SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year Commission file number 2-79095
ended December 31, 1996
JMB MORTGAGE PARTNERS, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3198533
(State of organization) (I.R.S. Employer identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 6
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . 6
Item 6. Selected Financial Data. . . . . . . . . . . 7
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operation . . . . . . . . . . . . 9
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 13
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 33
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 33
Item 11. Executive Compensation . . . . . . . . . . . 36
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 37
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 38
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 38
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 40
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references herein to "Notes" are to
Notes to Consolidated Financial Statements contained in this annual report.
Capitalized terms used herein, but not defined, have the same meanings as
used in the Notes.
The registrant, JMB Mortgage Partners, Ltd. (the "Partnership"), was a
limited partnership formed in 1982 and governed by the Revised Uniform
Limited Partnership Act of the State of Illinois to make first mortgage
loans and senior land purchase-leasebacks/leasehold mortgage loans and, to
a lesser extent, wrap-around and junior mortgage loans and land
purchase-leaseback arrangements on a subordinated basis. On December 3,
1982, the Partnership commenced an offering of $40,000,000 (subject to
increase by up to $25,000,000) in Limited Partnership interests (the
"Interests") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration No. 2-79095). A total of 39,690
Interests were sold to the public at an offering price of $1,000 per
Interest before certain discounts for volume purchases. The holders of
32,912 Interests were admitted to the Partnership during the fiscal year
ended October 31, 1983; the holders of 6,778 Interests were admitted to the
Partnership in the following fiscal year. The offering of Interests
terminated on December 31, 1983 (except in the states of Illinois,
Pennsylvania and Texas, where the offering terminated on December 2, 1983).
No Limited Partner made any additional capital contribution after such
date. The Limited Partners of the Partnership shared in their portion of
the benefits of ownership of the Partnership's mortgage investments
according to the number of Interests held.
The Partnership was engaged solely in the business of investing in
real estate, principally residential garden apartment complexes and
commercial properties, through participating first mortgage loans and
certain other mortgage investments. The Partnership's investments were
located throughout the nation and it had no investments located outside of
the United States. A presentation of information about industry segments,
geographic regions, raw materials or seasonality was not applicable and
would not have been material to an understanding of the Partnership's
business taken as a whole. The Partnership made a final liquidating
distribution of $5,648,995 including $350,110 to a liquidating trust
established for the benefit of the Holders of Interests and terminated its
operations and dissolved effective December 31, 1996. At repayment or
maturity of a particular mortgage investment or at sale of a particular
property acquired as a result of a non-performing loan, the net proceeds,
if any, were generally distributed or reinvested in existing properties
rather than invested in acquiring additional properties. (Reference is
also made to Item 7.)
The Partnership made real estate investments set forth in the
following table:
<TABLE>
<CAPTION>
NAME, TYPE OF PROPERTY DATE OF SALE OR
AND LOCATION SIZE PURCHASE DISPOSITION DATE TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------- ---------------------
<S> <C> <C> <C> <C>
1. Pineapple Place
Apartments
Dallas, Texas . . . 256 units 9-13-84 8-3-94 Participating first
mortgage loan (b)(d)
2. Lincoln Park
Apartments
Phoenix,
Arizona . . . . . . 332 units 4-9-84 2-5-87 Participating first
mortgage loan (a)
3. Oak Court of
Westmont
Shopping Center
Illinois. . . . . . 31,000 1-18-85 8-21-96 Participating first
sq.ft. mortgage loan (a)
4. Ocean Technology
Park Office
Building
Middletown,
Rhode Island. . . . 45,000 8-13-85 12-16-94 Participating first
sq.ft. mortgage loan (c)(d)
5. Spring Hill
Fashion Corner
shopping center
West Dundee,
Illinois. . . . . . 125,000 2-18-86 11-13-96 Participating first
sq.ft. mortgage loan (d)(e)
<FN>
- -----------------------
(a) The participating first mortgage loan secured by this property has
been repaid.
(b) Reference is made to the Notes for a description of the events
resulting in the Partnership obtaining legal title to this property in
November 1989.
(c) Reference is made to the Notes for a description of the events
resulting in the Partnership obtaining legal title to this property in
December 1990.
(d) This property has been sold. Reference is made to the Notes for a
description of the sale of this real property investment.
(e) Reference is made to the Notes for a description of the events
resulting in the Partnership obtaining legal title to this property in May
1995.
</TABLE>
The Partnership's former commitments for mortgage investments were
made in fiscal years 1983, 1984, 1985 and 1986. The Partnership's funding
of a participating first mortgage loan secured by the Pineapple Place
Apartments in Dallas, Texas and a description of the events resulting in
the Partnership obtaining legal title to the Pineapple Place Apartments in
November 1989 is described in the Notes. The Partnership's funding of a
participating first mortgage loan secured by the Oak Court of Westmont
Shopping Center in Westmont, Illinois is described in the Notes. The
Partnership's funding of a participating first mortgage loan secured by the
Ocean Technology Park Office Building in Middletown, Rhode Island and a
description of the events resulting in the Partnership obtaining legal
title to the Ocean Technology Park Office Building in December 1990 is
described in the Notes. The Partnership's funding of a participating first
mortgage loan secured by the Spring Hill Fashion Corner shopping center in
West Dundee, Illinois and the subsequent acquisition of title to this
property by the Partnership and its participating affiliated lenders is
described in the Notes.
The properties securing the Partnership's former mortgage investments
were subject to competition from similar types of properties (including in
certain areas, properties owned by affiliates of the General Partners) in
the respective vicinities in which they are located. Such competition was
generally for the retention of existing tenants. Additionally, the
properties were in competition for new tenants due to significant vacancies
which were present in the local market. Approximate occupancy levels for
the property owned in 1996 are set forth in the table in Item 2 below to
which reference is hereby made.
On November 13, 1996, the Partnership, through JMB/Spring Hill
Associates, sold the Spring Hill Fashion Corner which was the last
remaining investment property of the Partnership. Reference is made to
Item 7 below and to the Notes for a further description of such
transaction.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
<TABLE>
ITEM 2. PROPERTIES
The Partnership had made real estate investments in the five properties referred to under Item 1 above, to
which reference is hereby made for a description of such investments.
The following is a listing of the principal business or occupation carried on in and approximate occupancy
levels by quarter during fiscal years 1996 and 1995 for the Partnership's owned or reflected as owned investment
property during 1996:
<CAPTION>
1995 1996
------------------------- -------------------------
At At At At At At At At
Principal Business 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> <C>
Spring Hill
Fashion Corner
shopping center
West Dundee,
Illinois. . . . . . . . . . Retail 94%* 94% 92% 75% 67% 93% 95% N/A
<FN>
_______________
An N/A indicates that the property was not owned by the Partnership at the end of the quarter.
* Reference is made to the Notes 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>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1996 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
Immediately prior to the dissolution of the Partnership, there were
5,144 record holders of Interests in the Partnership. On December 31,
1996, the Partnership made a liquidating distribution to its limited
partners including amounts to a liquidating trust established for the
benefit of Holders of Interests and subsequently terminated its operations
and dissolved effective December 31, 1996. There had been no public market
for Interests and it had not been anticipated that a public market for
Interests would develop. Upon request, the Corporate General Partner
provided information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price paid for the
Interests, as well as any other economic aspects of the transaction, was
subject to negotiation by the investor.
