provides that if, during calendar year 1997, projections of gross rental revenue approved by the lender during the year are not less than $9 million per year for each of the next five calendar years, annual payments of ground rent would resume, but in a reduced amount (as defined). There can be no assurances that the restructure will be obtained. If the joint venture is unable to secure any modifications to the mortgage notes, the joint venture would likely decide, based upon current and anticipated future market conditions, not to commit any significant additional amounts to this property. This would result in the Partnership no longer having an ownership interest in this property and would result in a gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds.
Yerba Buena West Office Building
In June 1992, the joint venture transferred title to the property to the lender in return for an opportunity to share in future sale or refinancing proceeds above certain specified levels.
Based upon the conditions at the Yerba Buena West Office Building, including tenant disputes following the October 17, 1989 San Francisco earthquake, the venture had not made the debt service payments to the underlying lender, commencing with the January 1990 payment. The Partnership and Affiliated Partners had decided, based upon an analysis of current market conditions and the probability of large future cash deficits, not to fund future venture cash deficits. The venture was unable to negotiate a loan modification to pay for expected future cash deficits whereby the venture retained ownership of the property, and in June 1992, the venture transferred title to the property to the lender in return for an opportunity to share in future sale or refinancing proceeds above certain specified levels. In order for the joint venture to share in such proceeds, there must be a significant improvement in current market and property operating conditions resulting in a significant increase in value of the property. In addition, until June 1995, the venture will have a right of first opportunity to purchase the property if the lender chooses to sell. As a result of the transfer of title to the lender as discussed above, the Partnership no longer has an ownership interest in the property and recognized a gain in 1992 for financial reporting and Federal income tax purposes of $1,614,369 and $964,406, respectively, with no corresponding distributable proceeds.
Mall of Memphis
Although occupancy had been increasing, in order for the Mall of Memphis to maintain its competitive position in the marketplace, the Mall of Memphis venture completed a mall renovation in 1991. The renovation costs had been funded by the venture until additional financing was in place. The Partnership contributed approximately $2,252,000 in addition to foregoing their share of 1990 and a portion of the 1991 distributable cash flow from the property to cover their portion of the renovation costs. In March 1993, the venture finalized additional financing of a $7,600,000 ten year loan at a rate of 10%. The Partnership's share of the funding in 1993 was $4,719,095 (net of closing costs). Of the amount funded, the Partnership was required to deposit $1,000,000 in an escrow account as security against any currently undiscovered environmental issues. The venture would have been entitled to additional proceeds of $2,025,000 if the property had achieved certain occupancy levels and debt coverage ratios by September 30, 1994, however, the venture did not qualify for such additional proceeds as leasing did not achieve budgeted goals. Reference is made to Note 4(b). In May 1994, an affiliate of the General Partners assumed property management and leasing services. Property management fees are calculated as 3% of base rent (as defined) and leasing commissions are calculated at a rate, which approximates market, based on the terms of the related lease. In addition, the venture partner has approached the Partnership regarding selling its 36.94% interest in the Mall of Memphis to the Partnership. The Partnership is analyzing the proposal and there can be no assurances that such transaction will be consummated.
Meadowcrest Apartments
On June 30, 1992, the second mortgage note secured by the Meadowcrest Apartments complex, located in Dallas, Texas, was scheduled to mature. In October 1991, the Partnership entered into a contract with a prospective buyer for the sale of the property. On June 9, 1992, the Partnership sold the land, building and related improvements and personal property of the Meadowcrest Apartment Complex for $9,575,000 in cash (before selling costs and prorations). A portion of the sales proceeds was utilized to retire the related underlying mortgage notes of approximately $8,445,000. The Partnership received approximately $861,000 from the sale of the property after deducting expenses in connection with the sale and the mortgage loan retirement. As a result of the sale, the Partnership has recognized in 1992 a gain of $562,806 and $5,255,084 for financial reporting and Federal income tax purposes, respectively. Reference is made to Note 7(d).
South Point Apartments
In July 1993, the Partnership sold South Point Apartments to an unaffiliated buyer for approximately $1,145,000 (before closing costs and lender participation) in excess of the existing mortgage balance. As a result of the sale, the Partnership recognized a gain on sale in 1993 of $1,433,916 and $3,512,797 for financial reporting and Federal income tax purposes, respectively. Reference is made to Note 7(f).
General
There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partner(s) in an investment might become unable or unwilling to fulfill its (their) financial or other obligations, or that such joint venture partner(s) may have economic or business interests or goals that are inconsistent with those of the Partnership.
Though the economy has recently shown signs of improvement and financing is generally becoming more available for certain types of higher- quality properties in healthy markets, real estate lenders are typically requiring a lower loan-to-value ratio for mortgage financing than in the past. This has made it difficult for owners to refinance real estate assets at their current debt levels unless the value of the underlying property has appreciated significantly. As a consequence, and due to the weakness of some of the local real estate markets in which the Partnership's properties operate, the Partnership is taking steps to preserve its working capital. Therefore, the Partnership is carefully scrutinizing the appropriateness of any discretionary expenditures, particularly in relation to the amount of working capital it has available. By conserving working capital, the Partnership will be in a better position to meet future needs of its properties without having to rely on external financing sources.
Due to the factors discussed above and the general lack of buyers of real estate today, it is likely that the Partnership may hold some of its investment properties longer than originally anticipated in order to maximize the return to the Limited Partners. Although sale proceeds from the disposition of the Partnership's remaining assets are expected, in light of the current severely depressed real estate markets, without a dramatic improvement in market conditions, the Limited Partners will not receive a full return of their original investment.
Results of Operations
The aggregate decrease in cash and cash equivalents and short-term investments at December 31, 1994 as compared to December 31, 1993 is primarily due to cash retained at the 824 Market Street office building due to the suspension of debt service payments during 1993 and the remittance of such cash to the lender in conjunction with the lender realizing upon its security in the property in December 1994 as more fully discussed in Note 4(b).
The decrease in rents and other receivables at December 31, 1994 as compared to December 31, 1993 is primarily due to (i) the lender realizing upon its security in the 824 Market Street office building in December 1994, as more fully discussed in Note 4(b), (ii) a decrease in unbilled receivables related to 1994 at the Riverfront office building and (iii) an increase in the allowance for doubtful accounts related to certain tenants at the 767 Third Avenue office building.
The decrease in escrow deposits at December 31, 1994 as compared to December 31, 1993 is primarily due to the $312,486 reimbursement from the capital improvement escrow (as approved by the lender for the Partnership's apartment complexes) during 1994 for balcony repairs at the Scotland Yard I apartments. Reference is made to Note 4(c).
The decrease in prepaid expenses at December 31, 1994 as compared to December 31, 1993 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994, as more fully discussed in Note 4(b), and a $110,811 reduction in prepaid real estate taxes at the 767 Third Avenue office building due to a reduction in the property's assessed value.
The decrease in land and buildings and improvements at December 31, 1994 as compared to December 31, 1993 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994, as more fully discussed in Note 4(b), partially offset by tenant improvements resulting from 1994 leasing activity at the Mall of Memphis and the 767 Third Avenue and Riverfront office buildings and balcony repairs in 1994 at the Scotland Yard I and II apartments.
