JAMESTOWN 28, L.P. AND SUBSIDIARIES
(A LIMITED PARTNERSHIP)
CONSOLIDATED FINANCIAL STATEMENTS WITH
INDEPENDENT AUDITOR’S REPORT
DECEMBER 31, 2015
JAMESTOWN 28, L.P. AND SUBSIDIARIES
(A LIMITED PARTNERSHIP)
Table of Contents
Page
Independent Auditor’s Report
Consolidated Financial Statements:
Consolidated statement of net assets ....................................................................................................1
Consolidated schedule of investments ..................................................................................................2
Consolidated statement of operations ...................................................................................................3
Consolidated statement of changes in net assets ..................................................................................4
Consolidated statement of cash flows ...................................................................................................5
Notes to consolidated financial statements ..................................................................................... 6-25
INDEPENDENT AUDITOR’S REPORT
To the Partners of
JAMESTOWN 28, L.P. and subsidiaries
We have audited the accompanying consolidated financial statements of JAMESTOWN 28, L.P., a
Georgia limited partnership, and subsidiaries (the “Partnership”), which comprise the consolidated
statement of net assets, including the consolidated schedule of investments, as of December 31, 2015,
and the related consolidated statements of operations, changes in net assets and cash flows for the year
then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with U.S. generally accepted accounting principles; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
Partnership’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Partnership’s internal control. Accordingly, we express no such opinion. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of JAMESTOWN 28, L.P. and subsidiaries as of December 31, 2015,
and the consolidated results of their operations and their cash flows for the year then ended in accordance
with U.S. generally accepted accounting principles.
Marietta, Georgia
April 20, 2016
e n e r g y .
i n s i g h t .
g r o w t h .
p 770.989.0028
f 770.989.0201
1640 powers ferry road
governor’s ridge
building 11
suite 300
marietta, ga 30067
www.moorecolson.com
CONSOLIDATED STATEMENT OF NET ASSETS
DECEMBER 31, 2015
Assets:
Real estate investments, at fair value:
Real estate (cost: $321,428,006) 362,731,072$
Unconsolidated real estate partnerships (cost plus equity
in undistributed earnings: $228,785,413)252,570,903
Total real estate investments 615,301,975
Cash and cash equivalents 15,105,499
Restricted cash 9,791,575
Accrued investment income 405,361
Due from related parties 258,941
Due from limited partners 28,676
Prepaid expenses and other assets 77,267
Withholding taxes recoverable from future distributions to limited partners 5,790,871
Deferred financing costs, net of accumulated amortization of $1,240,819 1,327,768
Total assets 648,087,933
Liabilities:
Mortgage loan payable 188,000,000
Interest rate swap, at fair value 1,623,626
Accrued real estate expenses and taxes 411,542
Accrued capital and leasing costs 177,790
Tenant security deposits 912,644
Due to related parties 145,402
Deferred income 874,870
Total liabilities 192,145,874
Commitments and contingencies (See Note 10)
Net assets 455,942,059$
JAMESTOWN 28, L.P. AND SUBSIDIARIES
See notes to consolidated financial statements.
- 1 -
Real Estate Investments Ownership*
Ownership
Percentage City, State Type
Rentable Square
Feet (unaudited) Cost Fair Value
Percent of Fair
Value
JAMESTOWN 450 West 15th Street, L.P. ("Milk Studios") EP 53.0% New York, NY Mixed-Use 330,000 74,510,552$ 84,525,152$ 13.74%
JAMESTOWN Lantana North, L.P. and JAMESTOWN Lantana South, L.P. ("Lantana") CO 99.9% Santa Monica, CA Office 470,000 321,428,006 362,731,072 58.95%
JAMESTOWN MCH, L.P. ("Millennium") EP 23.6% Various Mixed-Use 1,470,000 154,274,861 168,045,751 27.31%
550,213,419$ 615,301,975$ 100.00%
* CO - ConsolidatedEP - Partnership accounted for under the equity method
JAMESTOWN 28, L.P. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2015
See notes to consolidated financial statements.
- 2 -
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
Revenues:
Revenue from real estate 23,734,466$
Equity in income from unconsolidated real estate partnerships 14,741,094
Other income 6,344
Total revenues 38,481,904
Expenses:
Real estate operating expenses 6,753,518
Real estate taxes 3,889,141
Interest expense 6,833,130
Asset management fee 1,912,177
Fund administration fee 1,629,216
Fund administrative expenses 5,648
Total expenses 21,022,830
Net investment income 17,459,074
Realized and unrealized gains (losses):
Realized gain on contingent liability 155,332
Change in unrealized gain on real estate 66,316,997
Change in unrealized gain on unconsolidated real estate partnerships 7,420,608
Change in unrealized loss on interest rate swap (563,065)
Net realized and unrealized gain 73,329,872
Increase in net assets resulting from operations 90,788,946$
JAMESTOWN 28, L.P. AND SUBSIDIARIES
See notes to consolidated financial statements.
- 3 -
General
Partner
Limited
Partners Total
Beginning balance - December 31, 2014 -$ 384,681,733$ 384,681,733$
From operating activities:
Net investment income 1,698 17,457,376 17,459,074
Net realized and unrealized gain 4,363,258 68,966,614 73,329,872
Increase in net assets resulting from operations 4,364,956 86,423,990 90,788,946
From capital transactions:
Distributions - (19,151,922) (19,151,922)
Interest income disbursed to the General Partner (1,698) - (1,698)
Redemptions - (375,000) (375,000)
Decrease in net assets resulting from capital transactions (1,698) (19,526,922) (19,528,620)
Ending balance - December 31, 2015 4,363,258$ 451,578,801$ 455,942,059$
JAMESTOWN 28, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2015
See notes to consolidated financial statements.
