SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1995 Commission File No. 2-79095
JMB MORTGAGE PARTNERS, LTD.
(Exact name of registrant as specified in its charter)
Illinois 36-3198533
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 16
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . 21
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . $ 453,751 1,104,277
Short-term investments (note 1). . . . . . . . . . . . . . . . . . 1,969,624 1,954,452
Interest, rents and other receivables. . . . . . . . . . . . . . . 154,071 33,069
Amount due from affiliate (note 2(d)). . . . . . . . . . . . . . . -- 302,250
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . 2,577,446 3,394,048
----------- -----------
Investment property (notes 1 and 2(d)):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000 --
Buildings and improvements . . . . . . . . . . . . . . . . . . . . 7,204,790 --
----------- -----------
9,604,790 --
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . 120,075 --
----------- -----------
Total investment property,
net of accumulated depreciation. . . . . . . . . . . . . 9,484,715 --
Mortgage notes receivable (net of allowance for loan losses
of $1,145,000 in 1995 and $2,147,000 in 1994 -
notes 2(c) and 2(d)) . . . . . . . . . . . . . . . . . . . . . . . 1,392,000 6,493,135
Deferred interest receivable (net of allowance for loan loss
of $458,000 in 1995 and 1994) - notes 2(c) and 2(d). . . . . . . . -- 735,615
Settlement note receivable (note 2(b)) . . . . . . . . . . . . . . . 90,500 91,500
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,075 --
----------- -----------
$13,555,736 10,714,298
=========== ===========
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
------------------------------------------------------
JUNE 30, DECEMBER 31,
1995 1994
------------ -----------
Current liabilities:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- 296,763
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 30,763 30,682
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . 15,344 --
Amounts due to affiliate . . . . . . . . . . . . . . . . . . . . . 59,144 --
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . 118,288 --
Amounts due to affiliates (note 4) . . . . . . . . . . . . . . . . 929,352 931,892
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . 1,152,891 1,259,337
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . 41,879 --
------------ -----------
Commitments and contingencies (notes 2 and 4)
Total liabilities. . . . . . . . . . . . . . . . . . . . . 1,194,770 1,259,337
Venture partners' subordinated equity in venture . . . . . . . . . . 3,774,312 --
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . 464,465 458,326
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (658,761) (652,622)
----------- -----------
(193,296) (193,296)
----------- -----------
Limited partners (39,695 interests):
Capital contributions, net of offering costs . . . . . . . . . . 34,918,348 34,918,348
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . 16,720,473 16,596,405
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (42,858,871) (41,866,496)
----------- -----------
8,779,950 9,648,257
----------- -----------
Total partners' capital accounts . . . . . . . . . . . . . 8,586,654 9,454,961
----------- -----------
$13,555,736 10,714,298
=========== ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . $ 417,147 484,591 746,851 985,858
Interest income. . . . . . . . . . . . . . . 33,285 182,258 67,692 360,133
----------- ---------- ----------- ----------
450,432 666,849 814,543 1,345,991
----------- ---------- ----------- ----------
Expenses:
Depreciation . . . . . . . . . . . . . . . . 60,075 74,352 120,075 147,554
Property operating expenses. . . . . . . . . 214,751 222,632 295,508 468,280
Mortgage investment servicing fees
(note 4) . . . . . . . . . . . . . . . . . 12,165 22,270 34,435 44,540
Professional services. . . . . . . . . . . . 7,550 15,600 40,075 40,887
Amortization of deferred expenses. . . . . . -- 1,244 -- 2,576
General and administrative . . . . . . . . . 31,033 28,257 58,330 48,818
Provision for value impairment
(note 2(a)). . . . . . . . . . . . . . . . -- 325,000 -- 325,000
----------- ---------- ----------- ----------
325,574 689,355 548,423 1,077,655
----------- ---------- ----------- ----------
Operating earnings (loss). . . . . . 124,858 (22,506) 266,120 268,336
Venture partners' share of venture's
operations (notes 1 and 2(d)). . . . . . . . (61,117) -- (135,913) --
----------- ---------- ----------- ----------
Net earnings (loss). . . . . . . . . $ 63,741 (22,506) 130,207 268,336
=========== ========== =========== ==========
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
Net earnings (loss) per
limited partnership
interest (note 1). . . . . . . . . $ 1.53 (.58) 3.13 6.48
=========== ========== =========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . . . $ 2.50 8.50 25.00 17.00
=========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130,207 268,336
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,075 147,554
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . -- 2,576
Provision for value impairment (note 2(a)) . . . . . . . . . . . . . -- 325,000
Venture partner's share of venture's operations (notes 1 and 2(d)) . 135,913 --
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . . . . . (121,002) 230
Amount due from affiliate. . . . . . . . . . . . . . . . . . . . . . . 302,250 --
Deferred interest receivable . . . . . . . . . . . . . . . . . . . . . 48 --
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . (296,763) --
Amount due to affiliate. . . . . . . . . . . . . . . . . . . . . . . . 59,144 --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 7,681
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . 118,288 (69,817)
Amounts due to affiliates (note 4) . . . . . . . . . . . . . . . . . . (2,540) (276,089)
