SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1995 Commission File No. 0-12140
JMB INCOME PROPERTIES, LTD. - X
(Exact name of registrant as specified in its charter)
Illinois 36-3235999
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations . . . . . . . . . . . 18
PART II OTHER INFORMATION
Item 3. Default Upon Senior Securities. . . . . . . 24
Item 5. Other Information . . . . . . . . . . . . . 25
Item 6. Exhibits and Reports on Form 8-K. . . . . . 26
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . $ 21,011,230 84,869,716
Short-term investments (note 1). . . . . . . . . . . . . . . 1,745,777 2,880,712
Rents and other receivables, net of allowance
for doubtful accounts of $111,117 in 1995 and
$109,345 in 1994 . . . . . . . . . . . . . . . . . . . . . 603,877 455,293
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 27,392 88,265
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . 83,527 35,190
------------ -----------
Total current assets . . . . . . . . . . . . . . . . 23,471,803 88,329,176
------------ -----------
Investment properties, at cost (notes 1, 2 and 3):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,486,896 8,486,896
Buildings and improvements . . . . . . . . . . . . . . . . . 80,620,320 80,610,282
------------ -----------
89,107,216 89,097,178
Less accumulated depreciation. . . . . . . . . . . . . . . . 32,518,250 31,896,865
------------ -----------
Total investment properties, net of
accumulated depreciation . . . . . . . . . . . . . . 56,588,966 57,200,313
Investment in unconsolidated ventures, at equity
(notes 1, 3 and 7) . . . . . . . . . . . . . . . . . . . . 24,214,543 24,030,924
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . 70,427 78,319
Accrued rents receivable . . . . . . . . . . . . . . . . . . . 1,057,446 1,071,784
------------ -----------
$105,403,185 170,710,516
============ ===========
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
MARCH 31, DECEMBER 31,
1995 1994
------------ -----------
Current liabilities:
Bank overdrafts. . . . . . . . . . . . . . . . . . . . . . . $ 2,863,217 383,252
Current portion of long-term debt
(notes 2 and 3(b)) . . . . . . . . . . . . . . . . . . . . 49,208,969 49,254,780
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 694,597 400,600
Accrued interest . . . . . . . . . . . . . . . . . . . . . . 2,643,737 2,644,247
Accrued real estate taxes. . . . . . . . . . . . . . . . . . 481,772 1,448,958
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . 55,892,292 54,131,837
Tenant security deposits . . . . . . . . . . . . . . . . . . . 14,945 19,844
------------ -----------
Commitments and contingencies (notes 1, 2 and 3)
Total liabilities. . . . . . . . . . . . . . . . . . . 55,907,237 54,151,681
Partners' capital accounts:
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . 1,408,725 1,367,150
Cumulative cash distributions. . . . . . . . . . . . . . . (250,000) (250,000)
------------ -----------
1,159,725 1,118,150
------------ -----------
Limited partners (150,005 interests):
Capital contributions, net of offering costs . . . . . . . 135,651,080 135,651,080
Cumulative net earnings. . . . . . . . . . . . . . . . . . 74,872,643 73,874,835
Cumulative cash distributions. . . . . . . . . . . . . . . (162,187,500) (94,085,230)
------------ -----------
48,336,223 115,440,685
------------ -----------
Total partners' capital accounts . . . . . . . . . . . 49,495,948 116,558,835
------------ -----------
$105,403,185 170,710,516
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . . . $4,415,121 7,755,983
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . 1,061,659 27,688
---------- ---------
5,476,780 7,783,671
---------- ---------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . . . 1,274,946 2,152,329
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 621,385 1,117,605
Property operating expenses. . . . . . . . . . . . . . . . . . . 2,354,227 3,627,582
Professional services. . . . . . . . . . . . . . . . . . . . . . 68,094 66,290
Amortization of deferred expenses. . . . . . . . . . . . . . . . 15,471 36,711
General and administrative . . . . . . . . . . . . . . . . . . . 161,893 48,281
---------- ---------
4,496,016 7,048,798
---------- ---------
Operating earnings. . . . . . . . . . . . . . . . . . . . 980,764 734,873
Partnership's share of operations of
unconsolidated ventures (note 1) . . . . . . . . . . . . . . . . 58,619 163,184
---------- ---------
Net operating earnings . . . . . . . . . . . . . . . . . . 1,039,383 898,057
Gain on sale of investment property
(note 2(b)). . . . . . . . . . . . . . . . . . . . . . . . . . . -- 518,710
---------- ---------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $1,039,383 1,416,767
========== =========
<PAGE>
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
1995 1994
------------ -----------
Net earnings per limited partnership
interest (note 1):
Net operating earnings. . . . . . . . . . . . . . . . . $ 6.65 5.75
Gain on sale of investment property . . . . . . . . . . -- 3.42
---------- ---------
Net earnings. . . . . . . . . . . . . . . . . . . . . . . $ 6.65 9.17
========== =========
Cash distributions per limited
partnership interest. . . . . . . . . . . . . . . . . . $ 454.00 4.00
========== =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,039,383 1,416,767
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 621,385 1,117,605
Amortization of deferred expenses. . . . . . . . . . . . . . . 15,471 36,711
Partnership's share of operations of uncon-
solidated ventures, net of distributions . . . . . . . . . . (58,619) --
Venture partner's share of venture's operations. . . . . . . . -- 135,492
Gain on sale of investment property. . . . . . . . . . . . . . -- (518,710)
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . . (148,584) (118,499)
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . (48,337) (48,914)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 60,873 127,785
Accrued rents receivable . . . . . . . . . . . . . . . . . . . 14,338 (127,229)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 293,997 (96,966)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . (510) (190,372)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . (967,186) (1,784,654)
Tenant security deposits . . . . . . . . . . . . . . . . . . . (4,899) (5,750)
----------- -----------
Net cash provided by (used in) operating activities. . . . 817,312 (56,734)
----------- -----------
Cash flows from investing activities:
Cash proceeds from sale of investment property,
net of selling expenses. . . . . . . . . . . . . . . . . . . . -- 567,897
Net sales and maturities of short-term investments . . . . . . . 1,134,935 436,057
Additions to investment properties . . . . . . . . . . . . . . . (10,038) (861,034)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . (7,579) (26)
Partnership's contribution to unconsolidated ventures. . . . . . (125,000) --
----------- -----------
Net cash provided by investing activities. . . . . . . . . 992,318 142,894
----------- -----------
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Cash flows from financing activities:
Bank overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . 2,479,965 383,252
Principal payments on long-term debt . . . . . . . . . . . . . . (45,811) (80,462)
Distributions to limited partners. . . . . . . . . . . . . . . . (68,102,270) (600,020)
------------ -----------
Net cash used in financing activities. . . . . . . . . . (65,668,116) (297,230)
------------ -----------
Net decrease in cash and cash
equivalents. . . . . . . . . . . . . . . . . . . . . . (63,858,486) (211,070)
Cash and cash equivalents, beginning of period . . . . . 84,869,716 1,061,308
------------ -----------
Cash and cash equivalents, end of period . . . . . . . .$ 21,011,230 850,238
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . .$ 1,275,456 2,342,701
============ ===========
Non-cash investing and financing activities. . . . . . . . . . .$ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
Readers of this report should refer to the Partnership's audited
financial statements for the year ended December 31, 1994, which are
included in the Partnership's 1994 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the
accounts of the Partnership and its venture, Animas Valley Mall Associates
("Animas") (note 3(b)). The effect of all transactions between the
Partnership and its venture has been eliminated in the consolidated
financial statements. The equity method of accounting has been applied in
the accompanying consolidated financial statements with respect to the
Partnership's venture interests in Royal Executive Park - I ("Royal
Executive Park") (note 3(c)) and JMB-40 Broad Street Associates ("Broad
Street") (note 3(d)). Accordingly, the accompanying consolidated financial
statements do not include the accounts of Royal Executive Park, or of Broad
Street.