- 4 -
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Increase in net assets resulting from operations 90,788,946$
Adjustments to reconcile increase in net assets resulting from operations
to net cash flows provided by operating activities:
Net realized and unrealized gain (73,329,872)
Amortization of deferred financing costs 513,975
Equity in income from unconsolidated real estate partnerships (14,741,094)
Bad debt expense 25,040
Changes in assets and liabilities:
Restricted cash (561,614)
Accrued investment income 376,667
Due from related parties 107,547
Prepaid expenses and other assets (27,591)
Withholding taxes recoverable from future distributions to limited partners 10,947,225
Accrued real estate expenses and taxes (1,302,184)
Tenant security deposits (296,260)
Due to related parties (2,593,876)
Deferred income 49,553
Net cash provided by operating activities 9,956,462
Cash flows from investing activities:
Additions to real estate (2,561,648)
Decrease in accrued capital and leasing costs (1,832,590)
Distributions from unconsolidated real estate partnerships 13,643,000
Decrease in restricted cash 1,441,784
Net cash provided by investing activities 10,690,546
Cash flows from financing activities:
Capital redemptions (375,000)
Receipt of due from limited partners 2,884,256
Distributions to partners (19,153,620)
Net cash used in financing activities (16,644,364)
Net increase in cash and cash equivalents 4,002,644
Cash and cash equivalents, beginning of year 11,102,855
Cash and cash equivalents, end of year 15,105,499$
Supplemental cash flow information:
Cash paid for interest 6,319,155$
Supplemental disclosure of noncash investing activity:
Reversal of liability in connection with acquisition of real estate due to lease termination (155,332)$
JAMESTOWN 28, L.P. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 2015
See notes to consolidated financial statements.
- 5 -
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
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1. ORGANIZATION AND PURPOSE
JAMESTOWN 28, L.P. (the “Partnership”), a Georgia limited partnership, has multiple subsidiaries for its
real estate investments (collectively referred to as the “Fund”). The Partnership was formed in December
2012 for the purpose of acquiring, investing, redeveloping, owning, operating and selling income producing
properties with the intention of achieving current income, capital appreciation or both. The Partnership
terminates on the earlier of December 31, 2031 or the occurrence of certain events as defined in the Amended
and Restated Agreement of Limited Partnership (herein referred to as the Partnership Agreement, inclusive
of all subsequent amendments and restatements). JAMESTOWN, L.P. (JAMESTOWN), a Georgia limited
partnership, is the General Partner.
The stated objectives of the Partnership are as follows:
a. To preserve and protect the partners’ investments in the Partnerships;
b. To realize an initial preferred return equal to 1.5% per annum of contributed capital from the date of
payment of contributed capital up to December 31, 2013 and 5.25% per annum thereafter; and
c. To return to the limited partners an amount equal to 110% of their total capital contributions
(including such capital contributions) from Net Proceeds of Sale or Refinancing and cash reserves
existing at the time the Partnership is liquidated.
The Partnership has two classes of limited partnership units available for subscription, A limited partnership
units (A Units) and B limited partnership units (B Units). The Partnership is authorized to issue between
80,000,000 and 500,000,000 A Units and 50,000,000 and 100,000,000 B Units, each having a subscription
price of $1.00. On November 15, 2013, the Fund closed for further purchase of A Units. At the close of the
fund, 384,703,000 A Units had been issued. During 2015, 375,000 units were redeemed in accordance with
the provisions in the Partnership Agreement.
Limited partners who purchased A Units had the option of either (i) paying the subscription price for their
units in full upon the acceptance by the General Partner of their subscription or (ii) paying a portion of the
subscription price upon the acceptance of their subscription and subsequently paying the remaining balance.
At December 31, 2015 $28,676 was due from limited partners relating to their capital contributions.
B Units are only available for subscription by JAMESTOWN. Once 250,000,000 A Units have been
subscribed, JAMESTOWN shall subscribe for at least one additional B Unit for every five A Units up to a
maximum of 100,000,000 B Units. B Units will be used to meet the capital needs of the Partnership or its
properties, including expansion of existing properties, tenant leasing costs, and capital projects at the
properties. Upon payment in full of the required B Unit contribution, such B Units shall automatically be
converted to A Units. At the time of a request for B Units, the amount payable is equal to the adjusted capital
contribution of A Units, as defined by the Partnership Agreement. At December 31, 2015, 76,940,600 B
Units had been subscribed and -0- B Units had been paid for under the provisions of the Partnership
Agreement.
All capitalized terms not defined herein shall have the meaning ascribed to them in the Partnership
Agreement.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (GAAP). The Partnership is considered an investment
company under GAAP.
(b) Basis of Consolidation
The consolidated financial statements of the Fund include the accounts of the Partnership and its real
estate partnerships for which it has control over the major operating and financing policies. All
significant intercompany accounts and transactions among the Partnership and its subsidiaries have
been eliminated in consolidation.
(c) Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues, expenses, and realized and unrealized gains (losses) during the
reporting period. These estimates and assumptions are based on management’s best estimates and
judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical
experience and other factors, including the current economic environment. Management adjusts such
estimates when facts and circumstances dictate. As future events and their effects cannot be determined
with precision, actual results could differ from those estimates. The most significant estimates and
assumptions for the Fund relate to the valuation of its real estate investments and derivative instruments.
Real estate investment values are affected by, among other things, the availability of capital, occupancy
rates, rental rates and interest and inflation rates. As a result, determining the real estate investment
values involve many assumptions. Amounts ultimately realized from the investment may vary
significantly from the fair values presented.
(d) Real Estate Investments
Real Estate
Real estate property acquisitions, sales and dispositions are recorded as of the date of closing. Real
estate investments are carried at fair value. Costs incurred in connection with the acquisition of the real
estate investment have been capitalized.
Expenditures that extend the economic life of the property or directly relate to revenues of future
periods, including tenant improvements and leasing commissions, are capitalized. Capitalized amounts
are not depreciated or amortized since appraisals take into account the estimated effect of physical
depreciation. Expenditures for maintenance and repairs are expensed as incurred.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 8 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Real Estate Investments (Continued)
Unconsolidated Real Estate Partnerships
Investments in the unconsolidated real estate partnerships are stated at fair value and are presented in
the consolidated financial statements using the equity method of accounting, as the control of the
investments is not held by the Fund. Under the equity method, the investments are initially recorded at
the original investment amount, plus additional amounts invested, reduced by distributions received
and adjusted for the Fund’s share of undistributed earnings or losses (including realized and unrealized
gains and losses) from the underlying partnerships. The Fund’s share in the net assets of the investment
in the unconsolidated real estate partnerships includes the estimated fair value of the real estate
investments, net of the cost of any debt and related derivatives and gives consideration to any
preferential return provisions in the applicable partnership agreements. The economic substance of the
investments is also taken into consideration in determining the Fund’s share of the fair value of the
investments. Capital contributions to the Fund’s investments in unconsolidated real estate partnerships
are recorded as of the date the funds are advanced. Distributions of income and return of capital from
the Fund’s investment in the unconsolidated real estate partnerships are recorded as of the date funds
are received.