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,344 (7,285)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . 41,879 --
----------- -----------
Net cash provided by operating activities. . . . . . . . . . . 502,924 398,186
----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments . . . . (15,172) 1,332,433
Additions to investment properties . . . . . . . . . . . . . . . . . . (11,489) (27,666)
Reduction in loan carrying value due to borrower payments (note 2(c)). 40,000 --
Payments received on settlement note from former loan guarantor
(note 2(b)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 14,500
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,075) --
----------- -----------
Net cash provided by investing activities. . . . . . . . . . . 3,264 1,319,267
----------- -----------
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Cash flows from financing activities:
Distributions to venture partners. . . . . . . . . . . . . . . . . . . (158,200) --
Distributions to limited partners. . . . . . . . . . . . . . . . . . . (992,375) (674,815)
Distributions to general partners. . . . . . . . . . . . . . . . . . . (6,139) (20,871)
----------- -----------
Net cash used in financing activities. . . . . . . . . . . . . (1,156,714) (695,686)
----------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . (650,526) 1,021,767
Cash and cash equivalents, beginning of year . . . . . . . . . 1,104,277 207,602
----------- -----------
Cash and cash equivalents, end of period . . . . . . . . . . . $ 453,751 1,229,369
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . $ -- --
=========== ===========
Non-cash investing and financing activities:
Balance due on mortgage note receivable. . . . . . . . . . . . . . . $ 6,063,135 --
Deferred interest receivable . . . . . . . . . . . . . . . . . . . . 735,567 --
Provision for loan loss. . . . . . . . . . . . . . . . . . . . . . . (1,002,000) --
Capitalized costs. . . . . . . . . . . . . . . . . . . . . . . . . . 6,699 --
Venture partners' interests. . . . . . . . . . . . . . . . . . . . . 3,796,599 --
----------- -----------
Net initial carrying value of investment property
(notes 1 and 2(d)) . . . . . . . . . . . . . . . . . . . . . $ 9,600,000 --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1994
which are included in the Partnership's 1994 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
For financial reporting purposes, effective January 1, 1995, the
mortgage loan secured by the Spring Hill Fashion Center was determined to
have been in-substance foreclosed and was reclassified as an investment in
a consolidated joint venture in real estate at its estimated fair value.
In early May 1995, the lenders (including the Partnership) obtained legal
title to the property (see note 2(d)). The effect of all transactions
between the Partnership and its venture has been eliminated.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to present the Partnership's accounts
in accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Partnership. The net
effect of these items is summarized as follows for the six months ended
June 30:
1995 1994
----------------------- ----------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings
(loss). . . . . . $130,207 (1,019,834) 268,336 444,939
Net earnings
(loss) per
limited
partnership
interest. . . . . $ 3.13 (24.80) 6.48 10.68
======== ========== ======= =======
The net earnings (loss) per limited partnership interest ("Interest")
is based upon the number of Interests outstanding at the end of each period
(39,695).
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies cash 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 pronounce-
ment. In addition, 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 ($197,510 at June 30,
1995 and $759,979 at December 31, 1994) 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.
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership's remaining participating first mortgage loan
investment (secured by the Oak Court of Westmont Shopping Center) provides
for the following components of interest: basic interest which is payable
monthly; simple accrued interest which is payable upon loan prepayment or
at maturity; additional participation interest, payable no less frequently
than annually, in annual gross receipts (as defined) of the property in
excess of a specified amount, and additional participation interest in
subsequent increases in the market value of the property in excess of a
specified amount, payable at the property's sale or at maturity.
Basic and simple accrued interest income on mortgage notes receivable
was being recognized using the interest method which results in a level
effective yield on the outstanding principal balance. Effective October 1,
1989, the Partnership recognized interest income only as collected on the
mortgage loan secured by the Oak Court of Westmont Shopping Center (note
2(c)). Effective January 1, 1993, the Partnership elected to early adopt
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS #114") which became effective
January, 1994. SFAS #114 provides that the impairment on a collateralized
loan that is considered impaired (as defined) will be recognized by
creating a valuation allowance to the recorded balance of the loan to yield
a net carrying amount of the loan which is equal to the fair value of the
loan collateral. The Partnership has elected to recognize subsequent
changes in the fair value of the collateral as adjustments to this
valuation allowance, as discussed in note 2. Further, effective January 1,
1993, for financial reporting purposes, the carrying amount of the loan
secured by the Oak Court of Westmont Shopping Center is being reduced by
any payments received from the borrower. Effective December 1, 1991, the
Partnership, for financial reporting purposes, suspended the accrual of the
simple accrued interest receivable (which is payable at maturity) on the
mortgage loan secured by the Spring Hill Fashion Center (note 2(d)).