The increase in accumulated depreciation at December 31, 1994 as compared to December 31, 1993 and the corresponding increase in depreciation expense for 1994 as compared to 1993 is primarily due to the full amortization of tenant improvements in 1994 due to a change in estimate with respect to such tenant improvements related to space formerly occupied by two major tenants, Saddlebrook and IBM, who had vacated the Riverfront office building in 1989 and 1993, respectively. Such space was subsequently released during 1993 and 1994, respectively, resulting in the demolition of the existing improvements and the installation of new improvements. Such increase was partially offset by the lender realizing upon its security in the 824 Market Street office building in December 1994 as more fully discussed in Note 4(b).
The decrease in deferred expenses and the decrease in current portion of long-term debt at December 31, 1994 as compared to December 31, 1993 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994, as more fully discussed in Note 4(b).
The increase in the venture partners' deficit in ventures at December 31, 1994 as compared to December 31, 1993 is primarily due to continuing operating deficits during 1994 and the 1994 write-off of tenant improvements at the Riverfront office building, as more fully discussed above. Reference is made to Note 4(b).
The increase in accounts payable at December 31, 1994 as compared to December 31, 1993 is primarily due to the timing of payment of operating expenses at the Partnership's investment properties.
The decrease in unearned rents at December 31, 1994 as compared to December 31, 1993 is primarily due to the timing of receipt of rental income primarily at the Mall of Memphis.
The decrease in accrued interest at December 31, 1994 as compared to December 31, 1993 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994, as more fully discussed in Note 4(b) partially offset by the interest accruals associated with the non-recourse mortgage loans secured by the Riverfront office building. The Partnership is delinquent in debt service payments at the Riverfront office building, as more fully discussed in Note 4(b).
The decrease in due to affiliates at December 31, 1994 as compared to December 31, 1993 is primarily due to the payment in 1994 of salary and overhead reimbursements related to Partnership operations for the years 1991, 1992 and 1993 which had been previously deferred.
The decrease in tenant security deposits at December 31, 1994 as compared to December 31, 1993 is primarily due to a reduction in occupancy during 1994 at the Mall of Memphis and the Scotland Yard I and II apartments.
The increase in long-term debt, less current portion at December 31, 1994 as compared to December 31, 1993 is primarily due to the accrual of participation interest which the lender is entitled to under the terms of the mortgages related to the Partnership's apartment complexes, as more fully discussed in Note 4(c).
The decrease in the venture partners' subordinated equity in ventures at December 31, 1994 as compared to December 31, 1993 is primarily due to the lender realizing upon its security in the 824 Market Street office building in December 1994 and the venture partner's share of the 1994 operating deficits at the 767 Third Avenue office building. Reference is made to Note 4(b).
The decrease in rental income for 1994 as compared to 1993 is primarily due to the sale of the South Point apartments in July 1993, as more fully discussed in Note 7(f), a reduction in rent paying occupancy at the 824 Market Street office building during 1994 (the lender realized upon its security in the building in December 1994), partially offset by an increase in rent paying occupancy at the 767 Third Avenue office building during 1994 and an increase in expense recoveries resulting from an increase in certain expenses at the Mall of Memphis. The decrease in rental income for 1993 as compared to 1992 is primarily due to the sale of the South Point apartments in July 1993.
The decrease in interest income for 1994 as compared to 1993 and for 1993 as compared to 1992 is primarily due to the decreased average investment in interest bearing U.S. Government obligations resulting from the Partnership's funding of the operating deficits at the 767 Third Avenue office building during 1993 and 1994.
The increase in mortgage and other interest for 1994 as compared to 1993 is primarily due to the accrual of participation interest which the lender is entitled to under the terms of the mortgages related to the Partnership's apartment complexes, as more fully discussed in Note 4(c), partially offset by the sale of the South Point apartments in July 1993, as more fully discussed in Note 7(f). The increase in mortgage and other interest for 1993 as compared to 1992 is primarily due to interest related to the additional financing secured by the Mall of Memphis during 1993, as more fully discussed in Note 4(b), and the accrual of participation interest related to the Partnership's apartment complexes. This increase is partially offset by the sale of the Wood Forest Glen apartments in April 1992, the sale of the Meadowcrest apartments and the Bitter Creek apartments in June 1992 and the sale of the South Point apartments in July 1993.
The decrease in property operating expenses for 1994 as compared to 1993 is primarily due to (i) the sale of the South Point apartments in July 1993, (ii) the establishment of a $527,774 reserve at December 31, 1993 due to the uncertainty of collection of the Partnership's mortgage notes receivable, as more fully discussed in Note 7(a), (iii) receipt in 1994 of a $178,835 1993 tax refund at the Riverfront office building due to a reduction in the property's 1993 assessed value, (iv) a reduction in 1994 real estate taxes of approximately $226,000 at the Riverfront office building due to a reduction in the property's 1994 assessed value and (v) the provision for doubtful accounts recorded in 1993 related to rents due from the former tenant and second mortgage lender at the 824 Market Street office building. The increase in property operating expenses for 1993 as compared to 1992 is primarily due to the reserve recorded at September 30, 1993 related to the mortgage notes receivable and the provision for doubtful accounts related to a former tenant at the 824 Market Street office building as more fully discussed above.
The decrease in professional services for 1994 as compared to 1993 is primarily due to a reduction in 1994 in Partnership legal expenses.
The increase in amortization of deferred expenses for 1994 and 1993 as compared to 1992 is primarily due to increased amortization relating to capitalized leasing costs at the 767 Third Avenue office building and the Riverfront office building, as more fully discussed in Note 4(b).
The decrease in Partnership's share of operations in unconsolidated ventures for 1994 and 1993 as compared to 1992 is primarily due to the disposition of the Partnership's interest in the Yerba Buena West office building in June 1992, as more fully discussed in Note 3(b).
The increase in the venture partners' share of loss of ventures' operations for 1994 as compared to 1993 is primarily due to continuing operating deficits during 1994 and the 1994 write-off of tenant improvements at the Riverfront office building, as more fully discussed above, partially offset by a reduction in operating deficits at the 767 Third Avenue office building due to an increase in occupancy during 1994. The increase in the venture partners' share of loss of ventures' operations for 1993 as compared to 1992 is primarily due to operating deficits incurred at the Mall of Memphis and Riverfront office building during 1993.
The gain from sale or disposition of investment properties for 1994 resulted from the lender realizing upon its security in the 824 Market Street office building; 1993 resulted from the sale of the South Point apartments; and 1992 resulted from the sale of the Wood Forest Glen apartments, the Meadowcrest apartments and the Bitter Creek apartments and the disposition of the Partnership's interest in the Yerba Buena West office building.