(e) Investment Income and Expenses
Rental income is recognized and recorded when due in accordance with the terms of the respective
lease agreements. Additional rents which are provided for in individual tenant leases primarily relate
to the reimbursement of certain operating expenses of the real estate properties and rents based on a
percentage of the tenant’s revenues. The Fund recognizes such reimbursement of expenses and
percentage rents as revenue when earned and the amounts can be reasonably estimated.
Equity in income from the Fund’s unconsolidated real estate partnerships represents the Fund’s share
of the partnerships’ net investment income.
Expenses are recognized when incurred.
(f) Deferred Financing Costs
Deferred financing costs connected with obtaining the mortgage loan payable are amortized over the
term of the loan.
(g) Fair Value of Assets, Liabilities, and Derivative Instrument
The Fund reports the fair value of its real estate investment and its derivative on the consolidated
financial statements. The Fund has elected not to fair value the mortgage loan payable which is
presented at cost on the consolidated financial statements and the fair value is disclosed separately (see
Notes 3 and 6).
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 9 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Cash and Cash Equivalents
The Fund classifies short-term, highly liquid investments purchased with maturities of 90 days or less
and money market accounts, as cash equivalents. These investments are stated at cost, which
approximates fair value. The Fund invests its cash primarily in deposits and money market funds with
commercial banks. At times, cash balances may exceed federally insured amounts. Management
believes it mitigates credit risk by depositing cash in and investing through major financial institutions.
(i) Restricted Cash
The Fund retained the services of an escrow agent in Germany. This agent released funds to the Fund
after the agent determined that each investment identified for purchase was in compliance with the
provisions of the Partnership Agreement. The agent’s supervision covered the investment phase of the
Fund and was terminated upon the complete release of the Fund’s equity which occurred during 2015.
Restricted cash consists of amounts required under the mortgage loan agreement for property taxes,
insurance, and debt service. Restricted cash also includes reserves required under the mortgage loan
agreement as a result of non-compliance with certain financial covenants (see Note 6).
(j) Accrued Investment Income - Allowance for Doubtful Accounts
In the normal course of business, the Fund extends unsecured credit to its tenants. The Fund performs
on-going credit evaluations of its tenants and maintains an allowance for doubtful accounts when
considered necessary. Accounts receivable are generally due under normal trade terms requiring
payment within 30 days from the invoice date. Unpaid accounts receivable do not bear interest.
Bad debts are provided using the allowance for doubtful accounts method based on historical
experience and management’s evaluation of outstanding accounts receivable at the end of each
year. The allowance for doubtful accounts was $-0- as of December 31, 2015.
(k) Withholding Taxes Recoverable From Future Distributions to Limited Partners
Amounts remitted on behalf of limited partners for withholding taxes are recognized as an asset that
will be recovered from future distributions to those limited partners.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 10 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) Income Taxes
No provision for income taxes is required by the Fund since the partners report their respective share
of the taxable income or loss of the Fund in determining their individual taxable income.
Section 1446 of the Internal Revenue Code (IRC) requires that a partnership with nonresident partners
remit withholding tax payments directly to the Internal Revenue Service. The withholding tax
payments are based upon the nonresident partners’ allocable share of the Fund’s consolidated income
that is effectively connected with a U.S. trade or business times the applicable income tax rate as
determined by the classification of income. The withholding tax payments are creditable against the
individual partner’s income tax liability and, to the extent the payments exceed the partner’s actual
income tax liability for the year, the excess will be refunded to the partner upon the filing of a U.S.
income tax return.
California Regulations require that a partnership with nonresident partners remit withholding tax
payments directly to the State of California Franchise Tax Board. The withholding tax payments are
remitted based upon distributions paid or distributable California source income allocable to a partner
under IRC Section 704. The withholding rates are between 7.00% and 12.30% depending upon the
entity type and residency status. To the extent that payments exceed the partner’s actual income tax
liability for the year, the excess will be refunded to the partner upon filing of a California state income
tax return. In the event that a partner provides the Partnership with a withholding exemption certificate,
no withholding is required.
Under tax regulations in the United States of America, the Fund itself is not subject to federal, state,
and local income taxes and, accordingly, such taxes have not been provided for in the accompanying
consolidated financial statements. Each partner is responsible for reporting its allocable share of the
Fund's income, gains, losses, deductions, and credits. The Fund accounts for income taxes in
accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 740, Income Taxes (ASC 740). ASC 740 prescribes a recognition threshold and measurement
attribute for recognizing tax return positions in the consolidated financial statements as those which are
"more likely than not" to be sustained upon examination by the taxing authority. ASC 740 also provides
guidance on derecognition, classification, interest, penalties, accounting for income tax uncertainties in
interim periods and the level of disclosures associated with any recorded income tax uncertainties.
Management has concluded that it has no material uncertain tax liabilities to be recognized at December
31, 2015. The Fund files U.S. federal, state and local tax returns. The 2012 through 2015 tax years of
the Fund remain subject to examination by U.S. federal, state and local tax authorities.
The Fund's policy is to record tax related interest and penalties as a component of real estate operating
expenses in the consolidated statement of operations. As of December 31, 2015, no interest or penalties
have been recognized. Under the tax regulations in the United States of America, any liability for
payment of federal and state income taxes on the Fund's earnings will be the responsibility of its
partners, rather than that of the Fund. Net income (loss) allocated to partners on the Fund's income tax
returns will differ from the accompanying consolidated financial statement amounts due to differences
between GAAP and the federal income tax basis of accounting.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 11 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Risks and Uncertainties
In the normal course of business, the Fund encounters economic risk, including interest rate risk, credit
risk, and market risk. Interest rate risk is the result of movements in the underlying variable component
of the mortgage financing rates. Credit risk is the risk of default on the Fund’s real estate investments
that results from an underlying tenant’s inability or unwillingness to make contractually required
payments. Market risk reflects changes in the valuation of real estate investments held by the Fund.