Reference is made to Item 6 below for a discussion of cash
distributions made to the Limited Partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION),
AND YEARS ENDED DECEMBER 31, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 2,099,747 1,567,512 2,056,527 2,963,381 2,696,006
============ ============ ============ ============ ============
Operating earnings
(loss) . . . . . . . . . $ 445,838 486,067 439,752 (45,355) (236,818)
Venture partners'
share of venture's
operations . . . . . . . 59,434 (260,214) -- -- --
------------ ------------ ------------ ------------ ------------
Net operating
earnings (loss) . . . . 505,272 225,853 439,752 (43,355) (236,818)
Net gain on sales of
investment properties. . 1,782 -- 775,633 -- --
Net gain on repayment
of mortgage note
receivable . . . . . . . 423,000 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings
(loss). . . . . . $ 930,054 225,853 1,215,385 (45,355) (236,818)
============ ============ ============ ============ ============
Net earnings (loss)
per interest (b):
Net operating
earnings (loss) . . . $ 12.69 5.30 10.21 (1.11) (5.79)
Net gain on sales
of investment
properties and
repayment of
mortgage note
receivable. . . . . . 4.46 -- 19.35 -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss)
per interest . . . $ 17.15 5.30 29.56 (1.11) (5.79)
============ ============ ============ ============ ============
Total assets. . . . . . . $ 5,648,995 13,389,571 10,714,298 18,131,445 19,735,612
============ ============ ============ ============ ============
Cash distributions
per interest (c) . . . . $ 90.71 32.50 208.00 34.00 34.00
============ ============ ============ ============ ============
<FN>
- --------------------
(a) The above selected financial data should be read in conjunction with
the financial statements and the related notes appearing elsewhere in this
annual report.
(b) The net earnings (loss) per Interest is based upon the number of
Interests outstanding at the end of each period (39,695) and the specified
profit and loss allocations (as discussed in the Notes) between the Limited
and General Partners.
(c) Cash distributions from the Partnership are generally not equal to
Partnership's income (loss) for either financial reporting or Federal
income tax purposes. Each partner's taxable income (loss) from the
Partnership in each year is equal to his allocable share of the taxable
income (loss) of the Partnership, without regard to the cash generated or
distributed by the Partnership. Accordingly, cash distributions to the
Limited Partners since the inception of the Partnership have not resulted
in taxable income to such Limited Partners.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item
1, the Partnership had approximately $34,900,000 (after deducting selling
expenses and other offering costs) with which to make investments in real
estate primarily through participating first mortgage loans, to pay for
legal fees and other costs related to such investments and for working
capital. A portion of such proceeds was utilized to make the mortgage
investments described in Item 1 above.
During the second quarter of 1996, some of the Limited Partners in the
Partnership received from an unaffiliated third party an unsolicited tender
offer to purchase up to 1,844 Interests in the Partnership at $120 per
Interest. The Partnership recommended against acceptance of this offer on
the basis that, among other things, the offer price was inadequate. In
June such offer expired with approximately 672 Interests being purchased by
such unaffiliated third party pursuant to such offer. The board of
directors of JMB Realty Corporation ("JMB"), the corporate general partner
of the Partnership, had established a special committee (the "Special
Committee") consisting of certain directors of JMB to deal with all matters
relating to tender offers for Interests in the Partnership, including any
and all responses to such tender offers. The Special Committee had
retained independent counsel to advise it in connection with any potential
tender offers for Interests and had retained Lehman Brothers Inc. as
financial advisor to assist the Special Committee in evaluating and
responding to any additional potential tender offers for Interests.
SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS
In October 1996, JMB/Spring Hill Associates (the "venture") finalized
a contract for the sale of the Spring Hill Fashion Corner. On November 13,
1996, the venture sold the property to an unaffiliated third party for
$9,200,000, all of which was received (less closing costs) in cash at
closing. As a result of the sale, the venture recognized a loss for
Federal income tax reporting purposes of approximately $1,030,000. As the
sale per the contract was estimated to result in a loss of approximately
$775,000 for financial reporting purposes in 1996, as a matter of prudent
accounting practice, the venture recognized a $775,000 provision for value
impairment at September 30, 1996, of which $468,488 was allocated to the
Partnership. When the sale of the property was completed in November 1996,
the venture, after the effect of the September 1996 provision for value
impairment, recognized a gain of approximately $3,000 for financial
reporting purposes, of which approximately $1,800 was allocated to the
Partnership.
OAK COURT OF WESTMONT SHOPPING CENTER, WESTMONT, ILLINOIS
Due to the property's previous high levels of vacancy, the borrower
made only partial interest payments since July, 1989 to the extent of cash
generated by the property. Since 1993, the Partnership, for financial
reporting purposes, reflected all amounts collected as reductions in the
carrying amount of the loan. The manager of the property, an affiliate of
the borrower, deferred a portion of its management fees in order to
increase the cash flow available to the Partnership. The borrower had been
unable to either sell the property or obtain replacement long-term
financing in order to repay the loan on its scheduled maturity date of
January 14, 1995. The Partnership worked closely with the borrower in an
effort to lease up previous vacant space at the property and assisted the
borrower in obtaining replacement financing. During July 1996, the
Partnership reached an agreement with the borrower to pay off the loan at a
specified amount prior to December 31, 1996. Pursuant to such agreement,
the Partnership received a $1,650,000 loan payoff, which consisted of
$1,575,000 in cash in August and a $75,000 short-term promissory note which
was paid in full in September 1996, as full repayment of the loan and any
accrued but unpaid mortgage interest. Due to the Partnership's prior
provisions for loan loss on this mortgage loan ($1,603,000 in the
aggregate), such payoff resulted in a gain of $423,000 for financial
reporting purposes but a loss of approximately $1,600,000 for Federal
income tax reporting purposes in 1996.
In connection with the liquidation and termination of the Partnership,
the Corporate General Partner formed a liquidating trust into which all of
the Partnership's remaining assets of $350,110, subject to liabilities,
were transferred by means of the final liquidating distribution on December
31, 1996. Such transferred amount represents the maximum estimated
potential obligation (including administrative costs) of the Partnership
due to certain representations and warranties issued to the buyer of the
Spring Hill Fashion Corner investment property. Although there can be no
assurance, the Partnership does not expect to incur any amounts in
connection with such representations and warranties (which are scheduled to
expire six months from sale). The initial trustees of the liquidating
trust are individuals who are officers of the Corporate General Partner.
Each Holder of Interests in the Partnership is deemed to be the beneficial
owner of a comparable share of the aggregate beneficial interests in the
liquidating trust. It is anticipated that the liquidating trust will
permit the realization of substantial cost savings in administrative and
other expenses until the remaining funds are distributed to the beneficial
owners of the liquidating trust. The liquidating trust is expected to be
in existence for approximately one year, subject to extension under certain
circumstances.
The Spring Hill Fashion Corner was the remaining investment property
of the Partnership. The Partnership made the final liquidating
distribution of $5,648,995 (including $350,110 to the liquidating trust
established for the benefit of the Holders of Interests, as discussed
above) to the Holders of Interests. (The Partnership also distributed an
additional $3,600,660 to the Limited Partners in 1996.) The Partnership
terminated its affairs as of December 31, 1996.