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the venture as described above.
Such adjustments are not recorded on the records of the Partnership. The
net effect of these items for the three months ended March 31 is summarized
as follows:
1995 1994
----------------------- -------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings
(loss). . . . .$1,039,383 (167,956) 1,416,767 (52,251)
Net earnings
(loss) per
limited
partnership
interest. . . .$ 6.65 (1.07) 9.17 (.31)
========== ======== ========= ========
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of each
period (150,005).
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from unconsolidated ventures are considered cash
flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings. The Partnership records amounts held in
U.S. Government obligations at cost, which approximates market. Therefore,
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, ($21,011,230 and $84,869,716 at March 31, 1995 and December 31, 1994,
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.
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As more fully discussed in note 2(a), due to the uncertainty of the
Partnership's ability to recover the net carrying value of the Pasadena
Town Square investment property through future operations and sale, as of
December 31, 1994, the Partnership recorded, as a matter of prudent
accounting practice, a provision for value impairment of such investment of
$8,434,103. Such provisions were recorded to reduce the net carrying value
of the investment property to the then outstanding balance of the related
non-recourse financing.
Certain amounts in the 1994 consolidated financial statements have
been reclassed to conform to the 1995 presentation.
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived assets (primarily its consolidated investments in land, buildings and
improvements) whenever their carrying value cannot be fully recovered
through estimated undiscounted future cash flows from operations and sale.
The amount of the impairment loss to be recognized would be the difference
between the long-lived asset's carrying value and the asset's estimated
fair value less costs to sell.
The amount of any impairment loss recognized by the Partnership under
its current accounting policy has been limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness. An impairment loss under SFAS 121
would be determined without regard to the nature or the balance of such
non-recourse indebtedness. Upon the disposition of a property for which an
impairment loss has been recognized under SFAS 121, the Partnership would
recognize, at a minimum, a net gain for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership expects to adopt SFAS 121 no later than the first
quarter of 1996. Although the Partnership has not currently assessed the
full impact of adopting SFAS 121, the amount of any such required
impairment loss could be materially higher than the amounts that have been
recorded in the past or may be recorded in 1995 under the Partnership's
current impairment policy. In addition, upon the disposition of an
impaired property, the Partnership would generally recognize more net gain
for financial reporting purposes under SFAS 121 than it would have under
the Partnership's current impairment policy, without regard to the amount,
if any, of cash proceeds received by the Partnership in connection with the
disposition. Although implementation of this new accounting statement
could significantly impact the Partnership's reported earnings, there would
be no impact on cash flows. Further, any such impairment loss would not be
recognized for Federal income tax purposes.
(2) INVESTMENT PROPERTIES
(a) Pasadena Town Square Mall
The Partnership is continuing discussions with a major department
store owner concerning the opening of a store at the Pasadena Town Square.
In order to add another department store at this center, the Partnership
would likely need to commit a substantial amount of capital. The
Partnership believes that the addition of another department store to this
property would enhance the competitive position of this property within the
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
immediate retail market resulting in improved operating results. In 1993,
the Partnership commenced a minor mall enhancement program which included
remodeling the food court. The program (with a cost of approximately
$500,000) was completed in 1994. In addition, the Partnership is
considering a program to repair the property's roof and parking lot. The
total cost of the repair work would be approximately $1,700,000. Such
amount would be partially recoverable from tenants pursuant to provisions
in their leases. Any decision to commit additional funds to this
investment property for any purpose will be based on, among other things,
the high likelihood of the return of such additional investment plus a
reasonable profit thereon. Consequently, there is no assurance that the
addition of a department store or the commencement of the capital repair
projects will ultimately occur.
The Partnership continues to hold discussions with the mortgage lender
regarding a refinancing and/or extension of the mortgage loan on the
property (which matured in January 1995). However, there is no assurance
that the Partnership will obtain a refinancing of the mortgage note.
During negotiations, the Partnership currently remits debt service payments
based on the cash generated by the investment property. The lender has
notified the Partnership of its demand for payment of all sums owed. Based
on the property operating and market conditions discussed above and if the
Partnership is unable to obtain a loan refinancing and/or extension on
economic terms which would provide for a high likelihood of return of any
additional investment plus a reasonable profit thereon, the Partnership may
decide not to commit any significant further amounts of capital to this
property. As a result, the lender would likely obtain title to the
property and the Partnership would no longer have an ownership interest.
Therefore, due to the factors discussed above and due to the uncertainty of
the Partnership's ability to recover the net carrying value of the Pasadena
Town Square investment property through future operations and sale, the
Partnership at December 31, 1994 recorded, as a matter of prudent
accounting practice, a provision for value impairment of such investment of
$8,434,103. Such provisions were recorded to reduce the net carrying value
of the investment property to the then outstanding balance of the related
non-recourse financing. In such event, the Partnership would recognize a
gain for financial reporting and a gain for Federal income tax reporting
purposes without any net realizable proceeds.