(n) Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605,
Revenue Recognition, most industry-specific guidance throughout the Industry Topics of the
Codification, and some cost guidance included in subtopic 605-35, Revenue Recognition -
Construction-Type and Production-Type Contracts. The core principle of the guidance is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The guidance provides five steps for an entity to achieve that core principle and provides
disclosure requirements for revenue recognition. The guidance also specifies the accounting for some
costs to obtain or fulfill a contract with a customer. The FASB issued ASU No. 2015-14, Deferral of
Effective Date, which amended the effective date to be for reporting periods beginning after
December 15, 2018 for nonpublic entities. Management is currently evaluating the impact of adopting
this new accounting standards update on the Fund’s consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis,
which changes the way reporting enterprises evaluate whether (a) they should consolidate limited
partnerships and similar entities, (b) fees paid to a decision maker or service provided are variable
interests in a variable interest entity (VIE), and (c) variable interests in a VIE held by related parties of
the reporting enterprise require the reporting enterprise to consolidate the VIE. The ASU is effective
for reporting periods beginning after December 15, 2016 for nonpublic entities. Early adoption is
allowed, including early adoption in an interim period. A reporting enterprise may apply a modified
retrospective approach or full retrospective application. Management is currently evaluating the impact
of adopting this new accounting standards update on the Fund’s consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30),
Simplifying the Presentation of Debt Issuance Costs. The new standard requires that debt issuance costs
related to a recognized debt liability be presented in the consolidated statement of net assets as a direct
deduction from the carrying amount of the debt liability. The adoption of this guidance will be effective
January 1, 2016, and is not expected to have a material impact on the Fund’s consolidated financial
statements.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 12 -
3. FAIR VALUE MEASUREMENTS
The Fund’s real estate investments and derivative instrument are reported at fair value in accordance with
ASC 820, Fair Value Measurements. ASC 820 establishes a hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that
the most observable inputs be used when available. Observable inputs are inputs that the market participants
would use in pricing the asset or liability developed based on market data obtained from sources independent
of the Fund. Unobservable inputs are inputs that reflect the Fund’s assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in
the circumstances. ASC 820 establishes a three-tier hierarchy to classify fair value measurements. The
hierarchy is broken down based on the reliability of inputs as follows:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that
the Fund has the ability to access. Valuation adjustments and block discounts are not applied to
Level 1 instruments.
Level 2 – Valuations based on quoted prices in markets that are not active or for which all
significant inputs are observable, either directly or indirectly.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value
measurement. Level 3 valuations incorporate certain assumptions and projections that are not
observable in the market and significant professional judgment is used in determining the fair value
assigned to such assets and liabilities.
The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety
of factors, including the type of instrument, whether the instrument is new and not yet established in the
marketplace, and other characteristics particular to the transaction. In instances where the determination of
the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the
fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. Investments in real estate are generally
classified within Level 3 of the fair value hierarchy. These fair value measurements are based primarily upon
judgmental estimates and are based on the current economic and competitive environment, characteristics of
the investment, credit, interest, and other factors. Therefore, fair value cannot be determined with precision,
cannot be substantiated by comparison to quoted prices in active markets, and may not be realized in a current
sale or immediate settlement of the asset and/or liability. Additionally, there are inherent uncertainties in any
fair value measurement technique, and changes in the underlying assumptions used, including discount rates,
liquidity risks, and estimates of future cash flows, could significantly affect the fair value measurement
amounts.
Fair value is a market-based measure considered from the perspective of a market participant rather than an
entity-specific measure. Therefore, even when market assumptions are not readily available, the Fund’s own
assumptions are set to reflect those that market participants would use in pricing the asset or liability at the
measurement date. The Fund uses prices and inputs that are current as of the measurement date, including
during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs
may be reduced for many instruments. This condition could cause an instrument to be reclassified between
the levels.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 13 -
3. FAIR VALUE MEASUREMENTS (Continued)
The following is a description of the valuation techniques used for assets and liabilities measured at fair value:
Real Estate
The fair value of the real estate investment has been determined giving consideration to the income, cost and
sales comparison approaches of estimating property value. The income approach estimates an income stream
for a property (typically 10 years) and discounts this income plus a reversion (presumed sale) into a present
value at a risk adjusted rate. Yield rates and growth assumptions utilized in this approach are derived from
market transactions as well as other financial and industry data. The cost approach estimates the replacement
cost of the building less physical depreciation plus the land value. Generally, this approach provides a check
on the value derived using the income approach. The sales comparison approach compares recent transactions
to the property. Adjustments are made for dissimilarities which typically provide a range of value. Generally,
the income approach carries the most weight in the value reconciliation.
As of December 31, 2015, the fair value of the property was determined using an internal valuation which
gives consideration to the approaches listed above, as well as appraisals, broker’s opinion of value, and other
external sources. Management uses all sources of market data in the internal valuation to ensure that the
valuation is reasonable. Transaction costs that the Fund will incur as real estate investments are sold are not
included in the December 31, 2015 fair value measurements, rather they are recorded in the year that the
transaction occurs. The Fund’s real estate investment is classified within Level 3 of the valuation hierarchy.
Unconsolidated Real Estate Partnerships
Unconsolidated real estate partnerships are stated at the fair value of the Fund’s ownership interest of the
underlying partnerships. The Fund’s ownership interests are valued based on the fair value of the underlying
real estate, any related mortgage loans payable and other factors, such as ownership percentage, ownership
rights, distribution provision and capital call obligations. The underlying assets and liabilities are valued
using the same methods the Fund uses for those assets and liabilities it holds directly. The Fund’s investments
in unconsolidated real estate partnerships are generally classified within Level 3 of the valuation hierarchy.
