SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal. . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . 5
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and Related
Security Holder Matters. . . . . . . . . . . . . 5
Item 6. Selected Financial Data. . . . . . . . . . . . . 6
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 8
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . 12
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . 41
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . 41
Item 11. Executive Compensation . . . . . . . . . . . . . 44
Item 12. Security Ownership of
Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . 45
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 46
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . 46
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 47
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Financial Statements
contained in this annual report.
The registrant, JMB Mortgage Partners, Ltd. - II (the "Partnership"),
is a limited partnership formed in 1983 and currently governed by the
Revised Uniform Limited Partnership Act of the State of Illinois to make
first mortgage loans and senior land purchase-leasebacks/leasehold mortgage
loans and, to a lesser extent, wrap-around and junior mortgage loans and
land purchase-leaseback arrangements on a subordinated basis. On January
31, 1984, the Partnership commenced an offering of $50,000,000 (subject to
increase by up to $50,000,000) in Limited Partnership interests (the
"Interests") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration No. 2-87086). A total of
approximately 22,585.5 Interests were sold to the public at an offering
price of $1,000 per Interest before certain discounts for volume purchases
(fractional interests are due to a Distribution Reinvestment Program). The
holders of 7,330.5 Interests were admitted to the Partnership during the
fiscal year ended October 31, 1984; the holders of 15,255 Interests were
admitted to the Partnership during the fiscal year ended October 31, 1985.
The offering of Interests terminated on April 30, 1985. No Limited Partner
has made any additional capital contribution after such date. The Limited
Partners of the Partnership share in their portion of the benefits of
ownership of the Partnership's mortgage investments according to the number
of Interests held.
The Partnership is engaged solely in the business of investing in real
estate, such as residential garden apartment complexes and smaller
commercial properties, through participating first mortgage loans and
certain other mortgage investments. The Partnership's remaining
investment, acquired through the foreclosure of one of its first mortgage
investments, is located in the State of Illinois. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate no later
than December 31, 2033. The Partnership is self-liquidating in nature. At
repayment or maturity of a particular mortgage investment or at sale of a
particular property acquired as a result of a non-performing loan, the net
proceeds, if any, are generally distributed or reinvested in existing
mortgage investments or properties held rather than invested in acquiring
additional mortgage investments. As discussed further in Item 7, the
marketplace in which the Partnership's remaining investment property
operates and real estate markets in general are in a recovery mode. The
Partnership currently expects to conduct an orderly liquidation of its
remaining investment as quickly as practicable and to wind up its affairs
as soon as it is feasibly possible, barring any unforeseen economic
developments. (Reference is also made to Note 1.)
The Partnership has made real estate investments set forth in the
following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1995,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. 1550 Spring Road
Office Building
DuPage County,
Illinois . . . . . . 24,000 7-27-84 6-2-92 Participating first
sq.ft. mortgage loan (b)
2. The Plaza at
Shelter Cove
shopping center
Hilton Head Island,
South Carolina . . . 85,500. 11-7-85 4-28-95 Participating first
sq.ft. mortgage loan (c)
3. Valley Lo Towers
apartment complex
Glenview,
Illinois . . . . . . 118 units 4-15-86 7-2-93 Participating first
mortgage loan (d)
4. Spring Hill
Fashion Center
shopping center
West Dundee,
Illinois . . . . . . 125,000 2-18-86 4% Participating first
sq.ft. mortgage loan (e)
<FN>
- ---------------
(a) The computation of this percentage for the real estate investment held at December 31, 1995 does not
include amounts invested from sources other than the original net proceeds of the public offering as described
above and in Item 7.
(b) Reference is made to Note 3(a) for a description of the events resulting in the Partnership obtaining
legal title to and selling this property in June 1992.
(c) Reference is made to Note 3(b) for a description of the prepayment of this loan in 1995.
(d) Reference is made to Note 3(c) for a description of the prepayment of this loan in 1993.
(e) Reference is made to Note 3(d) for a description of the events resulting in the Partnership obtaining
legal title to this property in May 1995.
</TABLE>
The Partnership's commitments for these mortgage investments were made
in fiscal years 1984, 1985 and 1986. The Partnership's funding of a
participating first mortgage loan secured by the 1550 Spring Road Office
Building in DuPage County, Illinois and a description of the events
resulting in the Partnership ultimately obtaining legal title to and
selling this property in June 1992 is described in Note 3(a). The
Partnership's funding of a participating first mortgage loan secured by the
Plaza at Shelter Cover shopping center in Hilton Head Island, South
Carolina and the borrower's prepayment of this loan on April 28, 1995 is
described in Note 3(b). The Partnership's funding of a participating first
mortgage loan secured by the Valley Lo Towers apartment complex in
Glenview, Illinois and a description of the prepayment of this loan in 1993
is described in Note 3(c). The Partnership's funding of a participating
first mortgage loan secured by the Spring Hill Fashion Center ("Spring
Hill") shopping center in West Dundee, Illinois and the subsequent
acquisition of title to this property by the Partnership and its
participating affiliated lenders is described in Note 3(d).
The Spring Hill investment is the Partnership's last remaining
investment at December 31, 1995. The Spring Hill property is subject to
competition from similar types of properties (including properties owned or
advised by affiliates of the General Partners). Such competition is
generally for the retention of existing tenants and for securing new
tenants due to significant vacancies which are present in the local market.
Reference is made to Item 7 below for a discussion of competitive
conditions and future plans of the property securing the Partnership's
remaining investment. Approximate occupancy levels for the Partnership's
owned investment property are set forth in the table in Item 2 below to
which reference is hereby made. In the opinion of the Corporate General
Partner of the Partnership, the Spring Hill property at December 31, 1995
is adequately insured.
The Partnership has no employees.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is made for a description of such terms and transactions.
<TABLE>
ITEM 2. PROPERTIES
The Partnership has made real estate investments in the four properties referred to under Item 1. Reference
is made to Item 1 and to Note 3 for a description of such investments.
The following is a listing of the principal business or occupation carried on in and approximate occupancy
levels by quarter during fiscal years 1995 and 1994 for the Partnership's owned or reflected as owned investment
property during 1995:
<CAPTION>
1994 1995
------------------------- -------------------------
Principal At At At At At At At At
Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---------- ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spring Hill
Fashion Center
Shopping Center
West Dundee,
Illinois . . . . . . . . . . . Retail N/A N/A N/A N/A 94%* 94% 92% 75%
<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 3(d) for a discussion of the presentation of this property as owned at March 31,
1995 although title did not transfer to the Partnership pursuant to a deed in lieu of foreclosure until May 1995.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any pending material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1994 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were 4,637 record holders of Interests
of the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Corporate General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any other
economic aspects of the transaction, will be subject to negotiation by the
investor. There are certain conditions and restrictions on the transfer of
Interests, including, among other things, the requirements that the
substitution of a transferee of Interests as a Limited Partner of the
Partnership be subject to the written consent of the Corporate General
Partner. The rights of a transferee of Interests who does not become a
substituted Limited Partner will be limited to the rights to receive his
share of profits or losses and cash distributions from the Partnership, and
such transferee will not be entitled to vote such Interests. No transfer
will be effective until the first day of the next succeeding calendar
quarter after the requisite transfer form satisfactory to the Corporate
General Partner has been received by the Corporate General Partner. The
transferee consequently will not be entitled to receive any cash
distributions or any allocable share of profits or losses for tax purposes
until such succeeding calendar quarter. Profits or losses from operations
of the Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the holder of
Interests, without regard to the results of Partnership's operations during
particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
holder of the Interests as of the last day of the quarterly period with
respect to which such distribution is made.
Reference is made to Item 6 for a discussion of cash distributions
made to the Limited Partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1995 1994 1993 1992 1991
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . $ 552,394 1,069,773 5,199,090 2,496,001 2,411,574
============ ============ =========== =========== ===========
Operating
earnings . . . . . . . . . $ 340,943 515,749 4,966,275 2,248,372 1,311,727
Partnership's share
of operations of
unconsolidated
venture (notes 1,
3(d) and 5) . . . . . . . . 46,056 -- -- -- --
------------ ------------ ----------- ----------- -----------
Net operating
earnings. . . . . . . . . . 386,999 515,749 4,966,275 2,248,372 1,311,727
Gain on sale
of property. . . . . . . . -- -- -- 358,035 --
------------ ------------ ----------- ----------- -----------
Net earnings. . . . . . $ 386,999 515,749 4,966,275 2,606,407 1,311,727
============ ============ =========== =========== ===========
Net earnings per
limited partnership
interest (b):
Net operating
earnings. . . . . . . . . $ 4.18 -- 183.03 93.97 57.48
Gain on sale of
property. . . . . . . . . -- -- -- 15.69 --
------------ ------------ ----------- ----------- -----------
Net earnings
per interest. . . . . $ 4.18 -- 183.03 109.66 57.48
============ ============ =========== =========== ===========
Total assets . . . . . . . . $ 2,077,801 10,972,574 12,140,622 20,207,152 20,902,113
============ ============ =========== =========== ===========
Cash distributions
per Interest (c) . . . . . $ 398.00 41.00 541.50 125.00 68.75
============ ============ =========== =========== ===========
<FN>
- ----------
(a) The above selected financial data should be read in
conjunction with the financial statements and the related notes appearing
elsewhere in this annual report.
(b) The net earnings per Interest is based upon the number of
Interests outstanding at the end of each period (22,590.5). Reference is
made Note 1.
(c) Cash distributions from the Partnership are generally not
equal to Partnership's income for financial reporting or Federal income tax
purposes. Each partner's taxable income from the Partnership in each year
is equal to his allocable share of the taxable income of the Partnership,
without regard to the cash generated or distributed by the Partnership.
Accordingly, cash distributions to the Limited Partners since the inception
of the Partnership have not resulted in taxable income to such Limited
Partners and have therefore represented a return of capital.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On January 31, 1984, the Partnership commenced an offering to the
public of up to $50,000,000 (subject to increase by up to $50,000,000)
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933. A total of approximately 22,585.5 Limited Partnership Interests
(at a price to the public of $1,000 per Interest) were issued by the
Partnership (fractional interests are due to a Distribution Reinvestment
Program) through May 20, 1985, the final closing date to admit Limited
Partners, from which the Partnership received $20,891,587 (net of selling
commissions and discounts for volume purchases). After deducting selling
expenses and other offering costs, the Partnership had approximately
$19,300,000 with which to invest in real estate primarily through
participating first mortgage loans, to pay for legal fees and other costs
related to such investments and for working capital. Portions of such
proceeds were utilized to make the mortgage investments described in Item 1
above.
At December 31, 1995, the Partnership had cash and cash equivalents of
approximately $1,392,000. Such 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. 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 ceased making operating
distributions effective with the second quarter of 1995. The General
Partners had previously been deferring mortgage investment servicing fees,
their share of the distributions of net cash flow from operations and
repayment proceeds and reimbursement for various out-of-pocket expenses.
The General Partners are currently receiving their share of these fees,
distributions and expenses. At December 31, 1995, there are no deferrals
in excess of that required by the Partnership Agreement. Reference is made
to Note 4.
The principal source of future short-term and long-term 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 3(c) 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 3(b) 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 recognized a loss on loan
prepayment of approximately $454,000 in 1995.
Reference is made to Note 3(d) regarding the default by the borrower
of the loan secured by Spring Hill Fashion Center, the drawing by the
lenders (including the Partnership) of the two $250,000 letters of credit
that were additionally securing this loan, and the January 1, 1995
assumption of property management at the Spring Hill Fashion Center by an
affiliate of the General Partners of the lenders. Effective as of the
management takeover date (January 1, 1995), the Partnership considered the
mortgage loan to be in-substance foreclosed and has accounted for its
investment as an investment in a 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 3(d)).
For Federal income tax reporting purposes, the Partnership recognized a
loss of approximately $135,000 in 1995 as a result of this transaction.
The operations of this property are expected to provide a current return
which would be significantly less than the scheduled interest payments due
under the original mortgage loan. Occupancy at the Spring Hill Fashion
Center was 75% at December 31, 1995 due to a major tenant, which occupied
approximately 24% of the leasable space at the property and which was
operating under Chapter 11 bankruptcy protection, not exercising its
renewal option when its current lease expired in October 1995 and vacating
its space. The Partnership executed a ten-year lease (which commenced in
February 1996) with a replacement tenant for this space at rental rates
somewhat lower than those of the former tenant. The Partnership is
actively pursuing the sale of the Spring Hill Fashion Center.
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 investment 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 for a description of the participating
first mortgage loans funded by the Partnership.
The increase in cash and cash equivalents at December 31, 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 December 31, 1995 as
compared to December 31, 1994 is attributable primarily to a decrease in
basic and gross receipts participation interest receivable on the mortgage
loan secured by the Plaza at Shelter Cove Shopping Center which was prepaid
in April 1995. Reference is made to Note 3(b).
The decrease in amount due from affiliate at December 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 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 3(d).
The decrease in promissory note receivable at December 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
3(c).
The decrease in mortgage notes receivable and deferred interest
receivable at December 31, 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 3(b). An additional decrease in
mortgage notes receivable and deferred interest receivable at December 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 3(d).
The increases in investment in unconsolidated venture, at equity and
Partnership's share of operations of unconsolidated venture at December 31,
1995 as compared to December 31, 1994 and for the year ended December 31,
1995 as compared to the years ended December 31, 1994 and 1993,
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 3(d).
Interest income decreased approximately $595,000 in 1995 as compared
to 1994 as a result of 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 3(b)). Interest income decreased
approximately $75,000 as a result of the recording as an investment in
unconsolidated venture, at equity, effective January 1, 1995 of the
mortgage loan secured by the Spring Hill Fashion Center (see Note 3(d)).
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 3(c)) resulted in a
decrease of approximately $50,000 in interest income. Such decreases in
interest income were partly offset by an increase of approximately $205,000
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.
Interest income decreased approximately $615,000 in 1994 as compared
to 1993 as a result of the 1993 prepayment of the loan secured by the
Valley Lo Towers Apartments. Reference is made to Note 3(c). Interest
income also decreased approximately $128,000 in 1994 as compared to 1993 as
a result of the suspension of the simple accrued interest on the loan
secured by the Plaza at Shelter Cove shopping center during May, 1994 (see
Note 3(b)). An additional decrease of approximately $140,000 in interest
income in 1994 as compared to 1993 is attributable to a decrease in
interest income on the Partnership's short-term investments primarily as a
result of smaller average outstanding balances in such investments in 1994.
Participation interest income in 1993 is attributable to the
prepayment of the loan secured by the Valley Lo Towers Apartments.
Reference is made to Note 3(c).
Mortgage investment servicing fees decreased in 1995 as compared to
1994 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 decrease in
mortgage investment servicing fees in 1994 as compared to 1993 is
attributable primarily to the prepayment of the loan secured by the Valley
Lo Towers Apartments. Reference is made to Note 3.
The decrease in professional services in 1995 and 1994 as compared to
1993 is attributable primarily to a higher legal and other professional
fees incurred in connection with certain of the Partnership's first
mortgage loan investments during 1993.
The increase in general and administrative expenses in 1995 as
compared to 1994 and 1993 is attributable primarily to an increase in
reimbursable costs to affiliates of the General Partners in 1995 and the
recognition of certain additional prior year reimbursable costs to such
affiliates. Reference is made to Note 4.
Reference is made to Note 3(d) regarding the provisions for loan loss
made in 1993 and 1994 on the loan secured by the Spring Hill Fashion
Center. Reference is made to Note 3(b) regarding the provision for loan
loss made in 1994 on the loan secured by the Plaza at Shelter Cove shopping
center.
Distributions made to General Partners in 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 in 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.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership in the near future.
However, to the extent that inflation in future periods would have an
adverse impact on property operating expenses, the effect would generally
be offset by amounts recovered from tenants as many of the long-term leases
at the Partnership's remaining property have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the property remains substantially occupied. In
addition, substantially all of the leases contain provisions which entitle
the Partnership to participate in gross receipts of tenants above fixed
minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1995 and 1994
Statements of Operations, years ended December 31, 1995, 1994 and 1993
Statements of Partners' Capital Accounts (Deficits), years ended
December 31, 1995, 1994 and 1993
Statements of Cash Flows, years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
SCHEDULES NOT FILED:
All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial statements or
related notes.
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheet, December 31, 1995
Statement of Operations, for the year ended December 31, 1995
Statement of Changes in Partners' Capital Accounts,
for the year ended December 31, 1995
Statement of Cash Flows, for the year ended December 31, 1995
Notes to Financial Statements
SCHEDULE
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB MORTGAGE PARTNERS, LTD. - II:
We have audited the financial statements of JMB Mortgage Partners,
Ltd. - II (a limited partnership) as listed in the accompanying index.
