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 September 30, 1995 Commission file #0-16252
JMB MORTGAGE PARTNERS, LTD. - II
(Exact name of registrant as specified in its charter)
Illinois 36-3252916
(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
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. . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K. . . . . . 17
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . $ 1,495,582 1,069,818
Interest and other receivables . . . . . . . . . . . . . . . 1,894 98,631
Amount due from affiliate (note 2(c)). . . . . . . . . . . . -- 35,000
Promissory note receivable (note 2(b)) . . . . . . . . . . . -- 963,454
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . 1,497,476 2,166,903
------------ -----------
Mortgage notes receivable (net of allowances for loan losses
of $473,000 in 1994 - notes 2(a) and 2(c)) . . . . . . . . . -- 7,229,100
Deferred interest receivable (notes 2(a) and 2(c)) . . . . . . -- 1,566,662
Investment in unconsolidated venture, at equity (notes 1 and 2(c)) 681,923 --
Deferred costs (net of accumulated amortization
of $145,105 in 1995 and $137,253 in 1994). . . . . . . . . . 2,057 9,909
------------ -----------
$ 2,181,456 10,972,574
============ ===========
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------
Current liabilities:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . $ 68,140 --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 10,076 1,823
Amounts due to affiliates (note 4) . . . . . . . . . . . . . 2,415 7,511
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . 80,631 9,334
------------ -----------
Commitments and contingencies (notes 2 and 4)
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . 1,873,934 1,581,370
Cumulative cash distributions. . . . . . . . . . . . . . . (1,932,819) (1,640,255)
------------ -----------
(57,885) (57,885)
------------ -----------
Limited partners (22,590.5 interests):
Capital contributions, net of offering costs . . . . . . . 19,272,546 19,272,546
Cumulative net earnings. . . . . . . . . . . . . . . . . . 20,041,001 19,912,398
Cumulative cash distributions. . . . . . . . . . . . . . . (37,154,837) (28,163,819)
------------ -----------
2,158,710 11,021,125
------------ -----------
Total partners' capital accounts . . . . . . . . . . 2,100,825 10,963,240
------------ -----------
$ 2,181,456 10,972,574
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------------------------------
1995 1994 1995 1994
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Interest income. . . . . . . . . . . . . $ 110,821 237,320 539,284 810,550
----------- ---------- --------- ----------
Expenses:
Mortgage investment servicing
fees (note 4). . . . . . . . . . . . . -- 5,457 6,680 16,443
Professional services. . . . . . . . . . -- -- 32,540 32,916
Amortization of deferred expenses. . . . 2,058 2,901 7,852 8,702
General and administrative . . . . . . . 59,492 19,911 109,048 69,255
----------- ---------- --------- ----------
61,550 28,269 156,120 127,316
----------- ---------- --------- ----------
Operating earnings . . . . . . . 49,271 209,051 383,164 683,234
Partnership's share of operations
of unconsolidated venture
(notes 1 and 2(c)) . . . . . . . . . . . 13,948 -- 38,003 --
----------- ---------- --------- ----------
Net earnings . . . . . . . . . . $ 63,219 209,051 421,167 683,234
=========== ========== ========= ==========
Net earnings (loss) per
limited partnership
interest (note 1). . . . . . . $ (8.03) -- 5.69 --
=========== ========== ========= ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . $ 350.00 4.00 398.00 12.00
=========== ========== ========= ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 421,167 683,234
Items not requiring (providing) cash or cash equivalents:
Amortization of deferred expenses. . . . . . . . . . . . . . . 7,852 8,702
Partnership's share of operations of unconsolidated venture,
net of distributions . . . . . . . . . . . . . . . . . . . . (10,003) --
Changes in:
Interest and other receivables . . . . . . . . . . . . . . . . . 96,737 87,749
Amount due from affiliate. . . . . . . . . . . . . . . . . . . . 35,000 --
Deferred interest receivable (note 2). . . . . . . . . . . . . . 1,481,618 (93,790)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 8,253 33,407
Amounts due to affiliates (note 4) . . . . . . . . . . . . . . . (5,096) (31,610)
Other current liabilities. . . . . . . . . . . . . . . . . . . . -- (4,657)
----------- ----------
Net cash provided by operating activities. . . . . . . . 2,035,528 683,035
----------- ----------
Cash flows from investing activities:
Net sales and maturities of short-term investments . . . . . . . -- 1,321,102
Prepayment of first mortgage loan (note 2(a)). . . . . . . . . . 6,643,000 --
Collection of principal on promissory note received in connection