Mortgage Loan Payable
The Fund carries its mortgage loan payable at cost as permitted by the Fair Value Option under ASC subtopic
825-10. The Fund’s debt valuation methodology, for disclosure purposes, focuses on transactions between
market participants using an investor’s cost of equity capital based on current market conditions.
The fair value disclosure of the mortgage loan payable is determined by discounting the difference between
the contractual loan payments and estimated market loan payments at an equity discount rate based on asset
appraisals that reflect how a typical third-party investor would value the cash flows. Market loan payments
are derived from overall market lending rates, debt origination and assumption transactions in the market,
and property specific factors, including loan to value and cap rate changes. The significant unobservable
inputs used in the fair value measurement of the Fund’s mortgage loan payable are the selection of certain
market interest rates and implied equity discount rates. The difference in the calculated fair value and the
balance outstanding is the market valuation adjustment.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 14 -
3. FAIR VALUE MEASUREMENTS (Continued)
Derivative Instrument
The fair value of the interest rate swap is based on the notional, payment frequency, day count fraction, fixed
and floating rates, and other factors, including the credit strength of both counterparties. The present value of
expected cash flow differences is calculated based on prevailing market and contractual interest rates and
credit spreads. The valuation is performed by an independent appraiser consistent with market standards for
valuing derivatives. Management reviews the valuation of the interest rate swap as needed but no less
frequently than once per year. The Fund’s derivative instrument is classified within Level 2 of the valuation
hierarchy.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following fair value hierarchy table presents information about the Fund’s assets and liabilities measured
at fair value on a recurring basis as of December 31, 2015:
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total as of
December 31,
2015
Assets
Real estate, at fair value $ - $ 362,731,072 $ 362,731,072
Unconsolidated real
estate partnerships, at fair value - 252,570,903 252,570,903
Total assets $ - $ 615,301,975 $ 615,301,975
Liabilities
Interest rate swap, at fair value $ 1,623,626 $ - $ 1,623,626
Total liabilities $ 1,623,626 $ - $ 1,623,626
The following table presents additional information about Level 3 assets measured at fair value on a recurring
basis as of December 31, 2015:
Real Estate
Unconsolidated
Real Estate
Partnerships
Total
Level 3 Assets
Beginning balance - December 31, 2014 $ 293,852,427 $ 244,052,201 $ 537,904,628
Additions to real estate investments 2,561,648 - 2,561,648
Equity in income - 14,741,094 14,741,094
Distributions received - (13,643,000) (13,643,000)
Change in unrealized gain 66,316,997 7,420,608 73,737,605
Ending balance - December 31, 2015 $ 362,731,072 $ 252,570,903 $ 615,301,975
Change in unrealized gain relating to assets
held at December 31, 2015 $ 66,316,997 $ 7,420,608 $ 73,737,605
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 15 -
3. FAIR VALUE MEASUREMENTS (Continued)
The following table shows quantitative information about unobservable inputs related to the Level 3 value
measurements used during the year ended December 31, 2015:
Type Asset Class Valuation Technique
Unobservable Inputs Weighted
Average
Real Estate and Mixed-Use Discounted Cash Flow Discount rate 8.67%
Unconsolidated
Real Estate Partnership
Terminal capitalization rate 6.00%
Office Discounted Cash Flow Discount rate 7.00%
Terminal capitalization rate 7.09%
Mortgage Loans Mixed-Use Discounted Cash Flow Market interest rate 3.81%
Payable Implied equity discount rate 10.35%
Office Discounted Cash Flow Market interest rate 2.15%
Implied equity discount rate 10.90%
Significant increases (decreases) in any of the inputs in isolation would result in a significantly lower (higher)
fair value, respectively.
At December 31, 2015, approximately 61%, 36% and 3% of the Fund’s investments in fair value were located
in the West, East and South regions of the United States, respectively, as defined by the National Council of
Real Estate Investment Fiduciaries.
4. REAL ESTATE
On July 26, 2013, the Partnership acquired Lantana for a purchase price of $313.7 million. Lantana is
comprised of four office buildings located in Santa Monica, California and is titled and owned through two
single purpose U.S. subsidiary partnerships, JAMESTOWN Lantana North, L.P. and JAMESTOWN Lantana
South, L.P. (the “Lantana Partnerships”), with the Partnership owning a 99.9% limited partnership interest in
each partnership.
In connection with the acquisition of Lantana, the Lantana Partnerships were assigned all rights and
obligations relating to the Property under the Declarations of Covenants, Conditions and Restrictions and
Easements (CCREs), which are recorded agreements governing the use of certain shared facilities, including
parking. Under these recorded agreements, a California nonprofit mutual benefit corporation is established
(collectively, the “Associations”), and these Associations hold title to the Lantana parking facilities and other
shared infrastructure. The Lantana Partnerships are members of the Associations and under these recorded
agreements are granted certain rights for the portions of the parking allocated to the Property and rights to the
revenue from such parking through May 17, 2108. All direct costs incurred in connection with the acquisition
of these parking rights have been capitalized and are included as a component of real estate investment in the
accompanying consolidated financial statements. Parking revenue totaled $3,440,140 for the year ended
December 31, 2015 which is included in revenue from real estate in the accompanying consolidated financial
statements.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 16 -
4. REAL ESTATE (Continued)
At December 31, 2015, Lantana’s cost basis and fair value basis was $321,428,006 and $362,731,702,
respectively.
Two tenants individually accounted for approximately 10% and 34% of revenue from real estate for the year
ended December 31, 2015. Their leases are scheduled to expire in 2020 and 2025, respectively.
The aggregate minimum future rentals, scheduled to be received on real estate, for noncancelable operating
leases in effect as of December 31, 2015 are as follows:
Year Ending
December 31: Amounts Due
2016 $ 12,821,393
2017 11,543,974
2018 11,478,582
2019 11,726,315
2020 11,298,509
Thereafter 37,012,761
Total future minimum lease payments $ 95,881,534
The Fund was also entitled to additional rents, which are not included above, which are primarily based upon
escalations of real estate taxes and operating expenses over base period amounts. These are included as
revenue from real estate in the accompanying consolidated financial statements.