Participation interest in increases in the market value of the Oak Court of
Westmont Shopping Center in excess of a specified amount is recognized as
income when received by the Partnership.
(2) MORTGAGE NOTES RECEIVABLE
(a) Pineapple Place Apartments
Reference is made to Notes 2(a) and 4(a) of Notes to Financial
Statements contained in the Partnership's 1994 Annual Report for a
description of the terms of this loan and for a description of the events
resulting in the Partnership obtaining legal title to this property in
November 1989. Reference is also made to note 3(a) for a description of
the sale of this property in August 1994.
Due to the Partnership's inability to recover the net carrying value
of the property in contemplation of the aforementioned sale, the
Partnership, for financial reporting purposes, made a provision for value
impairment of the property of $325,000 in June 1994.
(b) Ocean Technology Park Office Building
Reference is made to Notes 2(b) and 4(c) of Notes to Financial
Statements contained in the Partnership's 1994 Annual Report for a
description of the terms of this loan and for a description of the events
resulting in the Partnership obtaining legal title to this property in
December 1990. Reference is also made to note 3(b) for a description of
the sale of this property in December 1994. To the extent that the amounts
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the borrower owed the Partnership (including the delinquent amounts
referred to in Note 4(c) of Notes to Financial Statements contained in the
Partnership's 1994 Annual Report) exceeded the fair market value of the
property, the Partnership pursued enforcement of the guaranty from the
general partners of the borrower.
In September 1991, the Partnership obtained a judgment in the amount
of approximately $1,679,000 against the general partners of the borrower.
In 1992, one of the three general partners of the borrower filed for
protection under Chapter VII of the bankruptcy laws. The bankruptcy court
subsequently notified the Partnership that the debtor had no assets to
satisfy the judgment and that the bankruptcy claims have been discharged.
Effective January 1, 1993, settlement agreements were reached between the
Partnership and the two other general partners ("guarantors") of the
borrower. Pursuant to one of the settlement agreements, a promissory note
for $125,000 was issued by one of the guarantors to the Partnership.
Accordingly, the Partnership recognized $125,000 as settlement income in
1993. The note provides for annual principal payments (to be made not less
frequently than monthly) to the Partnership totaling $25,000 in the year
commencing April 1, 1993 and ending March 31, 1994, $30,000 in the year
ending March 31, 1995, and $35,000 in each of the final two years ending
March 31, 1996 and 1997, respectively. The aforementioned scheduled
principal payments are subject to earlier payment under certain
circumstances. The note provides for prepayment in whole or in part at any
time without penalty. This guarantor was current in his monthly payments
to the Partnership through August 31, 1994. The Partnership has not
received monthly and quarterly payments totaling $12,000 which were due as
of December 31, 1994 and has not received the 1995 monthly and quarterly
payments totaling $16,250 as of the date of this report. The Partnership
has contacted the guarantor regarding these delinquent amounts.
Pursuant to the other settlement agreement, a promissory note for
$300,000 (subject to reduction to $125,000 if no default has occurred) was
issued by the other guarantor to the Partnership. The note provides for
monthly principal payments totaling $15,000 in calendar year 1994, $20,000
in 1995, $25,000 in 1996, and $65,000 in calendar year 1997. The note also
provides for simple annual accrued interest of 5% in calendar years 1993
and 1994, 6% in 1995, and 7% in calendar years 1996 and 1997, all such
accrued interest payable on December 31, 1997. The aforementioned
scheduled principal payments are subject to earlier payment under certain
circumstances. The note provides for prepayment in whole or in part any
time without penalty. The guarantor in this settlement agreement has not
made any payments (which were to commence January, 1994) as of the date of
this report, and the Partnership has sent a default notice to the
guarantor. As a matter of prudent accounting practice, the Partnership is
recognizing income from this settlement only as collected.
(c) Oak Court of Westmont Shopping Center, Westmont, Illinois
Reference is made to Note 4(b) of Notes to Financial Statements
contained in the Partnership's 1994 Annual Report for a description of the
terms of this loan.