Inflation
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
To the extent that inflation in future periods does have an adverse impact on property operating expenses, the effect will generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's properties have escalation clauses covering increases in the cost of operating and maintaining the properties as well as real estate taxes. Therefore, there should be little effect on operating earnings if the properties remain substantially occupied. In addition, certain of the leases at the Partnership's shopping center investment contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
Future inflation may also cause capital appreciation of the Partnership's investment properties over a period of time to the extent that rental rates and replacement costs of properties increase.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations, years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Partners' Capital Accounts (Deficit), years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Schedule --------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI:
We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - XI (a limited partnership) and consolidated ventures as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlyle Real Estate Limited Partnership - XI and consolidated ventures at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois March 25, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts of the Partnership and the following of its ventures (note 3): GP- 1 Partners, Ltd. ("Bitter Creek") (property sold in June 1992, see note 7(e)), Mall of Memphis Associates ("Mall of Memphis"), 767 Third Avenue Associates ("767 Third Avenue"), Riverfront Office Park Joint Venture ("Riverfront") and Excelsior Associates, LP ("824 Market Street") (property transferred to lender in December 1994, see note 4(b)). The effect of all transactions between the Partnership and the ventures has been eliminated. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's interest in Carlyle/National City Associates ("Carlyle/National City") and Carlyle Yerba Buena Limited Partnership ("Yerba Buena") (property transferred to lender in June 1992, see note 3(b)(1)). Accordingly, the accompanying consolidated financial statements do not include the accounts of Carlyle/National City or Yerba Buena.
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 generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such adjustments are not recorded on the records of the Partnership. The net effect of these items is summarized as follows:
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The net loss per limited partnership interest is based upon the Limited Partnership Interests outstanding at the end of each period. Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial reporting and income tax purposes.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from unconsolidated ventures are considered cash flow from operating activities only to the extent of the Partnership's cumulative share of net earnings. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($1,932,366 and $0 at December 31, 1994 and 1993, respectively) as cash equivalents with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of leasing and financing fees incurred in connection with the acquisition and operation of the properties. Deferred leasing fees are amortized using the straight-line method over the terms stipulated in the related agreements. Deferred financing fees are amortized over the related commitment periods.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due, the Partnership accrues rental income over the full period of occupancy on a straight-line basis.
Certain reclassifications have been made to the 1993 and 1992 consolidated financial statements to conform with the 1994 presentation.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial Instruments", requires entities with total assets exceeding $150 million to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. As the debt secured by the Riverfront Office Building has been classified by the Partnership as a current liability at December 31, 1994 and 1993 as a result of default (see note 4(b)) and because resolution of such default is uncertain, the Partnership considers the disclosure of the SFAS 107 value of such long-term debt to be impracticable. The remaining debt, with a carrying balance of $108,685,311 has been calculated to have an SFAS 107 value of $106,716,115 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment and the inability to obtain comparable financing due to previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such calculated debt amounts reported (see note 4). The Partnership has no other significant financial instruments.
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No provision for State or Federal income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain instances, the Partnership has been required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership acquired, either directly or through joint venture (note 3), ten apartment complexes, eight office buildings, and an enclosed shopping mall. During 1984, the Partnership sold its Arlington, Texas and its Red Bank, Tennessee apartment complexes. During 1986, the Partnership sold its interest in Am-Car Real Estate Partnership-I joint venture ("AM- CAR"), which had ownership interests in the Pavillion Towers office complex located in Aurora, Colorado and the Coast Federal Office Building located in Pasadena, California. During 1988, the Partnership (through Somerset Lake Associates) sold its Indianapolis, Indiana apartment complex. During 1991, the Partnership disposed of its interest in the Gatehall Plaza office building located in Parsippany, New Jersey. During 1992, the Partnership sold its interest in the Wood Forest Glen Apartments, the Meadowcrest Apartments and the Bitter Creek Apartments. In addition, during 1992, the lender realized upon its security and took title to the Yerba Buena West Office Building. During 1993, the Partnership sold its interest in the South Point Apartments. During 1994, the lender realized upon its security and took title to the 824 Market Street Office Building. All of the properties owned at December 31, 1994 were operating. The cost of the investment properties represents the total cost to the Partnership or its ventures plus miscellaneous acquisition costs.
Depreciation on the operating properties has been provided over estimated useful lives of 5 to 30 years using the straight-line method.
All investment properties are pledged as security for the long-term debt, for which there is generally no recourse to the Partnership. The Partnership continues to make payments on its existing mortgage indebtedness related to its remaining investment properties, except as described in note 4 below.
Maintenance and repair expenses are charged to operations as incurred. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1994 is a party to four operating joint venture agreements. Pursuant to such venture agreements, the Partnership made initial capital contributions of approximately $51,345,000 before legal and other acquisition costs and its share of operating deficits as discussed below. In general, the Partnership's joint venture partners, who are either the sellers (or their affiliates) of the property investments being acquired or parties which have contributed an interest in the property being developed, or were subsequently admitted to the ventures, make no cash contributions to the ventures but their retention of an interest in the property, through the joint venture, is taken into account in determining the purchase price of the Partnership's interest,
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which is determined by arm's-length negotiations. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash contributions to the ventures.
The Partnership has acquired, through the above ventures, an enclosed shopping mall and three office buildings. The joint venture partners (who were primarily responsible for constructing the properties) contributed any excess of cost over the aggregate amount available from Partnership contributions and financing and, to the extent such funds exceeded the aggregate costs, were to retain such excesses. The venture properties have been financed under various long-term debt arrangements as described in note 4.
The Partnership generally has a cumulative preferred interest in net cash receipts (as defined) from the properties. Such preferential interest relates to a negotiated rate of return on contributions made by the Partnership. After the Partnership receives its preferential return, the venture partner is generally entitled to a non-cumulative return on its interest in the venture; additional net cash receipts are generally shared in a ratio relating to the various ownership interests of the Partnership and its venture partners. During 1994, 1993 and 1992, one of the ventures produced net cash receipts available for distribution to the Partnership. The Partnership has preferred positions (related to the Partnership's cash investment in the ventures) with respect to distribution of sale or refinancing proceeds from the ventures.
In general, operating profits and losses are shared in the same ratio as net cash receipts; however, if there are no net cash receipts, profits or losses are allocated to the partners based upon their respective economic interests.
There are certain risks associated with the Partnership's investments made through joint ventures, including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership.
(b) Unconsolidated Ventures
(1) Yerba Buena
In August 1985, the Partnership acquired, through the Carlyle Yerba Buena Limited Partnership ("Yerba Buena"), an interest in an existing six- story office building known as Yerba Buena West Office Building in San Francisco, California. The Partners of Yerba Buena included Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII") and Carlyle Real Estate Limited Partnership-XIV, two public partnerships sponsored by the Corporate General Partner of the Partnership (the "Affiliated Partners") and four Limited Partners unaffiliated with the Partnership or its general partners (the "Unaffiliated Partners"). Yerba Buena transferred title to the property to the lender in June 1992 as described below.
The Partnership and the Affiliated Partners purchased an 80% interest in the property from the sellers and simultaneously formed Yerba Buena with the Unaffiliated Partners. The Partnership owned a 23.36% interest in the property. The Partnership was generally entitled to 23.36% of Yerba Buena's annual net cash flow, net sale or refinancing proceeds and profits or losses. The Partnership's cash investment in connection with this property was approximately $4,000,000.