(b) North Hills Mall
The Partnership continues to seek the replacement of a major tenant,
which owns its own store, with another major tenant and/or adding another
major tenant to the center. The major tenant, which is currently using
only the first level of its two-story store, has expressed an interest in
closing its store. In order to replace the major tenant with another
and/or add another major tenant, the Partnership may need to commit
substantial capital. Any decision to commit additional funds to this
investment property for these purposes will be based on, among other
things, the high likelihood of the return of such additional investment
plus a reasonable profit thereon. The Partnership believes the replacement
of the major tenant and/or addition of another major department store to
this center would greatly enhance the competitive position of this center
within the North Richland Hills retail market. However, there can be no
assurance that such replacement and/or addition will ultimately occur.
The Partnership is in the third year of a five year program to repair
the property's roof and parking lot. The total cost of the repair is
expected to be approximately $1,500,000. Such amounts are partially
recoverable from tenants pursuant to provisions in their leases.
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership is currently seeking a refinancing and/or extension of
the mortgage loan on the property which matures in July 1995. However,
there is no assurance that the partnership will obtain a refinancing and/or
extension of all or substantially all of the mortgage note.
In February 1994, the Partnership sold its remaining land outparcel to
an unaffiliated third party. The sale price for the outparcel was $700,000
(before selling costs and prorations). The Partnership will retain the net
sale proceeds in its working capital. The Partnership recognized a gain of
$517,128 for financial reporting purposes and a gain of $518,710 for
Federal income tax purposes for the year ended 1994.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at March 31, 1995 is a party to three joint venture
agreements. Under certain circumstances, either pursuant to the venture
agreements or due to the Partnership's obligations as a general partner,
the Partnership may be required to make additional cash contributions to
the ventures.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners might become unable or unwilling to
fulfill their financial or other obligations, or that such joint venture
partners may have economic or business interests or goals that are
inconsistent with those of the Partnership.
(b) Animas Valley Mall
Operating profits and losses are allocated to the Partnership and the
joint venture partner according to their respective contributions to fund
operating deficits with any remaining losses allocated to the Partnership.
In April 1992, the Partnership and its joint venture partner settled
certain legal disputes regarding the joint venture agreement and management
of the property. Under the terms of the settlement, the joint venture
partner has contributed approximately $404,000 to the joint venture and
relinquished its approval rights in connection with the business affairs of
the joint venture. The unaffiliated venture partner has retained certain
approval rights in connection with a sale or refinancing of the property.
The Partnership, in return, has agreed to pay the unaffiliated venture
partner a certain settlement amount in connection with the disposition of
the property. Such disposition payment, approximately $153,000 at March
31, 1995, decreases annually on January 1 to $92,000 in 1996 and
thereafter. Under certain limited disposition events, the disposition
payment amount can be further reduced or eliminated.
In April 1992, the joint venture finalized a modification of the
existing long-term mortgage note secured by the Animas Valley Mall. Under
the terms of the modification, the joint venture, commencing with the
January 1991 payment, was obligated to pay debt service of interest only
installments at a rate of 10.25% per annum, through the original term of
the note, with the deferred interest (2.25%) accruing at 12.5% and payable
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
monthly to the extent of any excess cash flow (as defined) or upon the
earlier of the sale of the property or maturity of the note in January
1994. The joint venture has paid debt service in 1991, 1992, 1993 and
through February 1994 in accordance with these modified terms. In
addition, under the terms of the modification, the joint venture was
required to make monthly real estate tax escrow deposits. In April 1994,
the joint venture and the existing lender finalized an amendment to the
loan (effective March 1, 1994) providing for the extension of its maturity
to March 1995 and lowering the pay and accrual rate on the principal
balance to 8% per annum. Any excess cash flow generated by the property
during this period is payable to the lender quarterly towards interest
accrued as of December 31, 1993 (approximately $2,100,000). As of the date
of this report, no excess cash flow has been paid to the lender. In
addition, the joint venture agreed to market this property for sale during
the extension period. The lender has agreed to allow the joint venture to
retain a portion of the net sale proceeds (as defined) in excess of the
current principal balance of $27,000,000. In addition, the lender has
expressed a willingness to finance a portion of the purchase price for a
potential purchaser. The Partnership has been actively marketing the
property for sale. In February 1995, the joint venture entered into a non-
binding letter of intent to sell its interest in the Animas Valley Mall on
an all cash basis. The prospective purchaser has completed its due
diligence review. The Partnership and prospective purchaser are currently
negotiating a final price and documentation for the sale of the property.
In addition, the lender has agreed to extend the maturity date of the
underlying loan to July 1, 1995 and has also agreed to an increase in the
Partnership's participation in the sale proceeds in excess of the principal
balance. The joint venture continues to remit debt service at the 8% pay
rate. There are no assurances that the joint venture will be successful in
finalizing the sale of the property. Based upon current negotiations, if
the Partnership is successful in finalizing this sale, the net sale
proceeds the Partnership would retain would be less than $1 million. If
the Partnership is unsuccessful in its efforts to sell or refinance the
property, the Partnership has decided not to commit additional capital to
the joint venture. Therefore, assuming a sale cannot be achieved, and the
lender is unwilling to provide further extensions to the loan, the joint
venture will transfer title to the property to the lender. This would
result in the Partnership recognizing a gain for Federal income tax and
financial reporting purposes with no distributable proceeds. In addition,
a disposition through a sale to a third party or transfer of title to the
lender would result in a disposition payment to the joint venture partners
as discussed above.
(c) Royal Executive Park
Annual cash flow is distributed 49.9% to the Partnership and 50.1% to
the joint venture partner. However, since the joint venture partner did
not receive $2,605,200 of cash flow for each of the initial five years, the
joint venture partner will be entitled to receive such deficiency, up to a
total of $400,000 from annual cash flow, if any, available for distribution
to the partners after the Partnership and the joint venture partners have
received $2,594,800 and $2,605,200, respectively, per annum. Operating
profits and losses are generally allocated to the joint venture partners in
the same ratio that annual cash flow is distributed to the partners.
The joint venture agreement further provides that proceeds from sale
or refinancing of the complex will be distributed 49.9% to the Partnership
and 50.1% to the joint venture partner.
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The property was managed by an affiliate of the joint venture partner
under an agreement which provided for fees equal to 2% of the base rent
paid by tenants. Effective July 1, 1994, a former affiliate of the General
Partner of the Partnership assumed the property management responsibilities
for the joint venture. The new manager essentially assumed the previous
management agreement with the exception that a portion of the 2% management
fee will be paid to the previous manager annually by the new manager as
compensation to the previous manager for relinquishing management of the
property. In December 1994, the above affiliated property manager of the
General Partner of the Partnership was sold, and its interest in its
management contracts assigned, to an unaffiliated third party. In
addition, the former affiliate assumed the leasing responsibilities for the
property.