Approximately $1,429,000 of interest due to the Partnership through
June 30, 1995 was uncollected as of the date of this report. Of this
uncollected amount, approximately $185,000 represents basic interest due
for the six months ended June 30, 1995. For financial reporting purposes,
the carrying amount of this loan has been reduced by $40,000 in 1995, such
amount representing payments received from the borrower in 1995 (see note
1). For the period October 1, 1989 to December 31, 1992, the Partnership
recognized interest income only as collected. The borrower continues to
negotiate with the Partnership concerning the unpaid amounts.
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Occupancy at the shopping center was 62% at June 30, 1995, down from
82% at March 31, 1995, primarily as a result of the move out of a tenant
which occupied approximately 24% of the leasable space at the property and
whose lease was scheduled to expire November 30, 1996. Due to the
competitive conditions in this market, re-leasing time and expense could be
substantial to replace this tenant. The borrower continues to pursue
additional tenants for the shopping center, but the market remains very
competitive. Due to the property's continuing high levels of vacancy, the
borrower has made only partial interest payments since July, 1989 to the
extent of cash generated by the property. The manager of the property, an
affiliate of the borrower, is currently deferring a portion of its
management fees in order to increase the cash flow available to the
Partnership. Due to the aforementioned vacancy level of the property and
the current competitive market conditions, the borrower was unable to
either sell the property or to obtain replacement long-term financing in
order to repay the loan on its scheduled maturity date of January 14, 1995.
The Partnership is working closely with the borrower in an effort to lease
up the vacant space at the property and to make the property marketable for
either a sale or replacement financing. Accordingly, the Partnership has
classified this mortgage note receivable as a noncurrent asset in the
accompanying consolidated balance sheets.
Due to the uncertainty of the realization of the simple accrued
interest recognized through September 30, 1989 (approximately $458,000) and
the principal balance of the loan ($2,845,000), the Partnership, as a
matter of prudent accounting practice and to reflect the estimated fair
value of the collateral, has, for financial reporting purposes, made
provisions for loan loss of $368,000 in 1990, $458,000 in 1991 and $777,000
in 1992, bringing the total provision for loan loss on this loan to
$1,603,000, which is reflected in the accompanying consolidated balance
sheets. No further provisions for loan loss have been deemed necessary at
this time.
(d) Spring Hill Fashion Center, West Dundee, Illinois
Reference is made to Note 4(d) of Notes to Financial Statements
contained in the Partnership's 1994 Annual Report for a description of the
terms of this loan. Through October 1988, the total amount funded under
this loan was $10,030,000 (of which the Partnership's share was $6,063,135
(60.45%)). The other two participating lenders are JMB Mortgage Partners,
Ltd.-II and JMB Mortgage Partners, Ltd.-III, both of which are affiliates
of the General Partners of the Partnership. As additional security for the
first mortgage loan, the borrower delivered to the lenders, in January
1988, two $250,000 irrevocable and unconditional letters of credit (which
were to expire December 31, 1994 and January 15, 1995, respectively), upon
which the lenders could draw in the event a default occurred under the
loan. The aforementioned letters of credit had been subject to yearly
renewal if certain specified net operating income levels at the property
were not achieved by the borrower.
Due to the uncertainty of the realization of the simple accrued
interest recognized through November 30, 1991 (approximately $902,000) and
the principal balance of the loan ($6,063,135), the Partnership, as a
matter of prudent accounting practice and to reflect the estimated fair
value of the collateral, for financial reporting purposes, suspended the
accrual of the simple accrued interest (which was payable at maturity)
effective December 1, 1991 and made provisions for loan loss of $523,000 in
1992, $320,000 in 1993 and $159,000 in 1994, bringing the total provision
for loan loss on this loan to $1,002,000, which is reflected in the
accompanying consolidated balance sheet at December 31, 1994.
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The borrower defaulted in its scheduled basic interest payments due
under this loan during the fourth quarter of 1994. Consequently, the
lenders (including the Partnership) drew on the above-mentioned letters of
credit totaling $500,000 in late December, 1994. An affiliate of the
lenders took control of the property's funds in January, 1995 and is
currently managing the property under an agreement which provides for a fee
equal to 4% of the property's gross receipts (such fee excluding
compensation for leasing activity). In early May 1995, the lenders
obtained legal title to the property pursuant to a deed in lieu of
foreclosure. Effective as of the management takeover date (January 1,
1995), the Partnership considered the mortgage loan to be in-substance
foreclosed and has accounted for its investment as an investment in a
consolidated joint venture. For financial reporting purposes, the
Partnership did not recognize any material gain or loss from this
transaction as a result of the Partnership's previously recorded provisions
for loan loss. For Federal income tax reporting purposes, the Partnership
expects to recognize a loss of approximately $1,390,000 in 1995 as a result
of this transaction. The operations of this property are expected to
provide a current return which would be less than the scheduled interest
payments due under the original mortgage loan.