with mortgage loan prepayment (note 2(b)). . . . . . . . . . . 963,454 281,370
Costs in connection with investment in unconsolidated venture. . (776) --
----------- ----------
Net cash provided by investing activities. . . . . . . . 7,605,678 1,602,472
----------- ----------
Cash flows from financing activities:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . 68,140 --
Distributions to limited partners. . . . . . . . . . . . . . . . (8,991,018) (835,848)
Distributions to general partners. . . . . . . . . . . . . . . . (292,564) (705,545)
----------- ----------
Net cash used in financing activities. . . . . . . . . . (9,215,442) (1,541,393)
----------- ----------
Net increase in cash and cash equivalents. . . . . . . . 425,764 744,114
Cash and cash equivalents, beginning of year . . . . . . 1,069,818 293,879
----------- ----------
Cash and cash equivalents, end of period . . . . . . . . $ 1,495,582 1,037,993
=========== ==========
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . $ -- --
========== ==========
Non-cash investing and financing activities:
Balance due on mortgage note receivable. . . . . . . . . . . . $ 702,100 --
Deferred interest receivable . . . . . . . . . . . . . . . . . 85,044 --
Provision for loan loss. . . . . . . . . . . . . . . . . . . . (116,000) --
Capitalized costs. . . . . . . . . . . . . . . . . . . . . . . 776 --
---------- ----------
Investment in unconsolidated venture,
at equity (notes 1 and 2(c)) . . . . . . . . . . . . . $ 671,920 --
========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1994
which are included in the Partnership's 1994 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
For financial reporting purposes, effective January 1, 1995, the
mortgage loan secured by the Spring Hill Fashion Center was determined to
have been in-substance foreclosed and was reclassified as an investment in
a joint venture in real estate on the equity method at its estimated fair
value. In early May 1995, the lenders (including the Partnership) obtained
legal title to the property (see note 2(c)). Accordingly, the accompanying
financial statements do not include the accounts of the venture.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to present the Partnership's accounts
in accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Partnership. The net
effect of these items is summarized as follows for the nine months ended
September 30:
1995 1994
----------------------- -------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings
(loss). . . . . $421,167 (74,904) 683,234 765,995
Net earnings
(loss) per
limited
partnership
interest. . . . $ 5.69 (15.45) -- 2.68
======== ======== ======= =======
The net earnings (loss) per limited partnership interest ("Interest")
is based upon the number of Interests outstanding at the end of each period
(22,590.5). As further described in Note 2 of Notes to Financial
Statements included in the Partnership's 1994 Annual Report, net profits of
the Partnership from operations are allocated to the General Partners in an
amount equal to the greater of 1% of net profits or the amount of net cash
distributions to the General Partners, with the remaining net profits
allocated to the Limited Partners. As the distribution of deferred cash
flow distributions and deferred repayment proceeds paid to the General
Partners during the nine months ended September 30, 1994 (see note 4)
exceeded the net profits earned by the Partnership during the period, the
General Partners were allocated 100% of the Partnership's net profits for
the three and nine months ended September 30, 1994. The General Partners
were allocated approximately $293,000 of the Partnership's net profits for
the nine months ended September 30, 1995, primarily as a result of
receiving their share of distributions from repayment proceeds of
approximately $245,000 during the three months ended September 30, 1995,
with the Limited Partners being allocated the remainder of net profits for
1995. Such allocations had no effect on total Partnership assets or net
profits. Partnership distributions from its unconsolidated venture are
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
considered cash flow from operating activities only to the extent of the
Partnership's cumulative share of net earnings. In addition, the
Partnership records amounts held in U.S. Government obligations at cost
which approximates market. For the purposes of these statements, the
Partnership's policy is to consider all such amounts held with original
maturities of three months or less ($1,495,582 at September 30, 1995 and
$993,632 at December 31, 1994) as cash equivalents, with any remaining
amounts (generally with original maturities of one year or less) reflected
as short-term investments being held to maturity.