RESULTS OF OPERATIONS
Reference is made to the Notes for a description of certain of the
participating first mortgage loans funded by the Partnership.
The increase in cash and cash equivalents at December 31, 1996 as
compared to December 31, 1995 is attributable primarily to the
Partnership's retention of its share of the net proceeds from the sale of
the Spring Hill Fashion Corner for the final liquidating distribution to
the Holders of Interests in 1996.
The decrease in interest, rents and other receivables (net of
allowance for doubtful accounts), prepaid expenses, investment property,
deferred costs, accounts payable, accrued real estate taxes, unearned
rents, tenant security deposits and venture partners' equity in venture, at
December 31, 1996 as compared to December 31, 1995 is the result of the
Partnership's sale, through its consolidated venture, of the Spring Hill
Fashion Corner in November, 1996 as described above.
The decrease in mortgage note receivable at December 31, 1996 as
compared to December 31, 1995 is attributable to the Partnership's receipt
in 1996 of $1,650,000 representing an agreed upon settlement of the full
mortgage obligation secured by the Oak Court at Westmont property as
described above. Due to prior provisions for loan loss, such agreed upon
settlement resulted in a $423,000 gain on repayment of the mortgage note
receivable in 1996.
The decrease in settlement note receivable at December 31, 1996 as
compared to December 31, 1995 is the result of payments received in 1996
including the discounted payoff of $23,000 received by the Partnership in
1996 from one of the guarantors of the former loan secured by the Ocean
Technology Park Office Building. Such discounted payoff also resulted in
the $54,500 provision for loan loss in 1996.
The decrease in amounts due to affiliates at December 31, 1996 as
compared to December 31, 1995 is attributable primarily to certain
reimbursable costs to affiliates of the General Partners at December 31,
1995 which were paid or written off in 1996.
The decreases in interest income in 1996 and 1995 as compared to 1994
are attributable primarily to the Partnership's recording of the operations
of the Spring Hill Fashion Corner as a consolidated venture in 1996 and
1995 as compared to interest recognition on the loan in 1994. An
additional decrease in interest income for 1996 as compared to 1995 is
attributable primarily to a decrease in the Partnership's average invested
balance in interest-bearing cash equivalents due to the $1,835,000
distribution to the Limited and General Partners in May 1996, which
included a special distribution of $40 per Interest to the Limited Partners
as described above. An additional decrease in interest income in 1995 as
compared to 1994 is primarily the result of an increase in interest earned
on the Partnership's short-term investments in 1994, resulting from the
temporary investment of the proceeds received from the sales of the
Pineapple Place Apartments and the Ocean Technology Park Office Building in
1994.
Rental income and property operating expenses decreased for 1996 as
compared to 1995 due to a decrease in average occupancy at the Spring Hill
Fashion Corner in 1996 prior to its sale in November, 1996. Rental income
increased in 1995 as compared to 1994 primarily as a result of the
Partnership's recording of the operations of the Spring Hill Fashion Corner
as a consolidated venture, effective January 1, 1995. Such increase in
rental income was substantially offset by decreases in rental income at the
Pineapple Place Apartments and the Ocean Technology Park Office Building
which were sold in August 1994 and December 1994, respectively. Property
operating expenses decreased in 1996 and 1995 as compared to 1994 primarily
as a result of the 1994 sales of the Pineapple Place Apartments and the
Ocean Technology Park Office Building. Such decreases were substantially
offset as a result of the Partnership's recording of the operations of the
Spring Hill Fashion Corner as a consolidated venture, effective January 1,
1995.
Other income of $934,658 in 1996 is due to the write-off, immediately
prior to dissolution, of previously accrued but subordinated and deferred
mortgage investment servicing fees.
Depreciation expense decreased in 1996 as compared to 1995 due to the
suspension of depreciation on the Spring Hill Fashion Corner effective July
1, 1996 as such property was classified as held for sale as of such date.
Depreciation expense increased in 1995 as compared to 1994 primarily as a
result of the Partnership's recording of the operations of the Spring Hill
Fashion Corner as a consolidated venture, effective January 1, 1995. Such
increase was partially offset by a decrease in depreciation expense in 1995
as a result of the August 1994 sale of the Pineapple Place Apartments.
Mortgage investment servicing fees decreased in 1996 and 1995 as
compared to 1994 as a result of the lenders (including the Partnership)
obtaining legal title to the Spring Hill Fashion Corner in early May 1995.
The increase in general and administrative expenses in 1996 as
compared to 1995 is attributable primarily to an increase in costs for
certain outsourcing services and printing expenses in 1996 and to costs
incidental to the termination of the Partnership. The increase in general
and administrative expenses in 1995 as compared to 1994 is attributable
primarily to an increase in reimbursable costs to affiliates of the General
Partners in 1995 and the recognition of certain additional prior year
reimbursable costs to such affiliates.
Venture partners' share of venture's operations in 1996 and 1995 is
attributable to the Partnership's recording of the operations of the Spring
Hill Fashion Corner as a consolidated venture, effective January 1, 1995.
The decrease in venture partners' share of venture's operations for 1996 as
compared to 1995 is primarily the result of the venture partners' share of
the $775,000 provision for value impairment recognized on the Spring Hill
Fashion Corner as discussed above.