As previously reported, MCI had approached the joint venture seeking a
current rent reduction in return for a lease extension beyond its prior
lease expiration date of March 31, 1998 on its 180,000 square foot lease.
During the second quarter of 1994, the joint venture finalized a
modification and extension of MCI's 180,000 square foot lease. The terms
of the agreement provide for a reduction in MCI's rental rate, effective
July 1994, to a rental rate which approximates current market rental rates.
The agreement provides for set rental rate increases in April 1998 and in
April 2002. The extended lease expiration date is June 2006. In addition,
the joint venture provided a tenant improvement allowance of $1,500,000 to
MCI in 1994 to enhance its leased space. The joint venture's decision to
modify MCI's 180,000 square foot lease was based upon an analysis of
current and expected future market conditions. The joint venture believes,
given the risk of losing this tenant in 1998 and the resulting potential
downtime and costs associated with releasing the space, that a current
reduction in the rental rate and a contribution towards enhancement of
MCI's space in return for a long term extension of its lease will maximize
the property's cash flow over the long term. The 1994 costs associated
with MCI's expansion and modification were paid for from cash generated by
the property in 1993 and 1994 and net capital contributions by the
Partnership and the joint venture partner totalling $503,844 (contributed
in their respective ownership percentages).
(d) 40 Broad Street
The Broad Street venture agreement provides that the Partnership will
be allocated or distributed profits and losses, cash flow from operations
and sale or refinancing proceeds in the ratio of its capital contributions
to Broad Street which is 31.44%. The Partnership and the venture partner
(JMB Income Properties, Ltd. - XII, a partnership sponsored by the Managing
General Partner of the Partnership) are current with respect to their
required capital contributions to Broad Street.
The downtown New York City market remains extremely competitive due to
the significant amount of space available primarily resulting from the
layoffs, cutbacks and consolidations by financial service companies and
related businesses which dominated this market. Rental rates in the
downtown market are currently at depressed levels and this can be expected
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
to continue for the foreseeable future while the current vacant space is
gradually absorbed. Little, if any, new construction is planned for
downtown over the next few years and it is expected that the building will
continue to be adversely affected by the lower than originally projected
effective rental rates now achieved upon releasing of existing leases which
expire over the next few years. In addition, new leases will likely
require expenditures for lease commissions and tenant improvements prior to
tenant occupancy. This decline in rental rates, the increase in re-leasing
time and the costs upon re-leasing will result in a continued decrease in
cash flow from operations over the near-term.
Until December 1994, the property was managed by a former affiliate of
the General Partners of the Partnership for a fee calculated as 2% of gross
receipts of the property (see note 5).
(4) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties are to be allocated to the General
Partners to the greater of 1% of such profits or the amount of cash
distributable to the General Partners from any such sale or refinancing (as
described below). Losses from the sale or refinancing of investment
properties are to be allocated 1% to the General Partners. The remaining
sale or refinancing profits and losses will be allocated to the Limited
Partners.
An amendment to the Partnership Agreement, effective January 1, 1991,
generally provides that notwithstanding any allocation contained in the
Agreement, if at any time that profits are realized by the Partnership, any
current or anticipated event would cause the deficit balance in absolute
amount in the Capital Account of the General Partners to be greater than
their share of the Partnership's indebtedness (as defined) after such
event, then the allocation of Profits to the General Partners shall be
increased to the extent necessary to cause the deficit balance in the
Capital Account of the General Partners to be no less than their respective
shares of the Partnership's indebtedness after such event. In general, the
effect of this amendment is to allow the deferral of the recognition of
taxable gain to the Limited Partners.
The General Partners are not required to make any capital contribu-
tions except under certain limited circumstances upon termination of the
Partnership. Distributions of "cash flows" of the Partnership are
allocated 90% to the Limited Partners and 10% to the General Partners.
However, portions of such distributions to the General Partners are
subordinated to the Limited Partners' receipt of a stipulated return on
capital. Through March 31, 1995, a portion of the General Partners'
distributions have been deferred (note 5).
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership 3% of the selling price and any cumulative deferrals of their
10% distribution of disburseable cash, subject to certain limitations. Any
remaining proceeds (net after expenses and retained working capital) will
be distributed 85% to the Limited Partners and 15% to the General
Partners. However, the Limited Partners shall receive 100% of such net
sale proceeds until the Limited Partners (i) have received cash
distributions of sale or refinancing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership,
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and (ii) have received cumulative cash distributions from the Partnership's
operations which, when combined with sale or refinancing proceeds
previously distributed, equal a 10% annual return on the Limited Partners'
average capital investment for each year (their initial capital investment
as reduced by sale or refinancing proceeds previously distributed)
commencing with the first fiscal quarter of 1984. Therefore, in accordance
with the Partnership agreement, the General Partners have deferred the
receipt of certain sale proceeds ($3,481,000 or approximately $23 per
Interest) from the Partnership in connection with the sale of the Towne
Square Mall and Collin Creek Mall.
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates for the three
months ended March 31, 1995 and 1994 are as follows:
Unpaid at
March 31,
1995 1994 1995
-------- ------ -------------
Property management
and leasing fees. . . . . $108,816 164,303 6,914
Insurance commissions. . . 462 -- --
Reimbursement
(at cost) for
out-of-pocket
expenses. . . . . . . . . 26,785 567 6,230
-------- ------- ------
$136,063 164,870 13,144
======== ======= ======
North Hills Mall, Pasadena Town Square and Animas Valley Mall are
managed by an affiliate of the General Partners. Royal Executive Park
(note 3(c)) and 40 Broad Street (note 3(d)) are managed by a former
affiliate of the General Partners. In December 1994, the former affiliate
of the General Partner was sold, and its interest in its management
contracts assigned, to an unaffiliated third party.
The Managing General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Managing General Partner and its affiliates relating to the
administration of the Partnership and operation of Partnership investment
properties. In 1994 and through the first quarter of 1995, such costs
aggregated $157,029 and $76,167, respectively, all of which was paid at
March 31, 1995.
The General Partners have deferred (in accordance with the Partnership
agreement) payment of certain of their distributions of net cash flow from
the Partnership. The cumulative amount of such distributions aggregated
$9,619,714 at March 31, 1995 (approximately $64 per interest). In
addition, the General Partners have deferred certain sale proceeds of
$3,481,080 (approximately $23 per Interest) from the Partnership as more
fully described in note 4. All amounts due to the General Partner do not
bear interest and are expected to be paid, if allowable, in accordance with
the Partnership Agreement, from cash generated from future operations and
sales.
