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 number 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
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) . . . . . . . . . . . . . $ 1,272,594 1,069,818
Short-term investments (note 1). . . . . . . . . . . . . . . 896,229 --
Interest and other receivables . . . . . . . . . . . . . . . 81,470 98,631
Amount due from affiliate (note 2(c)). . . . . . . . . . . . -- 35,000
Promissory note receivable (note 2(b)) . . . . . . . . . . . -- 963,454
Mortgage note receivable (net of allowance for loan loss
of $357,000 in 1995 (note 2(a)). . . . . . . . . . . . . . 6,643,000 --
Deferred interest receivable (note 2(a)) . . . . . . . . . . 1,481,618 --
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . 10,374,911 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)) 685,158 --
Deferred costs (net of accumulated amortization
of $140,990 in 1995 and $137,253 in 1994). . . . . . . . . . 6,172 9,909
------------ -----------
$ 11,066,241 10,972,574
============ ===========
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
MARCH 31, 1995 AND DECEMBER 31, 1994
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1995 1994
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 7,255 1,823
Amounts due to affiliates (note 4) . . . . . . . . . . . . . 12,992 7,511
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . 20,247 9,334
------------ -----------
Commitments and contingencies (notes 2 and 4)
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . 1,591,410 1,581,370
Cumulative cash distributions. . . . . . . . . . . . . . . (1,650,295) (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. . . . . . . . . . . . . . . . . . 20,085,514 19,912,398
Cumulative cash distributions. . . . . . . . . . . . . . . (28,254,181) (28,163,819)
------------ -----------
11,103,879 11,021,125
------------ -----------
Total partners' capital accounts . . . . . . . . . . 11,045,994 10,963,240
------------ -----------
$ 11,066,241 10,972,574
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Income:
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . $ 221,116 300,692
--------- --------
Expenses:
Mortgage investment servicing fees (note 4). . . . . . . . . . . 5,285 5,529
Professional services. . . . . . . . . . . . . . . . . . . . . . 19,300 15,000
Amortization of deferred expenses. . . . . . . . . . . . . . . . 3,737 2,901
General and administrative . . . . . . . . . . . . . . . . . . . 22,876 24,800
--------- --------
51,198 48,230
--------- --------
Operating earnings . . . . . . . . . . . . . . . . . . . 169,918 252,462
Partnership's share of operations of unconsolidated venture
(notes 1 and 2(c)) . . . . . . . . . . . . . . . . . . . . . . . 13,238 --
--------- --------
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 183,156 252,462
========= ========
Net earnings per limited partnership interest (note 1) . $ 7.66 --
========= ========
Cash distributions per limited partnership
interest . . . . . . . . . . . . . . . . . . . . . . . $ 4.00 4.00
========= ========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 183,156 252,462
Items not requiring (providing) cash or cash equivalents:
Amortization of deferred expenses. . . . . . . . . . . . . . . 3,737 2,901
Partnership's share of operations of unconsolidated venture. . (13,238) --
Changes in:
Interest and other receivables . . . . . . . . . . . . . . . . . 17,161 21,369
Amount due from affiliate. . . . . . . . . . . . . . . . . . . . 35,000 --
Deferred interest receivable (note 2). . . . . . . . . . . . . . -- (62,527)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 5,432 3,973
Amounts due to affiliates (note 4) . . . . . . . . . . . . . . . 5,481 10,019
----------- ----------
Net cash provided by operating activities. . . . . . . . 236,729 228,197
----------- ----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments . (896,229) 191,941
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. . . . . . . . 66,449 473,311
----------- ----------
Cash flows from financing activities:
Distributions to limited partners. . . . . . . . . . . . . . . . (90,362) (90,362)
Distributions to general partners. . . . . . . . . . . . . . . . (10,040) (629,140)
----------- ----------
Net cash used in financing activities. . . . . . . . . . (100,402) (719,502)
----------- ----------
Net increase (decrease) in cash and cash equivalents . . 202,776 (17,994)
Cash and cash equivalents, beginning of period . . . . . 1,069,818 293,879
----------- ----------
Cash and cash equivalents, end of period . . . . . . . . $ 1,272,594 275,885
=========== ==========
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
MARCH 31, 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 has been determined
to have been in-substance foreclosed and has been reclassified as an
investment in a joint venture in real estate on the equity method at its
estimated fair value (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 three months ended
March 31:
1995 1994
----------------------- -------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings . . $183,156 195,124 252,462 266,565
Net earnings
per limited
partnership
interest. . . . $ 7.66 8.19 -- --
======== ======= ========= =========
The net earnings 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 three months ended March 31, 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
months ended March 31, 1994. Such allocation had no effect on total
Partnership assets or net profits.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies cash receipts and
payments according to whether they stem from operating, investing or
financing activities. The required information has been segregated and
accumulated according to the classifications specified in the
pronouncement. Partnership distributions from its unconsolidated venture
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
are 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 ($1,092,232 at March 31, 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
provide for the following components of interest: basic interest which is
payable monthly; simple accrued interest which is 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 is 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 is 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. Occupancy at the shopping center decreased to 95% at
March 31, 1995, from 99% at December 31, 1994. The borrower is current in
its basic interest payments on this loan.