Under a certain lease, the Fund was entitled to receive additional rents, which are also not included above,
equal to a percentage of the tenants’ annual gross sales over minimum amounts specified in the lease. For
the year ended December 31, 2015, the Fund earned $-0- in percentage rents from the tenant.
5. UNCONSOLIDATED REAL ESTATE PARTNERSHIPS
The Partnership owns a 53% limited partnership interest in the Milk Studios building, a mixed-use building
in New York, New York. The remaining 47% limited partnership interest is held by an affiliate.
The Partnership owns a preferred equity partnership interest in MP/JAMESTOWN Core Holding Co., L.P.,
a limited partnership commonly known as the Millennium Core Fund, which owns a 1,470,000 square foot
real estate portfolio comprised of mixed-use properties located in New York, Boston, Miami, Washington,
D.C. and San Francisco. The Fund’s interest in the Millennium Core Fund is titled and owned through a
single purpose U.S. subsidiary partnership, JAMESTOWN MCH, L.P.
At December 31, 2015, the Fund’s cost basis and fair value basis in the unconsolidated real estate partnerships
was $228,785,413 and $252,570,903, respectively.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 17 -
5. UNCONSOLIDATED REAL ESTATE PARTNERSHIPS (Continued)
The following is 100% of the condensed financial statements of the unconsolidated real estate partnerships
as of and for the year ended December 31, 2015:
Condensed Statement of Net Assets
Assets:
Real estate investments, at fair value (cost: $937,814,750) $ 1,528,790,840
Other assets 201,377,585
Total assets 1,730,168,425 Liabilities:
Mortgage loans payable 891,857,000
Interest rate swap, at fair value 456,122
Other liabilities 13,667,591
Total liabilities 905,980,713
Net assets $ 824,187,712
Fund’s share of net assets $ 252,570,903
Condensed Statement of Operations
Revenues $ 115,675,206
Expenses 79,889,913
Net investment income 35,785,293
Change in unrealized loss on interest rate swap (1,472,753)
Change in unrealized gain on real estate 72,753,920
Increase in net assets resulting from operations $ 107,066,460
Fund’s equity in increase in net assets resulting from operations $ 22,161,702
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 18 -
5. UNCONSOLIDATED REAL ESTATE PARTNERSHIPS (Continued)
The following table summarizes the principal amounts outstanding on the mortgage loans payable and the
calculated fair value as of December 31, 2015:
Loan Collateral
Principal Outstanding
December 31, 2015
Fair Value
December 31, 2015 (1)
Milk Studios (2) $ 168,500,000 $ 169,712,502
Millennium - Boston 104,357,000 104,384,200
Millennium 574,300,000 572,853,053
Millennium - Mezz 44,700,000 44,647,922
$ 891,857,000 $ 891,597,677
(1) The Fund carries its mortgage loans payable at cost as permitted by the fair value option of ASC subtopic ASC 825-10. The information is
provided as it relates to the disclosure of the mortgage loans payable.
(2) The Milk Studios loan contains a limited principal guaranty for amounts up to $17,861,000 provided by the Partnership. See Note 10.
Contributions, distributions and allocations of profits and losses from the unconsolidated real estate
partnerships will be funded, distributed and allocated to the partners in accordance with the provisions of the
partnership agreements and in proportion to their respective ownership percentages. The fair value of the
Fund’s ownership interest is based on the fair value of the net assets of the unconsolidated partnerships and
considers the distribution provisions of the related partnership agreements.
6. MORTGAGE LOAN PAYABLE
In connection with the acquisition of the property, the Lantana Partnerships entered into a mortgage loan
agreement in the amount of $188,000,000. The interest only mortgage loan has a maturity date of July 26,
2018 and bears interest at a rate of 1-month LIBOR (.43% at December 31, 2015) plus 1.85%. As of
December 31, 2015, the principal outstanding and the fair value of the mortgage loan payable was
$188,000,000 and $188,363,339, respectively. The mortgage loan payable requires monthly interest only
payments through the maturity date of July 26, 2018 at which time the principal, and any unpaid interest will
be due.
The mortgage loan payable contains prepayment penalty rights following the first loan year through the July
25, 2017. After July 25, 2017, the mortgage loan payable may be prepaid in accordance with the loan
agreement.
The mortgage loan payable also contains a guaranty of non-recourse carve-out stipulations provided by both
JAMESTOWN and the Fund and a limited principal guaranty with principal payments up to $5,400,000,
provided by JAMESTOWN and the Fund (see Note 10).
Under the terms of the mortgage loan agreement, the Lantana Partnerships are required to pay, in advance, a
quarterly administrative fee to the lender of $109,000 per year. For the year ended December 31, 2015, the
loan administrative fee totaled approximately $109,000 and is included in real estate operating expenses in
the accompanying consolidated financial statements.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 19 -
6. MORTGAGE LOAN PAYABLE (Continued)
For the year ended December 31, 2015, the Fund amortized financing costs of $513,975, which is included
as a component of interest expense in the accompanying consolidated financial statements.
The Lantana Partnerships are subject to certain financial and nonfinancial covenants under the mortgage loan
payable agreement. During 2014, the Lantana Partnerships did not meet the required minimum interest
coverage ratio (ICR) covenant as defined in the loan agreement. The failure of this covenant triggered a cash
management period which can be cured once the Lantana Partnerships pass the minimum ICR for two
consecutive quarters, as defined by the loan agreement. As of December 31, 2015, the Lantana Partnerships
remain under the cash management period.
During the cash management period, the Lantana Partnerships must deposit all Excess Cash Flow into a
reserve account equal to the amount required to cure the covenant failure. As of December 31, 2015, the
Lantana Partnerships are required to deposit approximately $41,100,000 (the “ICR Deposit Amount”) into
the reserve account. The Lantana Partnerships have the option to fulfill the required ICR Deposit Amount by
either cash deposits, a Letter of Credit, or repayment of principal. As of December 31, 2015, the reserve
account had a balance of approximately $4,000,000 and is included in restricted cash in the accompanying
consolidated financial statements. The Lantana Partnerships can draw from this account for certain allowable
capital costs, as detailed in the agreement.