The Partnership's participating first mortgage loan investments
provided for the following components of interest: basic interest which
was payable monthly; simple accrued interest which was payable upon loan
prepayment or at maturity; participation interest, payable no less
frequently than annually, in annual gross receipts (as defined) of the
respective properties in excess of specified amounts, and participation
interest in subsequent increases in the market values of the respective
properties in excess of specified amounts, payable at the respective
properties' sale or at maturity.
Basic and simple accrued interest income on mortgage notes receivable
was being recognized using the interest method, which resulted in a level
effective yield on the outstanding principal balance. Effective December
1, 1991, the Partnership, for financial reporting purposes, suspended the
accrual of the simple accrued interest receivable (which was payable at
maturity) on the mortgage loan secured by the Spring Hill Fashion Center
(see note 2(c)). Effective May 16, 1994, the Partnership, for financial
reporting purposes, suspended the accrual of the simple accrued interest
(which was payable at maturity) on the mortgage loan secured by the Plaza
at Shelter Cove shopping center (see note 2(a)). Participation interest in
increases in the market value of the respective properties in excess of
specified amounts was recognized as income when received by the
Partnership.
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS #114") became effective January,
1994. SFAS #114 provides that the impairment on a collateralized loan that
is considered impaired (as defined) will be recognized by creating a
valuation allowance to the recorded balance of the loan to yield a net
carrying amount of the loan which is equal to the fair value of the loan
collateral. The Partnership has elected to recognize subsequent changes in
the fair value of the collateral as adjustments to this valuation
allowance, as discussed in notes 2(a) and 2(c).
(2) MORTGAGE NOTES RECEIVABLE
(a) The Plaza at Shelter Cove Shopping Center, Hilton Head Island,
South Carolina
Reference is made to Note 3(b) of Notes to Financial Statements
contained in the Partnership's 1994 Annual Report for a description of the
terms of this loan, which was scheduled to mature in November 1995. In
April 1995, the Partnership received a prepayment in full of this mortgage
loan pursuant to a previously negotiated prepayment agreement. For
financial reporting purposes, the prepayment amount of approximately
$8,204,000 consisted of the loan principal of $6,643,000 (net of provision
for loan loss of $357,000), simple accrued interest of approximately
$1,482,000, and the balance due of prior years' gross receipts
participation interest and reimbursement of certain fees totaling
approximately $79,000. The Partnership did not recognize any gain or loss
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
on loan prepayment for financial reporting purposes as a result of the
$357,000 provision for loan loss recognized by the Partnership in 1994, as
described below. For Federal income tax reporting purposes, the
Partnership expects to recognize a loss on loan prepayment of approximately
$454,000 in 1995.
Due to the uncertainty of the realization of the simple accrued
interest recognized through May 15, 1994 (approximately $1,482,000) and the
principal balance of the loan ($7,000,000), the Partnership, as a matter of
prudent accounting practice and to reflect the estimated fair value of the
collateral had, for financial reporting purposes, suspended the accrual of
the simple accrued interest (which was payable at maturity) effective May
16, 1994 and made a provision for loan loss (including simple accrued
interest) of $357,000 in 1994, which is reflected in the accompanying
balance sheet at December 31, 1994.
(b) Valley Lo Towers Apartments, Glenview, Illinois
Reference is made to Note 3(c) of Notes to Financial Statements
contained in the Partnership's 1994 Annual Report for a description of the
terms of this loan.
In order to facilitate the borrower's condominium conversion, the
Partnership reached an agreement with the borrower regarding a prepayment
of the first mortgage loan. In July 1993, the Partnership received an
initial loan payoff totaling $11,600,000 from the borrower. The remaining
$1,575,000 of the total prepayment amount of $13,175,000 was represented by
a modified original promissory note, which bore interest (payable monthly
in arrears) at 6% per year on the unpaid principal balance, and which was
prepayable (without penalty) in whole or in part at any time prior to the
loan maturity date of April 15, 1996. The Partnership received principal
payments totaling $330,176 in 1993 and $281,370 in 1994 (such payments
representing proceeds from the sale of four designated units), thereby
reducing the outstanding principal balance of the promissory note to
$963,454, which balance was prepaid in full in March 1995 (together with
all interest due). The promissory note was secured by a guarantee signed
by the general partners of the borrower, as well as a first mortgage lien
on five designated unsold units (four of which had subsequently been sold)
and a junior collateral assignment on all remaining nondesignated unsold
units. For financial reporting purposes, the total prepayment amount of
$13,175,000 consisted of the prepayment of the first mortgage loan of
$8,500,000 (replaced by the above-mentioned modified promissory note of
$1,575,000), simple accrued interest on the first mortgage loan of
$1,427,419, and the recognition in 1993 of the total participation interest
on the first mortgage loan of $3,247,581.