The $1,782 gain on sale of investment property, net of venture
partners' share, in 1996 is due to the sale of the Spring Hill Fashion
Corner in November 1996 as discussed above. Gain on sale of investment
properties of $775,633 in 1994 is attributable to the 1994 sales of the
Pineapple Place Apartments and the Ocean Technology Park Office Building
investment properties.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally had not had a material effect on rental income or
property operating expenses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996
(Immediately prior to final liquidating distribution)
and December 31, 1995
Consolidated Statements of Operations, year ended
December 31, 1996 (Immediately prior to final liquidating
distribution) and years ended December 31, 1995 and 1994
Consolidated Statements of Partners' Capital Accounts
(Deficits), year ended December 31, 1996 (Immediately prior
to final liquidating distribution) and years ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows, year ended
December 31, 1996 (Immediately prior to final liquidating
distribution) and years ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB MORTGAGE PARTNERS, LTD:
We have audited the consolidated financial statements of JMB Mortgage
Partners, Ltd. (a limited partnership) and consolidated venture as listed
in the accompanying index. These consolidated financial statements are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB Mortgage Partners, Ltd. and consolidated venture at December 31, 1996
(Immediately prior to the final liquidating distribution) and 1995, and the
results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated venture changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 17, 1997
<TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND DECEMBER 31, 1995
ASSETS
------
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 5,648,995 2,410,051
Interest, rents and other receivables
(net of allowance for doubtful accounts
of $53,855 in 1995) . . . . . . . . . . . . . . . . . . . . . . . -- 149,359
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . -- 8,377
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 5,648,995 2,567,787
----------- -----------
Investment property:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 2,400,000
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . -- 7,233,901
----------- -----------
-- 9,633,901
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . -- 240,433
----------- -----------
Total investment property,
net of accumulated depreciation. . .. . . . . . . . . . . -- 9,393,468
Mortgage note receivable (net of allowance for loan
losses of $1,145,000 in 1995) . . . . . . . . . . . . . . . . . . . -- 1,332,000
Settlement note receivable. . . . . . . . . . . . . . . . . . . . . . -- 86,500
Deferred costs (net of accumulated amortization
of $79,369 in 1995) . . . . . . . . . . . . . . . . . . . . . . . . -- 9,816
----------- -----------
$ 5,648,995 13,389,571
=========== ===========
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ -- 20,116
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 16,668
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . -- 124,203
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . -- 957,006
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . -- 1,117,993
------------ ------------
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . -- 56,879
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . -- 1,174,872
Venture partners' subordinated equity in venture. . . . . . . . . . . -- 3,839,288
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . 722,778 473,672
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (723,778) (667,968)
------------ ------------
-- (193,296)
------------ ------------
Limited partners (39,695 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 34,918,348 34,918,348
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . 17,487,860 16,806,912
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (46,757,213) (43,156,553)
------------ ------------
5,648,995 8,568,707
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . 5,648,995 8,375,411
------------ ------------
$ 5,648,995 13,389,571
============ ============
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 1,024,861 1,438,070 1,218,027
Interest income . . . . . . . . . . . . . . . . . 140,228 129,442 838,500
Other income. . . . . . . . . . . . . . . . . . . 934,658 -- --
----------- ----------- -----------
2,099,747 1,567,512 2,056,527
----------- ----------- -----------
Expenses:
Depreciation. . . . . . . . . . . . . . . . . . . 124,737 240,433 172,832
Property operating expenses . . . . . . . . . . . 317,488 562,092 687,977
Mortgage investment servicing fees. . . . . . . . 18,112 48,661 89,081
Professional services . . . . . . . . . . . . . . 102,909 61,971 60,937
Amortization of deferred costs. . . . . . . . . . 10,922 1,809 3,698
General and administrative. . . . . . . . . . . . 250,241 166,479 118,250
Provisions for loan losses. . . . . . . . . . . . 54,500 -- 159,000
Provisions for value impairment . . . . . . . . . 775,000 -- 325,000
----------- ----------- -----------
1,653,909 1,081,445 1,616,775
----------- ----------- -----------
Operating earnings (loss) . . . . . . . . 445,838 486,067 439,752
Venture partners' share of venture's
operations. . . . . . . . . . . . . . . . . . . . 59,434 (260,214) --
----------- ----------- -----------
Net operating earnings (loss) . . . . . . 505,272 225,853 439,752
Gain on sales of investment properties,
net of venture partners' share of $1,166
in 1996 . . . . . . . . . . . . . . . . . . . . . 1,782 -- 775,633
Gain on repayment of mortgage note
receivable. . . . . . . . . . . . . . . . . . . . 423,000 -- --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $ 930,054 225,853 1,215,385
=========== =========== ===========
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - (CONTINUED)
1996 1995 1994
------------ ------------ ------------
Net earnings (loss) per limited partnership
interest:
Net operating earnings (loss) . . . . . . . . . $ 12.69 5.30 10.21
Net gain on sales of investment properties
and repayment of mortgage note receivable . . 4.46 -- 19.35
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $ 17.15 5.30 29.56
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (39,695 INTERESTS)
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ---------------------- ----------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
at Decem-
ber 31,
1993 . . . . $1,000 416,195 (618,247) (201,052)34,918,348 15,423,151 (33,609,936) 16,731,563
Net earnings
(loss) . . . -- 42,131 -- 42,131 -- 1,173,254 -- 1,173,254
Cash distri-
butions
($208.00
per limited
partnership
interest). . -- -- (34,375) (34,375) -- -- (8,256,560) (8,256,560)
------ ---------- ---------- -------------------- ---------- ---------- ----------
Balance
at Decem-
ber 31,
1994 . . . . 1,000 458,326 (652,622) (193,296)34,918,348 16,596,405 (41,866,496) 9,648,257
Net earnings
(loss) . . . -- 15,346 -- 15,346 -- 210,507 -- 210,507
Cash distri-
butions
($32.50
per limited
partnership
interest). . -- -- (15,346) (15,346) -- -- (1,290,057) (1,290,057)
------ ---------- ---------- -------------------- ---------- ---------- ----------
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS (39,695 INTERESTS)
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ---------------------- ----------------------- -----------
Balance at
Decem-
ber 31,
1995 . . . . 1,000 473,672 (667,968) (193,296)34,918,348 16,806,912 (43,156,553) 8,568,707
Net earnings
(loss) . . . -- 249,106 -- 249,106 -- 680,948 -- 680,948
Cash distri-
butions
($90.71
per limited
partnership
interest). . -- -- (55,810) (55,810) -- -- (3,600,660) (3,600,660)
------ ---------- ---------- --------- ---------- ---------- ---------- ----------
Balance at
Decem-
ber 31,
1996 . . . . $1,000 722,778 (723,778) -- 34,918,348 17,487,860 (46,757,213) 5,648,995
====== ========== ========== ========= ========== ========== ========== ==========
<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
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . $ 930,054 225,853 1,215,385
Items not requiring (providing) cash
or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . 124,737 240,433 172,832
Amortization of deferred costs. . . . . . . . 10,922 1,809 3,698
Provisions for loan losses. . . . . . . . . . 54,500 -- 159,000
Provisions for value impairment . . . . . . . 775,000 -- 325,000
Venture partners' share of venture's
operations and gain on sale . . . . . . . . (58,268) 260,214 --
Total gain on sales of investment properties. (2,948) -- (775,633)
Gain on repayment of mortgage note
receivable. . . . . . . . . . . . . . . . . (423,000) -- --
Changes in:
Interest, rents and other receivables. . . . . . 149,359 (116,290) (17,999)
Amount due from affiliate. . . . . . . . . . . . -- 302,250 (302,250)
Prepaid expenses . . . . . . . . . . . . . . . . 8,377 (8,377) --
Deferred interest receivable . . . . . . . . . . -- 48 166,203
Accounts payable . . . . . . . . . . . . . . . . (20,116) (10,566) 1,394
Unearned rents . . . . . . . . . . . . . . . . . (16,668) 16,668 --
Accrued real estate taxes. . . . . . . . . . . . (124,203) 124,203 (184,930)
Amounts due to affiliates. . . . . . . . . . . . (957,006) 25,114 (433,056)
Other current liabilities. . . . . . . . . . . . -- -- (21,768)
Tenant security deposits . . . . . . . . . . . . (56,879) 56,879 --
----------- ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . 393,861 1,118,238 307,876
----------- ----------- -----------
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments. . . . . . . . . . . . . -- 1,954,452 458,883
Additions to investment properties. . . . . . . . (383,258) (40,600) (30,822)
Reduction in loan carrying value due to
borrower payments . . . . . . . . . . . . . . . 105,000 100,000 115,000
Cash proceeds from repayment of mortgage
note receivable . . . . . . . . . . . . . . . . 1,650,000 -- --
Payments received on settlement note from
former loan guarantor . . . . . . . . . . . . . 32,000 5,000 20,000
Cash proceeds from sales of investment
properties, net of selling expenses . . . . . . 9,011,854 -- 8,019,910
Payment of deferred costs . . . . . . . . . . . . (133,023) (11,625) --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . 10,282,573 2,007,227 8,582,971
----------- ----------- -----------
Cash flows from financing activities:
Bank overdraft. . . . . . . . . . . . . . . . . . -- (296,763) 296,763
Distributions to venture partners . . . . . . . . (3,781,020) (217,525) --
Distributions to limited partners . . . . . . . . (3,600,660) (1,290,057) (8,256,560)
Distributions to general partners . . . . . . . . (55,810) (15,346) (34,375)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (7,437,490) (1,819,691) (7,994,172)
----------- ----------- -----------
Net increase (decrease)
in cash and cash equivalents . . . . . . 3,238,944 1,305,774 896,675
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . . . 2,410,051 1,104,277 207,602
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . . . . $ 5,648,995 2,410,051 1,104,277
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ -- -- --
=========== =========== ===========
JMB MORTGAGE PARTNERS, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
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 invest-
ment property . . . . . . . . . . . . . $ -- 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
YEAR ENDED DECEMBER 31, 1996
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION),
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership held an investment portfolio of a first mortgage loan
and (through a joint venture) an investment in commercial real estate in
the state of Illinois. Business activities consisted of collections of
interest and principal on such loan and, with respect to its investment in
real estate, rentals to a variety of commercial and retail companies, and
the ultimate sale or disposition of such real estate.