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Based upon the conditions at Yerba Buena, including tenant disputes following the October 17, 1989 San Francisco earthquake, the venture had not made the debt service payments to the underlying lender commencing with the January 1990 payment. The Partnership and Affiliated Partners had decided, based upon an analyses of current market conditions and the probability of large future cash deficits, not to fund future joint venture cash deficits. The joint venture was unable to negotiate a loan modification to pay for expected future cash deficits whereby the joint venture retained ownership of the property and in June 1992, the joint venture transferred title of the property to the lender in return for an opportunity to share in future sale or refinancing proceeds above certain specified levels. In order for the joint venture to share in such proceeds, there must be a significant improvement in current market and property operating conditions resulting in a significant increase in value of the property. In addition, until June 1995, the joint venture will have a right of first opportunity to purchase the property if the lender chooses to sell. As a result of the transfer of title to the lender as discussed above, the Partnership no longer has an ownership interest in the property and recognized in 1992 a gain for financial reporting and Federal income tax purposes of $1,614,369 and $964,406, respectively, with no corresponding distributable proceeds.
(2) Carlyle/National City
In July 1983, the Partnership acquired, through Carlyle/National City (a joint venture with Carlyle-XII), an interest in an existing thirty-five story office building in Cleveland, Ohio.
The Partnership made an initial contribution of $5,445,257 to Carlyle/National City. The terms of the Carlyle/National City venture agreement provide that the capital contributions, annual cash flow, net proceeds from sale or refinancing and profit or loss will be allocated or distributed 13.7255% to the Partnership. The Partnership's cash investment in the property was $3,341,583 after distributions resulting from the increase in the first mortgage loan.
In January 1994, the debt service payments under the existing mortgage for the National City Center Office Building increased from 9-5/8% to 11- 7/8% until the scheduled maturity of the loan in December 1995. Carlyle/National City reached an agreement with the current mortgage lender to refinance the existing mortgage effective April 28, 1994, with an interest rate of 8.5%. The loan will be amortized over 22 years with a balloon payment due at maturity on April 10, 2001. Carlyle/National City paid a refundable loan commitment fee of $1,164,524 in 1993 in conjunction with the refinancing. The fee was applied to accrued interest and the prepayment penalty of $580,586 based on the outstanding mortgage balance at the time of refinancing, with the balance of $238,215 refunded to Carlyle/National City in 1994. In addition, the lender required an escrow account of $612,000 to be established at the inception of the refinancing for future tenant improvements costs at the property. The lender also requires the tenant costs related to a major tenant (Baker & Hostetler) lease to be escrowed. The venture is required to escrow approximately $313,000 per year from 1994 through 1996 and approximately $236,000 per year in 1997 and 1998.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Five year maturities of long-term debt are as follows:
1995 . . . . . . . . . . . $34,720,167 1996 . . . . . . . . . . . 467,357 1997 . . . . . . . . . . . 517,419 1998 . . . . . . . . . . . 3,072,897 1999 . . . . . . . . . . . 74,819,044 ===========
(b) Long-Term Debt Modifications and Refinancings
General
As described below, the Partnership is seeking or has received mortgage note modifications on certain properties. Upon expiration of such modifications or scheduled maturity of the loans, should the Partnership not seek or be unable to secure new or additional modifications to the loans, based upon current and anticipated future market conditions, the Partnership may not commit any significant additional amounts to these properties. This would likely result in the Partnership no longer having an ownership (or security interest) in such properties. Such decisions will be made on a property-by-property basis and could result in a gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds.
Wood Forest Glen Apartments
The modification of the existing long-term mortgage note secured by the Wood Forest Glen apartment complex located in Houston, Texas expired on June 30, 1990. The Partnership continued to negotiate for further modifications to the mortgage loan but was unsuccessful. In December 1991, the Partnership was notified that the lender sold its mortgage note to a third party. The Partnership pursued discussions with the new lender concerning modifications to the mortgage loan and a possible sale of the property. The Partnership was not successful in securing such modifications; however, in April 1992, the Partnership sold its interest in the property to the new lender for approximately $213,000 in excess of the existing mortgage balance (see note 7(c)). As a result of the sale, the Partnership recognized in 1992 a gain on sale of $6,470,625 and $7,058,574 for financial reporting and Federal income tax purposes, respectively.
Bitter Creek Apartments
On June 10, 1992, the venture sold the property as more fully discussed in note 7(e).
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During February 1992, the Bitter Creek venture received an additional modification to the long-term mortgage notes. The venture was required to pay down approximately $436,000 of the principal balance of the mortgage loan in exchange for the lender forgiving all deferred interest and extending the term of the modification. The Partnership's share of the required principal payment was approximately $58,000. The new modified interest accrual and payment rate (averaging 7% for the period June 15, 1991 to June 9, 1992) was based upon the lender's prime rate. The additional mortgage modification provided that payments of interest be paid monthly and the principal balance and any accrued interest would be due and payable on December 15, 1992.
767 Third Avenue Office Building
Occupancy at the property is 89% at December 31, 1994, up from 83% in 1993. The 767 Third Avenue venture is aggressively marketing the remaining vacant space. The Partnership is obligated to fund its share of the net cash flow deficits resulting from costs associated with any leasing activity at the property.
During 1991 and 1992, the leases for approximately 67% of the space at the 767 Third Avenue office building located in New York, New York expired (substantially all of which have been released as of December 1994 but at lower effective rents). In order to reduce debt service payments during the tenant turnover period, the 767 Third Avenue venture obtained from the existing lender, in May 1992, a replacement mortgage loan which matures in May 1998 and bears a substantially lower interest rate (10%) than the original loan (12 3/8%). In connection with the replacement mortgage loan, 767 Third Avenue was required to fund $8,000,000 into an escrow account for future leasing costs and debt service shortfalls resulting from anticipated tenant turnover. At the inception of the escrow agreement, the venture was allowed to reduce the required escrow contributions by approximately $2,600,000 to reflect that certain leasing costs (described above) had already been incurred. 767 Third Avenue had been reserving the property's cash flow beginning with the second quarter of 1990; however, such amounts were less than the net required reserve. The Partnership's venture partner loaned $5,000,000 to the venture in order to fund the net escrow reserve account. In 1993, the reserve account was depleted and the venture (by way of partner contributions) continues to fund required leasing costs and debt service shortfalls. The loan funded by the Partnership's venture partner earns interest at an adjustable rate (10.5% at December 31, 1994) and provides for repayment of principal and interest out of the available cash flow from property operations and sale or refinancing proceeds. In June 1993, the Partnership purchased a 50% interest in the venture partner's loan including the related accrued interest. Accordingly, the Partnership's 50% interest in the principal portion of the loan ($2,500,000) is reflected as a decrease in long-term debt, less current portion in the consolidated financial statements. In conjunction with the agreement with the venture partner to loan the amounts necessary to fund the escrow account, because the Partnership did not purchase its share of the $5,000,000 loan by December 31, 1992, the Partnership's preferential return was removed from the calculation of the allocation of sale or refinancing proceeds. In addition, during 1994, the venture partner approached the Partnership regarding purchasing the Partnership's 50% interest in 767 Third Avenue, however, upon review of the proposed terms, the Partnership did not believe the offer to be in its best interest and the offer was rejected.