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, has, for financial reporting purposes, suspended the accrual of
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
the simple accrued interest (which is 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 sheets.
Reference is made to note 5 for a description of the prepayment of
this loan in April 1995.
(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.
The borrower is in the process of a condominium conversion. In order
to facilitate the 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.
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
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
the simple accrued interest (which was payable at maturity) effective
December 1, 1991 and provided for 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 properties gross receipts (such fee excluding
compensation for leasing activity). In early May 1995, the lenders
obtained legal title to the property 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 will not
recognize any material gain or loss from this transaction as a result of
the Partnership's previously recorded provisions for loan loss. For
federal income tax reporting purposes, the Partnership expects to recognize
a loss of approximately $163,000 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 94% at March 31, 1995, unchanged
from December 31, 1994. However, a major tenant, which occupies
approximately 24% of the leasable space at the property and who is
currently operating under Chapter 11 bankruptcy protection has informed the
Partnership that it does not intend to exercise its renewal option when its
current lease expires in October 1995. Due to the competitive conditions
in this market, re-leasing time and expense could be substantial when this
tenant vacates, which will further reduce cash flow from this investment to
the Partnership in the short term.
(3) 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 1994 for The Plaza at Shelter
Cove shopping center. Such information is not necessarily related to
current market values.
1995 1994
-------- -------
Total revenues . . . $302,121 251,039
======== =======
Net earnings . . . . $ 42,468 4,200
======== =======
(4) TRANSACTIONS WITH AFFILIATES
Fees and other expenses required to be paid by the Partnership to the
General Partners and their affiliates as of March 31, 1995 and for the
three months ended March 31, 1995 and 1994, are as follows:
Unpaid at
March 31,
1995 1994 1995
---- ---- -----------
Reimbursement (at cost) for
out-of-pocket expenses. . $ -- 41 2
==== ==== ==
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 $15,435 of which $7,705 was unpaid at March 31, 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. Such unpaid fees were $5,285 at March 31, 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 $200,000 of such
deferred cash flow distributions and $401,738 of deferred repayment
proceeds to the General Partners during the three months ended March 31,
1994.
At March 31, 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.
(5) SUBSEQUENT EVENT - PLAZA AT SHELTER COVE MORTGAGE LOAN PREPAYMENT
In April 1995, the Partnership received a prepayment of the mortgage
loan secured by the Plaza at Shelter Cove shopping center. The prepayment
amount consisted of the loan principal of $7,000,000 and simple accrued
interest of $1,125,000, together with all basic and gross receipts
participation interest due. The Partnership will not recognize any
material gain or loss on prepayment for financial reporting purposes as a
result of the $357,000 provision for loan loss recognized by the
Partnership in 1994. For federal income tax reporting purposes, the
Partnership expects to recognize a loss on prepayment of approximately
$454,000 in 1995. Due to such prepayment, the Partnership has reclassified
the principal portion of the loan and the related accrued interest to
current items in the accompanying balance sheet at March 31, 1995.
(6) 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 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 Financial Statements
contained in this report.
At March 31, 1995 the Partnership had cash and cash equivalents of
approximately $1,273,000. Such funds and short-term investments of
approximately $896,000 are available for distributions to partners and for
working capital requirements. 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 March 31,
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 future short-term liquidity and distributions
is expected to be from the collection of principal and interest on the
Partnership's remaining participating first mortgage loan investment (which
is payable interest only and was prepaid by the borrower in April 1995).