For financial reporting purposes, effective January 1, 1995, the
mortgage loan secured by the Spring Hill Fashion Corner was determined to
have been in-substance foreclosed and, since it was majority-owned by the
Partnership, was reclassified as a consolidated joint venture at its
estimated fair value. In early May 1995, the lenders (including the
Partnership) obtained legal title to the property. The effect of all
transactions between the Partnership and its consolidated venture has been
eliminated.
The Partnership's records were maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP"). Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The effect of these items for the years ended
December 31, 1996 (immediately prior to final liquidating distribution) and
1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 5,648,995 5,648,995 13,389,571 15,981,653
Partners' capital accounts
(deficits):
General Partners . . . . . . . -- -- (193,296) 8,598
Limited Partners . . . . . . . 5,648,995 5,648,995 8,568,707 15,962,448
Net earnings (loss):
General Partners . . . . . . . 249,106 (12,581) 15,346 (19,773)
Limited Partners . . . . . . . 680,948 (2,139,667) 210,507 (819,799)
Net earnings (loss) per limited
partnership interest. . . . . . . 17.15 (53.90) 5.30 (20.65)
========== =========== =========== ===========
</TABLE>
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). Also, because net earnings (loss) is computed immediately prior
to dissolution, Holders of Interests may have, on dissolution, an
additional capital gain or loss depending on the Holders' basis for Federal
income tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may have differed from these
estimates.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. In
addition, the Partnership recorded 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 (none and $2,305,805 at
December 31, 1996 and 1995, respectively) as cash equivalents, with any
remaining amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
Deferred costs consisted primarily of costs in connection with
mortgage investments which were amortized over the terms of the related
agreements using the straight-line method and lease commissions which are
amortized over the terms of the related leases using the straight-line
method.
No provision for state or Federal income taxes had been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the taxing authorities
amounts representing withholding from distributions paid to partners.
Depreciation on the Partnership's investment properties had been
provided over the estimated useful lives of the various components as
follows:
Years
------
Building and improvements - straight-line 30
Personal property - straight-line 5-7
===
Maintenance and repairs were charged to operations as incurred.
Significant betterments and improvements were capitalized and depreciated
over their estimated useful lives.
The Partnership adopted Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" ("SFAS 121") as required in the
first quarter of 1996. SFAS 121 requires that the Partnership record an
impairment loss on its properties to be held for investment whenever their
carrying value cannot be fully recovered through estimated undiscounted
future cash flows from their operations and sale. The amount of the
impairment loss to be recognized would be the difference between the
property's carrying value and the property's estimated fair value. The
Partnership's policy was to consider a property to be held for sale or
disposition when the Partnership had committed to a plan to sell such
property and active marketing activity had commenced or was expected to
commence in the near term. In accordance with SFAS 121, any properties
identified as "held for sale or disposition" were no longer depreciated.
Adjustments for impairment loss for such properties (subsequent to the date
of adoption of SFAS 121) were made in each period as necessary to report
these properties at the lower of carrying value or fair value less costs to
sell. The adoption of SFAS 121 did not have any significant effect on the
Partnership's financial position, results of operations or liquidity.
PINEAPPLE PLACE APARTMENTS, DALLAS, TEXAS
The Partnership funded $8,200,000 in September 1984 and $430,000 in
March 1985 on a participating first mortgage loan secured by a garden
apartment complex in Dallas, Texas. The entire principal balance of the
loan was scheduled to be due and payable September 12, 1994.
Although the Partnership had been recognizing interest income only as
collected on this loan, approximately $1,565,000 of interest due to the
Partnership was uncollected through the date that the Partnership obtained
ownership of the property.
The Partnership obtained legal title to the property in November 1989
and recorded its net carrying value in the property in an amount not in
excess of its estimated fair value. The guarantors of the previous
$8,630,000 loan (the general partners of the borrower) filed for protection
under Chapter VII of the U.S. bankruptcy laws. A former affiliate of the
General Partners of the Partnership assumed management of the property in
October 1989 under an agreement which provided for a fee equal to 5% of the
property's gross receipts.
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.
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.
OCEAN TECHNOLOGY PARK OFFICE BUILDING, MIDDLETOWN, RHODE ISLAND
In August 1985, the Partnership funded a participating first mortgage
loan in the principal amount of $4,500,000, secured by an office building
in Middletown, Rhode Island. During October 1990, $400,000 of originally
restricted loan proceeds were refunded to the Partnership. The entire
principal balance of the loan was scheduled to be due and payable August 5,
1995.
In March 1988, the Partnership sent a default notice to the borrower
under the terms of the promissory note due to the borrower's failure to
make various interest payments to the Partnership. The borrower
subsequently notified the Partnership that it had filed for protection
under Chapter XI of the bankruptcy laws.
Although the Partnership had been recognizing interest income only as
collected (effective January 1, 1988), approximately $1,075,000 of interest
due to the Partnership was uncollected through the date that the
Partnership obtained ownership of the property. The Partnership acquired
legal title to the property in December 1990. The Partnership recorded its
net carrying value in the property in an amount equal to its estimated fair
value, resulting in no gain or loss recognition in 1990 by the Partnership.
To the extent that the amounts the borrower owed the Partnership (including
the delinquent amounts), 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 were 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 provided 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 were subject to earlier payment under certain
circumstances. The note provided for prepayment in whole or in part at any
time without penalty. This guarantor was current in the monthly payments
to the Partnership through August 31, 1994. As the Partnership had not
received any subsequent payments which were due for 1994, 1995 and 1996,
the Partnership contacted the guarantor and agreed to a discounted payoff
of all amounts due regarding these delinquent amounts. In December 1996,
the Partnership received $23,000 as a final settlement of the promissory
note and recognized a provision for loan loss of $54,500.
Pursuant to the other settlement agreement, a promissory note for
$300,000 (subject to reduction to $125,000 if no default had occurred) was
issued by the other guarantor to the Partnership. The note provided 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
provided 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 were subject to earlier payment under certain
circumstances. The note provided for prepayment in whole or in part any
time without penalty. As the guarantor in this settlement agreement had
not made any payments (which were to commence January, 1994), as a matter
of prudent accounting practice, the Partnership recognized income from this
settlement only as collected. Although default notices were sent to the
guarantor, no amounts were collected on this settlement agreement and all
efforts to collect ceased as of the termination of the Partnership.