These financial statements are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of JMB Mortgage
Partners, Ltd. - II at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . $ 1,391,904 1,069,818
Interest and other receivables . . . . . . . . . . . . . . . . . . . . . 6,421 98,631
Amount due from affiliate (note 3(d)). . . . . . . . . . . . . . . . . . -- 35,000
Promissory note receivable (note 3(c)) . . . . . . . . . . . . . . . . . -- 963,454
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 1,398,325 2,166,903
------------ -----------
Mortgage notes receivable (net of allowance for loan
losses of $473,000 in 1994 (notes 3(b) and 3(d)). . . . . . . . . . . . . -- 7,229,100
Deferred interest receivable (notes 3(b) and 3(d)) . . . . . . . . . . . . -- 1,566,662
Investment in unconsolidated venture,
at equity (notes 1, 3(d) and 5). . . . . . . . . . . . . . . . . . . . . 679,476 --
Deferred costs (net of accumulated amortization of
$137,253 in 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 9,909
------------ -----------
$ 2,077,801 10,972,574
============ ===========
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1995 1994
------------ -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- 1,823
Amounts due to affiliates (note 4) . . . . . . . . . . . . . . . . . . . 11,144 7,511
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 11,144 9,334
------------ -----------
Commitments and contingencies (note 4)
Partners' capital accounts (deficits) (note 2)
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. . . . . . . . . . . . . . . . . . . . . . . . 20,006,833 19,912,398
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (37,154,837) (28,163,819)
------------ -----------
2,124,542 11,021,125
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . . . . 2,066,657 10,963,240
------------ -----------
$ 2,077,801 10,972,574
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Interest income. . . . . . . . . . . . . . . . . . . . $ 552,394 1,069,773 1,951,509
Participation interest income (note 3(c)). . . . . . . -- -- 3,247,581
----------- ----------- -----------
552,394 1,069,773 5,199,090
----------- ----------- -----------
Expenses:
Mortgage investment servicing fees (note 4). . . . . . 6,680 21,899 31,741
Professional services. . . . . . . . . . . . . . . . . 55,540 53,260 72,709
Amortization of deferred costs . . . . . . . . . . . . 9,909 11,603 11,613
General and administrative . . . . . . . . . . . . . . 139,322 91,262 79,752
Provisions for loan losses (notes 3(b) and 3(d)) . . . -- 376,000 37,000
----------- ----------- -----------
211,451 554,024 232,815
----------- ----------- -----------
Operating earnings . . . . . . . . . . . . . . 340,943 515,749 4,966,275
Partnership's share of operations of
unconsolidated venture (notes 1, 3(d) and 5) . . . . . 46,056 -- --
----------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . $ 386,999 515,749 4,966,275
=========== =========== ===========
Net earnings per limited partnership
interest (note 1) . . . . . . . . . . . . . . . . . . . $ 4.18 -- 183.03
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (22,590.5 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET OF
CONTRI- NET CASH OFFERING NET CASH
BUTIONS EARNINGS DISTRIBUTIONS TOTAL COSTS EARNINGS DISTRIBUTIONS TOTAL
------- --------- ------------- --------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
at Decem-
ber 31,
1992. . . . 1,000 233,978 (125,503) 109,475 19,272,546 15,777,766 (15,004,854) 20,045,458
Net earnings
(note 2). . -- 831,643 -- 831,643 -- 4,134,632 -- 4,134,632
Cash distri-
butions
($541.50
per limited
partnership
interest) . -- -- (799,167) (799,167) -- -- (12,232,755) (12,232,755)
------- --------- ---------- -------- ---------- ---------- ----------- -----------
Balance
at Decem-
ber 31,
1993. . . . 1,000 1,065,621 (924,670) 141,951 19,272,546 19,912,398 (27,237,609) 11,947,335
Net earnings
(note 2). . -- 515,749 -- 515,749 -- -- -- --
Cash distri-
butions
($41.00
per limited
partnership
interest) . -- -- (715,585) (715,585) -- -- (926,210) (926,210)
-------- --------- ----------- -------- ---------- ---------- ----------- ----------
Balance
at Decem-
ber 31,
1994. . . . 1,000 1,581,370 (1,640,255) (57,885) 19,272,546 19,912,398 (28,163,819) 11,021,125
Net earnings
(note 2). . -- 292,564 -- 292,564 -- 94,435 -- 94,435
Cash distri-
butions
($398.00
per limited
partnership
interest) . -- -- (292,564) (292,564) -- -- (8,991,018) (8,991,018)
------ --------- ----------- -------- ---------- ---------- ----------- ----------
Balance
at Decem-
ber 31,
1995. . . . $1,000 1,873,934 (1,932,819) (57,885) 19,272,546 20,006,833 (37,154,837) 2,124,542
====== ========= =========== ======== ========== ========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 386,999 515,749 4,966,275
Items not requiring (providing) cash
or cash equivalents:
Amortization of deferred costs . . . . . . . . . . . 9,909 11,603 11,613
Provisions for loan losses (notes 3(b) and 3(d)) . . -- 376,000 37,000
Promissory note received in connection with
mortgage loan prepayment (note 3(c)). . . . . . . . -- -- (1,575,000)
Partnership's share of operations of uncon-
solidated venture, net of distributions . . . . . . (7,556) -- --
Changes in:
Interest and other receivables. . . . . . . . . . . . 92,210 63,457 (4,695)
Amount due from affiliate (note 3(d)) . . . . . . . . 35,000 (35,000) --
Deferred interest receivable (note 3) . . . . . . . . 1,481,618 (74,545) 1,076,146
Accounts payable. . . . . . . . . . . . . . . . . . . (1,823) (6,115) 3,498
Amounts due to affiliates (note 4). . . . . . . . . . 3,633 (31,230) (4,381)
Other current liabilities . . . . . . . . . . . . . . -- (4,657) --
----------- ----------- -----------
Net cash provided by
operating activities . . . . . . . . . . . . 1,999,990 815,262 4,510,456
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities
of short-term investments. . . . . . . . . . . . . . -- 1,321,102 (304,660)
Prepayments of first mortgage loans
(notes 3(b) and 3(c)). . . . . . . . . . . . . . . . 6,643,000 -- 8,500,000
Collection of principal on promissory
note received in connection with
mortgage loan prepayment (note 3(c)) . . . . . . . . 963,454 281,370 330,176
Costs in conjunction with investment in
unconsolidated venture . . . . . . . . . . . . . . . (776) -- --
----------- ----------- -----------
Net cash provided by
investing activities . . . . . . . . . . . . 7,605,678 1,602,472 8,525,516
----------- ----------- -----------
Cash flows from financing activities:
Distributions to limited partners. . . . . . . . . . . (8,991,018) (926,210) (12,232,755)
Distributions to general partners. . . . . . . . . . . (292,564) (715,585) (799,167)
----------- ----------- -----------
Net cash used in
financing activities . . . . . . . . . . . . (9,283,582) (1,641,795) (13,031,922)
----------- ----------- -----------
Net increase in cash and
cash equivalents . . . . . . . . . . . . . . 322,086 775,939 4,050
Cash and equivalents,
beginning of year. . . . . . . . . . . . . . 1,069,818 293,879 289,829
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . . $ 1,391,904 1,069,818 293,879
=========== =========== ===========
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 -- --
----------- ----------- -----------
Initial investment in unconsolidated
venture, at equity (notes 1, 3(d)
and 5) . . . . . . . . . . . . . . . . . . . $ 671,920 -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The Partnership holds (through a joint venture) an equity investment
in commercial real estate in the state of Illinois. Business activities
consist of rentals to a variety of commercial and retail companies, and the
ultimate sale or disposition of such real estate. The Partnership
currently expects to conduct an orderly liquidation of its remaining
investment portfolio and wind up its affairs as soon as practicable.
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 3(d)). Accordingly, the accompanying
financial statements do not include the accounts of the JMB/Spring Hill
Associates ("Spring Hill") 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
GAAP adjustments are not recorded on the records of the Partnership. The
effect of these items for the years ended December 31, 1995 and 1994 is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------
TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $ 2,077,801 5,407,915 10,972,574 14,892,870
Partners' capital
accounts (deficits)
(note 2):
General Partner. . . . . . . . . . . (57,885) -- (57,885) --
Limited Partners . . . . . . . . . . 2,124,542 5,398,345 11,021,125 14,892,641
Net earnings (loss) (note 2):
General Partners . . . . . . . . . . 292,564 292,564 515,749 573,017
Limited Partners . . . . . . . . . . 94,435 (503,278) -- 443,821
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . . . 4.18 (22.28) -- 19.65
============ =========== =========== ===========
</TABLE>
The net earnings (loss) per limited partnership interest ("Interest")
is based upon the number of Interests outstanding at the end of each period
(22,590.5). As further described in note 2, 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. The General Partners were entitled to certain cash flow
distributions and repayment proceeds that had been previously deferred (see
note 4). For financial reporting purposes, such distributions exceeded net
profits of the Partnership for 1994 and, thus, for financial reporting
purposes, 100% of the Partnership's net profits for 1994 were allocated to
the General Partners. The General Partners were allocated approximately
$293,000 of the Partnership's net profits for 1995, primarily as a result
of receiving their share of distributions from repayment proceeds of
approximately $273,000 during 1995, with the Limited Partners being
allocated the remainder of net profits for 1995. Such allocations in 1995
and 1994 had no effect on total Partnership assets or net profits. Deficit
capital accounts will result, through the duration of the Partnership, in
net gain for financial reporting and Federal income tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from its unconsolidated venture are considered
cash flow from operating activities 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 ($1,291,904 and $993,632 at December 31, 1995 and 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.
Deferred costs consisted of costs incurred in connection with mortgage
investments which were amortized over the terms of the related agreements
using the straight-line method.
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.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
approximates SFAS 107 value due to the relatively short maturity of these
instruments.
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the taxing authorities
amounts representing withholding from distributions paid to partners.
(2) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, 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. Net losses from Partnership operations
are allocated 90% to the Limited Partners and 10% to the General Partners.
Profits from the repayment or other disposition of mortgage investments are
allocated first to the General Partners in an amount equal to the greater
of 1% of such net profits or the cash distributions to the General Partners
from the proceeds of such repayment or other disposition (as described
below). The remaining profits from the repayment or other disposition of
mortgage investments are allocated to the Limited Partners. Net losses
from any disposition of mortgage investments are to be allocated 97% to the
Limited Partners and 3% to the General Partners.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership. Distributions of "net cash flow" of
the Partnership are to be made 90% to the Limited Partners and 10% to the
General Partners, with one-half of such net cash flow distributable to the
General Partners in the first twelve fiscal quarters following the close of
the offering subordinated to the receipt by the Limited Partners of a
stipulated return on their "current capital accounts" on a non-cumulative
basis. Distributions of "repayment proceeds" are to be made 97% to the
Limited Partners until the Limited Partners have received repayment
proceeds equal to their contributed capital plus a stipulated return
thereon, with the remainder of such 97% distribution, subject to the
General Partners' receipt of any deferred share of net cash flow, to be
distributed 85% to the Limited Partners and 15% to the General Partners.
The remaining 3% of all distributions of repayment proceeds are to be
distributed to the General Partners, subject to certain limitations. Of
the cumulative distributions of $37,154,837 paid to the Limited Partners as
of December 31, 1995, $847,964 represents an 8.5% annual return to the
Limited Partners for the period during which the Limited Partners'
subscription proceeds were held in escrow through April 30, 1985,
$13,942,280 represents distributions of net cash flow for periods
subsequent to April 30, 1985 and $22,364,593 represents distributions of
sale and repayment proceeds from the sale of the 1550 Spring Road Office
Building (see note 3(a)), the prepayment of the loan secured by the Valley
Lo Towers (see note 3(c)) and the prepayment of the loan secured by the
Plaza at Shelter Cove shopping center (see note 3(b)). The General
Partners' cumulative distributions of $1,932,819 at December 31, 1995
represents distributions of net cash flow of $1,241,131 and distributions
of sale and repayment proceeds of $691,688.
(3) MORTGAGE NOTES RECEIVABLE
(a) 1550 SPRING RD. OFFICE BUILDING, DUPAGE COUNTY, ILLINOIS
In July 1984, the Partnership funded a participating first mortgage
loan in the principal amount of $2,250,000, secured by the 1550 Spring Road
Office Building located in DuPage County, Illinois. During August 1990,
the Partnership funded an additional $35,000. The entire principal balance
of the loan was scheduled to be due and payable July 27, 1994.
Due to the vacancy level of the office building and the associated re-
leasing costs, the borrower made only partial interest payments since
September 1987 to the extent of cash generated by the property. In June
1992, the Partnership obtained legal title to this property and recorded
its net carrying value in this mortgage investment in an amount not in
excess of its estimated fair value. Also in June 1992, the Partnership
sold this property to an unaffiliated third party for net sale proceeds of
$1,758,452, resulting in a gain on sale of $358,035 for financial reporting
purposes and a loss of approximately $527,000 for federal income tax
purposes. In August 1992, the Partnership distributed proceeds of $75 per
Interest to the Limited Partners from this sale. The General Partners
received payment of their share of such distributions of sale proceeds in
January 1994 (see note 4).
Although the Partnership had been recognizing interest income only as
collected (effective January 1, 1988), approximately $982,000 of basic
interest due to the Partnership through the date of sale was uncollected.
Due to the uncertainty of the realization of the simple accrued
interest receivable recognized through December 31, 1987 (approximately
$275,000) and the principal balance of the loan ($2,285,000), the
Partnership, as a matter of prudent accounting practice and to reflect the
estimated fair value of the collateral, had, for financial reporting
purposes, made provisions for loan loss on this loan of $275,000 in 1990
and $885,000 in 1991.
(b) THE PLAZA AT SHELTER COVE, HILTON HEAD ISLAND, SOUTH CAROLINA
The Partnership funded a $7,000,000 participating first mortgage loan
secured by The Plaza at Shelter Cove shopping center located in Hilton Head
Island, South Carolina, which was scheduled to mature November 7, 1995.
In April 1995, the Partnership received a prepayment of this mortgage
loan (together with all basic interest due) 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 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 recognized 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 1994
financial statements.
(c) VALLEY LO TOWERS, GLENVIEW, ILLINOIS
In 1986, the Partnership funded an $8,500,000 participating first
mortgage loan secured by the Valley Lo Towers luxury apartment complex
located in Glenview, Illinois. The entire principal balance of the loan
was scheduled to be due and payable on April 15, 1996.
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.
(d) SPRING HILL FASHION CENTER, WEST DUNDEE, ILLINOIS
In February 1986, the Partnership committed to participate in the
funding of a participating first mortgage loan in the maximum amount of
$11,000,000, secured by the Spring Hill Fashion Center shopping center
located in West Dundee, Illinois. The total amount funded under this loan
was $10,030,000 (of which the Partnership's share was $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, had, 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 recognized a loss of approximately $135,000 in 1995 as a result
of this transaction. The operations of this property are expected to
provide a current return which would be significantly less than the
scheduled interest payments due under the original mortgage loan.
The terms of Spring Hill's partnership agreement provide generally
that contributions, distributions, cash flow, sale or refinancing proceeds
and profits and losses will be distributed or allocated to the partners in
their respective ownership percentages (7% to the Partnership).
Occupancy of the shopping center was 75% at December 31, 1995 due to a
major tenant, which occupied approximately 24% of the leasable space at the
property and which was operating under Chapter 11 bankruptcy protection,
not exercising its renewal option when its lease expired in October 1995
and vacating its space. The Partnership executed a ten-year lease (which
commenced February 1996) with a replacement tenant for this space at rental
rates somewhat lower than those of the former tenant. The Partnership is
actively pursuing the sale of this property.
(4) TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Reimbursement (at cost) for
accounting services. . . . . . . . . . . $ 29,015 35,793 29,941 --
Reimbursement (at cost) for
portfolio management
services . . . . . . . . . . . . . . . . 17,553 13,083 1,482 --
Reimbursement (at cost) for
legal services . . . . . . . . . . . . . 1,165 1,863 1,577 --
Reimbursement (at cost) for
administrative charges and
other out-of-pocket expenses . . . . . . 53,009 389 3,928 11,144
-------- ------ ------ ------
$100,742 51,128 36,928 11,144
======== ====== ====== ======
<FN>
The above table reflects that during 1995, the Partnership recognized and paid certain 1994 administrative
charges of approximately $33,590 that had not previously been reimbursed.
</TABLE>
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 December 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 $256,219 of such
deferred cash flow distributions and $401,738 of deferred repayment
proceeds to the General Partners in 1994.
At December 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.
Effective October 1, 1995, the Corporate General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by, and partially reimbursed to, affiliates of the General Partners. Use
of such third parties is not expected to have a material effect on the
operations of the Partnership.
(5) INVESTMENT IN UNCONSOLIDATED VENTURE
Summary financial information for Spring Hill as of and for the year
ended December 31, 1995 is as follows:
1995
------------
Current assets . . . . . . . . . . . . . . . . . . . . $ 523,919
Current liabilities. . . . . . . . . . . . . . . . . . (162,532)
------------
Working capital. . . . . . . . . . . . . . . . . 361,387
Investment property, net . . . . . . . . . . . . . . . 9,393,468
Other assets, net. . . . . . . . . . . . . . . . . . . 9,816
Other liabilities. . . . . . . . . . . . . . . . . . . (56,735)
Venture partners' equity . . . . . . . . . . . . . . . (9,028,460)
------------
Partnership's capital. . . . . . . . . . . . . . $ 679,476
============
Represented by:
Invested capital . . . . . . . . . . . . . . . . . . $ 671,920
Cumulative distributions . . . . . . . . . . . . . . (38,500)
Cumulative earnings. . . . . . . . . . . . . . . . . 46,056
------------
$ 679,476
============
Total income . . . . . . . . . . . . . . . . . . . . . $ 1,451,866
============
Expenses applicable to operating income. . . . . . . . $ 793,930
============
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 657,936
============
Reference is made to notes 1 and 3(d) regarding the foreclosure of
this property by the Partnership and its participating lenders in May 1995.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB Mortgage Partners, Ltd.-II:
We have audited the financial statements of JMB/Spring Hill Associates
as listed in the accompanying index. In connection with our audit of the
financial statements, we also have audited the financial statement schedule
as listed in the accompanying index. These financial statements and
financial statement schedule are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of JMB/Spring Hill
Associates as of December 31, 1995 and the results of its operations and
its cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
------
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . $ 375,899
Rents and other receivables (net of allowance
for doubtful accounts of $53,855). . . . . . . . . 139,643
Prepaid expenses . . . . . . . . . . . . . . . . . . 8,377
-----------
Total current assets . . . . . . . . . . . . 523,919
-----------
Investment property (notes 1 and 2) - Schedule III:
Land . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000
Buildings and improvements . . . . . . . . . . . . . 7,233,901
-----------
9,633,901
Less: Accumulated depreciation. . . . . . . . . . . 240,433
-----------
Total investment property,
net of accumulated depreciation. . . . . . 9,393,468
Deferred costs (net of accumulated amortization
of $1,809) . . . . . . . . . . . . . . . . . . . . . 9,816
-----------
$ 9,927,203
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 21,661
Accrued real estate taxes. . . . . . . . . . . . . . 124,203
Unearned rents . . . . . . . . . . . . . . . . . . . 16,668
-----------
Total current liabilities. . . . . . . . . . 162,532
Tenant security deposits . . . . . . . . . . . . . . . 56,735
-----------
Commitments and contingencies (notes 5 and 6)
Total liabilities. . . . . . . . . . . . . . 219,267
Partners' capital accounts (note 4):
JMB Mortgage Partners, Ltd-II:
Capital contributions. . . . . . . . . . . . . . . 671,920
Net earnings . . . . . . . . . . . . . . . . . . . 46,056
Cash distributions . . . . . . . . . . . . . . . . (38,500)
Venture partners:
Capital contributions. . . . . . . . . . . . . . . 8,928,080
Net earnings . . . . . . . . . . . . . . . . . . . 611,880
Cash distributions . . . . . . . . . . . . . . . . (511,500)
-----------
Total partners' capital accounts . . . . . . 9,707,936
-----------
$ 9,927,203
===========
See accompanying notes to financial statements.
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Income:
Rental income. . . . . . . . . . . . . . . . . . . . $ 1,437,918
Interest income. . . . . . . . . . . . . . . . . . . 13,948
------------
1,451,866
------------
Expenses:
Depreciation . . . . . . . . . . . . . . . . . . . . 240,433
Property operating expenses. . . . . . . . . . . . . 551,688
Amortization of deferred costs . . . . . . . . . . . 1,809
------------
793,930
------------
Net earnings . . . . . . . . . . . . . . . . $ 657,936
============
See accompanying notes to financial statements.
<TABLE>
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
AFFILIATED PARTNERS JMB MORTGAGE PARTNERS, LTD.-II
----------------------------------------------- ---------------------------------------------------
NET NET
CONTRI- NET CASH CONTRI- NET CASH
BUTIONS EARNINGS DISTRIBUTIONS TOTAL BUTIONS EARNINGS DISTRIBUTIONS TOTAL
--------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
at Decem-
ber 31,
1994. . . . . $ -- -- -- -- -- -- -- --
Capital
contri-
butions . . . 8,928,080 -- -- 8,928,080 671,920 -- -- 671,920
Cash distri-
butions . . . -- -- (511,500) (511,500) -- -- (38,500) (38,500)
Net earnings
(note 4). . . -- 611,880 -- 611,880 -- 46,056 -- 46,056
---------- --------- ---------- ---------- ---------- ---------- ---------- ----------
Balance
at Decem-
ber 31,
1995. . . . . $8,928,080 611,880 (511,500) 9,028,460 671,920 46,056 (38,500) 679,476
========== ========= ========== ========== ========== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . $ 657,936
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . . . . 240,433
Amortization of deferred costs . . . . . . . . . . 1,809
Changes in:
Rents and other receivables. . . . . . . . . . . (139,643)
Prepaid expenses . . . . . . . . . . . . . . . . (8,377)
Accounts payable . . . . . . . . . . . . . . . . 21,661
Accrued real estate taxes. . . . . . . . . . . . 124,203
Unearned rents . . . . . . . . . . . . . . . . . 16,668
Tenant security deposits . . . . . . . . . . . . 56,735
------------
Net cash provided by
operating activities . . . . . . . . . . . 971,425
------------
Cash flows from investing activities:
Additions to investment property . . . . . . . . . (33,901)
Payment of deferred costs. . . . . . . . . . . . . (11,625)
------------
Net cash used in investing
activities . . . . . . . . . . . . . . . . (45,526)
------------
Cash flows from financing activities:
Cash distributions paid to partners. . . . . . . . (550,000)
------------
Net cash used in
financing activities . . . . . . . . . . . (550,000)
------------
Net increase in cash
and cash equivalents . . . . . . . . . . . 375,899
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . --
------------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . $ 375,899
============
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 . . . . . . . . . . . . . . . . . . $ 10,030,000
Deferred interest receivable . . . . . . . . . . 1,210,918
Provision for loan loss. . . . . . . . . . . . . (1,652,000)
Capitalized costs. . . . . . . . . . . . . . . . 11,082
------------
Net initial carrying value of
investment property and partners'
capital contributions (notes 1 and 2). . . $ 9,600,000
============
See accompanying notes to financial statements.