Occupancy at the shopping center remained at 94% at June 30, 1995,
unchanged from March 31, 1995. However, a major tenant, which occupies
approximately 24% of the leasable space at the property and who is
currently operating under Chapter 11 bankruptcy protection has informed the
Partnership that it does not intend to exercise its renewal option when its
current lease expires in October 1995. Due to the competitive conditions
in this market, re-leasing time and expense could be substantial when this
tenant vacates, which will further reduce cash flow from this investment to
the Partnership in the short term.
(3) SALES OF INVESTMENT PROPERTIES
(a) Pineapple Place Apartments
In May 1994, the Partnership reached an agreement in principle with a
potential purchaser regarding the sale of the Pineapple Place Apartments
and in August 1994 this sale was consummated. The sale price was
$7,535,000 which was paid in cash at closing, net of selling expenses and
prorations. The sale resulted in a gain of $75,734 for financial reporting
purposes due primarily to the $325,000 provision for value impairment
recognized by the Partnership in June 1994 in contemplation of this sale
(as discussed in note 2(a)). In addition, the Partnership reported a loss
on sale of approximately $570,000 for Federal income tax reporting purposes
in 1994. The Partnership distributed $180 per Interest to the Limited
Partners in 1994 from the proceeds of this sale. The General Partners have
deferred their share of distributions from the proceeds of this sale at
this time.
(b) Ocean Technology Park Office Building
The Partnership acquired title to the Ocean Technology Park Office
Building in December 1990, as described above in note 2(b). Due to the
uncertainty of the Partnership's ability to recover the net carrying value
of the property through future operations and sale of the property, the
Partnership, as a matter of prudent accounting practice and for financial
reporting purposes, made provisions for value impairment of the property of
$1,600,000 in 1991 and $1,080,000 in 1993, such provisions totaling
$2,680,000. Such provisions were recorded to reduce the net basis of the
investment property to its then estimated recoverable value.
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In December 1994, the Partnership sold the Ocean Technology Park
Office Building for a sale price of $750,000, all of which was paid in
cash at closing (net of selling expenses and prorations). The sale
resulted in a gain of $699,899 for financial reporting purposes due
primarily to the provisions for value impairment discussed above. In
addition, the Partnership reported a loss of approximately $2,083,000 for
Federal income tax reporting purposes in 1994. The Partnership distributed
$20 per Interest to the Limited Partners in 1995 from the proceeds of this
sale. The General Partners have deferred their share of distributions from
the proceeds of this sale at this time.
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses required to be paid by the Partnership to the
General Partners and their affiliates as of June 30, 1995 and for the six
months ended June 30, 1995 and 1994 are as follows:
Unpaid at
June 30,
1995 1994 1995
------- ------ -------------
Property management
and leasing fees . . . . . $25,829 53,406 4,068
Insurance commissions. . . . -- 3,518 --
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . . 659 592 22
------- ------ -----
$26,488 57,516 4,090
======= ====== =====
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates while directly engaged in
the administration of the Partnership. Such reimbursable costs for 1995
were $33,431, of which $689 was unpaid at June 30, 1995.
The Partnership is obligated to pay (not more often than monthly)
mortgage investment servicing fees to the General Partners at an annual
rate of 1% of the amount funded by the Partnership on mortgage
investments. The servicing fee is calculated from the date the Partnership
funds the mortgage investment. Payment of one-half of the fee is
subordinated to the receipt by the Limited Partners of a stipulated rate of
return on their current capital accounts. Such total cumulative unpaid
fees, which previously had generally been deferred but which are currently
being paid to the extent of the unsubordinated portion of such fees,
aggregated $924,573 at June 30, 1995, all of which has been accrued in the
accompanying consolidated financial statements.
Through November 1994, the Ocean Technology Park Office Building was
managed by an affiliate of the General Partners. In December 1994, the
affiliated property manager 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 for the purchaser and its affiliates.
The successor to the affiliated property manager's assets continues to act
as the property manager of the Ocean Technology Park Office Building after
the property's December 16, 1994 sale on the same terms that existed prior
to the sale.
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
The General Partners have also continued to defer payment of their
share of distributions of repayment proceeds amounting to $365,849,
resulting from the repayment in February 1987 of the loan secured by the
Lincoln Park Apartments and their share of sale proceeds amounting to
$245,536, resulting from the 1994 sales of the Pineapple Place Apartments
and the Ocean Technology Park Office Building.