(c) Spring Hill Fashion Center, West Dundee, Illinois
Reference is made to Note 3(d) of Notes to Financial Statements
contained in the Partnership's 1994 Annual Report for a description of the
terms of this loan. Through October 1988, the total amount funded under
this loan was $10,030,000 (of which the Partnership's share was $702,100
(7.0%)). The other two participating lenders are JMB Mortgage Partners,
Ltd. and JMB Mortgage Partners, Ltd.-III, both of which are affiliates of
the General Partners of the Partnership. As additional security for the
first mortgage loan, the borrower delivered to the lenders, in January
1988, two $250,000 irrevocable and unconditional letters of credit (which
were to expire December 31, 1994 and January 15, 1995, respectively), upon
which the lenders could draw in the event a default occurred under the
loan. The aforementioned letters of credit had been subject to yearly
renewal if certain specified net operating income levels at the property
were not achieved by the borrower.
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Due to the uncertainty of the realization of the simple accrued
interest recognized through November 30, 1991 (approximately $104,000) and
the principal balance of the loan ($702,100), 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 $60,000 in 1992,
$37,000 in 1993 and $19,000 in 1994, bringing the total provision for loan
loss on this loan to $116,000, which is reflected in the accompanying
balance sheet at 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 is
currently managing the property under an agreement which provides for a fee
equal to 4% of the property's gross receipts (such fee excluding
compensation for leasing activity). In early May 1995, the lenders
obtained legal title to the property pursuant to a deed in lieu of
foreclosure. Effective as of the management takeover date (January 1,
1995), the Partnership considered the mortgage loan to be in-substance
foreclosed and has accounted for its investment as an investment in a joint
venture on the equity method. 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,
as described above. For Federal income tax reporting purposes, the
Partnership expects to recognize a loss of approximately $161,000 in 1995
as a result of this transaction. The operations of this property are
expected to provide a current return which would be less than the scheduled
interest payments due under the original mortgage loan.
Occupancy at the shopping center was 92% at September 30, 1995, down
from 94% at June 30, 1995. However, a major tenant, which occupied
approximately 24% of the leasable space at the property and who is
operating under Chapter 11 bankruptcy protection had informed the lenders
(including the Partnership) that it did not intend to exercise its renewal
option when its current lease expired in October 1995 and has since vacated
its space, thereby reducing the occupancy at the property to 68%. The
Partnership is currently holding discussions with a potential replacement
tenant for this space. Due to the competitive conditions in this market,
re-leasing time and expense could be substantial to replace this major
tenant, which will further reduce cash flow from this investment to the
Partnership in the short term. Further, this property will most likely be
difficult to sell prior to the re-leasing of this space.
(3) SELECTED FINANCIAL INFORMATION
Pursuant to the requirements of the Securities and Exchange
Commission, the following is a summary of historical financial information
for the three months ended March 31, 1995 and the nine months ended
September 30, 1994 for The Plaza at Shelter Cove shopping center.
Reference is made to note 2(a). Such information is not necessarily
related to current market values.
1995 1994
-------- -------
Total revenues . . . $302,121 893,512
======== =======
Net earnings . . . . $ 42,468 100,304
======== =======
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONCLUDED
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses required to be paid by the Partnership to the
General Partners and their affiliates as of September 30, 1995 and for the
nine months ended September 30, 1995 and 1994, are as follows:
Unpaid at
September 30,
1995 1994 1995
---- ---- -------------
Reimbursement (at cost) for
out-of-pocket expenses. . $420 385 2
==== ==== ==
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates while directly engaged in
the administration of the Partnership. Such reimbursable costs for 1995
were $74,550, of which $2,413 was unpaid at September 30, 1995.