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(1) OPERATIONS AND BASIS OF ACCOUNTING
JMB/Spring Hill Associates ("Spring Hill") has the exclusive purpose
of owning a 100% interest in the Spring Hill Fashion Center ("the
Property"), a 125,000 square foot shopping center located in West Dundee,
Illinois. JMB Mortgage Partners, Ltd. ("MP-I"), JMB Mortgage Partners,
Ltd.-II ("MP-II"), and JMB Mortgage Partners, Ltd.-III ("MP-III")
collectively hold all of the venture interests in Spring Hill. Reference
is made to Note 3(d) of Notes to Financial Statements of JMB Mortgage
Partners, Ltd.-II. Such note is incorporated herein by reference.
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated
venture, JMB/Spring Hill Associates, in which JMB Mortgage Partners, Ltd.-
II and affiliates of the General Partners of JMB Mortgage Partners, Ltd.-II
are partners.
Spring Hill'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 Spring Hill's accounts in
accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of Spring Hill. The effect of
these items for the year ended December 31, 1995 is summarized as follows:
1995
----------------------------
TAX BASIS
GAAP BASIS (Unaudited)
---------- ----------
Total assets . . . . . . . . . . $9,927,203 10,268,398
Partners' capital accounts . . . 9,707,936 10,066,880
Net earnings . . . . . . . . . . 657,936 651,038
========== ==========
The preparation of financial statements in accordance with GAAP
requires Spring Hill to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Statement of Financial Accounting Standards No. 95 requires Spring
Hill to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. In
addition, Spring Hill records amounts held in U.S. Government obligations
at cost which approximates market. For the purposes of these statements,
Spring Hill's policy is to consider all such amounts held with original
maturities of three months or less ($373,549 at December 31, 1995) 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.
Depreciation on buildings and improvements has been provided over the
estimated useful lives of the assets (30 years) using the straight-line
method.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Under Spring Hill's impairment policy, provisions for value impairment
are recorded with respect to the investment property pursuant to Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Therefore, the Partnership does not anticipate a significant effect on its
financial statements upon full adoption of SFAS 121 as required in the
first quarter of 1996, absent the suspension of depreciation on the Spring
Hill investment property as the property will likely be categorized as held
for sale at January 1, 1996. Reference is made to Note 3(d) of Notes to
Financial Statements of JMB Mortgage Partners, Ltd.-II. Such note is
incorporated herein by reference.
Deferred costs consist of lease commissions incurred. Deferred leasing
commissions are amortized over the terms of the related lease agreements.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments," requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
approximates SFAS 107 value due to the relatively short maturity of these
instruments.
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than Spring Hill.
(2) INVESTMENT PROPERTY
A description of the acquisition of the property is contained in Note
3(d) of Notes to Financial Statements of JMB Mortgage Partners, Ltd.-II.
Such note is incorporated herein by reference.
(3) MANAGEMENT AGREEMENT
The property is managed by an affiliate of the General Partners of the
partners of Spring Hill for a fee computed as a percentage of certain
revenues.
(4) VENTURE AGREEMENT
Spring Hill's venture agreement provides for the partners to be
allocated or distributed shares of profits and losses, cash flow from
operations and sale or refinancing proceeds in proportion to their
ownership interests (60.45% to MP-I, 7% to MP-II and 32.55% to MP-III).
Reference is made to Note 3(d) of Notes to Financial Statements of JMB
Mortgage Partners, Ltd.-II. Such note is incorporated herein by reference.
(5) LEASES
As Property Lessor
At December 31, 1995, Spring Hill's principal asset is a shopping
center. Spring Hill has determined that all leases relating to this
property are properly classified as operating leases; therefore, rental
income is reported when earned and the cost of the property, excluding the
cost of the land, is depreciated over the estimated useful life. Leases
with tenants range in term from one to ten remaining years and provide for
fixed minimum rent and partial reimbursement of operating costs. In
addition, certain leases provide for either additional rent based upon
percentages of tenant sales volumes or provide for annual increases in
fixed minimum rents. A substantial portion of the ability of the tenant to
honor their leases is dependent on the retail economic sector.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1996. . . . . . . . . . . . . . . . . . . $ 1,122,000
1997. . . . . . . . . . . . . . . . . . . 1,096,000
1998. . . . . . . . . . . . . . . . . . . 1,046,000
1999. . . . . . . . . . . . . . . . . . . 1,011,000
2000. . . . . . . . . . . . . . . . . . . 883,000
Thereafter. . . . . . . . . . . . . . . . 1,870,000
-----------
$ 7,028,000
===========
(6) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by Spring
Hill to the General Partners and their affiliates as of December 31, 1995
and for the year ended December 31, 1995 are as follows:
UNPAID AT
DECEMBER 31,
1995 1995
-------- ------------
Property management and
leasing fees . . . . . . . . . . . $51,210 3,822
Insurance commissions. . . . . . . . 4,506 --
Reimbursement (at cost) for
out-of-pocket expenses . . . . . . 359 23
------- -----
$56,075 3,845
======= ======
<TABLE>
SCHEDULE III
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) AT CLOSE OF PERIOD (B)
------------------------- COSTS ------------------------------------
BUILDINGS CAPITALIZED BUILDINGS
AND SUBSEQUENT AND
ENCUMBRANCE LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL (C)
----------- ---------- ------------ --------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER:
West Dundee,
Illinois. . $ -- 2,400,000 7,200,000 33,901 2,400,000 7,233,901 9,633,901
========== ========= ========== ======== ========== ========== ==========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(D) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER:
West Dundee,
Illinois. . . . . . . . . . . . . . $240,433 1985 5/2/95 30 years 124,203
======== ========
</TABLE>
SCHEDULE III - CONTINUED
JMB/SPRING HILL ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
Notes:
(A) The initial cost to the Partnership represents the original
carrying value of the property, as determined at the foreclosure date (note
2).
(B) The aggregate cost of real estate owned at December 31, 1995
for Federal income tax purposes was $9,793,600.
(C) Reconciliation of real estate owned:
1995
-----------
Balance at beginning of period. . . . . . $ --
Additions during period . . . . . . . . . 9,633,901
-----------
Balance at end of period. . . . . . . . . $ 9,633,901
===========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . . $ --
Depreciation expenses . . . . . . . . . . 240,433
-----------
Balance at end of period. . . . . . . . . $ 240,433
===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
1994 and 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which is owned, directly or indirectly, by certain of
its officers and directors and members of their families. JMB has
responsibility for all aspects of the Partnership's operations, subject to
the requirement that sales of real property must be approved by the
Associate General Partner of the Partnership, AGPP Associates, L.P.
Effective December 31, 1995, AGPP Associates, L.P. acquired all of the
partnership interests in Mortgage Associates - II, L.P., the Associate
General Partner, and elected to continue the business of Mortgage
Associates - II, L.P. AGPP Associates, L.P., an Illinois limited
partnership with JMB as its sole general partner, continues as the
Associate General Partner. The Associate General Partner is directed by a
majority in interest of its limited partners (who are generally officers,
directors and affiliates of JMB or its affiliates) as to whether to provide
its approval of any sale of real property (or any interest therein) of the
Partnership.
The Partnership is subject to certain conflicts of interest arising out
of its relationships with the General Partners and their affiliates as well
as the fact that the General Partners and their affiliates are engaged in a
range of real estate activities. Certain services have been and may in the
future be provided to the Partnership or its investment properties by
affiliates of the General Partners, including property management services
and insurance brokerage services. In general, such services are to be
provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 1/01/95
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 5, 1996. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 5,
1996. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners,
Ltd.-III ("Mortgage Partners-III") JMB Mortgage Partners, Ltd.-IV
("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus")
and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-IV ("JMB
Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income
Properties,("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB
Income-VII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income
Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB
Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII") and JMB
Income Properties Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole
general partner of the associate general partner of most of the foregoing
partnerships. Most of the foregoing directors and officers are also
officers and/or directors of various affiliated companies of JMB including
Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P.
("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner of
Arvida/JMB Partners, L.P.-II ("Arvida-II")), and Income Growth Managers,
Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd.
("IDS/BIG")). Most of such directors and officers are also partners of
certain partnerships which are associate general partners in the following
real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X,
Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV,
Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-IX,
JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage
Partners, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus,
Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc., an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a Certified Public
Accountant.
Neil G. Bluhm (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 57) has been associated with JMB since June
1971, and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 54) has been associated with JMB since July
1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 62) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December 1972.
John G. Schreiber (age 49) has been associated with JMB since December
1970, and served as an Executive Vice President of JMB until December 1990.
Mr. Schreiber is a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. Mr. Schreiber is President of
Schreiber Investments, Inc., a company which is engaged in the real estate
investing business. He is also a senior advisor and partner of Blackstone
Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since
1994, Mr. Schreiber has also served as a Trustee of Amli Residential
Property Trust, a publicly-traded real estate investment trust that invests
in multi-family properties. He is also a director of a number of
investment companies advised or managed by T. Rowe Price associates and its
affiliates. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business.
H. Rigel Barber (age 46) has been associated with JMB since March
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 48) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 43) has been associated with JMB since February
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 47) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 60) has been associated with JMB since March 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners of the Partnership are entitled to receive a
share of cash distributions, when and as cash distributions are made to the
Limited Partners, and a share of profits or losses. Reference is also made
to Notes 2 and 4 for a description of such transactions, distributions and
allocations. 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 in 1994. The General Partners were
allocated taxable income of $292,564 in 1995.
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
The Corporate General Partner and its affiliates were due
reimbursement (at cost) in 1995 for accounting services, portfolio
management services, legal services and for administrative charges and
other out-of-pocket expenses of $29,015, $17,553, $1,165 and $19,419,
respectively, of which $11,144 was unpaid at December 31, 1995. Also,
during 1995, the Partnership recognized and paid certain 1994
administrative charges to the Corporate General Partner and its affiliates
of approximately $33,590 that had not previously been reimbursed.
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 December 31, 1995.
At December 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.
Effective October 1, 1995, the Corporate General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by, and partially reimbursed to, affiliates of the General Partners. Use
of such third parties is not expected to have a material effect on the
operations of the Partnership.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner, its officers and directors and the Associate General Partner own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty 5 Interests
Corporation directly Less than 1%
Limited Partnership
Interests Corporate
General Partner,
its officers and 11.14495
directors and the Interests
Associate General directly Less than 1%
Partner
<FN>
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the General Partners, their affiliates or their management other than those
described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements filed
with this report.)
(2) Exhibits
3-A.* The Prospectus of the Partnership dated January 31,
1984, as supplemented July 18, 1984 and May 15, 1985 as filed with the
Commission pursuant to Rules 424(b) and 424(c), is incorporated herein by
reference. Copies of Pages 8-10, 46-47 and A-7 to A-11 of the Prospectus,
copies of pages 1-3 of the Supplement dated July 18, 1984, and the
Supplement dated May 15, 1985 are incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership,
which agreement is incorporated herein by reference to the Partnership's
Prospectus as filed with the Commission in the Partnership's Registration
Statement on Form S-11 (File No. 2-87086) dated January 31, 1984.
10-A. Agreement for Deed in Lieu of Foreclosure and related
agreements dated as of April 4, 1995 between borrower and lenders relating
to Spring Hill Fashion Center are filed herewith.
10-B. Agreement of General Partnership of JMB/Spring Hill
Associates dated May 1, 1995 between JMB Mortgage Partners, Ltd., JMB
Mortgage Partners, Ltd.-II and JMB Mortgage Partners, Ltd.-III is filed
herewith.
21. List of Subsidiaries
24. Powers of Attorney
27. Financial Data Schedule
- ----------------
* Previously filed as Exhibits 3-A and 3-B, respectively, to
the Partnership's report for December 31, 1992 on Form 10-K (File No. 0-
16252) dated March 19, 1993.
(b) No reports on Form 8-K were required or filed since the
beginning of the last quarter of the period covered by this report.
(c) Not applicable
No annual report or proxy material for fiscal year 1995 has been sent
to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JMB MORTGAGE PARTNERS, LTD. - II
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1996
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1996
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1996
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1996
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1996
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1996
STUART C. NATHAN*
By: Stuart C. Nathan
Executive Vice President and Director
Date: March 25, 1996
*By: GAILEN J. HULL
Pursuant to a Power of Attorney
GAILEN J. HULL
By: GAILEN J. HULL, Attorney-in-Fact
Date: March 25, 1996
JMB MORTGAGE PARTNERS, LTD. - II
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------- ----
3-A. Pages 8-10, 46-47 and A-7 to
A-11 of the Prospectus of the
Partnership dated January 31, 1984,
pages 1-3 of the Supplement
dated July 18, 1984, the
Supplement dated May 15, 1985 Yes
3-B. Amended and Restated Agreement
of Limited Partnership Yes
10-A. Agreement for Deed in Lieu of
Foreclosure, dated April 4,
1995 No
10-B. General Partnership Agreement
for JMB/Spring Hill
Associates, dated
May 1, 1995 No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a general partner in JMB/Spring Hill Associates, an
Illinois general partnership which holds title to Spring Hill Fashion
Center. Reference is made to Note 3(d) for a summary description of the
terms of such partnership agreement. The Partnership's interest in the
foregoing joint venture partnership are included in the financial
statements of the Partnership filed with this annual report.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of JMB MORTGAGE PARTNERS,
LTD. - II, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of JMB MORTGAGE PARTNERS,
LTD. - II, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
A. Lee Sacks
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,391,904
<SECURITIES> 0
<RECEIVABLES> 6,421
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,398,325
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,077,801
<CURRENT-LIABILITIES> 11,144
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,066,657
<TOTAL-LIABILITY-AND-EQUITY> 2,077,801
<SALES> 0
<TOTAL-REVENUES> 552,394
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 211,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 340,943
<INCOME-TAX> 0
<INCOME-CONTINUING> 386,999
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 386,999
<EPS-PRIMARY> 4.18
<EPS-DILUTED> 4.18
</TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
EXHIBIT 10-A
------------------------------
JMB REALTY CORPORATION
900 North Michigan Avenue
Chicago, Illinois 60611
December 21, 1994
Spring Hill Associates
c/o Mr. Robert I. Glimcher
One Mellon Bank Center
500 Grant Street
Suite 2000
Pittsburgh, PA 15219
Re: Promissory Note in the Original Principal Amount of
$10,500,000.00, dated February 13, 1986 (the "Major Note"), made by Spring
Hill Associates (the "Borrower") and Payable to JMB Mortgage Partners, Ltd.
- -- III ("JMB"), Promissory Note in the Original Principal Amount of
$500,000.00, dated February 13, 1986 (the "Minor Note"), made by the
Borrower and Payable to JMB and Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing Statement, dated as of February 13,1986,
Executed by Borrower and Accepted by JMB (the "Mortgage")
Dear Mr. Glimcher:
This letter will memorialize the agreement reached on December 15,
1994 between representatives of JMB and the Borrower regarding the
indebtedness (collectively, the "Loan") evidenced by the above-referenced
Major Note and Minor Note (collectively, the "Notes"). The Borrower
acknowledges that it is in default under each of the documents and
instruments evidencing and/or securing the Loan (collectively the "Loan
Documents") and JMB has duly and validly accelerated and demanded payment
of the Notes and the Loan. JMB and the Borrower have agreed to settle and
resolve the outstanding defaults and their respective rights and
obligations on the following terms and subject to the following conditions:
A. POSSESSION AND MANAGEMENT OF PROPERTY. The Borrower agrees to
surrender possession, control and management of the real property subject
to the Mortgage (the "Property") immediately. In order to effectuate this
agreement:
1. simultaneously with the execution delivery of this
Agreement, the Borrower shall execute a notice addressed to each of the
tenants of the Property (collectively, the "Tenants") advising the Tenants
that the management of the Property has been transferred to a property
manager designated by JMB (the "Property Manager"), which notice shall be
in form and substance prescribed by the Property Manager;
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 2
2. the Borrower shall take all actions as are reasonably
necessary to facilitate the transfer of the management of the Property to
the Property Manager on or before the close of business on December 21,
1994, including, without limitation, delivering to JMB or the Property
Manager upon execution of this letter such materials as the Property
Manager may request, including, without limitation, (a) a true, correct and
complete rent roll for the "Project" (as defined below) through not earlier
than December 16, 1994, (b) a schedule of the Tenants, their respective
mailing addresses and the name and telephone number of their respective
contact persons, (c) true, correct and complete originals of leases with
the respective Tenants (the "Leases"), and (d) true, correct and complete
originals of each service, supply and vendor agreements concerning the
management and operation of the Project; and (e) true, correct and complete
copies (or originals) of the books, records and books of account for the
Project; and
3. from and after the execution of this letter up to and
including ninety (90) days after the "Closing Date" (as defined below), the
Borrower shall cooperate with JMB and the Property Manager to facilitate
the smooth and effective transition of management and control of the
Property to the Property Manager and shall respond to such questions and
inquiries as the Property Manager may have regarding the Property, the
Tenants, the Leases and the books and records of the Property.
B. LETTERS OF CREDIT. Borrower acknowledges that the sum of not
less than $500,000 is presently due and owing to JMB under the Minor Note
and that JMB is and shall remain unconditionally entitled to draw in full
upon Letter of Credit No. A-302331 (formerly No. 53952-IC), issued by
Pittsburgh National Bank (n/k/a PNC Bank, National Association) for the
account of Robert I. Glimcher in the amount of $250,000.00 and Letter of
Credit No. 01203, issued by Dollar Bank for the account of Michael G.
Zamagias in the amount of $250,000.00. Neither Borrower nor either account
party under these letters of credit shall take any action to interfere with
draws under the letters of credit.