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824 Market Street Office Building
Occupancy at the 824 Market Street office building located in Wilmington, Delaware had risen to 56% during 1994, up from 49% at December 31, 1993. The 824 Market Street venture was aggressively seeking replacement tenants for the vacant space; however, competition had risen significantly due to new office building development in the area over the last few years and the contraction of tenants in the financial services industry, resulting in lower effective rental rates. In order to reduce debt service payments during the tenant turnover period, the venture had negotiated with the first mortgage lender for a possible modification to the mortgage note. Such negotiations were unsuccessful and the venture received notice of default. Accordingly, for financial reporting purposes, the underlying debt of approximately $13,515,000 was reflected as a current liability in the accompanying consolidated financial statements at December 31, 1993. The first mortgage lender commenced proceedings to realize upon its security and was the successful bidder at the foreclosure sale held in October 1994. The deed was conveyed to the first mortgage lender on December 12, 1994. As a result of the disposition of the property, the Partnership recognized a gain in 1994 for financial reporting purposes and Federal income tax purposes of $3,689,195 and $6,805,134, respectively, with no corresponding distributable proceeds.
Riverfront Office Building
On August 28, 1990, the Riverfront joint venture acquired additional financing by way of a $5,800,000 fourth mortgage note in order to fund the costs associated with leasing vacant space. As of the date of this report, the joint venture has received approximately $5,730,000 in proceeds. The balance of the proceeds, a $70,000 engineering holdback, is payable to the joint venture upon completion of certain structural repairs, the extent of which are being negotiated with the lender but which are not expected to exceed the holdback amount. Though occupancy at the property has increased from 85% at December 31, 1993 to 95% at December 31, 1994, average rent paying occupancy decreased due to (i) a major tenant (vacating approximately 25% of the building in July 1992 due to a downsizing of its operations) continuing to pay rent through the remaining terms of its leases which expired in April 1993 and (ii) a second major tenant downsizing its operations in April 1993 by approximately 36,000 square feet or 11% of the building and receiving a rent reduction of approximately 23% on its remaining leased space. The property began operating at a deficit in 1992 and, as a result, debt service payments since July 1992 were made on a delayed basis. At December 31, 1994, the February 1993 through December 1994 debt service payments are delinquent by approximately $6,724,000. Accordingly, the loan balances of approximately $34,298,000 have been reflected as a current liability in the consolidated financial statements. In order to reduce debt service payments, the joint venture has initiated discussions with the lender to negotiate possible modifications to the mortgage notes. In this regard, the joint venture has entered into a non-binding letter of intent with the existing lender for a restructure of its mortgage loans. The proposed terms of the loan restructure would retroactively reduce the interest rate payable on the loans and reduce the term of the loan from its present maturity date of September 2018 to December 2007. The loans (which currently bear interest
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
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at rates ranging from 10% to 14% per annum) would bear interest at 6% per annum for the period January 1, 1993 through December 31, 1997. Thereafter, the interest rate per annum shall be the greater of the rate derived using the "Coverage Formula" (as defined) or 7% from January 1, 1998 to December 31, 1999; 8.25% from January 1, 2000 to December 31, 2002; and 9% from January 1, 2003 to December 31, 2007. In addition, the lender is entitled to earn a minimum internal rate of return of 10.5% per annum calculated over the restructured loan term. The proposed loan restructure would also require that net cash flow after debt service and capital be paid into an escrow account controlled by the lender to be used for operating shortfalls and costs associated with additional leasing as approved by the lender. There can be no assurances that any restructure will be obtained. In addition, the property operates under a ground lease and the joint venture has not made the scheduled ground lease payments since February 1993. The ground lessor is a general partner of the venture partner. At December 31, 1994, the total amount of ground lease payments in arrears is approximately $343,000. In this regard, the proposed loan restructure discussed above would provide for the waiver of any and all ground lease payments since the first missed payment in February 1993 until the earlier of any future mortgage loan prepayment date (resulting from a sale or refinancing of the property) or December 31, 2007. The proposed loan restructure also provides that if, during calendar year 1997, projections of gross rental revenue approved by the lender during the year are not less than $9 million per year for each of the next five calendar years, annual payments of ground rent would resume, but in a reduced amount (as defined). If the joint venture is unable to secure any modifications to the mortgage notes, the joint venture would likely decide, based upon current and anticipated future market conditions, not to commit any significant additional amounts to this property. This would result in the Partnership no longer having an ownership interest in this property and would result in a gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds.
Mall of Memphis
Although occupancy had been increasing, in order for the Mall of Memphis to maintain is competitive position in the marketplace, the Mall of Memphis venture completed a mall renovation in 1991. The renovation costs had been funded by the venture until additional financing was in place. The Partnership contributed approximately $2,252,000 in addition to foregoing their share of 1990 and a portion of the 1991 distributable cash flow from the property to cover their portion of the renovation costs. In March 1993, the venture finalized additional financing of a $7,600,000 ten year loan at a rate of 10%. The Partnership's share of the funding was $4,719,095 (net of closing costs). Of the amount funded, the Partnership was required to deposit $1,000,000 in an escrow account as security against any currently undiscovered environmental issues. The venture would have been entitled to additional proceeds of $2,025,000 if the property had achieved certain occupancy levels and debt coverage ratios by September 30, 1994, however, the venture did not qualify for such additional proceeds as leasing did not achieve budgeted goals. In May 1994, an affiliate of the General Partners assumed property management and leasing services. Property management fees are calculated as 3% of base rent (as defined) and leasing commissions are calculated at a rate, which approximates market, based on the terms of the related lease. In addition, the venture partner has approached the Partnership regarding selling its 36.94% interest in the Mall of Memphis to the Partnership, however, there can be no assurances that such transaction will be consummated.
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(c) Refinancings
In December 1990, the Partnership obtained replacement mortgage loans from an institutional lender to retire in full satisfaction, at an aggregate discount, the previously modified existing long-term mortgage notes secured by the Scotland Yard - Phase I and II, South Point and El Dorado View apartment complexes. Commencing April 1, 1992, the loans provide for payment of contingent interest equal to 35% of the amount by which gross receipts attributable to a fiscal year (all as defined) exceed a base amount. For the fiscal years 1994, 1993 and 1992, contingent interest aggregated approximately $257,000, $293,000 and $281,000, respectively. In the event that these properties are sold before the maturity date of the loans, the lender is entitled to a prepayment penalty of 6% of the mortgage principal and, in general, the higher of 65% of the sale proceeds or ten times the highest contingent interest amount in any of the three full fiscal years preceding the sale (all as defined). The Partnership sold South Point Apartments in July 1993, as further discussed in note 7(f). The lender has the right to call the remaining loans at any time after January 1, 1996. In this regard, the Partnership is currently marketing the Scotland Yard Phase I and II and the El Dorado View apartment complexes for sale. If the Partnership is unsuccessful in selling the properties prior to January 1, 1996 and the lender exercises its right to call the loans, the Partnership would recognize a gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds. The lender required the establishment of an escrow account, initially of approximately $980,000 in the aggregate, to be used towards the purchase of major capital items at the apartment complexes. Additionally, the lender required $150,000 of the sale proceeds from South Point Apartments to be added to the escrow account. As of December 31, 1994, the Partnership has been reimbursed from the escrow account approximately $959,000 for capital improvements at the above-referenced apartment complexes. Finally, the modification provides for the lender to participate in the net proceeds from the sale or refinancing of the properties in the form of additional contingent interest. The Partnership has recorded an accrual for such participation of $3,605,840 and $1,061,103 as deferred accrued interest included in the balance of long-term debt in the accompanying consolidated financial statements at December 31, 1994 and 1993, respectively.