The Partnership is obligated to pay (not more often than monthly)
mortgage investment servicing fees to the General Partners at an annual
rate of 1/4 of 1% of the maximum amount funded or to be funded by the
Partnership on mortgage investments. The servicing fee is calculated from
the date the Partnership first signs a letter of commitment for such
mortgage investment, but is not payable until the funding of the mortgage
investment. As all loans have been repaid or foreclosed, there were no
unpaid fees at September 30, 1995.
Although currently receiving their distributions of net cash flow and
repayment proceeds, the General Partners had previously deferred payment of
certain of their distributions of prior net cash flow and repayment
proceeds from the Partnership. The Partnership paid $256,219 of such
deferred cash flow distributions and $401,738 of deferred repayment
proceeds to the General Partners during the nine months ended September 30,
1994.
At September 30, 1995, there are no deferrals to the General Partners
in excess of that required by the Partnership Agreement. All amounts
deferred or currently payable to the General Partners or their affiliates
do not bear interest.
The Corporate General Partner of the Partnership has determined to use
independent third parties to perform certain administrative services
beginning in the fourth quarter of 1995. Use of such third parties is not
expected to have a material effect on the operations of the Partnership.
(5) ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of September 30,
1995 and for the three and nine months ended September 30, 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 Financial Statements
contained in this report.
At September 30, 1995 the Partnership had cash and cash equivalents of
approximately $1,496,000. The bank overdraft of approximately $68,000 at
September 30, 1995 was repaid in October 1995. The remaining funds are
available for distributions to partners and for working capital
requirements. The Partnership distributed $350 per Interest for the second
quarter of 1995 (including the General Partners' 3% share), primarily from
the proceeds of the prepayment of the loan secured by the Plaza at Shelter
Cove shopping center, as more fully discussed below. The General Partners
had previously been deferring mortgage investment servicing fees, their
share of the distributions of net cash flow from operations and sale and
repayment proceeds and reimbursement of various out-of-pocket expenses. At
September 30, 1995, there are no deferrals to the General Partners in
excess of that required by the Partnership Agreement. Reference is made to
Note 4.
The principal source of both short-term and long-term future liquidity
and distributions is expected to be from the Partnership's investment in
the Spring Hill Fashion Center joint venture, as described below.
In order to facilitate the condominium conversion by the borrower of
the loan secured by the Valley Lo Towers Apartments, the Partnership
reached an agreement with the borrower regarding a prepayment of the
mortgage loan. Reference is made to Note 2(b) for a description of the
prepayment of this loan in July 1993, subsequent principal payments in 1993
and 1994, and the March 1995 prepayment of the remaining balance (including
accrued interest) of the promissory note received in connection with the
prepayment of the loan secured by the Valley Lo Towers Apartments.
Reference is made to Note 2(a) for a description of the April 1995
prepayment of the loan secured by the Plaza at Shelter Cove shopping center
and the 1994 provision for loan loss of $357,000 on this mortgage loan
investment. For financial reporting purposes, the Partnership did not
recognize any gain or loss on this loan prepayment as a result of the
Partnership's previously recorded provision for loan loss. For Federal
income tax reporting purposes, the Partnership expects to recognize a loss
on loan prepayment of approximately $454,000 in 1995.
Reference is made to Note 2(c) regarding the default by the borrower
of the loan secured by Spring Hill Fashion Center, the drawing by the
lenders (including the Partnership) of the two $250,000 letters of credit
that were additionally securing this loan, and the January 1, 1995
assumption of property management at the Spring Hill Fashion Center by an
affiliate of the General Partners of the lenders. Effective as of the
management takeover date (January 1, 1995), the Partnership considered the
mortgage loan to be in-substance foreclosed and has accounted for its
investment as an investment in a joint venture, at equity. In early May
1995, the lenders obtained legal title to the property pursuant to a deed
in lieu of foreclosure. For financial reporting purposes, the Partnership
did not recognize any gain or loss from this transaction as a result of the
Partnership's previously recorded provisions for loan loss (see Note 2(c)).