C. DEED IN LIEU OF FORECLOSURE. The Borrower agrees to sell,
assign, convey and otherwise transfer to JMB, its nominee or its designee
(the "Grantee") the Property, together with all other real property
interests appurtenant thereto, all personal property owned by Borrower and
located on the Property, the Leases (including, without limitation, all
unapplied
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 3
security deposits under the Leases) and all other property, rights, titles
and interests owned by Borrower in connection with the ownership, use,
enjoyment, management and operation of the Property, whether real,
personal, tangible or intangible (collectively, the "Project"). In
connection with this transaction, JMB, Borrower and other appropriate
persons shall execute and deliver such documents and instruments as JMB
deems necessary or appropriate (the "Settlement Documents"). The Settlement
Documents shall provide, among other things, for the following:
1. the consummation of the transaction (the "Closing") will
take place on a date (the "Closing Date") that is as soon as is practical,
but in no event earlier than January 3, 1995;
2. Grantee's willingness to accept title to all or any
portion of the Project shall be subject to such examination and
investigation as JMB or Grantee may deem necessary or appropriate,
including, without limitation, receipt of a satisfactory environmental
audit of the Property, and Grantee may decline to accept all or any portion
of the Project;
3. the Borrower shall sell, assign, convey and otherwise
transfer the Project to Grantee, subject only to liens, claims and
encumbrances in favor of JMB, real estate taxes not yet due and payable,
the rights of Tenants under the Leases and liens, claims and encumbrances
reflected as senior to the Mortgage on the title insurance policy insuring
the lien of the mortgages issued to JMB in connection with the original of
the Loan. The Borrower shall execute and deliver to and in favor of JMB,
Grantee and/or the title insurer such affidavits, undertakings and other
documents and instruments (including, without limitation, a general
contractor's affidavit and a final lien waiver from Borrower's property
manager) as are necessary to cause the title insurer to issue to Grantee an
owner's title insurance policy satisfying the conditions of this paragraph
and to Lender date-down and non-merger endorsements to its existing title
insurance policies;
4. at Closing, Borrower and each of its general partners
shall execute and deliver to JMB a general release in form of substance
satisfactory to JMB and JMB shall execute and deliver to Borrower a
covenant not to sue borrower in connection with any matter arising from,
out of or in connection with the Loan, subject to exclusions for (a)
matters unrelated
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 4
to the Loan, (b) any claims arising in connection with a
bankruptcy or insolvency proceeding applicable to any one or more of
Borrower and its partners, (c) any claims arising under the Settlement
Documents or from and after the Closing Date, (d) any claims arising out of
tortious or fraudulent conduct and (e) any claims arising under the terms
or provisions of the Loan Documents relating to environmental matters
(which Borrower shall reaffirm in the Closing Documents);
5. at closing, JMB shall pay the Borrower the sum of Fifty
Thousand Dollars ($50,000.00) and shall waive its right to receive
additional interest under Section 1(c) of the Major Note and its right to
any prepayment premium under the Notes;
6. JMB and Grantee shall receive and retain, as their sole
and exclusive property, all rents and other amounts payable under the
Leases for periods from and after January 1, 1995. Borrower represents and
warrants that none of Borrower and its partners, agents, employees and
other representatives has received any such amounts and covenants and
agrees that, if any one or more of such persons and entities does receive
any such amounts, he, she or it shall receive and hold such amounts as
trustee for JMB and Grantee and shall, immediately upon receipt thereof,
endorse and deliver such amounts to the Property Manager;
7. Grantee shall assume the obligations identified on
Schedule A appended to this letter. All other obligations (other than
obligations under the Loan Documents) arising, accruing or occurring in
connection with the Project up to and including December 31, 1994 shall be
Borrower's sole and exclusive responsibility;
8. the Closing Documents shall include representations and
warranties regarding the condition of the Property and the operations of
the Project as JMB deems necessary and appropriate;
9. JMB's obligations under the Settlement Documents
(including, in particular, its obligations under Paragraphs 6 and 8 above),
shall be subject to such conditions as JMB deems necessary or appropriate,
including, without limitation, delivery of estoppel certificates from each
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 5
Tenant and delivery of all of the unapplied security
deposits under the Leases;
10. at Closing, if necessary, the parties shall enter into an
appropriate agreement regarding their respective rights and obligations
relating to the parking area that overlaps the line between lot 2 and lot 3
in the subdivision of which the Project is a part and any other appropriate
agreements with respect to shared maintenance; and
11. the Settlement Documents shall include such other terms
or provisions as JMB may determine are necessary or appropriate in
transactions including, without limitation, provisions relating to the
waiver of the right to contest relief from the automatic stay in the event
that the Borrower subsequently becomes the subject of a bankruptcy or other
insolvency proceeding.
Borrower acknowledges that transactions of the type described in this
letter are complex and that, although this letter sets forth the material
business terms of such transaction that have been discussed by the parties,
the Settlement Documents will contain other business terms as well as legal
terms and that this letter does not purport to state all of the terms and
conditions of this transaction.
If this letter accurately sets forth our understanding regarding the
matters set forth above, please so signify by executing two (2) duplicate
originals of this letter in the space provided below and returning one
fully executed duplicate original to the undersigned.
Sincerely,
JMB MORTGAGE PARTNERS, LTD. -- III, an
Illinois Limited Partnership
By: JMB Realty Corporation, a Delaware
corporation
Corporate General Partner
By: JULIE WALNER
Name: Julie Walner
Title: Vice President
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 6
The foregoing letter accurately sets forth the understanding of the
Borrower concerning the matters addressed therein and the Borrower and its
general partners intend to be legally bound by the terms and provisions of
this letter.
SPRING HILL ASSOCIATES
Date: By:
Name: Spring Hill Associates
- ------------- Title: General Partner
Date:
- ------------- Robert I. Glimcher
Date:
MICHAEL ZAMAGIAS
12/22/94 Michael Zamagias See accompanying
letter for certain limiting conditions
14-Dec-94
SPRING HILL ASSOCIATES OUTSTANDING CHARGES
VENDOR PURPOSE AMOUNT
ALPHA MESSAGE ANSWERING SERVICE 1.91
COMMONWEALTH EDISON ELEC-RM 240 8.51
COMMONWEALTH EDISON ELEC-LOT IGHTS 861.68
PJ'S DELI TERMINATION AGR. 300.00
CLIMATE SERVICE HVAC-TRAV.AGENT 87.90
WASTE MANAGEMENT TRASH PICK-UP 2,294.00
COURIER NEWS ADVERTISING 306.31
HIFFMAN SHAFFER LEASE COMMISS ION7,875.00
NORTHERN ILLINOIS ROOFING ROOFING-TRAV AGENTS 174.50
TOTAL $11,971.38
Spring Hill Associates
c/o Mr. Robert I. Glimcher
December 21, 1994
Page 6
The foregoing letter accurately sets forth the understanding of the
Borrower concerning the matters addressed therein and the Borrower and its
general partners intend to be legally bound by the terms and provisions of
this letter.
SPRING HILL ASSOCIATES
Date: By:
Name: Spring Hill Associates
Title: General Partner
Date: ROBERT I. GLIMCHER
Robert I. Glimcher
Date: MICHAEL ZAMAGIAS
Michael Zamagias
MICHAEL G. ZAMAGIAS
The Times Building
336 Fourth Avenue
Pittsburgh, Pennsylvania 15222
(412)391-7887
December 22, 1994
JMB Realty Corporation
900 North Michigan Avenue
Chicago, Illinois 60611
Re: Your Letter dated December 21, 1994 Addressed to
SPRING HILL ASSOCIATES C/O ROBERT I. GlIMCHER ("YOUR LETTER")
Gentleman:
As the addressee of Your Letter reflects, for more than seven (7) years
Robert I. Glimcher has been the sole Managing General Partner of Spring
Hill Associates. More importantly, insofar as Your Letter is concerned,
shortly after Spring Hill Associates executed the various Loan Documents
(for convenience, all term having initial capital letters, shall have the
meaning set forth in Your Letter), all issues concerning the ownership,
development, leasing , management and operation of the Project were made
solely by Robert I. Glimcher (or the Glimcher Group Incorporated) and I am
unable and unwilling individually to make or join in any representation or
warranties concerning the condition of the Property or operation of the
Project.
Appreciating that time is of the essence, I have conditionally executed
Your Letter solely to reflect my agreement as Co-General Partner to grant
JMB or its designee the absolute, unconditional right to take over
management of the Property immediately and to allow Spring Hill Associates
to execute a deed in lieu of foreclosure to JMB or its designee in exchange
for $50,000; however, with respect to the specific paragraphs of your
letter, I individually agree only to the following provisions:
- As to paragraph (A), it is acceptable but only to the extent that,
with respect to subparagraph 2, I make no representation or warranty as to
the truth, correctness or completeness of the documents delivered by Robert
I. Glimcher on behalf of Spring Hill Associates.
- As to paragraph (B), I acknowledge that the sum of not less than
$500,000 is presently due and owing by the Borrower to JMB under the Minor
Note; that JMB is entitled to draw in full upon Letter of Credit (No.
01203) issued by Dollar Bank for my account; and that I will take no action
to interfere with drawing under that Letter of Credit
JMB Realty Corporation
December 22, 1994
Page 2
- As to Paragraph (C), subparagraph 1 and 2 are acceptable;
subparagraph 3 is acceptable but only to the extent that it includes unpaid
real estate taxes, if any; subparagraph 4 is acceptable but only to the
extent that the JMB covenant not to sue specifically includes "each of
Borrower's partners" and the exclusions in subparagraph "a" through "e"
relate separately and severally to the actions of each partner;
subparagraph 5 and 6 are acceptable; subparagraph 7 is acceptable but only
to the extent that unpaid real estate taxes, if any, are added to Schedule
A; subparagraph 9 is acceptable only if the requirement for delivery of
estoppel certificates for each Tenant is deleted; subparagraph 10 and 11
are acceptable.
Very truly yours,
Michael G. Zamagias
MGZ:cam
cc: Katten Muchin & Zavis
David M. Lesser. Esq.
Robert I Glimcher
AGREEMENT FOR DEED IN LIEU OF FORECLOSE
THIS AGREEMENT FOR DEED IN LIEU OF FORECLOSURE ("THIS
AGREEMENT" is made and entered into as of the 4th day of April, 1995,
by and between SPRING HILL ASSOCIATES, an Ohio general partnership (the
"BORROWER"), and JMB MORTGAGE PARTNERS, LTD. - III, an Illinois limited
partnership (the "LENDER").
RECITALS
A. Robert I. Glimcher ("GLIMCHER") and Michael G. Zamagias
("ZAMAGIAS") are the sole general partners of the Borrower. Glimcher is the
managing general partner of the Borrower.
B. Partnership owns that certain real property commonly
known as the Spring Hill Fashion Corner Phase I, West Dundee, Illinois and
legally described on SCHEDULE A appended to this Agreement (the "LAND").
The Land is improved with various buildings, parking areas, walkways,
curbs, gutters and other improvements (the "IMPROVEMENTS"), including,
without limitation, a certain one story building containing approximately
125,000 net rentable square feet and a parking are comprised of
approximately 629 parking spaces. The Land and the Improvements, together
with all easements, tenements, hereditament, strips, gaps, gores, rights of
way and other rights, privileges and interests appurtenant thereto,
sometimes hereinafter are referred to collectively as the "REAL PROPERTY."
The Real Property, together with the "LEASES" (as hereinafter defined) and
other real and personal property, whether tangible or intangible, related
to the use, enjoyment, ownership, operation and management of the Real
Property sometimes hereinafter are referred to collectively as the
"PROJECT."
C. On or about February, 13, 1986, Lender extended to
Borrower credit facilities (collectively, the "Loan") in the maximum
aggregate principal amount of $11,000,000.00 for the purpose of renovating
the Real Property. To evidence and secure the Loan, the Borrower has
executed and delivered to Lender various documents and instruments,
including, without limitation, the documents and instruments identified and
defined on SCHEDULE B appended to this Agreement (collectively, the "LOAN
DOCUMENTS").
D. Without limiting any claims that Lender may allege with respect to
other non-performance by the Borrower, the Borrower has failed to pay to
Lender when due the scheduled monthly installments of principal and
interest payable under the Loan Documents for the months of October,
November and December, 1994 and January, 1995 (the "DEFAULTS"). As a
result of the Defaults, (1) Lender has duly and validly accelerated the
maturity of the Notes and (2) the Loan, including, without limitation,
interest thereon at the stated and default interest rates, as applicable
from time to time and all
other amounts owing to Lender under the Loan and the Loan Documents
(collectively, the "LIABILITIES"), is past due and is payable to Lender,
without presentment, notice, demand or other action of any person of
entity. Except as described in Paragraph F below, Lender has not received
payment of any of the Liabilities.
E. The Borrower and the Lender have executed and delivered a
certain letter, dated December 21, l994, (the "LETTER AGREEMENT"), from
Lender to Borrower and countersigned by Borrower, Glimcher and Zamagias.
Zamagias' acceptance of the Letter Agreement was qualified by a certain
letter, dated December 22, 1994, from Zamagias to JMB Realty Corporation,
which letter was not acknowledged or accepted by Lender or any of its
affiliates and is superseded by the execution and delivery of this
Agreement.
F. Pursuant to the Letter Agreement, among other things,
effective on December 23, 1994, the Borrower surrendered to the Lender's
designee, JMB Retail Properties Co. (the "PROPERTY MANAGER"), the
management of the Project.
G. On December 22, 1994, the Lender presented to PNC Bank, a
Sight Draft pursuant to which it drew the full stated amount of the
Glimcher Letter of Credit and to Dollar Bank a Sight Draft pursuant to
which it drew the full stated amount of the Zamagias Letter of Credit.
Lender hereby acknowledges receipt of the amounts of its draws under the
Glimcher Letter of Credit and the Zamagias Letter of Credit, respectively.
H. The Borrower has requested that the Lender agree to
settle and resolve the Liabilities, the Defaults and other matters
concerning the Loan and the Project. The parties desire to so settle and
resolve such matters without costly and protracted litigation, on the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
representations, warranties, covenants and agreements contained in this
Agreement, the sum of One Dollar ($1.00) each to the other in hand paid and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the properties hereby represent, warrant, covenant
and agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE
1.1 INCORPORATION BY REFERENCE. The foregoing Recitals and each
schedule and exhibit appended to this Agreement are incorporated into this
Agreement by this reference as if set forth in full in the body hereof.
-2-
ARTICLE II
ACKNOWLEDGEMENTS, REAFFIRMATION AND RELATED MATTERS
2.1 ACKNOWLEDGEMENTS AND REAFFIRMATIONS. The Borrower hereby
represents, warrants, acknowledges and agrees as follows:
2.1.1 the Borrower acknowledges that the Loan and each Note
have been duly and validly accelerated and, therefore, the Loan and each
Note have matured and that all amounts payable to Lender under the Loan and
the Loan Documents, including, without limitation, the outstanding unpaid
principal balance thereof, all accrued and unpaid interest thereunder
(whether at the stated or default rate) and all other amounts payable
thereunder (including, without limitation, attorneys' fees incurred in
connection with the negotiation, documentation and consummation of the
transactions contemplated by this Agreement and otherwise) are immediately
due and payable to Lender by the Borrower pursuant to the various Loan
Documents, all without notice, grace, further opportunity for cure, without
notice, demand, presentment or any other action by Lender or any other
person or entity and without any defense, counterclaim or right of offset,
all of the foregoing, if and to the extent available to the Borrower, being
hereby unconditionally, irrevocably and expressly waived and disclaimed by
the Borrower;
2.1.2 the Borrower acknowledges and agrees that there is no
defense, counterclaim or right of offset with respect to the payment in
full of the Liabilities or the enforcement by Lender of any and all of the
rights and remedies provided for in the Loan Documents and that the Loan
Documents remain in full force and effect, enforceable against Borrower in
accordance with their respective terms;
2.1.3 the Borrower acknowledges and agrees that SCHEDULE
2.1.3 appended to this Agreement is a true and correct schedule of the
principal and interest payable under the Loan Documents as of December 31,
1994;
2.1.4 each of Borrower and (AS EVIDENCED BY THEIR EXECUTION
AND DELIVERY OF THIS AGREEMENT IN THEIR CAPACITIES AS GENERAL PARTNERS OF
THE BORROWER AND BY THEIR INITIALS SET FORTH BELOW THIS SUBSECTION)
Glimcher and Zamagias acknowledges and agrees (a) that, by executing the
Letter Agreement, each of Borrower, Glimcher (as to the Glimcher Letter of
Credit only) and Zamagias (as to the Zamagias Letter of Credit only)
acknowledges that Lender was entitled to draw under the Letters of Credit,
(b) that each of Borrower, Glimcher (as to the Glimcher Letter of Credit
only) and
-3-
Zamagias (as to the Zamagias Letter of Credit only) acknowledges that
Lender has rightfully drawn the amounts described above under the Letters
of Credit and (c) that none of the Borrower, Glimcher (as to the Glimcher
Letter of Credit only) and Zamagias (as to the Zamagias Letter of Credit
only) has any claim, defense or counterclaim against Lender as a result of
such draw
RIG MGZ
2.1.5 the Borrower acknowledges that Lender has no further
obligation to disburse or advance proceeds of the Loan; and
2.1.6 the Borrower acknowledges that the Liabilities exceed
the value of the "Property" (as hereinafter defined) and that the Borrower
has no equity in the Property.
2.2 The Borrower acknowledges and agrees that, pursuant to the
Letter Agreement, the Property Manager has been collecting the rents,
issues and profits of the Project for periods commencing on January 1, 1995
and that such rents, issues and profits constitute (and that the Lender may
retain such rents, issues and profits as) Lender's sole and exclusive
property.