The aggregate amount of deferred payments to the General Partners at
June 30, 1995 in excess of that required by the Partnership Agreement is
equivalent to approximately $15 per Interest. All amounts deferred or
currently payable to the General Partners or their affiliates do not bear
interest.
Subsequent to June 30, 1995, the Corporate General Partner of the
Partnership has determined to use an independent third party or parties to
perform certain of these administrative services beginning in late 1995.
Use of a third party, rather than reimbursement to the Corporate General
Partner and its affiliates, is not expected to have a material effect on
the operations of the Partnership.
(5) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 1995
and for the three and six months ended June 30, 1995 and 1994.
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
At June 30, 1995, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $454,000. Such funds and short-
term investments of approximately $1,970,000 are available for
distributions to partners and for working capital requirements. The
Partnership and its consolidated venture have currently budgeted
approximately $475,000 in 1995 for tenant improvements and other capital
expenditures at the Spring Hill Fashion Center (as discussed below and in
Note 2(d)). 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. Reference is made to Note 3(a) for a description of
the sale of the Pineapple Place Apartments in August 1994. The Partnership
distributed $180 per Interest to the Limited Partners in 1994 from the
proceeds of this sale. The General Partners have deferred their share of
distributions from the proceeds of this sale at this time. Reference is
also made to Note 3(b) for a description of the sale of the Ocean
Technology Park Office Building in December 1994. The Partnership
distributed $20 per Interest to the Limited Partners in 1995 from the
proceeds of this sale. The General Partners have also deferred their share
of distributions from the proceeds of this sale at this time. The General
Partners had been deferring mortgage investment servicing fees, their share
of the distributions of net cash flow and sale and repayment proceeds and
reimbursement of various out-of-pocket expenses. The aggregate amount of
deferred payments to the General Partners in excess of that required by the
Partnership Agreement at June 30, 1995 is equivalent to approximately $15
per Interest. Reference is made to Note 4.
The source of future short-term liquidity and distributions is
expected to be from the collection of interest on the Partnership's
remaining participating first mortgage loan investment (which is payable
interest only). Reference is made to Note 2(c). The source of future
long-term liquidity would include the collection of principal on this
participating first mortgage loan investment. Such collection of principal
would depend upon the borrower's ability to sell the property or to obtain
replacement long-term financing. Given that real estate markets are
generally depressed, there can be no assurance that the Partnership will
obtain full repayment of its loan. In addition, reference is made to Note
2(c) concerning the delinquent interest amounts, the recognition of
interest income and suspension of certain interest accruals and the
provisions for loan loss on the loan secured by the Oak Court of Westmont
Shopping Center. Occupancy at this shopping center was 62% at June 30,
1995, down from 82% at March 31, 1995, primarily as a result of the move
out of a tenant which occupied approximately 24% of the leasable space at
the property and whose lease was scheduled to expire November 30, 1996.
Due to the competitive conditions in this market, re-leasing time and
expense could be substantial to replace this tenant. The borrower
continues to pursue additional tenants for the shopping center, but the
market remains very competitive. Due to the Oak Court of Westmont
property's continuing high levels of vacancy, the borrower has made only
partial interest payments since July 1989 to the extent of cash generated
by the property. The borrower continues to negotiate with the Partnership
regarding such unpaid amounts. The manager of the property, an affiliate
of the borrower, is currently deferring a portion of its management fees in
order to increase the cash flow available to the Partnership. Due to the
aforementioned vacancy level at the Oak Court of Westmont Shopping Center
and the current competitive market conditions, the borrower was unable to
either sell the property or obtain replacement long-term financing in order
to repay the loan on its scheduled maturity date in January 1995. The
Partnership is working closely with the borrower in an effort to lease up
the vacant space at the property and to make the property marketable for
either a sale or replacement financing. Accordingly, the Partnership has
classified this mortgage note receivable as a non-current asset in the
accompanying consolidated balance sheets. Due to the uncertainty of the
realization of the simple accrued interest receivable recognized through
September 30, 1989 (approximately $458,000) and the principal balance of
the loan ($2,845,000), the Partnership, as a matter of prudent accounting
practice and to reflect the estimated fair value of the collateral, had,
for financial reporting purposes, provided for a provision for loan loss of
$368,000 in 1990, $458,000 in 1991 and $777,000 in 1992, bringing the total
provision for loan loss on this loan to $1,603,000, which is reflected in
the accompanying consolidated balance sheets. No further provisions for
loan loss have been deemed necessary at this time.