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or other disposition of investment properties are allocated first to the General Partners in an amount equal to the greater of the amount distributable to the General Partners from the proceeds of any such sale (as described below) or 1% of the profits from the sale. Losses from the sale or other disposition of investment properties will be allocated 1% to the General Partners. The remaining sale profits and losses will be allocated to the Limited Partners.
An amendment to the Partnership Agreement, effective January 1, 1991, generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event which would cause the deficit balance in absolute amount in the Capital Account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of profits to the General Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
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shall be increased to the extent necessary to cause the deficit balance in the Capital Account of the General Partners to be no less than their respective shares of the Partnership's indebtedness after such event. In general, the effect of this amendment is to allow the deferral of the recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu- tions except under certain limited circumstances upon dissolution and termination of the Partnership. Distributions of "net cash receipts" of the Partnership are allocated 90% to the Limited Partners and 10% to the General Partners (of which 6.25% constitutes a management fee to the Corporate General Partner for services in managing the Partnership).
The Partnership Agreement provides that the Limited Partners shall receive 99% and the General Partners shall receive 1% of the sale or refinancing proceeds of a real property (net after expenses and retained working capital) until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership, and (ii) have received cumulative cash distributions from the Partnership's operations which when combined with sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the first fiscal quarter of 1983. After such distributions, the General Partners shall receive (to the extent not previously received) proceeds up to 3% of the aggregate sales price of properties previously sold by the Partnership with any remaining proceeds allocated 85% to the Limited Partners and 15% General Partners. The Limited Partners have not yet received cash distributions of sale or refinancing proceeds in an amount equal to their initial capital investment. Therefore, no sale proceeds are distributable to the General Partners pursuant to the distribution levels described above.
Allocations among the partners in the accompanying accrual basis consolidated financial statements have been made in accordance with the provisions of the Partnership Agreement and the venture agreements (see note 3). The allocation percentages may differ from year to year based on future events. Differences may therefore result between allocations among the partners on the GAAP basis and the tax basis. Such differences would have no significant effect on total assets, total partners' capital or net loss.
(6) MANAGEMENT AGREEMENTS
In May 1994, an affiliate of the General Partners assumed property management and leasing services at the Mall of Memphis from an affiliate of the venture partner. Leasing commissions at the Mall of Memphis are calculated at a rate, which approximates market, based on the terms of the related lease.
Certain of the Partnership's properties are managed by affiliates of the General Partners or their assignees for fees computed as a percentage of certain rents received by the properties. In December 1994, one of the affiliated property managers sold substantially all of its assets and assigned its interest in its management contracts to an unaffiliated third party. In addition, certain of the management personnel of the property manager became management personnel of the purchaser and its affiliates. The successor to the affiliated property manager's assets is acting as the property manager of the Scotland Yard-Phase I and II Apartments and the El Dorado View Apartments after the sale on the same terms that existed prior to the sale.
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(7) SALES OF INVESTMENT PROPERTIES
(a) Pavillion Towers, Aurora, Colorado
During April 1986, the Partnership sold its interest in Am-Car Real Estate Partnership-I ("Am-Car") (which owns the Pavillion Towers office complex located in Aurora, Colorado) to its venture partners for $1,000,000 in cash, promissory notes aggregating $3,750,000 and the venture partners' assumption of the Partnership's share of the debt encumbering the property. The two promissory notes of $3,000,000 and $750,000 bear interest at various rates and are due in April 1996. Beginning in 1991, the Partnership has not received the scheduled interest payments of $15,000 on the $750,000 note and as of the date of this report, the Partnership has not received the 1993 or 1994 scheduled interest payment of $60,000 on the $3,000,000 note. Collection of all past due and future amounts from these notes are considered unlikely; however, the Partnership is evaluating all of its legal options. Due to the uncertainty of collection of all past due and future amounts from these notes, a $527,774 reserve was established at December 31, 1993 to reduce the mortgage notes receivable balance to an amount not to exceed the related deferred gain on sale.
The sale was accounted for by the installment method whereby the gain on sale of $3,057,695 (net of discount on the promissory notes receivable of $1,682,305) was recognized as collections of principal were received. Effective January 1, 1990, the Partnership adopted the cost recovery method of accounting. The interest received in 1992 ($60,000) was applied against the outstanding principal balance. No profit was recognized in 1994, 1993 or 1992.
(b) Mortgage notes receivable relating to the above sale consist of the following:
1994 1993 ------------ ---------- Promissory note secured by personal guarantees of the buyers of the Part- nership's interest in the Pavillion Tower office complex located in Aurora, Colorado. Payable interest only (aggregating $150,000 over the ten-year period) at various rates. The entire unpaid principal balance is due April 24, 1996. Balance is net of $199,406 of unamortized discount at December 31, 1994 and 1993 based on an imputed rate of 8-1/2% . . . . . . . . . . . . $ 543,094 543,094 Promissory note secured by personal guarantees of the buyers of the Partnership's interest in the Pavillion Tower office complex located in Aurora, Colorado. Payable interest only (aggregating $600,000 over the ten-year period) at various rates. The entire unpaid principal balance is due April 24, 1996. Balance is net of $797,625 of unamortized discount at December 31, 1994 and 1993 based on an imputed rate of 8-1/2% . . . . . . . . . . . . 2,052,375 2,052,375 ---------- --------- CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1994 1993 ------------ ------------
Total long-term notes receivable . . . . 2,595,469 2,595,469 Reserve for uncollectibility . . . . . . (527,774) (527,774) ---------- --------- Total long-term notes receivable (net of reserve for uncollectibility). . . . . . . . . . . $2,067,695 2,067,695 ========== =========
(c) Wood Forest Glen Apartments
On April 2, 1992, the Partnership sold its interest in the Wood Forest Glen Apartments to the lender for approximately $213,000 in excess of the existing mortgage balance ($11,138,170 at the date of sale). The Partnership recognized in 1992 a gain of $6,470,625 and $7,058,574 for financial reporting and Federal income tax purposes, respectively.
(d) Meadowcrest Apartments
On June 9, 1992, the Partnership sold the land, building and related improvements and personal property of the Meadowcrest apartment complex located in Dallas, Texas for $9,575,000 in cash before selling costs and prorations. A major portion of the sales proceeds was utilized to retire the related underlying mortgage notes of approximately $8,445,000 (a portion of which were scheduled to mature June 30, 1992). The Partnership received approximately $861,000 from the sale of the property after deducting expenses in connection with the sale and the mortgage loan. As a result of the sale, the Partnership recognized in 1992 a gain of $562,806 and $5,255,084 for financial reporting and Federal income tax purposes, respectively.