ARTICLE III
CONVEYANCE OF PROPERTY AND RELATED TRANSACTIONS
3.1 TRANSFERS BY BORROWER. On the terms and subject to conditions
contained in this Agreement, Borrower hereby covenants and agrees to sell,
assign, convey and otherwise transfer (or cause such sale, assignment,
conveyance and transfer) to Lender or Lender's nominee or designee (the
"GRANTEE"), on the "Closing Date" (as hereinafter defined), absolutely and
free of any right of redemption or other right, title or interest of any
person or entity claiming, by, through or under Borrower, other than
"Permitted Exceptions" (as hereinafter defined), all of Borrower's present
and future right, title and interest in and to the following real and
personal property (collectively, the "PROPERTY")
3.1.1 by a special warranty deed, executed by the Borrower
to and in favor of Grantee (the "DEED"), the Real Property;
3.1.2 by an assignment of leases in the form of SCHEDULE
3.1.2 appended to this Agreement executed by the Borrower to
-4-
and in favor of the Grantee (the "ASSIGNMENT OF LEASES"), all leases,
licenses and other agreements granting to any person or entity the right to
use or occupy all or any portion of the Real Property, including, without
limitation, the landlord's right to receive and hold security deposits
thereunder and all unapplied security deposits (the "SECURITY DEPOSITS"),
all amounts payable to the landlord thereunder other than amounts payable
for periods through December 31, 1994, if and to the extent actually paid
to Borrower on or before December 22, 1994 (collectively, the "LEASES"),
and Borrower's claims in the "INSOLVENCY EVENT" (as hereinafter defined) of
F&M Distributors, Inc. (the "F&M CLAIM");
3.1.3 by one or more warranty instruments of assignment
executed by the Borrower to and in favor of the Grantee,
(collectively, the "ASSIGNMENT OF CONTRACTS AND RIGHTS") the following:
3.1.3.1 if and to the extent in Borrower's possession or
otherwise reasonably available from Borrower's design professionals or
other contractors, all drawings, plans and specifications relating to any
existing or proposed Improvements (the "PLANS"), together with the
acknowledgment and consent of each architect and engineer;
3.1.3.2 all unexpired claims, warranties, guarantees and
sureties, if any, received in connection with all or any portion of the
Real Property or the "Personal Property" (as hereinafter defined),
including, without limitation, the design and construction of the
Improvements (the "Warranties");
3.1.3.3 all annexation, development, sale, service, energy,
utility, recapture, supply and maintenance rights, contracts, equipment
leases and other agreements relating to the Real Property and/or the
Personal Property (including, without limitation, those listed on SCHEDULE
3.1.3.3 appended to this Agreement) (the "CONTRACTS"), if and to the extent
that they are assignable and Grantee elects to accept such assignment;
3.1.3.4 all building, special use and other permits,
licenses, certificates of occupancy, franchises and applications for
preliminary or final plan approval or any such licenses and permits
(including, without limitation, those listed on SCHEDULE 3.1.3.4 appended
to this Agreement) issued by any federal, state, county or municipal
authority relating to the use enjoyment, ownership, development,
construction, maintenance, management,
-5-
repair and operation of the Real Property and running to or in
favor of any one or more of the Borrower and the Real Property (the
"Permits"), if and to the extent assignable;
3.1.3.5 all of the Borrower's rights under and proceeds of
all pending insurance claims for damage to or destruction of all or any
portion of the Property, unless such damage or destruction has been
repaired or rebuilt by the Borrower and the Borrower has advanced funds to
pay for such repair or rebuilding;
3.1.3.6 all of the Borrower's files, books, records and books
of accounts (including, without limitation, mailing, customer and "frequent
user" lists) relating to the use, enjoyment, ownership, management,
maintenance, repair and operation of the Property, other than tax returns,
partnership financial records and other items not reasonably related to the
ongoing uses, enjoyment, ownership, management, maintenance, repair and
operation of the Property; and
3.1.3.7 all contracts and other intangible personal property
now owned by any Borrower and used or useful in connection with the use,
enjoyment, ownership, development, leasing, management, maintenance, repair
or operation of the Real Property (including, without limitation, trade
styles and trade names, licenses, other assignable contract rights,
brochures, manuals, advertising material and assignable utility contracts);
3.1.4 by a warranty bill of sale executed by Borrower to
and in favor of Lender (the "BILL OF SALE"), all other personal property of
any kind or nature whatsoever, whether tangible or intangible, owned by
Borrower and located at or used or useful in connection with the Real
Property and/or the Project, including, without limitation, the items
identified on SCHEDULE 3.1.4 appended to this Agreement; all furniture,
fixtures and equipment located at or otherwise used or useful in connection
with the Real Property and/or the Project; all inventories of supplies; all
construction, maintenance and repair materials, whether or not stored or
situated on the Land; all heating, ventilating, incinerating, lighting,
plumbing, electrical, and air conditioning fixtures and equipment; all hot
water heaters, furnaces, heating controls, motors and boiler pressure
systems and equipment located in or on the Real Property; and all security
equipment and means and devices of access (collectively, the "TANGIBLE
PERSONAL PROPERTY"); and
-6-
3.1.5 by appropriate instruments of transfer, such other
real and personal property that Lender may require.
The property described in Section 3.1.2 through Section 3.1.5, both
inclusive, sometimes is referred to in this Agreement collectively as the
"PERSONAL PROPERTY."
3.2 DOCUMENTATION. Each instrument (or so many duplicate originals
thereof as Lender or Grantee may reasonably require) of sale, assignment,
conveyance or other transfer of the Property shall be in form and substance
satisfactory to Lender and Grantee, shall be duly executed, attested,
notarized and/or acknowledged, as appropriate, and shall be deposited into
the "ESCROW" (as hereinafter defined) by the Borrower simultaneously with
the execution and delivery of this Agreement. If and to the extent
necessary or appropriate, the Borrower shall update said deposits on the
"CLOSING DATE" (as hereinafter defined) by depositing into the Escrow such
additional or replacement documents and instruments as are necessary or
appropriate. Any two or more of the transfers contemplated by this Article
may be effected in a single instrument of transfer, if the parties so
agree.
3.3 NO ASSUMPTION. The Borrower acknowledges and agrees (a) that
the acceptance by Grantee of title to the Property shall not create any
personal obligations on the part of Grantee to third parties for claims of
any kind whatsoever that such third parties might have against any one or
more of the Borrower and/or the Property as of the Closing Date, (b) that
Grantee will not assume or agree to discharge any obligations or
liabilities pertaining to the Property that arose, accrued, occurred or
were contracted for on or before December 31, 1994 and (c) that, except as
expressly provided in Section 5.4.3, neither Grantee nor Lender shall
assume or agree to discharge any obligations or liabilities, no matter when
arising or accruing, that Grantee does not expressly assume in writing.
ARTICLE IV
CONDITIONS TO CLOSING
4.1 CLOSING CONDITIONS. Lender's obligations contained in Section
5.4 ("LENDERS'S CLOSING OBLIGATIONS") shall be subject to the prior
satisfaction of each and all of the following conditions precedent (the
"CLOSING CONDITIONS"), any one or more of which may be waived by Lender, at
its sole and absolute discretion:
4.1.1 the Borrower shall have performed or tendered
performance of all of its covenants and agreements to be performed under
this Agreement up to and including Closing Date;
-7-
4.1.2 all of the representations and warranties of the
Borrower contained in any one or more of this Agreement and the documents
and instruments that have been or are to be delivered to Lender in
connection with this Agreement (collectively the "SETTLEMENT DOCUMENTS")
shall be true, correct, complete and not misleading as of the Closing Date,
except to the extent that they expressly relate to an earlier date, in
which event Borrower shall update said representations and warranties to
the Closing Date and, as so updated, said representations and warranties
shall not disclose an adverse change in the physical condition or legal
status of the Property taken as a whole, from that previously represented
in any one or more of the Settlement Documents;
4.1.3 Lender shall have conducted and shall be satisfied
with such matters regarding the physical condition and legal status of the
Property, including, without limitation, status of title to Real Property,
the absence of hazardous substances and related materials and the
compliance of the Property with applicable environmental and other safety
and health laws; and
4.1.4 Ticor Title Insurance Company (in this capacity, the
"TITLE INSURER") shall be prepared to issue:
4.1.4.1 to Lender, datedown and so-called "non-
merger" endorsements to Lender's existing Title Insurance
Policy No. K-36506 (the "ENDORSEMENTS"); and
4.1.4.2 to Grantee, an ALTA owner's title insurance
policy (or a marked-up commitment having the force and effect of a policy),
effective the Closing Date, insuring Grantee's fee simple absolute title in
and to the Real Property, subject only to those liens, claims and
encumbrances identified on Part A of SCHEDULE 4.1.4.2 appended to this
Agreement (the "PERMITTED EXCEPTIONS"), and including extended coverage
over general exceptions and the following endorsements: 3.1 zoning (with
parking), access, contiguity,survey accuracy, location, restrictions,
encroachment and tax lot, and any other endorsements that Lender reasonably
may require after review of the title commitment and survey (the "TITLE
POLICY").
4.2 COVENANTS PENDING CLOSING.
4.2.1 TRANSITION AND COOPERATION. From and after the
execution and delivery of this Agreement up to and including the ninetieth
(90) day after the Closing Date, the Borrower shall cooperate with the
Lender, the Property Manager and the Grantee to (a) review, analyze and
interpret the books and
-8-
records delivered to Lender, Property Manager or Grantee, (b) assist
Lender, Property Manager and Grantee in the orderly and effective
transition of ownership and management of the Property, (c) settle any
claims involving third parties and (d) respond to such questions and
inquiries as Lender, Property Manager and the Grantee may have regarding
the Property, the Project and the books and records of the Property and the
Project. The Borrower shall cooperate with Lender and take such actions as
necessary or appropriate to assist Lender in obtaining estoppel
certificates, subordination and attornment agreements and other
arrangements that Lender, Property Manager or Grantee may desire with any
tenants under the Leases or parties to any of the Contracts.
4.2.2 RECEIPT AND REMITTANCE OF FUNDS. If Borrower has
received, from and after December 23, 1994 up to and including the date of
this Agreement, or receives from and after the date of this Agreement any
amounts payable to it under any Lease or otherwise in connection with the
ownership, use, enjoyment and management of the Project, it shall receive
and hold such amounts as trustee for the Lender and the Grantee and shall,
immediately upon receipt thereof (or, with respect to any such amounts
received up to and including the date of this Agreement, simultaneously
with the execution and delivery of this Agreement) endorse, pay and deliver
such amounts to the Property Manager.
ARTICLE V
CLOSING
5.1 TIME AND PLACE OF CLOSING. The consummation of the transfers
described in Article III and related transactions contemplated by this
Agreement (the "CLOSING") shall take place at 10:00 am. local Chicago time
at the offices of Lender's attorneys designated in Article X or at such
other place in the metropolitan Chicago area as Lender may designate, and
through a closing escrow (the "Escrow") established pursuant to an
agreement (the "ESCROW AGREEMENT") with Ticor Title Insurance Company (in
this capacity, the "ESCROW AGENT"). The Closing shall take place on the
third business" day after all of the Closing Conditions have been satisfied
or waived by Lender (the "CLOSING DATE"), but in no event later than April
6, 1995 (the "OUTSIDE DATE"). If the Closing does not occur on or before
the Outside Date for any reason other than default by Lender:
5.1.1 Lender may, by giving notice to Borrower, at any time
thereafter, terminate this Agreement, in which case, Lender's obligation to
consummate the transactions contemplated by this Agreement shall be null,
void and of no
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further force or effect and Lender may pursue any and all of the
rights or remedies available to it under the Loan Documents, at law or in
equity against the Property and/or the Borrower; or
5.1.2 Lender may elect to accept title to the Property as
provided in Article III, but shall be relieved of Lender's Closing
Obligations, in which event all aspects of the Closing other than the
performance and delivery of Lender's Closing Obligations shall occur on a
day designated by Lender in a notice given to the Borrower, which day shall
be the Closing Date.
5.2 DELIVERIES GENERALLY. Where appropriate, any documents and
instruments to be executed and delivered at the Closing may be executed in
counterparts. With respect to any such document or instrument, each such
counterpart shall constitute an original, but all such counterparts
together shall constitute one instrument or agreement. At the Closing,
each party shall execute and deliver to the other so many counterpart or
duplicate originals of each such document and instrument as the other
reasonably may request.
5.3 BORROWER DELIVERIES. On the Closing Date, Borrower shall
deliver or cause to be delivered to Lender and/or Grantee, as appropriate,
the following documents and instruments, each executed, attested, notarized
and/or acknowledged, as appropriate:
5.3.1 [INTENTIONALLY OMITTED]
5.3.2 the Deed;
5.3.3 the Bill of Sale;
5.3.4 the Assignment of Leases;
5.3.5 the Assignment of Contracts and Rights;
5.3.6 appropriate instruments executed by appropriate
persons and entities sufficient to sell, assign, convey and otherwise
transfer all of the other rights, titles, interests and properties
described in Article III;
5.3.7 if and to the extent not previously delivered to the
Property Manager, possession, dominion and control of the Property and the
documents, instruments, agreements and records constituting or evidencing
the Property, including, without limitation, the original Leases,
Contracts, Plans and Permits;
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5.3.8 a Release of Lender and Affiliated Persons in the form of
SCHEDULE 5.3.8 appended to this Agreement, executed by the Borrower,
Glimcher and Zamagias;
5.3.9 such documents and instruments as are necessary to evidence
the organization and existence of the Borrower and the due authorization of
the transactions contemplated by this Agreement, including, without
limitation, a photocopy of Borrower's partnership agreement, certified as
true, correct, complete and in full force and effect by each of Glimcher
and Zamagias and an opinion of counsel to the Borrower, Glimcher and
Zamagias, dated as of the Closing Date, in form and substance acceptable to
Lender, addressing, with respect to this Agreement and the other Settlement
Documents, capacity, organization, existence, good standing, power,
authority and due authorization, non-contravention, legality, validity,
binding effect and enforceability;
5.3.10 evidence of termination of all management and brokerage
agreements affecting the Real Property, pursuant to which each contracting
person shall, on its own behalf and on behalf of its affiliates, successors
and assigns, acknowledge full and final payment of or waive any and all
rights or claims to any management fees, brokerage commissions and any
other fees and expenses associated with the Property;
5.3.11 a waiver of statutory lien rights against the Real Property
from any service or material provider, property manager and broker
sufficient to release in full any lien or potential claim for lien that
such person may have against the Real Property;
5.3.12 the Endorsements, the Title Policy and such other documents
and instruments as are necessary to cause the Title Insurer to issue the
Endorsements and the Title Policy, including, without limitation, a GAP
undertaking, an ALTA statement and an affidavit of no new improvements;
5.3.13 an affidavit sufficient to establish that the Real Property
is exempt from the disclosure requirements of the Illinois Responsible
Property Transfer Act;
5.3.14 if the Closing Date occurs after the effective date of this
Agreement, a certificate regarding representations and warranties
sufficient to evidence satisfaction of the Closing Condition set forth in
Section 4.1.2;
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5.3.15 photocopies of the (or, if not theretofore delivered
to Property Manager, the original) Leases, certified by the Borrower to be
true, correct and complete;
5.3.16 a rent roll setting forth such information as of
December 23, 1994 as Lender, Grantee and Property Manager may require (the
"Rent Roll"), certified by Borrower to be true, correct and complete;
5.3.17 photocopies of the (or, if not theretofore delivered
to Property Manager, the original) Contracts and Permits, certified by
Borrower to be true, correct and complete;
5.3.18 a certificate of non-foreign status;
5.3.19 such additional documents as are necessary to
evidence assignment of the F&M Claim; and
5.3.20 such other documents and instruments are the
reasonably necessary appropriate to effectuate the Closing, provided that
said documents and instruments are not inconsistent with the parties'
intent as expressed in this Agreement.
5.4 LENDER'S DELIVERIES. On the Closing Date, Lender shall, as
Lender's Closing Obligations, deliver or cause to be delivered to the
Borrower the following:
5.4.1 [INTENTIONALLY OMITTED]
5.4.2 a Covenant Not to Sue Borrower and Affiliated Persons
in the form of SCHEDULE 5.4.2 appended to this Agreement, duly executed,
attested, notarized and/or acknowledged, as appropriate; and
5.4.3 an appropriate instrument pursuant to which Lender
shall assume Borrower's obligation to pay the expenses of the Property
identified on SCHEDULE 5.4.3, duly executed, attested, notarized and/or
acknowledged, as appropriate.
5.5 JOINT DELIVERIES. On the Closing Date, the parties shall
jointly execute and deliver the following:
5.5.1 a closing and settlement statement;
5.5.2 the Escrow Agreement or such to the Escrow Agreement
as are reasonably necessary to provide for the consummation of the
transactions contemplated by this Agreement;
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5.5.3 State of Illinois and, if applicable, City of West
Dundee real estate transfer declarations; and
5.5.4 such other documents and instruments as are
reasonably necessary to consummate the transactions contemplated by this
Agreement, provided that said documents and instruments are not
inconsistent with the parties' intent as expressed in this Agreement.
5.6 FURTHER ASSURANCES. The Borrower covenants and agrees that,
with regard to any items that it is required to deliver or cause to be
delivered to Lender or Grantee pursuant to this Agreement, to the extent
that such items are not fully delivered to Lender or Grantee on the Closing
Date, unless Lender or Grantee formally waives any such requirement in
writing, Borrower shall cooperate fully with Lender and Grantee on and
after the Closing Date so that such items are delivered to Lender or
Grantee.
5.7 PRORATIONS. APPORTIONMENTS. ADJUSTMENTS AND COSTS. The amounts
payable under Sections 5.3 and 5.4 above may be offset and adjusted at
Closing. In addition, the following items shall be paid and adjusted in
the manner hereinafter set forth:
5.7.1 provided that all real estate taxes due and payable
on or before the Closing Date shall have been paid in full, there shall be
no proration of real estate taxes;
5.7.2 Lender or Grantee shall be entitled to receive and
retain, as their sole and exclusive property, all rents and other amounts
payable under the Leases for periods from and after January 1, 1995. In
addition, Lender or Grantee shall be entitled to receive and retain, as
their sole and exclusive property, all rents and other amounts payable
under the Leases for periods prior to January 1, 1995 that had not been
collected by the Borrower as of the close of business on December 22, 1994
and, if and to the extent the Borrower or any of its representatives shall
have received any such amounts from and after December 23, 1994 and shall
not have paid such amounts to the Lender prior to the Closing Date, on the
Closing Date, Borrower shall account to Lender for any such amounts in
accordance with SECTION 4.2.2 and shall pay such amounts to Lender or
Lender shall receive a credit against the payment contemplated by Section
5.4.1 in the amount of any such payments;
5.7.3 Borrower shall be solely and exclusively responsible
for all expenses of the Project arising, accruing or occurring up to and
including December 31, 1994 except for those obligations identified on
SCHEDULE 5.4.3 appended to this Agreement and, if and to the extent
Borrower, Lender or
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Property Manager have received any statements or invoices for any
such obligations, on the Closing Date, the Borrower shall pay such
invoices;
5.7.4 each party shall pay its respective attorneys' fees
and costs and all other expenses incurred directly by it in connection with
the transactions contemplated by this Agreement; and
5.7.5 Lender shall pay title insurance premiums, the Escrow
Agent's fees and real estate transfer taxes, if any, incurred in connection
with the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BORROWER
6.1 REPRESENTATIONS AND WARRANTIES. Subject to Section 10.16,
Borrower hereby represents and warrants unto Lender as follows:
6.1.1 to its knowledge, the Borrower has provided to Lender
and its officers, employees, agents, advisers, attorneys, accountants,
architects and engineers access to all Real Property and Personal Property
and true and correct and complete originals or photocopies of the Leases,
Plans, Contracts, Warranties, Permits, engineering reports, environmental
reports, soil reports, compaction tests and utility plans relating to the
Property, lease and sale files, correspondence relating to the Property,
and the financial and other books and records relating to the use,
enjoyment, ownership, development, sale, management, maintenance, repair
and operation of the Property so as to enable Lender, Property Manager and
Grantee to make such inspections, tests, copies and verifications they
consider necessary;
6.1.2 the execution, delivery and performance by the
Borrower of this Agreement and the Settlement Documents does not and will
not violate, contradict or interfere with, contravene, breach or otherwise
conflict with any agreement, judicial or administrative order or pending
or, to the knowledge of the Borrower, threatened legal proceeding to which
any one or more of Borrower, Glimcher and Zamagias is a party, by which any
one or more of such persons is bound or that otherwise binds or involves in
any manner the Property, the Loan, the Loan Documents or the transactions
contemplated by this Agreement;
6.1.3 Borrower is a general partnership duly organized,
validly existing and good standing under the laws of the State
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of Ohio; Borrower has the legal power and authority to execute, deliver and
perform this Agreement and the other Settlement Documents; the execution,
delivery and performance of this Agreement and the other Settlement
Documents have been duly and validly authorized by all required partnership
action of the Borrower; and this Agreement and each Settlement Document to
be executed by any one or more of Borrower, Glimcher and Zamagias do or
shall constitute the legal, valid and binding obligations of such persons,
enforceable against them in accordance with their respective terms;
6.1.4 none of Borrower, Glimcher and Zamagias is the subject of
any pending or threatened "Insolvency Event" (as hereinafter defined);
6.1.5 to its knowledge, the Borrower owns fee simple title to
the Property, free and clear of any and all liens, claims or encumbrances
except those identified on SCHEDULE 4.1.4.2;
6.1.6 except for the Permitted Exceptions and otherwise to its
knowledge Borrower is not a party to, nor is any portion of the Property
bound by, any contract, commitment or other agreement to sell, transfer,
convey or assign, to provide rights of first refusal, options or other
similar rights with respect to, to lease, license or otherwise grant rights
for the use or occupancy of or to otherwise pledge, hypothecate, transfer
or dispose of all, any portion of or any interest in the Property;
6.1.7 to its knowledge SCHEDULE 3.1.4 appended to this
Agreement is a true, correct and complete schedule of all Tangible Personal
Property;
6.1.8 to its knowledge SCHEDULE 3.1.3.3 appended to this
Agreement is a true, correct and complete schedule of all Contracts. Each
such Contract is in good standing and in full force and effect, has not
been modified or amended in any manner from the photocopy thereof
previously delivered to Lender and no party is in default thereunder;
6.1.9 to the Borrower's knowledge, SCHEDULE 3.1.3.4 appended to
this Agreement is a true, correct and complete schedule of all Permits.