If the cash management period is not cured after four consecutive quarters by either meeting the minimum
interest coverage ratio or by fulfilling the reserve account with the ICR Deposit Amount, the lender has the
right, but not the obligation, to apply the balance in the reserve account towards any outstanding obligations
and the Lantana Partnerships will not be able to recoup these funds. As of December 31, 2015, the lender has
not exercised this right. Management believes the Lantana Partnerships will cure the cash management period
in 2017.
On May 28, 2014, a major tenant in the South Campus, IMAX Corporation, exercised their early termination
option effective as of April 30, 2015. Upon receipt of such notice, all Excess Cash Flow was required to be
deposited into a Vacancy Reserve account until a total of approximately $2,800,000 was funded. The
Vacancy Reserve was fully funded on October 15, 2014 and the balance is included in restricted cash in the
accompanying consolidated financial statements. In March 2016, the Lantana Partnerships executed a lease
with an existing tenant to expand into the former IMAX space. As a result, the Vacancy Reserve was released
to the Lantana Partnerships to cover tenant improvement and leasing costs associated with the new lease. The
cash flows related to the lease expansion are included in the internal valuation used to calculate the fair value
of Lantana at December 31, 2015.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 20 -
7. DERIVATIVE INSTRUMENT
To limit the Fund’s exposure to interest rate fluctuations on its variable rate debt, the Fund has entered into
an interest rate swap agreement on the mortgage loan payable.
The interest rate swap agreement fixed the LIBOR portion of the interest rate at 1.46% for a total all-in-rate
of 3.31% (after taking into consideration the administrative fee of $109,000 per year and a 365/360 interest
method, the all-in-rate is 3.41%). As of December 31, 2015, the interest rate swap agreement had a notional
amount of $188,000,000 and a recorded fair value liability of $1,623,626. The agreement expires on July 26,
2018. For the year ended December 31, 2015, the Partnership incurred $2,424,212 in interest expense related
to the derivative which is included as a component of interest expense in the accompanying consolidated
financial statements.
In accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities, the Fund has
not designated this interest rate swap as a cash flow hedge. Accordingly, the Fund recognizes any changes
in fair value as a component of unrealized gains (losses) in the accompanying consolidated financial
statements. For the year ended December 31, 2015, the total unrealized loss on the interest rate swap was
$563,065.
8. PARTNERSHIP AGREEMENT
The Partnership Agreement contains provisions relating to capital contributions, redemptions, distributions
of cash flow, distribution of proceeds from capital transactions and allocation of profits and losses.
Allocation of Profits and Losses
Net income of the Partnership is to be allocated to the partners as follows:
a) First, to the General Partner, until the cumulative net income to the General Partner is equal to the
cumulative subordinated General Partner distribution of cash flow, any specially allocated interest and
the amount necessary to offset any allocated losses, as defined by the Partnership Agreement.
b) Second, to the limited partners, equal to the sum of the cumulative initial preferred return, the
cumulative 5.25% preferred return, 10% of limited partners’ cumulative capital contributions and the
amount necessary to offset any allocated losses, as defined by the Partnership Agreement.
c) Third, to the partners, pro rata, 66.67% to the limited partners and 33.33% to the General Partner.
Net loss of the Partnership is to be allocated to the partners as follows:
a) First, to the partners to offset any net income previously allocated, pro rata, 66.67% to the limited
partners and 33.33% to the General Partner under the tranche described above.
b) Second, to the limited partners, to cause the cumulative net losses to each limited partner to equal such
limited partner’s capital contributions.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 21 -
8. PARTNERSHIP AGREEMENT (Continued)
Allocation of Profits and Losses (Continued)
c) Third, to the limited partners, in proportion to and to the extent necessary to offset any income allocated
to such partner equal to 10% of such partner’s cumulative capital contributions, cumulative 5.25%
preferred return, and cumulative initial preferred return, in that order.
d) Fourth, to the General Partner.
Distributions of Operating and Capital Cash Flows
Interest income is specially allocated to the General Partner (see Note 9). Cash flow, as defined by the
Partnership Agreement, is to be distributed to the A Unit limited partners and the General Partner annually
on May 15 of the following year, commencing on May 15, 2014, in the following priority:
a) First, to the limited partners, until the cumulative distributions to each limited partner are equal to such
limited partner’s initial preferred return. The initial preferred return shall be a non-compounding per
annum rate equal to $.0150 per unit from the time of payment of the subscription amounts until
December 31, 2013. This amount, totaling $2,160,499, was paid in May 2014.
b) Second, to the limited partners, until the cumulative distributions to each limited partner are equal to
such limited partner’s preferred return. The preferred return shall be a non-compounding per annum
rate equal to $.0525 per unit starting from the time of payment of the subscription amounts until
January 1, 2014. The amount has been paid for 2014. The distribution for 2015 will be paid in
May 2016.
c) Third, to the partners, pro rata, 66.67% to the limited partners and 33.33% to the General Partner. To
date, no amounts have been paid under this provision.
Net proceeds from a sale or refinancing are to be distributed in a priority specified in the Partnership
Agreement.
9. RELATED PARTY TRANSACTIONS
Due from Related Parties
Due from related parties consists of amounts due from the Associations for operating expense reimbursements
totaling approximately $219,000, and amounts due from JAMESTOWN related to administration of limited
partner accounts totaling approximately $40,000, which are included in due from related parties in the
accompanying consolidated financial statements.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 22 -
9. RELATED PARTY TRANSACTIONS (Continued)
General Partner Syndication Fees
Syndication fees equal to 4% of capital contributions made to the Partnership were paid to JAMESTOWN.
These fees are for the cost of equity acquisition, including all sales commissions payable to third parties,
marketing costs, sales coordination costs, prospectus preparation and reviews and costs associated with
obtaining fund ratings. From the inception of the Fund through December 31, 2015, syndication fees included
as a reduction of net assets totaled $15,388,120.