An additional source of both short-term and long-term future liquidity
and distributions is expected to be from net cash generated by the Spring
Hill Fashion Center investment property and from the sale of such
investment. Reference is made to Note 2(d) regarding the default by the
borrower of the loan secured by Spring Hill Fashion Center, the drawing by
the lenders (including the Partnership) of the two $250,000 letters of
credit that were additionally securing this loan, and the January 1, 1995
assumption of property management at the Spring Hill Fashion Center by an
affiliate of the General Partners of the lenders. Effective as of the
management takeover date (January 1, 1995), the Partnership considered the
mortgage loan to be in-substance foreclosed and has accounted for its
investment as an investment in a consolidated joint venture. In early May
1995, the lenders obtained legal title to the property pursuant to a deed
in lieu of foreclosure. For financial reporting purposes, the Partnership
did not recognize any material gain or loss from this transaction as a
result of the Partnership's previously recorded provisions for loan loss
(see Note 2(d)). For Federal income tax reporting purposes, the
Partnership expects to recognize a loss of approximately $1,390,000 in 1995
as a result of this transaction. The operations of this property are
expected to provide a current return which would be less than the scheduled
interest payments due under the original mortgage loan. Occupancy at the
Spring Hill Fashion Center was 94% at June 30, 1995, unchanged from March
31, 1995. However, a major tenant, F&M Distributors ("F&M") which occupies
30,000 square feet (approximately 24%) of the leasable space at the
property and who is currently operating under Chapter 11 bankruptcy
protection, has informed the lenders (including the Partnership) that it
does not intend to exercise its renewal option when its current lease
expires in October 1995. Due to the competitive conditions in this market,
re-leasing time and expense could be substantial when this tenant vacates,
which will further reduce cash flow from this investment to the Partnership
in the short term. The Partnership is currently evaluating its long-term
strategy with respect to this real estate investment. The manager of the
property is marketing the vacant space, and it will most likely be
difficult to sell this property prior to the re-leasing of the F&M space.
Finally, reference is made to Note 2(b) for a description of the
Partnership's settlements with certain guarantors of the previous loan
secured by the Ocean Technology Park Office Building. The Partnership does
not consider the guarantors of this former loan to be a significant source
of future liquidity.
The Partnership is carefully scrutinizing the appropriateness of any
discretionary expenditures, particularly in relation to the amount of
working capital it has available and the need to preserve funds for
potential future leasing costs (as discussed in Note 2(d)). Reference is
made to Note 4 for a description of certain fees and payments, the receipt
of certain of which is being deferred by the General Partners of the
Partnership. By conserving working capital, the Partnership will be in a
better position to meet its future needs.
RESULTS OF OPERATIONS
Reference is made to Note 4 of Notes to Financial Statements contained
in the Partnership's 1994 Annual Report for a description of the
participating first mortgage loans funded by the Partnership.
The combined decrease in cash and cash equivalents and short-term
investments at June 30, 1995 as compared to December 31, 1994 is
attributable primarily to the Partnership's distribution of $20 per
Interest to the Limited Partners in 1995 from the proceeds of the December
1994 sale of the Ocean Technology Park Office Building.
The increase in interest, rents and other receivables, investment
property, deferred costs, unearned rents, accrued real estate taxes,
unearned rents, tenant security deposits and venture partners' equity in
venture, and the decrease in mortgage notes receivable and deferred
interest receivable at June 30, 1995 as compared to December 31, 1994 is
attributable to the Partnership's recording as an investment in
consolidated venture, effective January 1, 1995, the former mortgage loan
secured by the Spring Hill Fashion Center. Reference is made to Notes 1
and 2(d). An additional decrease in mortgage notes receivable at June 30,
1995 as compared to December 31, 1994 is the result of a $40,000 reduction
in the carrying value of the loan secured by the Oak Court of Westmont
Shopping Center, such amount representing payments received from the
borrower in 1995. Reference is made to Notes 1 and 2(c).
The decrease in amount due from affiliate at June 30, 1995 as compared
to December 31, 1994 is attributable to the Partnership's 1995 receipt of
$302,250 from JMB Mortgage Partners, Ltd.-III, one of the other two
participating lenders of the loan secured by the Spring Hill Fashion
Center, such amount representing the Partnership's share of the drawn
letters of credit (totaling $500,000) in December 1994 in connection with
such loan. Reference is made to Note 2(d).
The decrease in bank overdraft at June 30, 1995 as compared to
December 31, 1994 is attributable to the Partnership's repayment in 1995 of
a temporary bank overdraft of approximately $297,000 which existed at
December 31, 1994, resulting primarily from the timing of the Partnership's
maturities of short-term investments.
The increase in amount due to affiliate at June 30, 1995 as compared
to December 31, 1994 is attributable to a real estate tax reimbursement of
$59,144 due to JMB Mortgage Partners, Ltd.-III, one of the other two
participating lenders, and venture partners, in the Spring Hill Fashion
Center, for property real estate taxes paid in 1995. Such amount was
repaid subsequent to June 30, 1995.