A former affiliate of the General Partners of the Partnership assumed
management of the property during October 1990 under an agreement which
provided for a fee equal to 5% of the property's gross receipts, plus lease
commissions. Effective January 1, 1994, the management agreement was
amended to provide for a fee equal to 6% of the property's gross receipts
(such fee to include compensation for leasing activity).
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 recorded in 1991 and 1993 totaling
$2,680,000. 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.
SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS
In February 1986, the Partnership committed to participate in the
funding of a participating first mortgage loan in the maximum amount of
$11,000,000 secured by the Spring Hill Fashion Corner shopping center
located in West Dundee, Illinois. 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 were JMB Mortgage Partners, Ltd.-II and
JMB Mortgage Partners, Ltd.-III, both of which were or 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 was reflected in the
accompanying consolidated financial statements for December 31, 1994.
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 was
managing the property under an agreement which provided for a maximum fee
equal to 6% of the property's gross receipts (such fee including
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 had accounted for its investment as a consolidated joint
venture. For financial reporting purposes, the Partnership did not
recognize any 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 recognized a loss of
approximately $1,171,000 in 1995 as a result of this transaction.
The terms of Spring Hill's partnership agreement provided generally
that contributions, distributions, cash flow, sale or refinancing proceeds
and profits and losses were to be distributed or allocated to the partners
in their respective ownership percentages (60.45% to the Partnership).
In October 1996, Spring Hill finalized a contract for the sale of the
Spring Hill Fashion Corner. On November 13, 1996, the venture sold the
property to an unaffiliated third party for $9,200,000, all of which was
received (less closing costs) in cash at closing. As a result of the
sale, the venture recognized a loss for Federal income tax reporting
purposes of approximately $1,030,000. As the sale per the contract was
estimated to result in a loss of approximately $775,000 for financial
reporting purposes in 1996 as a matter of prudent accounting practice, the
venture recognized a $775,000 provision for value impairment at September
30, 1996, of which $468,488 was allocated to the Partnership. When the
sale of the property was completed in November 1996, the venture, after the
effect of the September 1996 provision for value impairment, recognized a
gain of approximately $3,000 for financial reporting purposes, of which
approximately $1,800 was allocated to the Partnership.
As Spring Hill had committed to a plan to sell the property, the
property was classified as held for sale as of July 1, 1996 and therefore
was not subject to continued depreciation. The results of operations of
the property included in the accompanying consolidated financial statements
were a net operating loss of $90,841 and net operating earnings of $397,722
for the years ended December 31, 1996 and 1995, respectively. The property
was not reflected as owned by the Partnership and its affiliated lenders
prior to January 1, 1995 as described above.
OAK COURT OF WESTMONT SHOPPING CENTER, WESTMONT, ILLINOIS
The Partnership funded $2,845,000 on a participating first mortgage
loan secured by a shopping center in Westmont, Illinois in January 1985.
The loan bore basic interest at the rate of 13% per annum and provided for
monthly payments of interest only. The loan also provided for simple
accrued interest of 3.8% per annum, payable upon prepayment or at maturity.
The Partnership was also entitled to participation in annual gross receipts
(as defined) of the shopping center and to participate in increases in the
value of the shopping center.
Due to the property's previous high levels of vacancy, the borrower
made only partial interest payments since July 1989 to the extent of cash
generated by the property. Since 1993, the Partnership, for financial
reporting purposes, reflected all amounts collected as reductions in the
carrying amount of the loan. The manager of the property, an affiliate of
the borrower, deferred a portion of its management fees in order to
increase the cash flow available to the Partnership. The borrower had been
unable to either sell the property or obtain replacement long-term
financing in order to repay the loan on its scheduled maturity date of
January 14, 1995. The Partnership worked closely with the borrower in an
effort to lease up previous vacant space at the property and assisted the
borrower in obtaining replacement financing. During July 1996, the
Partnership reached an agreement with the borrower to pay off the loan at a
specified amount prior to December 31, 1996. Pursuant to such agreement,
the Partnership received a $1,650,000 loan payoff, which consisted of
$1,575,000 in cash in August and a $75,000 short-term promissory note which
was paid in full in September 1996, as full repayment of the loan and any
accrued but unpaid mortgage interest. Due to the Partnership's prior
provisions for loan loss on this mortgage loan ($1,603,000 in the
aggregate), such payoff resulted in a gain of $423,000 for financial
reporting purposes but a loss of approximately $1,600,000 for Federal
income tax reporting purposes in 1996.
LEASES - AS PROPERTY LESSOR
The Partnership had determined that all leases relating to the Spring
Hill Fashion Corner were properly classified as operating leases;
therefore, rental income was reported when earned and the costs of the
property, excluding the cost of land, were depreciated over its estimated
useful life. Leases with tenants ranged in term from one to ten remaining
years and provided for fixed minimum rent and partial reimbursement of
operating costs. In addition, certain leases provided for either
additional rent based upon percentages of tenant sales volumes or provided
for annual increases in fixed minimum rents.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations were allocated as follows: net
profits were allocated to the General Partners in an amount equal to the
greater of 1% of net profits or the amount of net cash flow actually
distributed to the General Partners, with the Limited Partners being
allocated the remaining net profits; net losses were allocated 97% to the
Limited Partners and 3% to the General Partners. Net profits from the
repayment or other disposition of mortgage investments were allocated first
to the General Partners in an amount equal to the greater of any cash
distributions to the General Partners from the proceeds of any such
repayment or other disposition (as described below) or 1% of the net
profits from the repayment or other disposition. However, during 1996, a
reallocation of current year's gain on repayment of mortgage note
receivable was made among the partners for financial reporting purposes.
Such reallocation did not have an effect on total assets, total partners'
capital or net earnings. Net losses from the repayment or other
disposition of mortgage investments were allocated 3% to the General
Partners. The remaining net profits and losses from the repayment or other
disposition of mortgage investments were allocated to the Limited Partners.
The General Partners were not required to make any capital contribu-
tions upon dissolution and termination of the Partnership. Distributions
of "net cash flow" of the Partnership were made 97% to the Limited Partners
and 3% to the General Partners. Distributions of "repayment proceeds" were
to be made 97% to the Limited Partners until the Limited Partners had
received their contributed capital plus a stipulated return thereon, with
the remainder of such 97% distribution, subject to the General Partners'
receipt of any deficiency in its cumulative, non-compounded mortgage
investment servicing fee, to be distributed 15% to the General Partners and
85% to the Limited Partners. The remaining 3% of all distributions of
repayment proceeds were distributable to the General Partners. However,
upon completion of the liquidation of the Partnership and final
distribution of all Partnership funds, all previous distributions of sale
and repayment proceeds to the General Partners were to be recontributed to
the Partnership to the extent that the Limited Partners had not received
sale and repayment proceeds equal to their initial capital investment.