For Federal income tax reporting purposes, the Partnership expects to
recognize a loss of approximately $161,000 in 1995 as a result of this
transaction. The operations of this property are expected to provide a
current return which would be less than the scheduled interest payments due
under the original mortgage loan. Occupancy at the Spring Hill Fashion
Center was 92% at September 30, 1995, down from 94% at June 30, 1995.
However, a major tenant, which occupied approximately 24% of the leasable
space at the property and who is operating under Chapter 11 bankruptcy
protection, had informed the lenders (including the Partnership) that it
did not intend to exercise its renewal option when its current lease
expired in October 1995 and has since vacated its space, thereby reducing
the occupancy at the property to 68%. The Partnership is currently holding
discussions with a potential replacement tenant for this space. Due to the
competitive conditions in this market, re-leasing time and expense could be
substantial to replace this major tenant, which will further reduce cash
flow from this investment to the Partnership in the short term. Further,
this property will most likely be difficult to sell prior to the re-leasing
of this space.
Because the interest from the mortgage loan secured by the Plaza at
Shelter Cove shopping center comprised the major share of the Partnership's
net cash receipts, the Partnership has ceased making operating
distributions effective with the second quarter of 1995.
The Partnership is carefully scrutinizing the appropriateness of any
discretionary expenditures, particularly in relation to the amount of
working capital it has available. Reference is made to Note 4 for a
description of certain fees and payments, the receipt of certain of which
had been deferred by the General Partners of the Partnership. By
conserving working capital, the Partnership will be in a better position to
meet its future needs. After reviewing the remaining property and its
competitive marketplace, the General Partners of the Partnership expect to
be able to liquidate the remaining asset as quickly as practicable.
Therefore, the affairs of the Partnership are expected to be wound up as
soon as it is feasibly possible, barring unforeseen economic developments.
RESULTS OF OPERATIONS
Reference is made to Note 3 of Notes to Financial Statements contained
in the Partnership's 1994 Annual Report for a description of the
participating first mortgage loans funded by the Partnership.
The increase in cash and cash equivalents at September 30, 1995 as
compared to December 31, 1994 is attributable primarily to the
Partnership's suspension of operating distributions effective with the
second quarter of 1995, as discussed above.
The decrease in interest and other receivables at September 30, 1995
as compared to December 31, 1994 is attributable to a decrease in interest
receivable on the Partnership's short-term investments at September 30,
1995, due to lower balances in such investments which resulted primarily
from the Partnership's distribution of repayment proceeds of $350 per
Interest (including the General Partners' 3% share) during the third
quarter of 1995, as discussed above.
The decrease in amount due from affiliate at September 30, 1995 as
compared to December 31, 1994 is attributable to the Partnership's 1995
receipt of $35,000 from JMB Mortgage Partners, Ltd. - III, one of the other
two participating lenders of the loan secured by the Spring Hill Fashion
Center, such amount representing the Partnership's share of the drawn
letters of credit (totaling $500,000) in December 1994 in connection with
such loan. Reference is made to Note 2(c).
The decrease in promissory note receivable at September 30, 1995 as
compared to December 31, 1994 is attributable to the Partnership's receipt
in March 1995 of the entire remaining principal balance of the promissory
note received in connection with the 1993 prepayment of the first mortgage
loan secured by the Valley Lo Towers Apartments. Reference is made to Note
2(b).
The decrease in mortgage note receivable and deferred interest
receivable at September 30, 1995 as compared to December 31, 1994 is
attributable primarily to the prepayment of the mortgage loan and related
deferred interest secured by the Plaza at Shelter Cove shopping center in
April 1995. Reference is made to Note 2(a). An additional decrease in
mortgage notes receivable and deferred interest receivable at September 30,
1995 as compared to December 31, 1994 is attributable to the Partnership's
recording as an investment in unconsolidated venture, at equity, effective
January 1, 1995, the mortgage loan secured by the Spring Hill Fashion
Center. Reference is made to Notes 1 and 2(c).