(e) Bitter Creek Apartments
On June 10, 1992, the Partnership, through the Bitter Creek venture, sold the land, building and related improvements and personal property of the Bitter Creek apartment complex for $10,250,000 in cash before selling costs and prorations. A major portion of the sales proceeds was utilized to retire the related underlying mortgage note of approximately $9,064,000 (note 4(b)). In addition, pursuant to the venture partner agreement, the Partnership and venture partner were allocated $338,709 and $681,423 of net sales proceeds, respectively. The venture agreement generally provides that the gain of $1,024,264 from the sale of the entire property will be first allocated to the joint venture partners' respective negative capital accounts. Any amounts remaining will be allocated 50% to the Partnership and 50% to the venture partner. The venture partner's share of the gain was $881,297. The Partnership recognized in 1992 a gain of $142,967 and $2,808,159 for financial reporting and Federal income tax purposes, respectively.
(f) South Point Apartments
On July 29, 1993, the Partnership sold the land, buildings and related improvements and personal property of the South Point apartments complex located in Houston, Texas to an unaffiliated buyer at a sales price determined by arm's-length negotiations. The sales price of the property was $5,600,000 (before closing costs and prorations). A major portion of the sales proceeds was utilized to retire the related underlying mortgage principal of $4,455,000. The Partnership received in connection with the sale, after all fees and expenses, approximately $932,000. Of this amount,
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the lender was entitled to approximately $606,000 as participation in the sales proceeds. From the sale, the Partnership received a net amount of cash of approximately $326,000, of which $150,000 was required by the lender to be escrowed for the benefit of the Partnership's other properties financed by the lender, as more fully discussed in note 4(c). As a result of the sale, the Partnership has recognized in 1993 a gain of $1,433,916 and $3,512,797 for financial reporting purposes and for Federal income tax purposes, respectively.
(8) LEASES
(a) As Property Lessor
At December 31, 1994, the Partnership's and its consolidated ventures' principal assets are two office buildings, one enclosed shopping mall and three apartment complexes. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding the cost of land, is depreciated over their estimated useful lives. Leases with office building and shopping center tenants range in term from one to twenty-four years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide for additional rent based upon percentages of tenant sales volumes. With respect to the Partnership's shopping center investment, a substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector. Apartment complex leases in effect at December 31, 1994 are generally for a term of one year or less and provide for annual rents of approximately $5,429,000.
Cost of the leased assets net of accumulated depreciation are summarized as follows at December 31, 1994:
Shopping mall: Cost . . . . . . . . . . . . . . . $ 55,382,829 Accumulated depreciation . . . . . (19,097,888) ------------ 36,284,941 ------------ Office buildings: Cost . . . . . . . . . . . . . . . 115,532,291 Accumulated depreciation . . . . . (45,021,172) ------------ 70,511,119 ------------ Apartment complexes: Cost . . . . . . . . . . . . . . . 26,734,127 Accumulated depreciation . . . . . (11,309,050) ------------ 15,425,077 ------------ Total. . . . . . . . . . . . . . . . $122,221,137 ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Minimum lease payments, including amounts representing executory costs (e.g., taxes, maintenance, insurance), and any related profit in excess of specific reimbursements, to be received in the future under the above commercial operating lease agreements, are as follows:
1995 . . . . . . . . . . . . . . . . $ 20,085,961 1996 . . . . . . . . . . . . . . . . 18,490,744 1997 . . . . . . . . . . . . . . . . 14,657,147 1998 . . . . . . . . . . . . . . . . 10,819,146 1999 . . . . . . . . . . . . . . . . 8,151,826 Thereafter . . . . . . . . . . . . . 34,360,468 ------------
Total. . . . . . . . . . . . . . . . $106,565,292 ============
Additional contingent rent (based on sales by property tenants) included in consolidated rental income was as follows for the years ended December 31, 1994, 1993 and 1992:
1992 . . . . . . . . . . . . . . . . $424,211 1993 . . . . . . . . . . . . . . . . 352,862 1994 . . . . . . . . . . . . . . . . 277,151 ========
(b) As Property Lessee
The following lease agreement has been determined to be an operating lease.
The Riverfront venture owns a net leasehold interest which expires in 2061 (subject to a 19-year extension) in the land underlying the Cambridge, Massachusetts office building. The lease provides for annual rent equal to the greater of 2% of gross income from the property or a minimum amount (which increases on a fixed schedule from $132,700 at inception,to $298,575 for the years 2007 through 2080). The joint venture has not made the scheduled ground lease payments since February 1993. At December 31, 1994, the total amount of ground lease payments in arrears is approximately $343,000. Reference is made to note 4(b) regarding the potential waiver of any and all scheduled ground rent payments due under the lease since February 1993 in conjunction with a proposed loan restructure with the mortgage lender.
Future minimum rental commitments under this lease are as follows:
1995 . . . . . . . . . . . $ 179,145 1996 . . . . . . . . . . . 187,417 1997 . . . . . . . . . . . 212,230 1998 . . . . . . . . . . . 212,230 1999 . . . . . . . . . . . 212,230 Thereafter . . . . . . . . 18,053,679 -----------
Total. . . . . . . . . . . $19,056,931 ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
The Corporate General Partner has deferred payment of partnership management fees as set forth in the above table. In addition, distributions to the General Partners of the first quarter 1991 net cash flow of the Partnership aggregating $7,161 have also been deferred. These amounts do not bear interest and are expected to be paid in future periods.
(10) COMMITMENTS AND CONTINGENCIES
The Partnership is a defendant in several actions brought against it arising in the ordinary course of business. It is the belief of the Corporate General Partner, based on its knowledge of facts and advice of counsel, that the claims made against the Partnership in such actions will not result in a material adverse effect on the Partnership's consolidated financial position or results of operations.
(11) INVESTMENT IN UNCONSOLIDATED VENTURE
For the Yerba Buena venture (note 3(b)(1)) for the year ended December 31, 1992, total income was $1,431,864, expenses applicable to operating loss were $3,523,650 and net income was $4,254,514.
ITEM 9.

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

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. JMB has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, Realty Associates-XI, L.P., an Illinois limited partnership with JMB as the sole general partner. The Associate General Partner shall be directed by a majority in interest of its limited partners (who are generally officers, directors and affiliates of JMB or its affiliates) as to whether to provide its approval of any sale of real property (or any interest therein) of the Partnership. Various relationships of the Partnership to the Corporate General Partner and its affiliates are described under the caption "Conflicts of Interest" at pages 9-14 of the Prospectus, which description is hereby incorporated herein by reference to Exhibit 3-A to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-10494) dated March 19, 1993.
The names, positions held and length of service therein of each director, executive officer and certain officers of the Corporate General Partner are as follows: SERVED IN NAME OFFICE OFFICE SINCE ---- ------ ------------
Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Jeffrey R. Rosenthal Managing Director-Corporate 4/22/91 Chief Financial Officer 8/01/93 Douglas H. Cameron Executive Vice President 1/01/95 Gary Nickele Executive Vice President 1/01/92 and General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Ira J. Schulman Executive Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve one-year terms until the annual meeting of the Corporate General Partner to be held on June 7, 1995. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on June 7, 1995. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the Corporate General Partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle- XVII), JMB Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII"). Most of the foregoing officers and directors are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the Corporate General Partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG"). Most of such directors and officers are also partners of certain partnerships which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle- XVII, JMB Income-VI, JMB Income-VII, JMB Income-VIII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage Partners- IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 57) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers, and a director of Catellus Development Corporation, a major diversified real estate development company. He is a Certified Public Accountant.