Since, upon termination and liquidation of the Partnership, the Limited
Partners did not receive total sale and repayment proceeds equal to their
initial capital investment, the General Partners did not share in any of
their previously deferred distributions of sale and repayment proceeds. Of
the cumulative distributions of $46,757,213 paid to the Limited Partners
$1,790,821 represented an 8.5% annual return to the Limited Partners for
the period during which the Limited Partners' subscription proceeds were
held in escrow through January 31, 1984, $21,613,928 represented
distributions of repayment and sale proceeds to the Limited Partners
resulting from the repayment in February 1987 of the first mortgage loan
secured by the Lincoln Park Apartments and the repayment in August 1996 of
the first mortgage loan secured by the Oak Court of Westmont Shopping
Center and the sales of the Pineapple Place Apartments in August 1994 and
the Ocean Technology Park Office Building in December 1994 and $23,352,464
represents distributions of net cash flow for periods subsequent to January
31, 1984. The Partnership made a final liquidating distribution of
$5,648,995 to the Holders of Interests (including $350,110 to the
liquidating trust established for the benefit of the Holders of Interests,
as previously discussed). The General Partners' cumulative distributions
of $723,778 represented distributions of net cash flow.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses incurred and paid by the Partnership to the General Partners and
their affiliates for the years ended December 31, 1996, 1995 and 1994 were
as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
------- ------- ------- ------------
Property management
fees . . . . . . . . $36,685 51,210 65,052 --
Insurance commissions 1,433 4,506 2,864 --
Reimbursement (at cost)
for accounting
services . . . . . . 5,671 40,452 56,647 --
Reimbursement (at cost)
for portfolio
management services. 17,272 22,618 15,223 --
Reimbursement (at cost)
for legal services . 6,247 1,319 3,216 --
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket
expenses . . . . . . 4,454 68,768 1,732 --
------- ------- ------- -------
$71,762 188,873 144,734 --
======= ======= ======= =======
An affiliate of the General Partners earned and received leasing
commissions totaling $27,589 in 1996 in connection with certain leases at
the Spring Hill Fashion Corner.
The above table reflects that during 1995, the Partnership recognized
and paid certain 1994 administrative charges of approximately $42,296 that
had not previously been reimbursed.
The Partnership was 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 was calculated from the date the Partnership funded the
mortgage investment. Payment of one-half of the fee was subordinated to
the receipt by the Limited Partners of a stipulated rate of return on their
capital accounts. Such subordinated amounts previously accrued in the
amount of approximately $935,000 were written off to other income in 1996.
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 continued 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.
The General Partners had previously deferred payment of their share of
distributions of repayment and sale proceeds amounting to $831,790. Due to
the terms of the Partnership Agreement, the General Partners are not
entitled to these amounts upon liquidation and termination of the
Partnership.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
fiscal year 1995 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership was JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which was owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB had responsibility for all aspects of the Partnership's operations,
subject to the requirement that all mortgage investments and all
dispositions thereof (including by sale or exchange) were required to be
approved by the Associate General Partner of the Partnership, AGPP
Associates, L.P. AGPP Associates, L.P., an Illinois limited partnership
with JMB as its sole general partner, was directed by a majority in
interest of its limited partners (who were generally officers, directors
and affiliates of JMB or its affiliates) as to whether to provide its
approval of any mortgage investment of the Partnership or the disposition
thereof.
The Partnership was subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates were
engaged in a range of real estate activities. Certain services were
provided to the Partnership or its investment properties by affiliates of
the General Partners, including property management services and insurance
brokerage services. In general, such services were provided on terms no
less favorable to the Partnership than could be obtained from independent
third parties and were otherwise subject to conditions and restrictions
contained in the Partnership Agreement. The Partnership Agreement
permitted the General Partners and their affiliates to provide services to,
and otherwise deal and do business with, persons who were engaged in
transactions with the Partnership, and permitted the Partnership to borrow
from, purchase goods and services from, and otherwise to do business with,
persons who did business with the General Partners or their affiliates.
The General Partners and their affiliates were in competition with the
Partnership under certain circumstances, including, in certain geographical
markets, for tenants for properties and/or for the sale of properties.
Because the timing and amount of cash distributions and profits and losses
of the Partnership could be affected by various determinations by the
General Partners under the Partnership Agreement, including whether and
when to sell or refinance a property, the establishment and maintenance of
reasonable reserves, the timing of expenditures and the allocation of
certain tax items under the Partnership Agreement, the General Partners may
have had a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors had been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 7, 1997. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1997. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"),
Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real
Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate
Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited
Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership -
XVI ("Carlyle- XVI"), Carlyle Real Estate Limited Partnership-XVII
("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage
Partners-III"), JMB Mortgage Partners, Ltd. - IV ("Mortgage Partners -IV"),
Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus,
Ltd.-II ("Carlyle Income Plus-II") and the managing general partner of JMB
Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V
("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB
Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI, ("JMB Income-XI"),
JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income
Properties Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general
partner of the associate general partner of most of the foregoing
partnerships. Most of the foregoing directors and officers are also
officers and/or directors of various affiliated companies of JMB including
Arvida/JMB Managers Inc. (the general partner of Arvida/JMB Partners, L.P.
("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner of
Arvida/JMB Partners, L.P.-II ("Arvida-II")), and Income Growth Managers,
Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd.
("IDS/BIG")) Most of such directors and officers are also partners of
certain partnerships which are associate general partners in the following
real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-XI,
Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-
XVII, JMB Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB
Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV,
Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October 1969. Mr. Malkin is a director of Urban Shopping Center, Inc.
("USC, Inc."), an affiliate of JMB that is a real estate investment trust
in the business of owning, managing and developing shopping centers. He is
Certified Public Accountant.
Neil G. Bluhm (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August 1970. Mr. Bluhm is a director of USC, Inc. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 58) has been associated with JMB since June
1971, and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 55) has been associated with JMB since July
1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December 1972.
John G. Schreiber (age 50) has been associated with JMB since December
1970, and served as an Executive Vice President of JMB until December 1990.
Mr. Schreiber is a director of USC, Inc. Mr. Schreiber is President of
Schreiber Investments, Inc., a company which is engaged in the real estate
investing business. He is also a senior advisor and partner of Blackstone
Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since
1994, Mr. Schreiber has also served as a trustee of Amli Residential
Property Trust, a publicly-traded real estate investment trust that invests
in multi-family properties. He is also a director of a number of
investment companies advised or managed by T. Rowe Price Associates and its
affiliates. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business.
H. Rigel Barber (age 47) has been associated with JMB since March
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 49) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 44) has been associated with JMB since February
1984. He holds a JD degree from the University of Michigan Law School and
is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 48) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 61) has been associated with JMB since March 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership had no officers or directors. The General Partners of
the Partnership were entitled to receive a share of cash distributions,
when and as cash distributions were made to the Limited Partners, and a
share of profits or losses. In 1996, 1995 and 1994, cash distributions of
$55,810, $15,346 and $34,375 were paid, respectively, to the General
Partners. The General Partners were allocated taxable loss of $12,581 in
1996.
The Partnership, pursuant to the Partnership Agreement, was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
Urban Retail Properties Company, an affiliate of the Corporate General
Partner, provided property management services to the Partnership for 1996
for the Spring Hill Fashion Corner. In 1996, such affiliate earned
property management fees of $36,685 and leasing fees of $27,589 for such
services. As set forth in the Prospectus of the Partnership, the Corporate
General Partner had to negotiate such agreements on terms no less favorable
to the Partnership than those customarily charged for similar services in
the relevant geographical area (but in no event at rates greater than 5%
of the gross income from a residential property and in no event greater
than 6% of the gross income from a commercial property where the property
manager performed leasing services), and such agreements had to be
terminable by either party thereto, without penalty upon 60 days' notice.