The increases in investment in unconsolidated venture, at equity and
Partnership's share of operations of unconsolidated venture at September
30, 1995 as compared to December 31, 1994 and for the three and nine months
ended September 30, 1995 as compared to the three and nine months ended
September 30, 1994, respectively, is attributable to the Partnership's
recording as an investment in unconsolidated venture, at equity, effective
January 1, 1995, the mortgage loan secured by the Spring Hill Fashion
Center. Reference is made to Notes 1 and 2(c).
The increase in bank overdraft at September 30, 1995 as compared to
December 31, 1994 is attributable primarily to the Partnership's temporary
bank overdraft (as discussed above) of approximately $68,000 at September
30, 1995, resulting from the timing of the Partnership's maturities of
short-term investments.
Interest income decreased for the three and nine months ended
September 30, 1995 as compared to the three and nine months ended September
30, 1994 primarily as a result of (i) the April 1995 prepayment of the loan
secured by the Plaza at Shelter Cove shopping center and the suspension of
the simple accrued interest on the loan secured by the Plaza at Shelter
Cove shopping center during May 1994 (see Note 2(a)), (ii) the recording as
an investment in unconsolidated venture, at equity, effective January 1,
1995, the mortgage loan secured by the Spring Hill Fashion Center (see Note
2(c)), and (iii) the 1995 repayment of the remaining principal balance of
the promissory note received in connection with the 1993 prepayment of the
mortgage loan secured by the Valley Lo Towers Apartments (see Note 2(b)).
Such decreases in interest income were partly offset by an increase in
interest earned on the Partnership's short-term investments in 1995, due
primarily to greater average balances in such investments, which resulted
primarily from the temporary investment of proceeds received from the
prepayment of the loan secured by the Plaza at Shelter Cove shopping
center, as described above.
Mortgage investment servicing fees decreased for the three and nine
months ended September 30, 1995 as compared to the year-earlier periods as
a result of (i) the prepayment of the loan secured by the Plaza at Shelter
Cove shopping center in April 1995, (ii) the prepayment of the promissory
note received in connection with the prepayment of the loan secured by the
Valley Lo Towers Apartments, and (iii) the obtaining of legal title to the
Spring Hill Fashion Center in May 1995.
The increases in general and administrative expenses for the three and
nine months ended September 30, 1995 as compared to the three and nine
months ended September 30, 1994 are 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. Reference is made to Note 4.
Distributions made to General Partners for the nine months ended
September 30, 1994 include payments of $256,219 of previously deferred net
cash flow distributions and $401,738 of previously deferred repayment
proceeds. Reference is made to Note 4. Distributions made to Limited and
General Partners for the nine months ended September 30, 1995 include
distributions totaling $390 per Interest (including the General Partners'
3% share) from the April 1995 prepayment of the loan secured by the Plaza
at Shelter Cover shopping center and the March 1995 prepayment of the
remaining principal balance of the promissory note received in connection
with the 1993 prepayment of the loan secured by the Valley Lo Towers
Apartments.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's owned or
reflected as owned investment property.
<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>
Spring Hill
Fashion Center
Shopping Center
West Dundee, Illinois. N/A N/A N/A N/A 94%* 94% 92%
<FN>
- --------------------
An "N/A" indicates that the property was not owned or reflected as owned by the Partnership at the end of the
quarter.
* Reference is made to Note 2(c) for a discussion of the presentation of this property as owned at March 31,
1995 although title did not transfer to the Partnership pursuant to a deed in lieu of foreclosure until May 1995.
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule.
(b) No reports on Form 8-K were required or have been filed for
the quarter covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JMB MORTGAGE PARTNERS, LTD. - II
BY: JMB Realty Corporation
(Corporate General Partner)
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Date: November 9, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull
Principal Accounting Officer
Date: November 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<CIK> 0000730206
<NAME> JMB MORTGAGE PARTNERS, LTD. - II
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,495,582
<SECURITIES> 0
<RECEIVABLES> 1,894
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,497,476
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,181,456
<CURRENT-LIABILITIES> 80,631
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,100,825
<TOTAL-LIABILITY-AND-EQUITY> 2,181,456
<SALES> 0
<TOTAL-REVENUES> 539,284
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 156,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 383,164
<INCOME-TAX> 0
<INCOME-CONTINUING> 421,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 421,167
<EPS-PRIMARY> 5.69
<EPS-DILUTED> 5.69
</TABLE>