In addition, syndication fees equal to 1% of capital contributions made to the Partnership were paid to
JAMESTOWN for reimbursement of expenses incurred in evaluating and pursuing investment opportunities
for the Partnership, due diligence costs incurred in connection with prospective investments not acquired by
the Partnership, organizational expenses, prospectus printing costs, and fees paid to escrow agents. From the
inception of the Fund through December 31, 2015, syndication fees expensed as fund administration expenses
totaled $3,847,030.
Special Interest Income Allocation to General Partner
As provided by the Partnership Agreement, JAMESTOWN receives interest income earned by the Fund,
which includes interest income allocated from property partnerships, for the management of the following
affairs of the Fund: the costs of the annual audits of the Fund’s financial statements, the preparation of the
tax returns of the Fund in the United States and Germany, and communications of the affairs of the Fund to
the limited partners. The cost of these affairs will be borne by the General Partner or an affiliate and paid
from the interest income of the Fund. For the year ended December 31, 2015, the Fund earned $1,698 in
interest income, all of which has been remitted to JAMESTOWN.
Fund Administration Fee
As provided for in the Partnership Agreement, JAMESTOWN is entitled to an annual fee, payable monthly,
equal to 0.42% of limited partner invested equity for the administration of the Fund. The fee shall increase
by 3% each year. For the year ended December 31, 2015, the Fund incurred a fund administration fee of
$1,629,216.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 23 -
9. RELATED PARTY TRANSACTIONS (Continued)
Asset Management Fee
As provided for in the Partnership Agreement, JAMESTOWN is entitled to an annual fee, payable monthly,
equal to 0.64% of limited partner invested equity for the supervision of the properties and the management
of the affairs of the Fund. The fee shall increase by 3% each year. For the year ended December 31, 2015,
the Fund incurred an asset management fee of $1,912,177.
As of December 31, 2015, approximately $74,000 remained payable to JAMESTOWN related to these
services and is included in due to related parties in the accompanying consolidated financial statements.
Insurance
During 2015, the Fund paid insurance premiums totaling approximately $7,000, to an affiliate of the General
Partner. This amount is included in real estate operating expenses in the accompanying consolidated financial
statements.
Real Estate Investment Level Services
The General Partner may retain one or more of their affiliates to perform services for Lantana including
property management, development and construction management, sustainability consulting, and other
services. A certain affiliate of the General Partner served as the property management company for Lantana
through May 31, 2015, and was entitled to receive a monthly management fee of 2.5% of Gross Receipts, as
defined by the agreement. On June 1, 2015, Lantana terminated this agreement and entered into a new
property management agreement with another affiliate. The affiliate is entitled to receive a monthly
management fee of 2.5% of Gross Receipts, as defined by the agreement. The agreement has an initial term
of one year and will be automatically renewed for successive one year periods unless terminated by either
party. For the year ended December 31, 2015, Lantana incurred property management fees totaling $562,132
and payroll reimbursements totaling approximately $782,000. These amounts are included in real estate
operating expenses in the accompanying consolidated financial statements.
Additionally, approximately $86,000 in fees and reimbursements were incurred by the Fund for services
performed by affiliates related to development and construction management, retail leasing, legal, and
marketing of Lantana. Of these amounts, approximately $26,000 is included in real estate operating expenses
and approximately $60,000 is capitalized as real estate in the accompanying consolidated financial
statements.
As of December 31, 2015, $71,000 remained payable to various affiliates related to these services and is
included in due to related parties in the accompanying consolidated financial statements.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 24 -
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may be subject to various litigations and in some instances the
amount sought may be substantial. Although the outcome of such claims, litigation, and disputes cannot be
predicted with certainty, in the opinion of management, based on facts known at this time, the resolution of
such matters are not anticipated to have a material adverse effect on the consolidated financial position or
results of operations of the Fund.
The Partnership is contingently liable for a limited principal guaranty for amounts up to $17,861,000 on the
Milk Studios mortgage loan payable.
The Partnership is contingently liable for a guaranty of non-recourse carve-outs and a limited principal
guaranty up to approximately $5,400,000 on the Lantana North and Lantana South mortgage loan payable
described in Note 6. Under the non-recourse carve-out guarantee, the Partnership would be liable for the
obligations as defined, in addition to all interest, legal fees, and collection costs incurred enforcing any right
granted per the guaranty.
As of December 31, 2015, the Fund had an outstanding obligation to fund property level reserves totaling
approximately $7,000,000 to its real estate investments as outlined in the Fund’s prospectus. These reserves
are anticipated to be funded for capital and leasing projects or working capital, as needed.
As of December 31, 2015, the Fund has an additional outstanding unrecorded obligation to fund tenant
improvements totaling approximately $7,300,000. These amounts will be paid in accordance with the
tenants’ leases.
11. FINANCIAL HIGHLIGHTS
The following are certain financial highlights of the Fund for the year ended December 31, 2015:
Investment management expenses:
Asset management fee (1) 0.64%
Fund administration fee (1) 0.42%
1.06%
Net investment income ratio (2) 4.69%
Total return, before investment management expenses (2) 25.33%
Total return, after investment management expenses (2) 23.21%
Limited Partner expected distributions for 2015 (3) 5.25%
(1) Annual fee paid to the General Partner based on limited partner invested equity (see Note 9). Asset management fees and fund administration fees calculated on time weighted net assets of $372,412,118 as required by GAAP, are 0.51% and 0.44%, respectively.
(2) The net investment income ratio is calculated using total net investment income (loss) for the year ended December 31, 2015 over the December 31, 2014 net asset value less any time weighted redemptions made during the current year less any time weighted distributions
made during the current year. The total return is calculated using the increase (decrease) in net assets resulting from operations for the year
ended December 31, 2015 before and after investment management expenses over the December 31, 2014 net asset value less any time weighted redemptions made during the current year less any time weighted distributions made during the current year.
(3) Distributions relating to 2015 expected to be paid in May 2016.
JAMESTOWN 28, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
- 25 -
12. SUBSEQUENT EVENTS
In accordance with accounting standards, the Fund has evaluated events and transactions occurring from
January 1, 2016 through April 20, 2016, the date the consolidated financial statements were available for
issuance. Management has concluded that there were no other significant events requiring recognition and/or
disclosure in the consolidated financial statements other than those disclosed herein.