Each such Permit is in good standing and in full force and effect, has not
been modified or amended in any manner from the photocopy thereof
previously delivered to Lender and no party is in default thereunder;
6.1.10 to the Borrower's knowledge, SCHEDULE 6.1.10 is a
true, correct and complete Schedule of all of the Leases; each
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Lease is in good standing and in full force and effect, has not been
modified or amended in any manner from the photocopy thereof previously
delivered to Lender; up to December 23, 1994, there existed no breach,
default or other non-performance under any Lease by the Borrower, as
landlord, and, except as set forth on SCHEDULE 6.1.10, no tenant is in
default thereunder;
6.1.11 to the Borrower's knowledge, there is no pending or
threatened legal proceeding affecting all or any part of the Property;
6.1.12 to the Borrower's knowledge, (other than those
occurrences for which Borrower maintained at the time of such occurrence
adequate occurrence based insurance coverage) there has been no personal
injury or property damage in, on, upon or about the Real Property for which
any person or entity has a claim, right or cause of action against
Borrower, any person or entity acting on behalf of a Borrower or all or any
portion of the Property and the Borrower has, at all times during the past
five (5) years, maintained in full force and effect adequate "occurrence"
insurance to protect against any such claim;
6.1.13 to the Borrower's knowledge, the current condition,
use and operation of the Property complies with currently applicable zoning
and building laws and does not otherwise violate any applicable
governmental requirements and Borrower has not received any notice from any
governmental authority of any proposed or actual zoning change or any
violation of any governmental requirement in respect of all or any portion
of the Property that has not been corrected and removed from the
appropriate public record;
6.1.14 to the Borrower's knowledge, Borrower has not
received any notice of and there is not presently contemplated or pending
any special assessment against or increase in assessed valuation of all or
any portion of the Real Property;
6.1.15 to the Borrower's knowledge, Borrower has not
received any notice of and there do not exist any defects, inadequacies or
other conditions that have not been corrected or, if not corrected, would
result in the impairment, termination of or increase in the premium under
any insurance coverage applicable to all or any portion of the Real
Property or the owner thereof or that would otherwise adversely affect the
insurability of the Real Property or the owner thereof;
6.1.16 to the Borrower's knowledge, the Borrower owns and
there is included among the Property all of the real and
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personal property, whether tangible or intangible, and all other rights,
titles and interests related to the Borrower's use, enjoyment, ownership,
management, sale, development, maintenance, repair and operation of the
Real Property;
6.1.17 to the Borrower's knowledge, the Real Property
and the transactions contemplated by this Agreement are exempt from the
disclosure requirements of the Illinois Responsible Property Transfer Act;
and
6.1.18 to the Borrower's knowledge, except as disclosed
in books and records delivered to Lender, there is no information material
to the use, enjoyment, ownership, management, sale, development and
operation of the Property that has not previously been disclosed to Lender.
ARTICLE VII
EVALUATION OF AGREE
7.1 EVALUATION OF AGREEMENT. Borrower and (AS EVIDENCED BY
THEIR EXECUTION AND DELIVERY OF THIS AGREEMENT IN THEIR CAPACITIES AS
GENERAL PARTNERS OF THE BORROWER AND BY THEIR INITIALS SET FORTH BELOW THIS
SUBSECTION, BUT SOLELY WITH RESPECT TO HIMSELF AND THE BORROWER), Glimcher
and Zamagias each represents, warrants, acknowledges and agrees, that he or
it has read and fully understands this Agreement, including, without
limitation, the terms and provisions of Article IX; that he or it has had a
full and fair opportunity to evaluate this Agreement and the transactions
and other matters contemplated by this Agreement; that he or it has had a
full and fair opportunity to consult with and has consulted with his or its
own attorneys, accountants and other business advisers and counselors of
his or its choosing in
connection with the negotiation, evaluation, execution, delivery and
performance of this Agreement, the documents and instruments to be executed
and delivered pursuant to this Agreement and the consummation of the
transactions contemplated by this Agreement and said documents and
instruments; that he or it is sophisticated and experienced in matters such
as the Property and the Loan; that consummation of the transactions
contemplated by this Agreement may have adverse tax consequences for
Borrower, Glimcher and Zamagias have and it has been advised in connection
with the transactions contemplated by this Agreement by competent tax
advisers of its or his own choosing; and that, in light of the foregoing
and under the circumstances taken as a whole, this Agreement, the documents
and instruments to be executed and delivered pursuant to this Agreement and
the transactions contemplated by this Agreement and said
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documents and instruments are fair to him or it and equitable in all
respects.
RIG MPZ
ARTICLE VIII
MATTERS REGARDING CONVEYANCES
AND TRANSFERS
8.1 ABSOLUTE CONVEYANCE. The Borrower acknowledges and agrees that
the sale, assignment, conveyance and other transfer of the Property to
Grantee pursuant to the terms of this Agreement are in all respects an
absolute conveyance of all of its rights, titles and interests in and to
all or any portion of the Property, in fact as well as in form, and are not
intended as a mortgage, trust conveyance, deed of trust, conditional sale
or security interest of any kind or nature whatsoever; that the
consideration for such sale, assignment, conveyance and other transfer is
exactly as recited herein; and that, after the Closing Date, Borrower will
not have further right, title, interest or claims (including, without
limitation, any rights of redemption, reinstatement or similar rights) in
or to all or any portion of the Property or the proceeds and profits that
may be derived therefrom. The Borrower acknowledges and agrees further
that the sale, assignment, conveyance and transfer of the Property
includes, and that Lender or Grantee shall be entitled to retain, any tax,
insurance or other escrows established in connection with the Loan, all of
which shall, simultaneously with the Closing, become Lender or Grantee's
sole and exclusive property.
8.2 NO MERGER. The parties hereto affirm, acknowledge and agree,
and the Deed may recite that, notwithstanding (a) the execution of this
Agreement by Lender, (b) the fact that Lender or its affiliate may be the
assignee, grantee or other transferee under any one or more of the
instruments of transfer contemplated by this Agreement and (c) the
acceptance by Lender or Grantee of the sale, assignment, conveyance or
other transfer of all or any portion of the Property as contemplated by
this Agreement, the Notes, the Mortgage and all of the other Loan Documents
shall, subject, if applicable, to the terms and provisions of the Covenant
Not To Sue, remain in full force and effect after the consummation of the
transactions contemplated by this Agreement and the indebtedness evidenced
by the Notes shall not be canceled or satisfied. The parties hereto
further affirm, acknowledge and agree that Grantee's interests in and to
the Property under all transfers provided for in this Agreement shall not
merge with the interests of the Lender in and to the Property under any one
or
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more of the Loan Documents and such rights, titles and interest shall at
all times remain separate and distinct. It is the express intention of the
parties to this Agreement, for the purposes of 735 Illinois Compiled
Statutes Section 5/15-1401 and otherwise, that the liens and security
interests evidenced by the Loan Documents shall be and remain at all times
valid and continuous liens and security interests in, to, against and on
the Property, notwithstanding the union of any such right, title or
interest in Lender and/or its affiliate at any time.
ARTICLE IX
INSOLVENCY MATTERS
9.1 AUTOMATIC STAY. If any person or entity, including, without
limitation, the Borrower or any of its partners, becomes the subject of any
Insolvency Event, each of the Borrower and (AS EVIDENCED BY THEIR EXECUTION
AND DELIVERY OF THIS AGREEMENT IN THEIR CAPACITIES AS GENERAL PARTNERS OF
THE BORROWER AND BY THEIR INITIALS SET FORTH BELOW THIS SECTION, BUT SOLELY
WITH RESPECT TO HIMSELF AND THE BORROWER), Glimcher and Zamagias agree as
follows:
9.1.1 any automatic stay, injunction or other limitation or
prohibition against the Lender resulting from such Insolvency Event shall,
immediately and automatically, be modified and terminated with respect to
Lender, without further notice, hearing or order of court, so that the
Lender may proceed to exercise any and all rights and remedies available to
it under any one or more of the Loan Documents or otherwise under
applicable law against any one or more of the Property and the persons and
entities obligated for the payment or performance of the Loan and the Loan
Documents, as if no such Insolvency Event had been commenced;
9.1.2 that he or it, as applicable, shall not contest any
motion, application or other action of Lender made or taken in any court of
competent jurisdiction seeking the modification or termination of any such
automatic stay, injunction or other limitation or prohibition on the
enforcement of the agreement set forth in the immediately preceding
sentence in a manner consistent therewith; and
9.1.3 that, in the event of any such Insolvency Event, he
or it shall immediately take any and all actions necessary or appropriate
to cause this Agreement to be assumed and reaffirmed in such Insolvency
Event.
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The agreements set forth in this Section constitutes a material inducement
to the Lender's agreements SET FORTH in this Agreement.
RIG MGZ
9.2 DEFINITION OF INSOLVENCY EVENT. For the purposes of this
Agreement, the term "INSOLVENCY EVENT" shall mean any legal proceeding
under any law regarding or providing for bankruptcy, insolvency, the
appointment of a receiver, guardian, trustee, conservator or similar
officer, moratorium or creditors' rights or debtors' obligations generally,
commenced voluntarily or, involuntarily.
9.3 AGREEMENT AS INTERIM CASH COLLATERAL ORDER. If the Borrower
becomes the subject of an Insolvency Event, the Borrower agrees, in
consideration of the Lender's Closing Obligations and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, as follows:
9.3.1 if the debtor in said Insolvency Event desires to use
"cash collateral" (as that term is defined in the Code), this Agreement
shall, without modification, be deemed to be a stipulation between the
Lender and the debtor or debtors in said Insolvency Event for the entry
pursuant to Section 363 of the Code of a cash collateral order
incorporating the terms and provisions of this Agreement, including,
without limitation, the terms and provisions of Article II and Article IV.
The Borrower shall cooperate with the Lender to cause, and shall not take
or omit to take any action that would delay or otherwise hinder, the
immediate entry of such a cash collateral order fully incorporating,
without supplement or modification (except as may be agreed to by Lender),
the terms and provisions of this Agreement. Such cash collateral order
(and any subsequent cash collateral order) shall permit the use of such
cash collateral (a) only until the end of the applicable exclusivity period
provided for in Section 1121(b) of the Code or, if shorter and if
applicable, the period for filing a plan reorganization under Section
362(d) and (b) during such period, only to pay the necessary expenses, if
any, that the landlord is obligated to pay under any Lease, for the
operation or preservation of the Property and to the payment of the
Borrower's obligations to Lender under this Agreement and the other Loan
Documents; and
9.3.2 all income from the operation of the Property shall constitute
cash collateral in any such Insolvency Event and, to the extent that any
such income is used and consumed after the commencement of such an
Insolvency Event, the Borrower agrees that such income constitutes
collateral for Lender's secured claim under
-20-
Section 506 of the Code in the amount so used or consumed. If and to the
extent that the collateral securing Lender's claims in said Insolvency
Event at any time is deemed or proves to be insufficient to pay Lender's
claim in full, Lender's secured claim shall be deemed to have been
inadequately protected under the provisions of said cash collateral order
(or any subsequent cash collateral order) and Lender shall have an
administrative expense claim in said Insolvency Event to such extent. Said
administrative expense claim shall have "super priority" over any and all
administrative expenses of the kind specified in Sections 503(b) and 507(b)
of the Code, shall be equal to the priority provided under the provisions
of Section 364(c) (1) of the Code over all other costs and administrative
expenses of the kind specified in Sections 105, 300, 326, 330, 331, 503(b),
506(c), 507(a), 507(b) or 726 of the Code and shall at all times be senior
to the rights of the Borrower, any debtor in possession or any trustee;
PROVIDED, HOWEVER, that such administrative expense claims shall be
subordinate to the professional fees and reimbursement of professionals'
expenses that may be awarded to professionals retained by the debtor in
said Insolvency Event pursuant to Sections 330 and/or 331 of the Code and
the fees of any bankruptcy trustee.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. Unless expressly provided otherwise in this Agreement,
any notice, request, demand or other communication required to be given
under this Agreement or any document or instrument executed and delivered
pursuant to this Agreement shall be in writing, shall be deemed to be given
or delivered (a) on the date of personal delivery of the notice, request,
demand or other communication at or before 3:00 p.m. local Chicago time,
(b) on the second business day after the day of mailing of such notice,
request, demand or other communication by United States Registered Mail or
United States Certified Mail, postage prepaid, or (c) on the next business
day after mailing of such notice, request, demand or other communication by
express courier, freight charges prepaid, to the parties (including any
person or entity designated for receipt of a photocopy thereof) at the
following addresses or at such other address as any of the parties may
hereafter specify in the aforementioned manner:
if to Borrower: Spring Hill Associates
c/o Glimcher Group, Inc.
One Mellon Bank Center
500 Grant Street -- Suite 2000
Pittsburgh, Pennsylvania 15219
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with a copy to: Michael G. Zamagias
Zamagias Properties
336 Fourth Avenue
Pittsburgh, Pennsylvania 15222
with a copy to: William I. Kohn, Esq.
Barnes & Thornburg
200 West Madison Street
Suite 2610
Chicago, Illinois 60606
if to Lender: c/o JMB Realty Corporation
900 North Michigan Avenue
Chicago, Illinois 60611
Attention: Ms. Julie Walner
with a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Synde B. Keywell, Esq. and
David M. Lesser, Esq.
10.2 ENTIRE AGREEMENT. This Agreement, together with the documents
and instruments to be executed and delivered pursuant to this Agreement,
constitutes the entire agreement of the parties hereto with respect to the
matters addressed herein and therein and, except as expressly set forth
herein and therein, supersedes all prior or contemporaneous contracts,
covenants, agreements, representations, warranties and statements, whether
written or oral, with respect to such matters, including, without
limitation, the outline of terms referred to in the Recitals.
10.3 AMENDMENT. This Agreement may not be amended, changed, modified
or terminated, except by written instrument executed by all parties to this
Agreement.
10.4 WAIVER. No waiver by Lender of any failure or refusal of any
party to comply with its obligations under this Agreement shall be deemed a
waiver of any other or subsequent failure or refusal to so comply by such
other party. No waiver shall be valid unless in writing signed by the
party to be charged and only to the extent therein set forth.
10.5 SEVERABILITY. If any term or provision of this Agreement or
application thereof to any person or circumstances shall, to any extent, be
found by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Agreement, or the application of such term or
provision to persons or circumstances other than those as to which it is
held invalid or unenforceable,
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shall not be affected thereby and each other term or provision of this
Agreement shall be valid and be enforced to the fullest extent permitted by
law, unless the result would be inconsistent with the manifest intent of
the parties or expressed in this Agreement.
10.6 CAPTIONS. The title of this Agreement and the headings of the
various paragraphs of this Agreement have been inserted only for the
purposes of convenience, and are not part of this Agreement and shall not
be deemed in any manner to modify, explain, expand or restrict any of the
provisions of this Agreement.
10.7 GOVERNING LAW. The place of business of Borrower and Lender,
the location of the Property, and the place of payment and performance
under this Agreement being the State of Illinois, this Agreement and such
documents and instruments shall be construed and enforced according to the
laws of that State.
10.8 ASSIGNABILITY. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and beneficiaries hereof and their
respective heirs, executors, personal representatives, successors and
assigns; PROVIDED, HOWEVER, that no party hereto other than Lender may
assign any of its rights or obligations hereunder, if any, and any such
purported or attempted assignment shall be null and void AB INITIO and of
no force or effect.
10.9 NO THIRD PARTY BENEFICIARIES. Unless expressly provided
otherwise herein, this Agreement is made and entered into for the sole
protection and benefit of the parties hereto and Grantee, and no other
person, persons, entity or entities shall have any right of action hereon,
right to claim any right or benefit from the terms contained herein or be
deemed a third party beneficiary hereunder.
10.10 COUNTERPARTS. Any of this Agreement and the documents and
instruments to be executed and delivered pursuant to this Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one instrument.
10.11 ATTORNEYS' FEES COSTS AND EXPENSES. Anything to the contrary
hereof in notwithstanding, in any action, proceeding or dispute resolution
process arising from, out of or in connection with this Agreement and the
transactions contemplated hereby, Lender shall be entitled to recover from
the Borrower the costs, expenses and attorneys' fees incurred by it in
connection therewith, if Lender is prevailing party. Nothing contained in
this Section is intended to limit any provision regarding payment of
attorney's fees, costs, expenses and similar matters contained elsewhere in
this Agreement or in any other document or instrument to be executed and
delivered pursuant to this Agreement.
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10.12 CUMULATIVE REMEDIES. Unless expressly provided otherwise
herein, the rights and remedies of Lender provided for herein shall be
cumulative and concurrent and shall include all other rights and remedies
available at law or in equity, may be pursued singly, successively or
together, at the sole and absolute discretion of the Lender and may be
exercised as often as occasion therefor shall arise.
10.13 BUSINESS DAY. If any payment to be made or obligation to be
performed hereunder is to be made or performed on a day other than a
business day, it shall be deemed to be made or performed in a timely manner
if done on the next succeeding business day. For the purposes of this
Agreement, a business day shall be any day other than a Saturday, Sunday or
official Federal or State of Illinois holiday.
10.14 FURTHER ASSURANCES. The Borrower covenants and agrees that,
from and after the execution and delivery of this Agreement, it shall, from
time to time, execute and deliver any and all documents and instruments as
are reasonably necessary or rested by Lender to carry out the intent of the
Agreement, provided that the execution and delivery of said documents and
instruments does not increase his or its liability beyond that contemplated
by this Agreement.
10.15 TIME OF ESSENCE. Time is of the essence of this
Agreement.