JMB Insurance Agency, Inc. an affiliate of the Corporate General
Partner of the Partnership, received insurance brokerage commissions in
1996 aggregating $1,433 in connection with providing insurance coverage for
the Spring Hill Fashion Corner. Such commissions were at rates set by
insurance companies for the classes of coverage provided.
The Corporate General Partner and its affiliates were reimbursed (at
cost) in 1996 for accounting services, portfolio management services, legal
services and for administrative charges and other out-of-pocket expenses of
$5,671, $17,272, $6,247 and $4,454, respectively. Also, during 1995, the
Partnership recognized and paid certain 1994 administrative charges to the
Corporate General Partner and its affiliates of approximately $42,296 that
had not previously been reimbursed.
The Partnership was 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 was calculated from the date the Partnership funds the
mortgage investment. Payment of one-half of the fee was subordinated to
the receipt by the Limited Partners of a stipulated rate of return on their
current capital accounts. Such subordinated amounts previously accrued in
the amount of approximately $935,000 were written off to other income in
1996.
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 continued 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.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group was known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership (immediately prior to final liquidating distribution).
(b) The Corporate General Partner, its officers and directors and the Associate General Partner owned as a
group the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 5 Interests directly Less than 1%
Limited Partnership
Interests Neil G. Bluhm 115 Interests indirectly
(1) Less than 1%
Limited Partnership
Interests Judd D. Malkin 190 Interests indirectly
(1)(2) Less than 1%
Limited Partnership
Interests Corporate General Partner, 195 Interests (1) (2) Less than 1%
its officers and
directors and the
Associate General Partner
as a group
<FN>
(1) Includes 115 Interests owned by investment partnerships, of which Messrs. Bluhm and Malkin are the
managing general partners thereof and have shared investment and voting power with respect to the Interests so
owned.
(2) Includes 75 Interests owned by investment partnerships, of which Mr. Malkin is the managing general
partner thereof and has sole investment and voting power with respect to the Interests so owned.
No officer or director of the Corporate General Partner of the Partnership possessed a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There existed no arrangement, known to the Partnership, the operation of which would have resulted in a
change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed or incorporated by
reference as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this report.)
(2) Exhibits
3-A. The Prospectus of the Partnership dated December
3, 1982, as supplemented April 29, 1983, August
23, 1983 and January 11, 1984 as filed with the Commission pursuant to
Rules 424(b) and 424(c), is hereby incorporated herein by reference.
Copies of pages 7-9, 41-42, and A-6 to A-9 of the Prospectus are hereby
incorporated herein by reference to Exhibit 3-A to the Partnership's report
for December 31, 1992 (File NO. 2-79095) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the
Prospectus, which agreement is hereby incorporated herein by reference to
the Partnership's Registration Statement on Form S-11 (File No. 2-79095)
dated December 3, 1982.
3-C. Acknowledgement of rights and duties of the
General Partners of the Partnership between AGPP Associates, L.P. (a
successor Associated General Partner of the Partnership) and JMB Realty
Corporation as of December 31, 1995 is hereby incorporated herein by
reference to the Partnership's report for September 30, 1996, as amended,
on Form 10-Q/A (File No. 2-79095) dated November 8, 1996.
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 19, 1993.
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 19, 1993.
10-C. Promissory Notes for the Spring Hill Fashion
Center, dated February 13, 1986, between Spring
Hill Associates, an Ohio general partnership, and JMB Mortgage Partners,
Ltd.-III, an Illinois limited partnership, with requisite exhibits, as
filed with the Partnership's Report on Form 8-K (File No. 2-79095) for
February 18, 1986 is incorporated herein by reference.
10-D. Participation Agreement for the Spring Hill
Fashion Center, dated February 13, 1986, between
JMB Mortgage Partners, Ltd.-III, JMB Mortgage Partners, Ltd. and JMB
Mortgage Partners, Ltd.-II, all Illinois limited partnerships, as filed
with the Partnership's Report on Form 8-K File No. 2-79095) for February
18, 1986 is incorporated herein by reference.
10-E. Agreement for Deed in Lieu of Foreclosure and
related agreements dated as of April 4, 1995 between borrower and lenders
relating to Spring Hill Fashion Center are incorporated herein by reference
to the Partnership's report for December 31, 1995 on Form 10-K (File No. 2-
79095) dated March 25, 1996.
10-F. Agreement of General Partnership of JMB/Spring
Hill Associates dated May 1, 1995 between JMB Mortgage Partners, Ltd., JMB
Mortgage Partners, Ltd.-II and JMB Mortgage Partners, Ltd.-III is
incorporated herein by reference to the Partnership's report for December
31, 1995 on Form 10-K (File No. 2-79095) dated March 25, 1996.
10-G. Real Property Purchase Agreement between
JMB/Spring Hill Associates and Inland Real Estate Corporation, dated
October 14, 1996, as amended October 29, 1996 is hereby incorporated herein
by reference to the Partnership's report on Form 8-K (File No. 2-79095)
dated November 13, 1996.
24. Powers of Attorney
27. Financial Data Schedule
(b) The following report on Form 8-K was filed since the
beginning of the last quarter of the period covered by this report.
The Partnership's report on Form 8-K (File No. 2-79095)
for November 13, 1996 describing the sale of the Spring Hill Fashion Corner
was filed. No financial statements were required to be filed therewith.
No annual report or proxy material for the fiscal year 1996 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JMB MORTGAGE PARTNERS, LTD.
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 21, 1997
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 21, 1997
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 21, 1997
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 21, 1997
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 21, 1997
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 21, 1997
By: STUART C. NATHAN*
Stuart C. Nathan,
Executive Vice President and Director
Date: March 21, 1997
*By: GAILEN J. HULL,
Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 21, 1997
JMB MORTGAGE PARTNERS, LTD.
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----
3-A. Pages 7-9, 41-42 and A-6
to A-9 of the Prospectus
of the Partnership dated
December 3, 1982 Yes
3-B. Amended and Restated Agreement
of Limited Partnership Yes
3-C. Acknowledgement of rights and Yes
duties of General Partners
of the Partnership
10-A. Promissory Note ($2,495,000),
dated January 14, 1985 Yes
10-B. Promissory Note ($350,000),
dated January 14, 1985 Yes
10-C. Promissory Notes, dated
February 13, 1986 Yes
10-D. Participation Agreement,
dated February 13, 1986 Yes
10-E. Agreement for Deed in Lieu
of Foreclosure, dated
April 4, 1995 Yes
10-F. General Partnership Agree-
ment for JMB/Spring Hill
Associates, dated May 1, 1995 Yes
10-G. Real Property Purchase Agreement
relating to the sale of the
Spring Hill Fashion Corner Yes
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of JMB MORTGAGE PARTNERS,
LTD., do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J.
HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1996, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of JMB MORTGAGE PARTNERS,
LTD., do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J.
HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1996, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,648,995
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,648,995
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,648,995
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,648,995
<TOTAL-LIABILITY-AND-EQUITY> 5,648,995
<SALES> 1,024,861
<TOTAL-REVENUES> 2,099,747
<CGS> 0
<TOTAL-COSTS> 453,147
<OTHER-EXPENSES> 371,762
<LOSS-PROVISION> 829,500
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 445,838
<INCOME-TAX> 0
<INCOME-CONTINUING> 505,272
<DISCONTINUED> 424,782
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 930,054
<EPS-PRIMARY> 17.15
<EPS-DILUTED> 17.15
</TABLE>