JMB INCOME PROPERTIES, LTD. - X
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(6) SALE OF INVESTMENT PROPERTY
On December 29, 1994, the Partnership sold the land, related
improvements and personal property of the Collin Creek Mall located in
Plano, Texas. The purchaser was not affiliated with the Partnership or its
General Partners and the sale price was determined by arm's-length
negotiations. The sale price of the land, related improvements and
personal property was $108,000,000 (before selling costs and prorations),
all of which was paid in cash at closing. A portion of the cash proceeds
($24,546,213) was utilized to retire the first mortgage secured by the
property. An affiliate of the General Partner has retained management of
the property. The Partnership recognized a gain of $64,054,814 for
financial reporting purposes and has recognized a gain of $79,757,206 for
Federal income tax purposes in 1994.
(7) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
The summary income statement information for the Royal Executive Park
and Broad Street ventures for the three months ended March 31, 1995 and
1994 is as follows:
1995 1994
---------- ----------
Total income. . . . . . . . . $2,404,852 2,913,429
========== ==========
Operating earnings. . . . . . $ 294,911 466,738
========== ==========
Net earnings to Partnership . $ 58,619 163,184
========== ==========
(8) ADJUSTMENTS
In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of March 31,
1995 and for the three months ended March 31, 1995 and 1994.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
During February 1995, approximately $68,100,000 was distributed to the
Limited Partners, substantially all of which represented sales proceeds
from the December 1994, sale of the Collin Creek Mall as discussed below.
The Partnership has retained a portion of the Collin Creek Mall sales
proceeds as working capital as also discussed below. At March 31, 1995,
the Partnership and its consolidated venture had cash and cash equivalents
of $21,011,230. Bank overdrafts of $2,863,217 as of March 31, 1995 have
been subsequently repaid as of April 1995. Such remaining funds and short-
term investments of approximately $1,746,000 are available for
distributions to partners and for working capital requirements including
tenant and capital improvements, to the extent not funded from future
operations, any payments to the Animas joint venture partner should the
property be disposed without any proceeds to the Partnership as discussed
below and to fund any cash flow deficits at Royal Executive Park as
discussed below. The Partnership and its consolidated venture have
currently budgeted in 1995 approximately $1,848,000 for tenant improvements
and other capital expenditures. The Partnership's share of such items and
its share of such similar items for its unconsolidated ventures in 1995 is
currently budgeted to be approximately $3,833,000. Actual amounts expended
in 1995 may vary depending on a number of factors including actual leasing
activity, results of property operations, liquidity considerations and
other market conditions over the course of the year. The source of capital
for such items and for both short-term and long-term future liquidity and
distributions is expected to be through net cash generated by the
Partnership's investment properties and through the sale of such
investments. However, the Partnership does not consider the Pasadena Town
Square and the Animas Valley Mall investment properties to be a significant
source of long-term liquidity. In such regard, reference is made to the
Partnership's property specific discussions below. As more fully described
in Note 6, the Partnership sold the Collin Creek Mall in December 1994. In
addition, the Animas joint venture has entered into a non-binding letter of
intent to sell the Animas Valley Mall, as more fully discussed below. The
Partnership's and its ventures' mortgage obligations are all non-recourse.
Therefore, the Partnership and its ventures are not obligated to pay
mortgage indebtedness unless the related property produces sufficient net
cash flow from operations or sale.
Currently, as more fully discussed below, the Partnership is exploring
the addition of a major department store at each of the North Hills Mall
and the Pasadena Town Square shopping center which, if undertaken, may
require the Partnership to commit a substantial amount of capital. Also,
the Partnership may need to commit capital for its share of leasing costs
associated with the vacant space at the Royal Executive Park office
building as discussed below. In addition, the Partnership may decide to
pay down portions of indebtedness in order to achieve loan extensions on
the non-recourse mortgage loans at Pasadena Town Square (which matured
January 1995) and North Hills Mall (which matures in July 1995). Any
decision to commit additional amounts to these investment properties for
any purpose will be based on, among other things, the high likelihood of
return of such additional investment plus a reasonable profit thereon.
Future distributions from sales or operations will be dependent upon a
combination of the operating cash flow from the remaining investment
properties and the longer term capital requirements of the Partnership.
The Partnership currently expects, however, to maintain a $4 per interest
per quarter distribution from operations to the Limited Partners in 1995.
Overall cash flow returns at 40 Broad Street for the next few years
are expected to be lower than in previous years. The Partnership will
continue its aggressive leasing program; however, the downtown New York
City market remains extremely competitive due to the significant amount of
space available primarily resulting from the layoffs, cutbacks and
consolidations by financial service companies and related businesses which
dominated this market. In addition to competition for tenants in the
downtown Manhattan market from other buildings in the area, there is
increasing competition from less expensive alternatives to Manhattan.
Rental rates in the downtown market are currently at depressed levels and
this can be expected to continue for the foreseeable future while the
current vacant space is gradually absorbed. Little, if any new
construction is planned for downtown over the next few years and it is
expected that the building will continue to be adversely affected by the
lower than originally expected effective rental rates achieved upon
releasing of existing leases which expire over the next few years. In
addition, new leases will likely require expenditures for lease commissions
and tenant improvements prior to tenant occupancy. This decline in rental
rates, the anticipated increase in re-leasing time and the costs upon re-
leasing will result in a decrease in cash flow from operations over the
near term.
The Partnership sold the Collin Creek Mall on December 29, 1994. The
mortgage loan secured by the property was satisfied in full from proceeds
of the sale. Reference is made to Note 6 for a further description of this
sale.
The Partnership continues to seek the replacement of a major tenant,
which owns its own store, at the North Hills Mall with another major
tenant and/or adding another major tenant to the center. The major tenant,
which is currently using only the first level of its two-story store, has
expressed an interest in closing its store. In order to replace the major
tenant with another and/or add another major tenant, the Partnership may
need to commit substantial capital. Any decision to commit additional
funds to this investment property for these purposes will be based on,
among other things, the high likelihood of the return of such additional
investment plus a reasonable profit thereon. However, there can be no
assurance that such replacement and/or addition will ultimately occur. The
Partnership is in the third year of a five year program to repair the
property's roof and parking lot. The total cost of the repair is expected
to be approximately $1,500,000. The work scheduled to be incurred in 1995
has been included in the budgeted improvement costs described above. The
total five-year costs will be partially recoverable from tenants pursuant
to provisions in their leases.