Rental income, depreciation and property operating expenses decreased
for the three and six months ended June 30, 1995 as compared to the three
and six months ended June 30, 1994 primarily as a result of the August 1994
sale of the Pineapple Place Apartments and the December 1994 sale of the
Ocean Technology Park Office Building. Reference is made to Note 3. Such
decreases were partly offset as a result of the Partnership's recording of
the operations of the Spring Hill Fashion Center as an investment in
consolidated venture, effective January 1, 1995. Reference is made to
Notes 1 and 2(d).
The decrease in interest income for the three and six months ended
June 30, 1995 as compared to the three and six months ended June 30, 1994
is attributable primarily to the Partnership's recording of the operations
of the Spring Hill Fashion Center as an investment in consolidated venture
in 1995 as compared to interest recognition on a loan in 1994. Reference
is made to Notes 1 and 2(d).
Mortgage investment servicing fees decreased for the three and six
months ended June 30, 1995 as compared to the year-earlier periods as a
result of the lenders (including the Partnership) obtaining legal title to
the Spring Hill Fashion Center in early May 1995. Reference is made to
Note 2(d).
Reference is made to Note 2(c) regarding the $325,000 provision for
value impairment made in 1994 on the Pineapple Place Apartments investment
property.
The increase in venture partners' share of operations for the three
and six months ended June 30, 1995 as compared to the three and six months
ended June 30, 1994 is attributable to the Partnership's recording of the
operations of the Spring Hill Fashion Center as an investment in
consolidated venture in 1995. Reference is made to Notes 1 and 2(d).
Distributions made to Limited Partners for the six months ended June
30, 1995 include a distribution of $20 per Interest to the Limited Partners
from the proceeds of the December 1994 sale of the Ocean Technology Park
Office Building (see Note 3(b)).
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's
owned or reflected as owned investment properties.
<CAPTION>
1994 1995
--------------------------------------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Pineapple Place
Apartments
Dallas, Texas . . . . . 95% 97% N/A N/A N/A N/A
2. Ocean Technology
Park Office
Building
Middletown,
Rhode Island. . . . . . 100% 36% 36% N/A N/A N/A
3. Spring Hill
Fashion Center
Shopping Center
West Dundee, Illinois . N/A N/A N/A N/A 94%* 94%
<FN>
--------------------
An "N/A" indicates that the property was not owned or reflected as owned by the Partnership at the end of the
quarter.
* Reference is made to Note 2(d) for a discussion of the presentation of this property as owned at March 31,
1995 although title did not transfer to the Partnership pursuant to a deed in lieu of foreclosure until May 1995.
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10-A. Promissory Note ($2,495,000) for the Oak Court of Westmont
Shopping Center, dated January 14, 1985, between WBR Westmont Associates,
an Illinois limited partnership, LaSalle National Bank, Trustee, and JMB
Mortgage Partners, Ltd., an Illinois limited partnership is hereby
incorporated herein by reference to the Partnership's report on Form 10-K
(File No. 2-79095) for December 31, 1992, dated March 27, 1995.
10-B. Promissory Note ($350,000) for the Oak Court of Westmont
Shopping Center, dated January 14, 1985, between WBR Westmont Associates,
an Illinois limited partnership, LaSalle National Bank, Trustee, and JMB
Mortgage Partners, Ltd., an Illinois limited partnership is hereby
incorporated herein by reference to the Partnership's report on Form 10-K
(File No. 2-79095) for December 31, 1992, dated March 27, 1995.
27. Financial Data Schedule.
(b) No reports on Form 8-K were required or have been filed for
the quarter covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Partnership has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JMB MORTGAGE PARTNERS, LTD.
BY: JMB Realty Corporation
(Corporate General Partner)
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Date: August 9, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull
Principal Accounting Officer
Date: August 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000706074
<NAME> JMB MORTGAGE PARTNERS, LTD.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 453,751
<SECURITIES> 1,969,624
<RECEIVABLES> 154,071
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,577,446
<PP&E> 9,604,790
<DEPRECIATION> 120,075
<TOTAL-ASSETS> 13,555,736
<CURRENT-LIABILITIES> 1,152,891
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,586,654
<TOTAL-LIABILITY-AND-EQUITY> 13,555,736
<SALES> 746,851
<TOTAL-REVENUES> 814,543
<CGS> 0
<TOTAL-COSTS> 415,583
<OTHER-EXPENSES> 132,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 266,120
<INCOME-TAX> 0
<INCOME-CONTINUING> 130,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,207
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.13
</TABLE>