Neil G. Bluhm (age 57) is an individual general partner of JMB Income- IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 56) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 53) has been associated with JMB since July, 1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 61) (President and Director of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 48) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investment business. He is also a senior advisor and partner of Blackstone Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also served as a Trustee of Amli Residential Property Trust, a publicly-traded real estate investment trust that invests in multi-family properties. He is also a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 45) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 47) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Jeffrey R. Rosenthal (age 43) has been associated with JMB since December, 1987. He is a Certified Public Accountant.
Douglas H. Cameron (age 45) has been associated with JMB since April, 1977. Prior to becoming Executive Vice President of JMB in 1995, Mr. Cameron was Managing Director of Capital Markets - Property Sales from June 1990. He holds a Masters degree in Business Administration from the University of Southern California.
Gary Nickele (age 42) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Ira J. Schulman (age 43) has been associated with JMB since February, 1983. He holds a Masters degree in Business Administration from the University of Pittsburgh.
Gailen J. Hull (age 46) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 59) has been associated with JMB since March, 1973. He is a Certified Public Accountant. ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses as described under the caption "Compensation and Fees" at pages 6-9, "Cash Distributions" at pages 117-119, "Allocation of Profits or Losses for Tax Purposes" at page 117 and "Distributions and Compensations; Allocations of Profits and Losses" at pages A-5 to A-10 of the Prospectus, which descriptions are hereby incorporated herein by reference to Exhibit 3-A to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-10494) dated March 19, 1993. Reference is also made to Notes 5 and 9 for a description of such transactions, distributions and allocations. In 1994, 1993, and 1992, no cash distributions were paid to the General Partners. In 1991, the General Partners deferred distributions of $7,161 and management fees of $11,936.
JMB Properties Company, (which had been an affiliate of the Corporate General Partner until it was sold to an unaffiliated third party in December 1994 (see Note 6)), provided property management services to the Partnership through November 1994 for the El Dorado View Apartments in Webster, Texas, Scotland Yard - Phase I and Scotland Yard-Phase II in Houston, Texas. Fees were calculated at 5% of gross income for the apartment complexes. Such affiliate earned property management fees amounting to $255,865 in 1994, all of which were paid at December 31, 1994. In May 1994, JMB Retail Properties, Co., an affiliate of the General Partners, assumed property management and leasing services at the Mall of Memphis from an affiliate of the venture partner. Such affiliate earned property management fees amounting to $125,945 in 1994 of which $40,194 were unpaid at December 31, 1994. As set forth in the Prospectus of the Partnership, the Corporate General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area (but in no event at rates greater than 5% of the gross income from a property), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Corporate General Partner, earned and received insurance brokerage commissions in 1994 aggregating $32,821 in connection with the provision of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage provided.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses or out-of-pocket expenses and salaries relating to the administration of the Partnership and the acquisition and operation of the Partnership's real property investments. In 1994, the Corporate General Partner of the Partnership was due reimbursement for such expenses in the amount of $181,955. Cumulative amounts unpaid at December 31, 1994 were $69,635.
The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership, as described under the captions "Compensation and Fees" at pages 6-9, "Conflicts of Interest" at pages 9-14 and "Powers, Rights and Duties of the General Partners" at pages A-12 to A-17 of the Prospectus, which descriptions are hereby incorporated herein by reference to Exhibit 3-A to the Partnership's report for December 31, 1992 on Form 10-K (File No. 0- 10494) dated March 19, 1993. The relationship of the Corporate General Partner to its affiliates is set forth above in Item 10.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed with this annual report).
(2) Exhibits.
3-A.* The Prospectus of the Partnership dated May 8, 1981, as supplemented on July 27, 1981, October 9, 1981, November 5, 1981, December 10, 1981, February 19, 1982 and April 23, 1982, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Pages 6-14, 117-119, A-5 to A-10 and A-12 to A-17 are hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference.
4-A. Long-term debt modification relating to the 767 Third Avenue Office Building in New York, New York is hereby incorporated herein by reference.
4-B. Mortgage loan documents secured by the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
4-C. First through third mortgage loan documents secured by the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post- Effective Amendment No. 3 to Form S-11 (File No. 2- 70724) dated May 8, 1981.
4-D.* Fourth mortgage loan document secured by the Riverfront Office Building in Cambridge, Massachusetts is hereby incorporated herein by reference.
4-E Deed of trust note document dated March 31, 1993 secured by the Mall of Memphis in Memphis, Tennessee is hereby incorporated by reference.
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in the 767 Third Avenue Office Building in New York, New York are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8, 1981.
10-B. Acquisition Documents relating to the purchase by the Partnership of an interest in the Mall of Memphis in Memphis, Tennessee are hereby incorporated by reference to the Partnership's Registration Statement on Post- Effective Amendment No. 2 to Form S-11 (File No. 2- 70724) dated May 8, 1981.
10-C. Acquisition documents relating to the purchase by the Partnership of an interest in the Riverfront Office Building in Cambridge, Massachusetts are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8, 1981.
21. List of Subsidiaries.
24. Powers of Attorney
27. Financial Data Schedule
99-A. The Partnership's Report on Form 8-K (File No. 0-10494) dated December 23, 1994 describing the December 12, 1994 disposition of the 824 Market Street Office Building and exhibit thereto are hereby incorporated herein by reference. _____________
* Previously filed in Exhibits 3-A, 3-B and 4-D to the Partnership's Report on Form 10-K for December 31, 1992 of the Securities Exchange Act of 1934 (File No. 0-10494) filed on March 19, 1993.
Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the Securities and Exchange Commission upon request.
(b) The following on Form 8-K was filed since the beginning of the last quarter of the period covered by this report:
The Partnership's Report on Form 8-K (File No. 0-10494) dated December 23, 1994 describing the December 12, 1994 disposition of the 824 Market Street Office Building and exhibit thereto are hereby incorporated herein by reference.
No annual report or proxy material for the fiscal year 1994 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
By: JMB Realty Corporation Corporate General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Corporate General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Director Date: March 27, 1995
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 27, 1995
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 27, 1995
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 27, 1995
JEFFREY R. ROSENTHAL* By: Jeffrey R. Rosenthal, Chief Financial Officer Principal Financial Officer Date: March 27, 1995
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 27, 1995
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 27, 1995
STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 27, 1995
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 27, 1995
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ----
3-A. Pages 6-14, 117-119, A-5 to A-10, A-12 to A-17 of the Prospectus of the Partnership dated May 8, 1981 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Mortgage loan documents secured by the 767 Third Avenue Office Building Yes
4-B. Mortgage loan documents secured by the Mall of Memphis Yes
4-C. First through third mortgage loan documents secured by the Riverfront Office Building Yes
4-D. Fourth mortgage loan document secured by the Riverfront Office Building Yes
4-E. Deed of trust note dated March 31, 1993 secured by the Mall of Memphis Yes
10-A. Acquisition documents related to the 767 Third Avenue Office Building Yes
10-B. Acquisition documents related to the Mall of Memphis Yes
10-C. Acquisition documents related to the Riverfront Office Building Yes
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
99-A. Form 8-K for December 12, 1994 Yes