The Partnership is currently seeking a refinancing and/or extension of
the mortgage loan on North Hills Mall which matures in July 1995. However,
there is no assurance that the Partnership will obtain a refinancing of all
or substantially all of the mortgage note. In February 1994, the
Partnership sold its sole remaining land outparcel to an unaffiliated third
party. The sale price for the outparcel was $700,000 (before selling costs
and prorations). The Partnership has retained the net sale proceeds in its
working capital.
The Pasadena Town Square trade area population consists primarily of
lower to moderate income residents. The local economy had been severely
affected by the recession and has been slow to recover. Many of the trade
area residents are employed by local petro-chemical plants which continue
to reduce their labor force as that industry continues to restructure and
consolidate in order to be more competitive. In addition, the property has
been subjected to increased competition for shoppers and tenants from new
and recently renovated retail properties within the trade area. As a
result, tenant sales at the property have decreased over the last several
years. Over the next two years, tenant leases covering approximately
42,000 square feet or approximately 17% of the Partnership's owned leasable
square footage expire. Due to recent poor sales performance, many of these
tenants are electing not to renew their leases or are renewing at lower
rental rates. Occupancy of the property has declined to 72% at March 31,
1995 from 85% at December 31, 1993. Several other tenants whose leases are
not due to expire in the near term, have approached the Partnership seeking
reductions in the amount of rent they must pay. The Partnership has
granted relief to certain tenants which could demonstrate that without a
reduction in their rent, they would no longer be able to remain in business
in the Mall. Any decision to grant rent reductions is made on a case by
case basis. As a result of these market and property operating conditions,
the property's cash flow from operations prior to capital expenditures is
expected to decline for a period of time.
The Partnership has taken certain measures and is exploring others in
an attempt to stem recent operating declines at the Pasadena Town Square
Shopping Center. Such measures include, as discussed more fully below, the
performance of certain enhancement programs and the possible addition of a
third major department store. There are no assurances, however, that this
will ultimately occur or that it will have an immediate positive impact on
occupancy or the rental rates achieved upon releasing vacant or expiring
space at the property. The Partnership is continuing discussions with a
major department store owner concerning the construction and operation of a
store at the property. In order to add another department store at this
center, the Partnership would likely need to commit a substantial amount of
capital. The Partnership believes that the addition of another department
store to this property would enhance the competitive position of this
property within the immediate retail market resulting in improved operating
results. There is no assurance, however, that the addition of a
department store will ultimately occur. In 1993, the Partnership commenced
a minor mall enhancement program which included remodeling the food court.
The program cost approximately $500,000 and was completed in 1994. In
addition, the Partnership is considering a program to repair the property's
roof and parking lot. The total cost of the repair work is expected to be
approximately $1,700,000. The work to be incurred in 1995 has been
included in the budgeted improvement costs described above. The total
five-year project cost would be partially recoverable from tenants pursuant
to provisions in their leases. Any decision to commit additional funds to
this investment property for any purpose will be based on, among other
things, the high likelihood of the recovery of such additional investment
plus a reasonable profit thereon.
The Partnership continues to hold discussions with the mortgage lender
regarding a refinancing and/or extension of the mortgage loan on the
Pasadena Town Square investment property (which matured in January 1995).
However, there is no assurance that the Partnership will obtain a
refinancing of the mortgage note. During negotiations, the Partnership
currently remits debt service payments based on the cash generated by the
investment property. The lender has notified the Partnership of its demand
for payment of all sums owed. Based on the property operating and market
conditions discussed above and if the Partnership is unable to obtain a
loan refinancing and/or extension on economic terms which would provide for
a high likelihood of return of any additional investment plus a reasonable
profit thereon, the Partnership may decide not to commit any significant
further amounts of capital to this property. As a result, the lender would
likely obtain title to the property and the Partnership would no longer
have an ownership interest. Therefore, due to the factors discussed above
and due to the uncertainty of the Partnership's ability to recover the net
carrying value of the Pasadena Town Square investment property through
future operations and sales, the Partnership, at December 31, 1994
recorded, as a matter of prudent accounting practice, a provision for value
impairment of such investment of $8,434,103. Such provisions were recorded
to reduce the net carrying value of the investment property to the then
outstanding balance of the related non-recourse financing. In such event,
the Partnership would recognize a gain for financial reporting and a gain
for Federal income tax reporting purposes without any net realizable
proceeds.
In April 1992, the Partnership and its joint venture partner settled
certain legal disputes regarding the Animas joint venture agreement and
management at the Animas Valley Mall. Under the terms of the settlement,
the unaffiliated venture partner has contributed approximately $404,000 to
the joint venture and relinquished its approval rights in connection with
the business affairs of the joint venture. The unaffiliated venture
partner has retained certain approval rights in connection with a sale or
refinancing of the property. The Partnership, in return, has agreed to pay
the joint venture partner a certain settlement amount in connection with
the disposition of the property. Such disposition payment, approximated
$153,000 at March 31, 1995, decreases annually on January 1 to $92,000 in
1996 and thereafter. Under certain limited disposition events, the
disposition payment amount can be further reduced or eliminated.
In April 1992, the joint venture finalized a modification of the
existing long-term mortgage note secured by the Animas Valley Mall. Under
the terms of the modification, the joint venture, commencing with the
January 1991 payment, was obligated to pay debt service of interest only
installments at a rate of 10.25% per annum, through the original term of
the note, with the deferred interest (2.25%) accruing at 12.5% and payable
monthly to the extent of any excess cash flow (as defined) or upon the
earlier of the sale of the property or maturity of the note in January
1994. The joint venture has paid debt service in 1991, 1992, 1993 and
through February 1994 in accordance with these modified terms. In
addition, under the terms of the modification, the joint venture was
required to make monthly real estate tax escrow deposits. In April 1994,
the joint venture and the existing lender finalized an amendment to the
loan (effective March 1, 1994) providing for the extension of its maturity
to March 1995 and lowering the pay and accrual rate on the principal
balance to 8% per annum. Any excess cash flow generated by the property
during this period is payable to the lender quarterly towards interest
accrued as of December 31, 1993 (approximately $2,100,000). As of the date
of this report, no excess cash flow has been paid to the lender. In
addition, the joint venture agreed to market this property for sale during
the extension period. The lender has agreed to allow the joint venture to
retain a portion of the net sale proceeds (as defined) in excess of the
current principal balance of $27,000,000. In addition, the lender has
expressed a willingness to finance a portion of the purchase price for a
potential purchaser. The Partnership has been actively marketing the
property for sale. In February 1995, the joint venture entered into a non-
binding letter of intent to sell its interest in the Animas Valley Mall on
an all cash basis. The prospective purchaser has completed its due
diligence review. The Partnership and prospective purchaser are currently
negotiating a final price and documentation for the sale of the property.