10.16 KNOWLEDGE: LIABILITY OF GLIMCHER AND ZAMAGIAS. When used in
this Agreement, references to the Borrower's "knowledge" shall mean, with
respect to knowledge attributed to the Borrower through Glimcher, matters
of which Glimcher has current actual knowledge or that it is commercially
reasonable to expect that the managing general partner of a partnership
owning and operating a property such as the Project would have, based upon
a commercially reasonable investigation, and, with respect to knowledge
attributed to the Borrower through Zamagias, matters of which Zamagias or
one of his personal agents or representatives (such as attorneys,
accountants and business managers, but expressly excluding Glimcher)
possesses current actual knowledge. Notwithstanding any of the foregoing,
the Lender acknowledges and agrees that the indirect, secondary liability
of Glimcher and Zamagias, as general partners of the Borrower, under this
Agreement and the other Settlement Documents shall be limited as follows:
10.16.1 Glimcher shall have no indirect, secondary liability as
to matters arising out of a breach of the representations and warranties
contained in this Agreement and the other Settlement Documents, but
Glimcher hereby represents and warrants that he has reviewed such
representations and
-24-
warranties (including, without limitation, those representations and
warranties contained in Article VI of this Agreement) and that he has no
current actual knowledge that any such representations and warranties are
materially incorrect, incomplete or misleading and Glimcher acknowledges
and agrees that he shall have direct personal liability if the
representations and warranties contained in this Section 10.16.1 are
materially incorrect;
10.16.2 Zamagias shall have no indirect, secondary liability as
to matters arising out of a breach of the representations and warranties
contained in this Agreement and the other Settlement Documents, but
Zamagias hereby represents and warrants that he has reviewed such
representations and warranties (including, without limitation, those
representations and warranties contained in Article VI of this Agreement)
and that he has no current actual knowledge that any such representations
and warranties are materially incorrect, incomplete or misleading and
Zamagias acknowledges and agrees that he shall have direct personal
liability if the representations and warranties contained in this Section
10.16.2 are materially incorrect;
10.16.3 as to the covenants and agreements contained in any one
or more of this Agreement and the Settlement Documents, the indirect
secondary liability of Glimcher and Zamagias, as general partners of the
Borrower shall be "non-recourse" in nature to Glimcher and Zamagias except,
with respect to each of them, to the extent that any breach, default or
other non-performance of any such covenant or agreement arises out of the
fraudulent, grossly negligent or willful acts or omissions of either or
both of them, in which event the partner or partners who have so acted or
omitted to act shall, jointly and severally with the Borrower, be
personally liable for such breach, default or other nonperformance.
Lender acknowledges and agrees further that, the direct, primary personal
liability of Glimcher and Zamagias under this Agreement shall be limited to
the matters expressly set forth in Section 2.1.4, Section 7.1, Section 9.1,
Section 10.16.1 (with respect to Glimcher), Section 10.16.2 (with respect
to Zamagias) and Section 10.17.
10.17 WAIVER OF TRIAL BY JURY; VENUE. BORROWER AND (AS EVIDENCED BY
THEIR EXECUTION AND DELIVERY OF THIS AGREEMENT IN THEIR CAPACITIES AS
GENERAL PARTNERS OF THE BORROWER AND BY THEIR INITIALS SET FORTH BELOW THIS
SECTION, BUT SOLELY WITH RESPECT TO HIMSELF AND BORROWER), GLIMCHER AND
ZAMAGIAS EACH IRREVOCABLY AND
-25-
UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDINGS BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT
OR ANY DOCUMENT OR INSTRUMENT TO BE EXECUTED AND DELIVERED PURSUANT TO THIS
AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
BORROWER AND BORROWER ACKNOWLEDGES THAT NEITHER THE LENDER NOR ANY PERSON
ACTING ON BEHALF OF THE LENDER HAS MADE ANY REPRESENTATIONS OP FACT TO
INDUCE THIS WAIVER OP TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. EACH OF BORROWER AND (AS EVIDENCED BY THEIR EXECUTION AND DELIVERY
OF THIS AGREEMENT IN THEIR CAPACITIES AS GENERAL PARTNERS OF THE BORROWER
AND BY THEIR INITIALS SET FORTH BELOW THIS SECTION, BUT SOLELY WITH RESPECT
TO HIMSELF AND BORROWER), GLIMCHER AND ZAMAGIAS EACH FURTHER ACKNOWLEDGES
AND AGREES THAT BE OR IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF HIS OR ITS OWN FREE WILL, THAT BE OR IT HAS HAD THE OPPORTUNITY
TO DISCUSS THIS WAIVER WITH COUNSEL, THAT THE PROPERTY AND OTHER SUBJECT
MATTER OF THIS AGREEMENT IS SITUATED IN KANE COUNTY, ILLINOIS AND THAT,
UNLESS LENDER AGREES OTHERWISE, ANY AND ALL LEGAL PROCEEDINGS INSTITUTED IN
RESPECT OF THIS AGREEMENT, THE DOCUMENTS AND INSTRUMENTS EXECUTED AND
DELIVERED PURSUANT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT SHALL BE INSTITUTED IN THE CIRCUIT COURT OF, OR THE UNITED
STATES COURTS SITTING PERMANENTLY IN, KANE COUNTY, ILLINOIS.
-26-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed this effective as of the day and year first above written.
LENDER:
JMB MORTGAGE PARTNERS, LTD.-
III, an Illinois limited
partnership
By:JMB Realty Corporation, a
Delaware corporation
By: JULIE WALNER
Name: Julie Walner
ATTEST Title: Vice President
By: SHEREEN TAYLOR
Name: Shereen Taylor
Title:Senior Counsel
BORROWER:
SPRING HILL ASSOCIATES, an Ohio
general partnership
By: ROBERT I. GLIMCHER
Name: Robert I. Glimcher
Title: One of its General Partners
(and, for the purposes of
Sections 2.1.4, 7.1, 9.1, 10.16.1 and 10.17, individually)
By: MICHAEL G. ZAMAGIAS
Name: Michael G. Zamagias
Title: One of its General Partners
(and, for the purposes of
Sections 2.1.4, 7.1, 9.1, 10.16.2 and 10.17, individually)
-27-
SCHEDULE A
Legal Description of Land
PARCEL ONE:
LOTS 1 AND 3 IN SPRING HILL FASHION CORNER, BEING A RESUBDIVISION
OF LOTS 5, 6, 7, 8 AND 9 OF THE PLAT OF SPRING HILL SOUTHEAST AND
UNSUBDIVIDED LANDS IN THE SOUTHWEST QUARTER OF SECTION 22, TOWNSHIP 42
NORTH, RANGE 8, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT
THEREOF RECORDED NOVEMBER 21, 1984 AS DOCUMENT 1702859 IN KANE COUNTY,
ILLINOIS.
PARCEL TWO:
EASEMENT CREATING A MEANS OF DRAINAGE OF SURFACE WATER FOR THE
BENEFIT OF PARCEL ONE AS SET FORTH IN EASEMENT AGREEMENT DATED OCTOBER 26,
1984 AND RECORDED OCTOBER 30, 1984, AS DOCUMENT NO. 1700606 GRANTED BY
HOMART DEVELOPMENT CO., A DELAWARE CORPORATION IN FAVOR OF SPRING HILL
ASSOCIATES, AN OHIO GENERAL PARTNERSHIP OVER THE STORM DRAINAGE ROUTING
DESCRIBED AS FOLLOWS: BEGINNING AT A POINT, DEFINED AS THE INTERSECTION OF
THE CENTER LINE OF ENTRANCE ROAD B OF SPRING HILL MALL AND THE NORTHERN
R.O.W. LINE OF STATE HIGHWAY 72; THENCE, NORTHERLY ALONG SAID CENTERLINE OF
ENTRANCE ROAD B A DISTANCE OF 260 FEET TO A POINT; THENCE EASTERLY 40 FEET
TO AN EXISTING STORM SEWER MANHOLE; THENCE EAST 17 FEET ALONG A 36 INCH CMP
TO THE WEST PROPERTY LINE OF LOT NUMBER 9 OF SPRING HILL SOUTHEAST
SUBDIVISION, TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY 17 FEET ALONG
THE 30 INCH CMP TO THE AFOREMENTIONED STORM SEWER MANHOLE; THENCE WESTERLY
162 FEET ALONG AN EXISTING 36 INCH CMP TO AN OUTFALL STRUCTURE IN THE
SPRING HILL MALL DETENTION POND; THENCE TO THE AFOREMENTIONED DETENTION
POND.
PARCEL THREE:
ACCESS EASEMENT OVER, ACROSS AND UPON THAT PORTION OF THE SOUTHWEST
QUARTER OF SECTION 22, TOWNSHIP 42 NORTH, RANGE 8, EAST OF THE THIRD
PRINCIPAL MERIDIAN KNOWN AS "RING ROAD" AS DESCRIBED AND DELINEATED ON
EXHIBIT "B" ATTACHED TO AND FORMING A PART OF THE OPERATING AGREEMENT
RECORDED APRIL 27, 1981 AS DOCUMENT 1575014, IN THE OFFICE OF THE RECORDER
OF DEEDS, KANE COUNTY, ILLINOIS.
PARCEL FOUR:
EASEMENT FOR PARKING AND INGRESS AND EGRESS ON, OVER AND THROUGH
LOTS 1, 3 AND 4 OF SPRING HILL FASHION CORNER, AS MORE FULLY DESCRIBED IN
PARCEL ONE ABOVE, AS CREATED BY DECLARATION OF COMMON AREA INGRESS-EGRESS
AND PARKING EASEMENT RECORDED OCTOBER 30, 1984 AS DOCUMENT 1700608, IN THE
OFFICE OF THE RECORDER OF DEEDS, KANE COUNTY, ILLINOIS.
Common Street Address: Spring Hill Fashion Corner
State, Routes 31 and 72
West Dundee
Kane County, Illinois
Permanent Index Nos.: 03-22-326-044 and 03-22-326-046
-29-
SCHEDULE C
SCHEDULE OF LOAN DOCUMENTS
1. Promissory Note, dated February 13, 1986, made by Borrower and
payable to the order of Lender in the principal amount of $10,500, 000.00
(the "Major NOTE");
2. Promissory Note, dated February 13, 1986, made by Borrower and
payable to the order of Lender in the principal amount of $500, 000.00 (the
"MINOR NOTE") (the Major Note and the Minor Note sometimes are referred to
in this Agreement individually as a "Note" and collectively as the
"Notes");
3. Mortgage, Assignment of Leases and Rents, Security Agreement and
Financing Statement, dated as of February 13, 1986 and recorded in the
Office of the Recorder of Deeds of Kane County, Illinois on February 14,
1986 as Document No. 1756892 (the "Mortgage");
4. Letter of Credit No. 53952-IC (subsequently redesignated No. A-
302331) issued by Pittsburgh National Bank (n/k/a PNC Bank National
Association ("PNC Bank")) for the account of Glimcher in the amount of
$250,000.00 (the "GlIMCHER LETTER of Credit");
5. Letter of Credit No. 01203, issued by Dollar Bank for the account of
Zamagias in the amount of $250,000.00 (the "ZAMAGIAS LETTER OF CREDIT").
-30-
SCHEDULE 2.1.3
LIABILITIES
Principal - $10,030,000.00
Interest - $ 2,468,891.24
STATE OF ILLINOIS )
) SS:
COUNTY OF KANE )
SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED made and entered into this 2nd day of May, 1995,
by and between SPRING HILL ASSOCIATES, and Ohio General Partnership, with
its principal address at One Mellon Bank Center, Suite 2000, Pittsburgh,
PA. 15219, hereinafter referred to as "Grantee", and JMB/SPRING HILL
ASSOCIATES, an Illinois general partnership, whose address is c/o JMB
Realty Corporation, 900 North Michigan Avenue, Chicago, Illinois 60611,
hereinafter referred to as "Grantee",
W I T E S S E T H:
That said Grantor for and in consideration of the sum of ONE DOLLAR ($1.00)
and other good and valuable consideration, paid by Grantee, the receipt and
sufficiency of such consideration being hereby acknowledged, does by these
presents bargain, sell, convey and confirm unto Grantee, a certain tract or
parcel of land, together with the
THIS DOCUMENT PREPARED BY:
James E. DiGregory, Esq.
One Mellon Bank Center, Suite 2000
Pittsburgh, PA. 15219
UPON RECORDATION RETURN TO:
David M. Lesser, Esq.
Katten, Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
SEND TAX BILLS TO:
Robert H. Cohen, Vice President, Group Manager
JMB Retail Properties Co.
152 Stratford Square
Bloomingdale, Illinois 60108
improvements thereon and appurtenances thereunto belonging, situate in
Kane County, Illinois, which said real estate hereby conveyed is more
particularly described on Exhibit "A" attached hereto and make a part
hereof.
TO HAVE AND TO HOLD THE SAME, together with all rights and appurtenances to
the same belonging, unto the Grantee and to its successors and assigns
forever. The Grantor hereby covenants that it and its successors and
assigns do, shall and will Warrant and Defend the title to the premises
unto the said Grantee and to its successors and assigns forever, against
the lawful claims of all persons claiming by, from, through or under
Grantor, but none other.
IN WITNESS WHEREOF, the Grantor has executed these presents the day and
year first above written.
In the presence of: GRANTOR:
SPRING HILL ASSOCIATES, an Ohio
General Partnership
ROBERT I. GLIMCHER
Robert I. Glimcher, General Partner
Michael G. Zamagias, General Partner
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF ALLEGHENY )
On this 15th day of February, 1995, before me, a Notary Public,
personally appeared Robert I.Glimcher, who acknowledged himself to be the
general partner of SPRING HILL ASSOCIATES, an Ohio general partnership, and
that he, as general partner, being duly authorized to do so, executed the
foregoing instrument for the purposes set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
COLLEEN MOORE
Colleen Moore
Notary Public
My Commission Exp.: June 29, 1996
[Notarial Seal]
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF ALLEGHENY )
On this ------ day of ----------, before me, a Notary Public,
personally appeared Michael G. Zamagias, who acknowledged himself to be the
general partner of SPRING HILL ASSOCIATES, an Ohio general partnership, and
that he, as general partner, being duly authorized to do so, executed the
foregoing instrument for the purposes set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public
My Commission Expires.:
[Notarial Seal]
IMPROVEMENTS THEREON AND APPURTENANCES THEREUNTO BELONGING, SITUATE IN KANE
COUNTY, ILLINOIS, WHICH SAID REAL ESTATE HEREBY CONVEYED IS MORE
PARTICULARLY DESCRIBED ON EXHIBIT "A" ATTACHED HERETO AND MADE PART HEREOF.
TO HAVE AND TO HOLD THE SAME, TOGETHER WITH ALL RIGHTS AND APPURTENANCES TO
THE SAME BELONGING, UNTO THE GRANTEE AND TO ITS SUCCESSORS AND ASSIGNS
FOREVER. THE GRANTOR HEREBY COVENANTS THAT IT AND ITS SUCCESSORS AND
ASSIGNS FOREVER DO, SHALL AND WILL WARRANT AND DEFEND THE TITLE TO THE
PREMISES UNTO THE SAID GRANTEE AND TO ITS SUCCESSORS AND ASSIGNS FOREVER,
AGAINST THE LAWFUL CLAIMS OF ALL PERSONS CLAIMING BY, FROM, THROUGH OR
UNDER GRANTOR, BUT NONE OTHER.
IN WITNESS WHEREOF, THE GRANTOR HAS EXECUTED THESE PRESENTS THE DAY AND
YEAR FIRST ABOVE WRITTEN;
In the presence of: GRANTOR:
SPRING HILL ASSOCIATES, and Ohio
General Partnership
ROBERT I. GLIMCHER,
Robert I. Glimcher, General Partner
MICHAEL G. ZAMAGIAS,
Michael G. Zamagias, General Partner
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF ALLEGHENY )
On this 15th day of February, 1995, before me, a Notary Public,
personally appeared Robert I.Glimcher, who acknowledged himself to be the
general partner of SPRING HILL ASSOCIATES, an Ohio general partnership, and
that he, as general partner, being duly authorized to do so, executed the
foregoing instrument for the purposes set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Colleen Moore
Notary Public
My Commission Exp.: June 29, 1996
[Notarial Seal]
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF ALLEGHENY )
On this 2ND day of May, 1995, before me, a Notary Public, personally
appeared Michael G. Zamagias, who acknowledged himself to be the general
partner of SPRING HILL ASSOCIATES, an Ohio general partnership, and that
he, as general partner, being duly authorized to do so, executed the
foregoing instrument for the purposes set forth therein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
CAROL A. MACSURAK
Carol A. Macsurak
Notary Public
My Commission Exp.: April 28, 1997
EXHIBIT A
LEGAL DESCRIPTION OF LAND
PARCEL ONE:
LOTS I. AND 3 IN SPRING HILL FASHION CORNER, BEING A
RESUBDIVISION OF LOTS 5, 6, 7 AND 8 OF THE PLAT OF SPRING HILL SOUTHEAST
AND UNSUBDIVIDED LANDS IN THE SOUTHWEST QUARTER OF SECTION 22, TOWNSHIP 42
NORTH, RANGE 8, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT
THEREOF RECORDED NOVEMBER 21, I984 AS DOCUMENT 1702859 IN KANE COUNTY,
ILLINOIS.
PARCEL TWO:
EASEMENT CREATING A MEANS OF DRAINAGE OF SURFACE WATER FOR THE
BENEFIT OF PARCEL ONE AS SET FORTH IN EASEMENT AGREEMENT DATED OCTOBER 26,
1984 AND RECORDED OCTOBER 30, 1984, AS DOCUMENT NO. 1700606 GRANTED BY
HOMART DEVELOPMENT CO., A DELAWARE CORPORATION IN FAVOR OF SPRING HILL
ASSOCIATES, AN OHIO GENERAL PARTNERSHIP OVER THE STORM DRAINAGE ROUTING
DESCRIBED AS FOLLOWS: BEGINNING AT A POINT, DEFINED AS THE INTERSECTION OF
THE CENTER LINE OF ENTRANCE ROAD B OF SPRING HILL MALL AND THE NORTHERN
R.O.W. LINE OF STATE HIGHWAY 72; THENCE, NORTHERLY ALONG SAID CENTERLINE OF
ENTRANCE ROAD B A DISTANCE OF 260 FEET TO A POINT; THENCE EASTERLY 40 FEET
TO AN EXISTING STORM SEWER MANHOLE; THENCE EAST 17 FEET ALONG A 36 INCH CMP
TO THE WEST PROPERTY LINE OF LOT NUMBER 9 OF SPRING HILL SOUTHEAST
SUBDIVISION, TO THE TRUE POINT OF BEGINNING; THENCE WESTERLY 17 FEET ALONG
THE 30 INCH CMP TO THE AFOREMENTIONED STORM SEWER MANHOLE; THENCE WESTERLY
162 FEET ALONG AN EXISTING 36 INCH CMP TO AN OUTFALL STRUCTURE IN THE
SPRING HILL MALL DETENTION POND; THENCE TO THE AFOREMENTIONED DETENTION
POND.
PARCEL THREE:
ACCESS EASEMENT OVER, ACROSS AND UPON THAT PORTION OF THE
SOUTHWEST QUARTER OF SECTION 22, TOWNSHIP 42 NORTH, RANGE 8, EAST OF THE
THIRD PRINCIPAL MERIDIAN KNOWN AS "RING ROAD" AS DESCRIBED AND DELINEATED
ON EXHIBIT "B" AFFECT TO AND FORMING A PART OF THE OPERATING AGREEMENT
RECORDED APRIL 27, 1981 AS DOCUMENT 1575014, IN THE OFFICE OF THE RECORDER
OF DEEDS, KANE COUNTY, ILLINOIS.
PARCEL FOUR:
EASEMENT FOR PARKING AND INGRESS AND EGRESS ON, OVER AND
THROUGH LOTS I, 3 AND 4 OF SPRING HILL FASHION CORNER, AS MORE FULLY
DESCRIBED IN PARCEL ONE ABOVE, AS CREATED BY DECLARATION OF COMMON AREA
INGRESS-EGRESS AND PARKING EASEMENT RECORDED OCTOBER 30. 1984 AS DOCUMENT
1700608, IN THE OFFICE OF THE
RECORDER OF DEEDS, KANE COUNTY, ILLINOIS.