Reference is made to Notes 2(a) and 5. An additional source of future
short-term liquidity and the principal source of future long-term liquidity
is expected to be from the Partnership's investment in the Spring Hill
Fashion Center joint venture, as described below.
The borrower of the loan secured by the Valley Lo Towers Apartments is
in the process of a condominium conversion. In order to facilitate the
conversion, 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.
Regarding the Spring Hill Fashion Center, reference is made to Note
2(c) regarding the suspension of certain interest accruals and the
provisions for loan loss on this mortgage loan investment. 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 this 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 provided for 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. Reference is also 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 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 has 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 in lieu of foreclosure. For financial reporting purposes, the
Partnership will not recognize any material gain or loss from this
transaction as a result of the Partnership's previously recorded provisions
for loan loss. For federal income tax reporting purposes, the Partnership
expects to recognize a loss of approximately $163,000 in 1995 as a result
of this transaction. The operations of this property are expected to
provide a current return which would be less than the scheduled interest
payments due under the original mortgage loan. Occupancy at the Spring
Hill Fashion Center was 94% at March 31, 1995, unchanged from December 31,
1994. However, a major tenant, which occupies approximately 24% of the
leasable space at the property and who is currently operating under Chapter
11 bankruptcy protection, has informed the Partnership that it does not
intend to exercise its renewal option when its current lease expires in
October 1995. Due to the competitive conditions in this market, re-leasing
time and expense could be substantial when this tenant vacates, which will
further reduce cash flow from this investment to the Partnership in the
short term. The Partnership is currently evaluating its long-term strategy
with respect to its remaining real estate investment.
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.
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 combined increase in cash and cash equivalents and short-term
investments at March 31, 1995 as compared to December 31, 1994 is
attributable primarily to the Partnership's receipt in March 1995 of the
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 Partnership
intends to distribute $40 per Interest to the Limited Partners (and the
General Partners' 3% share) during the second quarter of 1995 from the
prepayment proceeds of this promissory note.
The decrease in amount due from affiliate at March 31, 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 in 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 March 31, 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 increase in mortgage note receivable (current) and deferred
interest receivable (current), and the corresponding decrease in mortgage
notes receivable (noncurrent) and deferred interest receivable
(noncurrent), at March 31, 1995 as compared to December 31, 1994 is
primarily attributable to the reclassification (to current) of the mortgage
loan and related deferred interest secured by the Plaza at Shelter Cove
shopping center due to its prepayment in April 1995. Reference is made to
Notes 2(a) and 5. An additional decrease in mortgage notes receivable and
deferred interest receivable at March 31, 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 March 31,
1995 as compared to December 31, 1994 and for the three months ended March
31, 1995 as compared to the three months ended March 31, 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).
Interest income decreased for the three months ended March 31, 1995 as
compared to the three months ended March 31, 1994 primarily as a result of
(i) 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.
Distributions made to General Partners decreased for the three months
ended March 31, 1995 as compared to the same period in 1994 due primarily
to the payment of $200,000 of previously deferred net cash flow
distributions and $401,738 of previously deferred repayment proceeds during
the three months ended March 31, 1994. Reference is made to Note 4.
<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 investment
property reflected as owned.
<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%
<FN>
- - --------------------
An "N/A" indicates that the property was not reflected as owned by the Partnership at the end of the quarter.
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Promissory Note for the Plaza at Shelter Cove
shopping center, dated October 7, 1985, between HHI 50 Company, a South
Carolina limited partnership, and JMB Mortgage Partners, Ltd.-II, an
Illinois limited partnership with requisite exhibits, as filed with the
Partnership's Report on Form 8-K (File No. 2-87086) for November 7, 1985 is
incorporated herein by reference.
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: 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 THREE MONTHS ENDED MARCH 31,
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,272,594
<SECURITIES> 896,229
<RECEIVABLES> 8,206,088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,374,911
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,066,241
<CURRENT-LIABILITIES> 20,247
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 11,045,994
<TOTAL-LIABILITY-AND-EQUITY> 11,066,241
<SALES> 0
<TOTAL-REVENUES> 221,116
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 51,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 169,918
<INCOME-TAX> 0
<INCOME-CONTINUING> 183,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,156
<EPS-PRIMARY> 7.66
<EPS-DILUTED> 0
</TABLE>