In addition, the lender has agreed to extend the maturity date of the
underlying loan to July 1, 1995 and has also agreed to an increase in the
Partnership's participation in the sale proceeds in excess of the principal
balance. The joint venture continues to remit debt service at the 8% pay
rate. There are no assurances that the joint venture will be successful in
finalizing the sale of the property. Based upon current negotiations, if
the Partnership is successful in finalizing this sale, the net sale
proceeds the Partnership would retain would be less than $1 million. If
the Partnership is unsuccessful in its efforts to sell or refinance the
property, the Partnership has decided not to commit additional capital to
the joint venture. Therefore, assuming a sale cannot be achieved, and the
lender is unwilling to provide further extensions to the loan, the joint
venture will transfer title to the property to the lender. This would
result in the Partnership recognizing a gain for Federal income tax and
financial reporting purposes with no distributable proceeds. In addition,
a disposition through a sale to a third party or transfer of title to the
lender would result in a disposition payment to the joint venture partners
as discussed above.
As previously reported, MCI had approached the joint venture seeking a
current rent reduction in return for a lease extension beyond its current
lease expiration date of March 31, 1998 on its existing 180,000 square foot
lease. During the second quarter of 1994, the joint venture finalized a
modification and extension of MCI's 180,000 square foot lease. The terms
of the agreement provide for a reduction in MCI's rental rate, effective
July 1994, to a rental rate which approximates current market rental rates.
The agreement provides for set rental rate increases in April 1998 and in
April 2002. The extended lease expiration date is June 2006. In addition,
the joint venture provided a tenant improvement allowance of $1,500,000 to
MCI in 1994 to enhance its leased space. The joint venture's decision to
modify MCI's 180,000 square foot lease was based upon an analysis of
current and expected future market conditions. The joint venture believes,
given the risk of losing this tenant in 1998 and the resulting potential
downtime and costs associated with releasing the space, that a current
reduction in the rental rate and contribution towards enhancement of its
space in return for a long term extension of its lease will maximize the
property's cash flow over the long term. The 1994 costs associated with
MCI's expansion and modification were paid for from cash generated by the
property in 1993 and 1994 net capital contributions by the Partnership and
the joint venture partner totalling $503,844 (contributed in their
respective ownership percentages).
The property was managed by an affiliate of the joint venture partner
under an agreement which provided for fees equal to 2% of the base rent
paid by tenants. Effective July 1, 1994, a former affiliate of the General
Partner of the Partnership assumed the property management responsibilities
for the joint venture. The new manager essentially assumed the previous
management agreement with the exception that a portion of the 2% management
fee will be paid to the previous manager annually by the new manager as
compensation to the previous manager for relinquishing management of the
property. In December 1994, the above affiliated property manager of the
General Partner of the Partnership was sold, and its interest in its
management contracts assigned, to an unaffiliated third party. In
addition, the former affiliate assumed the leasing responsibilities for the
property.
The Southern Westchester County, New York office market (the
competitive market for the building) is extremely competitive with a
current vacancy rate of approximately 20%. While office building
development in this market is virtually at a standstill, significant
improvement in the competitive market conditions is not expected for
several years. The competitive market conditions have resulted in lower
than originally anticipated effective rental rates that can be achieved and
high releasing costs that will be incurred in conjunction with releasing
space which expires. Consequently, the property cash flow has been
significantly reduced as a result of the lease expiration and subsequent
move-out of New York Telephone, and the modification and extension of MCI's
lease. Consequently, the Partnership and joint venture partner may need to
contribute capital to the joint venture in the future in order to pay for
leasing costs associated with the lease-up of the current vacant space.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
While the real estate markets are recuperating, highly competitive
market conditions continue to exist in most locations. The Partnership's
approach has been to aggressively and creatively manage the Partnership's
real estate assets to attract and retain tenants. Net effective rents to
the landlord from renewal tenants are much more favorable than lease terms
which can be negotiated with new tenants. However, the Partnership's
capital resources must also be preserved and allocated in such a manner as
to maximize the total value of the portfolio. As a result of the real
estate market conditions discussed above, the Partnership continues to
conserve its working capital. All expenditures are carefully analyzed and
certain capital projects are deferred when appropriate. The Partnership
has also sought or is seeking additional loan modifications where
appropriate. By conserving working capital, the Partnership will be in a
better position to meet the future needs of its properties since outside
sources of capital may be limited. The Partnership has decided to retain
approximately $15.7 million of the Collin Creek Mall sale proceeds (Note 6)
in its working capital. These funds will be available, if necessary or
deemed appropriate by the General Partners, for the programs to enhance the
Partnership's properties as discussed above. As we have reported
previously, due to these factors, the Partnership has held certain of its
investment properties longer than originally anticipated in an effort to
maximize the return to the Limited Partners.
RESULTS OF OPERATIONS
The aggregate decreased in cash and cash equivalents and short-term
investments, at March 31, 1995 as compared to December 31, 1994, is due
primarily to the February 1995 partial distribution of sale proceeds of
$68,102,270 from the sale of Collin Creek Mall in 1994.
The decrease in the balance of prepaid expenses at March 31, 1995 as
compared to December 31, 1994 is primarily due to the timing of payment of
insurance premiums at certain of the Partnership's investment properties.
The increase in escrow deposits at March 31, 1995 as compared to
December 31, 1994 is primarily due to the timing of payment of real estate
taxes from escrow deposits at Animas Valley Mall. See Note 3(b).
The increase in accounts payable, at March 31, 1995 as compared to
December 31, 1994, is primarily due to the timing of operating expenses and
prepayment of rent at ceratin of the Partnership's properties.
The decrease in accrued real estate taxes, at March 31, 1995 as
compared to December 31, 1994, is primarily due to the timing of real
estate tax payments at the North Hills Mall and Pasadena Town Square
investment properties.
The decrease in rental income, mortgage and other interest,
depreciation, property operating expenses,and amortization of deferred
expenses for the three months ended March 31, 1995 as compared to the same
period in 1994 is due primarily to the sale of the Collin Creek Mall in
December 1994 (Note 6). The decrease in rental income is also partially
due to lower occupancy levels and lower effective rents earned upon
renewals at the Pasadena Town Square investment property. The decrease in
depreciation expense is also due to the provision for value impairment of
$8,434,103 which was recorded at December 31, 1994 relating to the Pasadena
Town Square (Note 1).
The increase in interest income for the three months ended March 31,
1995 as compared to the three months ended March 31, 1994 is due to the
increase in the Partnership's average balance in U.S. Government
obligations due to the temporary investment from sale proceeds of the
Collin Creek Mall investment property.
The increase in general and administrative for the three months ended
March 31, 1995 as compared to the three months ended March 31, 1994 is due
to costs associated with the replacement or addition of new anchor tenants
at both Pasadena Town Square and North Hills Mall investment properties as
discussed in Notes 2(a) & (b).
The decrease in Partnership's share of operations of unconsolidated
ventures for the three months ended March 31, 1995 as compared to the three
months ended March 31, 1994 is due primarily to the MCI lease modification
that included reduced rent at the Royal Executive Park investment property
as more fully explained above and in Note 3(c).
The gain in sale of investment property of $518,710 in 1994 is the
result of the land outparcel sale at the North Hills Mall (Note 2(b)).
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Reference is made to Notes 2(a) and 3(b) of the Notes to Consolidated
Financial Statements and to the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations filed with this report for discussions of default (or alleged
defaults) under, and/or current attempts to obtain refinancing,
modification or extension of, mortgage loans secured by the Pasadena Town
Square and Animas Valley Mall investment properties, which discussions are
hereby incorporated herein by reference.
<TABLE>
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Partnership's
investment properties.
<CAPTION>
1994 1995
-------------------------------------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. North Hills Mall
North Richland Hills,
Texas (a). . . . . . . 95% 95% 96% 95% 92%
2. Pasadena Town Square
Pasadena, Texas. . . . 84% 80% 73% 72% 72%
3. Collin Creek Mall
Plano, Texas . . . . . 92% 91% 97% N/A N/A
4. Animas Valley Mall
Farmington, New Mexico 90% 90% 90% 90% 91%
5. Royal Executive Park
Ryebrook, New York . . 78% 78% 78% 78% 78%
6. 40 Broad Street
New York, New York . . 80% 86% 83% 83% 76%
- -----------------
<FN>
(a) The occupancy has been restated to reflect occupancy by temporary tenants which were not previously
included. Occupancy without the temporary tenants is 87% at March 31, 1994, 87% at June 30, 1994, 85% at
September 30, 1994, 89% at December 31, 1994 and 88% at March 31, 1995.
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
Response:
(a) Exhibits:
4-A. Document relating to the mortgage loan secured by the
Collin Creek Mall in Plano, Texas is hereby incorporated by reference to
the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-
12140) dated March 19, 1993.
4-B. Document relating to the mortgage loan secured by the
Pasadena Town Square shopping center in Pasadena, Texas is hereby
incorporated by reference to the Partnership's report for December 31, 1992
on Form 10-K (File No. 0-12140) dated March 19, 1993.
4-C. Modification document relating to the mortgage loan
secured by the Animas Valley Mall in Farmington, New Mexico is hereby
incorporated by reference to the Partnership's report for December 31, 1992
on Form 10-K (File No. 0-12432) dated March 19, 1993.
4-D. Modification document relating to the mortgage loan
secured by the Animas Valley Mall in Farmington, New Mexico, a copy of
which is hereby incorporated by reference to the Partnership's report for
June 30, 1994 on Form 10-Q (File No. 0-12140) dated August 12, 1994.
10-A. Acquisition documents relating to the purchase by the
Partnership of an interest in the 40 Broad Street office building in new
York, New York are hereby incorporated by reference to the Partnership's
report on Form 8-K (File No. 0-12432) dated December 31, 1985.
10-B. Acquisition documents relating to the purchase by the
Partnership of an interest in the Royal Executive Park office complex in
Ryebrook, New York are hereby incorporated by reference to the
Partnership's report on Form 8-K (File No. 0-12432) dated December 30,
1983.
10-C. Acquisition documents relating to the purchase by the
Partnership of the North Hills Mall in North Richland Hills, Texas are
hereby incorporated by reference to the Partnership's Registration
Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-83599)
dated June 29, 1983.
10-D. Acquisition documents relating to the purchase by the
Partnership of the Pasadena Town Square shopping center in Pasadena, Texas
are hereby incorporated by reference to the Partnership's Registration
Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-83599)
dated June 29, 1983.
10-E. Acquisition documents including the venture agreement
relating to the purchase by the Partnership of an interest in the Animas
Valley Mall in Farmington, New Mexico are hereby incorporated by reference
to the Partnership's Registration Statement on Post-Effective Amendment No.
2 to Form S-11 (File No. 2-83599) dated June 29, 1983.
10-F. Sale documents relating to the outparcel sale at the
Animas Valley Mall in Farmington, New Mexico are hereby incorporated by
reference to the Partnerships report for December 31, 1993 on Form 10-K
(File No. 0-12140) dated March 25, 1994.
10-G. Sale documents relating to the outparcel sale at the North
Hills Mall in North Richard Hills, Texas are hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-12140) dated March 25, 1994.
10-H. Sale documents relating to the sale of the Collin Creek
Mall in Plano, Texas are hereby incorporated by reference to the
Partnership's report for December 29, 1994 on Form 8-K (File No. 0-12140)
dated January 13, 1995.
27. Financial Data Schedule
(b) No reports on Form 8-K were filed since the beginning of the
last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - X
BY: JMB Realty Corporation
(Managing General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 11, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000719244
<NAME> JMB INCOME PROPERTIES, LTD. - X
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 21,011,230
<SECURITIES> 1,745,777
<RECEIVABLES> 714,796
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,471,803
<PP&E> 89,107,216
<DEPRECIATION> 32,518,250
<TOTAL-ASSETS> 105,403,185
<CURRENT-LIABILITIES> 55,892,292
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 49,495,948
<TOTAL-LIABILITY-AND-EQUITY> 105,403,185
<SALES> 4,415,121
<TOTAL-REVENUES> 5,476,780
<CGS> 0
<TOTAL-COSTS> 2,991,083
<OTHER-EXPENSES> 229,987
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,274,946
<INCOME-PRETAX> 980,764
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,039,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,039,383
<EPS-PRIMARY> 6.65
<EPS-DILUTED> 0
</TABLE>