Cohn Street Address: Spring Hill Fashion Corner
State Routes 31 and 72
West Dundee
Kane County, Illinois
Permanent Index Nos.: 03-22-326-044 and 03-22-326-046
WARRANTY BILL OF SALE
For and in consideration of the sum of Ten and No/100 Dollars
($10.00) in hand paid and other good and valuable consideration, the
receipt, adequacy and sufficiency of which hereby are acknowledged, SPRING
HILL ASSOCIATES, an Ohio general partnership ("BORROWER"), hereby warrants,
sells, transfers, conveys, delivers, assigns and sets over to JMB/SPRING
HILL ASSOCIATES, an Illinois general partnership, its successors and
assigns (collectively, "GRANTEE") all of its right, title and interest in
and to personal property of any kind or nature whatsoever, whether tangible
or intangible, owned by Borrower and located at and used in connection with
the "REAL PROPERTY" [as that term is defined in the Agreement for Deed in
Lieu of Foreclosure, dated as of April 1, 1995 ("AGREEMENT"), by and among
Borrower and JMB Mortgage Partners - III, Ltd., an Illinois limited
partnership ("LENDER")], including, without limitation, the items listed on
SCHEDULE 3.1.4 appended to the Agreement.
Nothing contained herein shall operate so as to supersede
representations, warranties, covenants or agreements made by Borrower or
Lender in the Agreement.
Borrower hereby warrants that it owns such personal property, in each
case free of all claims, liens and encumbrances not disclosed in the
Agreement.
The interests of Grantee in and to the property conveyed hereby shall
not merge with the interest of Lender or Grantee under the Loan Documents
(as that term is defined in the Agreement).
IN WITNESS WHEREOF, Borrower has caused this Warranty Bill of Sale to
be executed as of the day and year first below written
DATED: April 2, 1995
SPRING HILL ASSOCIATES, an Ohio
general Partnership
By: ROBERT I. GLIMCHER
Name: Robert I. Glimcher
Its: General Partner
The foregoing Warranty Bill
of Sale is consented to on
behalf of Borrower
By: MICHAEL G. ZAMAGIAS
Name: Michael G. Zamagias
Its: General Partner
STATE OF PENNSYLVANIA )
) SS
COUNTY OF ALLEGHENY )
ACKNOWLEDGEMENT
I, the undersigned, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY, that Robert I. Glimcher, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument as a general partner of Spring Hill Associates, an Ohio general
partnership, appeared before me this day in person and acknowledged that he
signed and delivered the said instrument as his own free and voluntary act
and as the free and voluntary act of said partnership, for the uses and
purposes set forth therein.
GIVEN under my hand and Notarial seal this 4th day of April 1995.
COLLEEN MOORE
Notary Public
My commission expires: June 29, 1996
STATE OF PENNSYLVANIA )
) SS
COUNTY OF ALLEGHENY )
ACKNOWLEDGEMENT
I, the undersigned, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY, that Robert I. Glimcher, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument as a general partner of Spring Hill Associates, an Ohio general
partnership, appeared before me this day in person and acknowledged that he
signed and delivered the said instrument as his own free and voluntary act
and as the free and voluntary act of said partnership, for the uses and
purposes set forth therein.
GIVEN under my hand and Notarial seal this 10th day of April 1995.
CAROL A. MACSURAK
Carol A. Macsurak
Notary Public
My commission expires: April 28, 1997
JMB MORTAGE PARTNERS, LTD. - II
EXHIBIT 10-B
------------------------------
AGREEMENT OF PARTNERSHIP OF
JMB\SPRING HILL ASSOCIATES
This Agreement is made and entered into effective as of the 19th day
of December, 1994 by and among JMB MORTGAGE PARTNERS, LTD., an Illinois
limited partnership, JMB MORTGAGE PARTNERS, LTD.-II, an Illinois limited
partnership, and JMB MORTGAGE PARTNERS, LTD.-III, an Illinois limited
partnership (herein the "General Partners", sometimes herein referred to as
the "Partners").
R E C I T A L S:
WHEREAS, the parties hereto desire to form a general partnership
pursuant to the Uniform Partnership Act, as amended, as in effect in the
State of Illinois, except as hereinafter provided, upon the terms and
conditions as set froth herein.
NOW THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, with the intention of being
legally bound, do hereby agree as follows:
SECTION 1. FORMATION; NAME; TERM; OFFICE; PURPOSE.
1.1 FORMATION. The parties hereby enter into and form, or ratify
the formation of, a general partnership (the "Partnership") in accordance
with the provisions of the Uniform Partnership Act as from time to time
amended and in effect in Illinois (the "Act"). Except as provided in this
Agreement, the rights and liabilities of the Partners shall be as provided
in the Act.
1.2 NAME. The name of the Partnership shall be "JMB/Spring Hill
Associates" and such name shall be used at all times in connection with its
business and affairs.
1.3 TERM. Partnership shall begin as of the date hereinabove
mentioned and, subject to earlier termination as herein provided, shall
continue until the earlier to occur of the last day of December, 2044 or
the first date on which the Partners determines that (i) all assets and
property of the Partnership have been reduced to cash or cash equivalents;
(ii) all liabilities and obligations of the Partnership have been paid and
satisfied in full; and (iii) the purposes of the Partnership have been
completed.
1.4 OFFICE. The books and records of the Partnership shall be
maintained at 900 North Michigan, Chicago, Illinois 60611. The Partners
may change the office of the Partnership and shall promptly thereafter
notify each of the Partners of such change.
1.5 PURPOSE. The purpose of the Partnership shall be to acquire,
hold, develop and otherwise use for profit, certain real property located
in West Dundee, Illinois, together with improvements thereon and certain
tangible and intangible personal property used in connection therewith,
commonly known as "Spring Hill Fashion Center" and to
engage in any and all activities related or incidental thereto. Whenever
the term "Property" appears in this Agreement, such term shall mean any
property, real or personal, tangible or intangible, at any time owned by
the Partnership.
SECTION 2. PARTNERS; CAPITAL.
2.1 PARTNERS. The names and addresses of the Partners are set
forth in EXHIBIT A hereto. If additional individuals or entities are to be
admitted to the Partnership as Partners as permitted under this Agreement,
EXHIBIT A hereto shall be appropriately amended by such persons and the
Partners to reflect the names and addresses of each other Partner.
2.2 CAPITAL CONTRIBUTIONS. The Partners have contributed or have
agreed to contribute the sums set forth in EXHIBIT A attached hereto and
made a part hereof. The Partners may make such additional contributions as
may be agreed to from time to time by the Partners, provided that any such
additional capital shall be contributed to the Partnership by the Partners
pro-rata in the proportion of their "Partnership Shares" (as hereinafter
defined). In the event that any Partner makes an additional capital
contribution to the Partnership or receives a return of all or part of its
contributions to the Partnership, such fact shall promptly be recorded in
the books and records of the Partnership, and EXHIBIT A shall be promptly
amended to reflect the same.
2.3 WITHDRAWALS OF CAPITAL. Except as otherwise herein provided,
no Partner shall be entitled to withdraw capital or to receive
distributions of or against capital without the prior written consent of,
and upon the terms and conditions specified by, the other Partners.
2.4 CAPITAL ACCOUNTS. The Partnership shall maintain for each of
the Partners a capital account, which shall be the aggregate amount of the
contributions to the Partnership made by such Partner, reduced by the
aggregate amount of any losses allocated, and any distributions of cash or
the fair market value or other assets of the Partnership made, to such
Partner and increased by the aggregate amount of any net profits allocated
to such Partner.
2.5 LOANS. All advances or payments to the Partnership by any
Partner, other than the contributions required or made under Section 2.1
hereof, shall be deemed to be loans by such Partner to the Partnership, and
the Partner making such loan shall be entitled to interest thereon at such
rates per annum as the Partners may agree, and such loan together with
interest as aforesaid, shall be repaid before any distribution shall be
made hereunder to the other Partners. No such loan to the Partnership
shall be made without the prior written consent of the Partners and shall
be required to be made by all Partners in proportion to their respective
Partnership Shares (as hereinafter defined). With respect to any
borrowings by the Partnership for which there is recourse to the Partners
or any of their respective assets, the Partners shall be liable for such
borrowing in proportion to their respective Partnership Shares (as
hereinafter defined) as determined from time to time.
2
SECTION 3. PARTNERSHIP SHARES.
3.1 DEFINITIONS; ALLOCATIONS FOR TAX PURPOSES. As used herein,
"profits" shall include, without limitation, each item of Partnership
income and gain, and "losses" shall include, without limitation, each item
of loss, and deductions as determined for Federal income tax purposes, and
"Partnership Share" shall be as set forth on EXHIBIT A attached hereto.
All profits or losses from the operations of the Partnership (including the
sale or refinancing of the Property) for a fiscal year or part thereof
shall be allocated to the Partners based upon their respective Partnership
Shares.
3.2 CASH DISTRIBUTIONS.
(a) All profits or losses from the sale or other disposition of all
or any substantial portion of the Property shall be allocated to the
Partners in accordance with the respective Partnership Shares on the date
on which the Partnership recognized such profits or losses for Federal
income tax purposes. Notwithstanding anything to the contrary in this
Agreement, upon the ultimate liquidation of the Partnership, if any Partner
has a deficit balance in his capital account (after giving effect to the
allocation set forth in this agreement, including without limitation, the
allocations set forth in this Section 3.2 (a), then any such Partner will
make a capital contribution to the Partnership in an amount equal to such
deficit balance, any such capital contribution shall be distributed as
proceeds from the liquidation of the Partnership to the other Partner with
a positive balance in his capital account to the extent of such positive
balance. Notwithstanding any adjustment of the allocations of profits or
losses provided in this Agreement by any judicial body or governmental
agency (or any amendment hereto as a result of a change or proposed change
in any law or regulation or any interpretation thereof), the allocation of
profits or losses provided in this Agreement shall control for purposes of
the determination of the Partners' capital accounts for all purposes of
this Agreement.
(b) Each distribution to the Partners of cash or other assets of the
Partnership made prior to the dissolution of the Partnership made prior to
the dissolution of the Partnership, including, but not limited to, each
distribution of net cash flow from the operations of the Partnership and
net proceeds received by the Partnership from the sale or refinancing of
all or any substantial portion of the Property, shall be made to the
Partners in accordance with their respective Partnership Shares owned on
the date of such distribution. Each distribution of cash or other assets
of the Partnership made after dissolution of the Partnership shall be made
in accordance with Section 7.3 hereof. Distributions of the Partners will
be made in such amount and at such times as shall be determined by all of
the Partners, or in the event of the dissolution and liquidation of the
Partnership, by the Winding-Up-Party (as hereinafter defined).
SECTION 4. MANAGEMENT OF THE PARTNERSHIP. The ultimate
responsibility for the affairs of the Partnership shall be vested in the
Partners.
3
SECTION 5. PARTNERSHIP BOOKS AND RECORDS; FISCAL YEAR. The Partners
shall keep and maintain the books and records of the Partnership at the
principal place of business of the Partnership. The fiscal year of the
Partnership shall end on the 31st day of December in each year. The books
of the Partnership shall be kept on the cash or accrual basis, and the
Partnership shall be on the cash or accrual basis for tax purposes, as
determined by the Partners. The books and records of the Partnership shall
be audited at such times and by such accountants as shall be determined
from time to time by the Partners. The funds of the Partnership shall be
deposited in such bank accounts or invested in such interest bearing or
non-interest-bearing investments, as shall be determined by the Partners.
SECTION 6. TRANSFER OF PARTNERSHIP INTERESTS.
6.1 WRITTEN CONSENT REQUIRED. No Partner may sell, assign,
transfer, encumber or hypothecate the whole or any part of its Partnership
interest (including, but not limited to, its interest in the capital or
profits of the Partnership) without the written consent of the other
Partners.
6.2 SUBSTITUTED PARTNERS. Any party or person admitted to the
Partnership as a substituted Partner shall be subject to and bound by all
of the provisions of this Agreement as if originally a party to this
Agreement. Any party or person admitted to the Partnership as a
substituted Partner shall have all of the rights as a partner in the
Partnership conferred upon a general partner pursuant to the Act. The
admittance of a party or person to the Partnership as a substituted Partner
and the withdrawal of a party or person as a partner in the Partnership
shall continue to exist with the then remaining parties or persons of
Partners as if all the then existing Partners were originally all of the
Partners in the Partnership.
6.3 LIABILITY OF PARTNERS. A Partner shall have no liability
hereunder (including, but not limited to, any liability as a surety but
excluding liability for the repayment or any outstanding principal and
interest on loans made by the Partnership to such Partner) for any
obligations accruing under or in connection with the Partnership and
relating to events occurring after such Partner shall have sold, assigned
or transferred its entire Partnership interest.
SECTION 7 DISSOLUTION AND CONTINUATION OR TERMINATION OF THE
PARTNERSHIP.
7.1 DISSOLUTION OF PARTNERSHIP. No act, thing, occurrence, event
or circumstance shall cause or result in the dissolution of the
Partnership, except the matters specified in Section 7.2 below.
4
7.2 DISSOLUTION EVENTS AND CONTINUATION OR TERMINATION OF THE
PARTNERSHIP. The happening of any one of the following events shall work a
dissolution of the Partnership.
(i) The bankruptcy, legal incapacity, dissolution, termination, termination
or expulsion of any then existing Partner; provided, however, that in such
event the remaining Partners shall have the right to elect to continue the
Partnership's business by depositing at the office of the Partnership a
writing evidencing such election;
(ii) The reduction to cash or cash equivalents of all of the assets of the
Partnership
(iii) The unanimous agreement in writing by all of the Partners of the
Partnership; or
(iv) The termination of the term of the Partnership pursuant to section
1.3 hereof. Without limitation on the other provisions hereof, the
admission of a new Partner shall not work a dissolution of the Partnership.
Except as otherwise provided in this Agreement, each Partner agrees that,
without the consent of the other Partners, a Partner may not withdraw from
or cause a voluntary dissolution of the Partnership.
7.3 WINDING UP PARTNERSHIP AFFAIRS. Upon the occurrence of any of
the events specified in Section 7.2 causing a dissolution of the
Partnership and except as otherwise provided in Section 7.2, the remaining
Partner or Partners shall commence to wind up the affairs of the
Partnership and to liquidate its investments (and in this connection shall
have full right and unlimited discretion to determine in good faith the
time, manner and terms of any sale or sales of Partnership Property). The
Partner or Partners obligated to wind up the affairs of the Partnership as
aforesaid are herein called the "Winding-Up Party". The Partners and their
legal representatives, successors and assignees shall continue to share
profits and losses during the period of liquidation in the same manner and
proportion as immediately before the dissolution. Following the payment of
all debts and liabilities of the Partnership and all expenses of
liquidation and subject to the right of the Winding-Up Party to set up such
cash reserves as, and for so long as, it may deem reasonable necessary, the
proceeds of the liquidation and any other funds and assets of the
Partnership shall be distributed to the Partners (after deducting from the
distributive share of a Partner any sum such Partner owes the Partnership)
in accordance with Capital Account balances and Partnership Shares as
provided in Section 3.2 (b) hereof. No Partner shall have any right to
demand or receive property other than cash upon dissolution or termination
of the Partnership. Upon the completion of the liquidation of the
Partnership and of the distribution of all Partnership assets, the
Partnership shall terminate and the Winding-Up Party shall have the
authority to execute any and all documents required in its judgement to
effectuate the dissolution and termination of the Partnership. Each
Partner shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and its capital contribution
thereto and share of the profits or losses therefrom, and shall have no
recourse therefor against any Partner; provided that nothing herein
contained shall relieve any Partner of such Partner's obligation to pay any
liability or indebtedness owing the Partnership by such Partner.
5
SECTION 8 NOTICES; AMENDMENT.
8.1 NOTICES. Any notice which a Partner is required or may desire
to give any other Partner shall be in writing, and may be given by
personally delivered or by mailing the same by United States registered or
certified mail, return receipt requested, to the Partner to whom such
notice is directed at the address of each Partner as set forth on EXHIBIT A
hereto, subject to the right of a Partner to designate a different address
for itself by notice similarly given. Any notice so given by United States
mail shall be deemed to have been given on the second day after it is
deposited in the United States mail as registered or certified mail,
addressed as above provided, with postage thereon fully prepaid. Any such
notice not given by registered or certified mail as aforesaid shall be
deemed to be given upon receipt by the party to whom it is to be given.
8.2 AMENDMENT. This Agreement may be amended by written agreement
of amendment executed by all the Partners, but no otherwise.
SECTION 9 MISCELLANEOUS. Each Partner hereby irrevocably waives
any and all rights that it may have to maintain any action for partition of
any of the Partnership Property. This Agreement constitutes the entire
agreement between the parties. This Agreement supersedes any prior
agreement or understanding between the parties. This Agreement and the
rights of the parties hereunder shall be governed by and interpreted in
accordance with the laws of the State of Illinois. Except as herein
otherwise specifically provided, this Agreement shall be binding upon and
inure to the benefit of the parties and their legal representatives,
successors and assignees. Captions contained in the Agreement in no way
define, limit or extend the scope or intent of this Agreement. If any
provisions of this Agreement, or the application of such provision to any
person or circumstance, shall be held invalid, the remainder of this
Agreement, or application of such provision to other persons or
circumstances, shall not be affected thereby. This Agreement may be
executed in several counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same instrument. The opinion
of the independent certified public accountants retained by the Partnership
from time to time shall be final and binding with respect to all
computations and determination required to be made under Section 3 hereof
(including computations and determinations in connection with any
distribution following or in connection with the dissolution of the
Partnership). If the Partnership or any Partner obtains a judgement
against any other party by reason of breach of this Agreement or failure to
comply with the provisions hereof, a reasonable attorney's fee as fixed by
the court shall be included in such judgement. Any Partner shall be
entitled to maintain, on its own behalf of the Partnership, any action or
proceeding against any other Partner or the Partnership (including, without
limitation, any action for damages, specific performance or declaratory
relief) for or by reason of breach by such party of this Agreement,
notwithstanding the fact that any or all of the parties to such proceeding
may then be a partner in the Partnership, and without dissolving the
Partnership as a partnership. No remedy conferred upon the Partnership or
any Partner in this Agreement is intended to be exclusive or any other
remedy herein
6
or by law provided or permitted, but each shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute (subject, however, to the
limitations expressly herein set forth). No waiver by a Partner or the
Partnership of any breach of this Agreement shall be deemed to be a waiver
of any other breach of any kind or nature and no acceptance of payment or
performance by a Partner or the Partnership after any such breach shall be
deemed to be a waiver of any breach of this Agreement whether or not such
Partner or the Partnership knows of such breach at the time it accepts such
payment or performance. No failure or delay on the part of a Partner or
the Partnership to exercise any right it may have shall prevent the
exercise thereof by such Partner or the Partnership at any time such other
Partner may continue to be in default hereunder, and no such failure or
delay shall operate as a waiver of any breach or default.
IN WITNESS WHEREOF, the undersigned have executed this Agreement of
Partnership of JMB/Spring Hill Associates as of the day and year first
above written.
JMB MORTGAGE PARTNERS, LTD., an
Illinois limited partnership
By: JMB Realty Corporation, a
Delaware corporation
Corporate General Partner
By: JULIE WALAER
Its: Vice President
JMB MORTGAGE PARTNERS, LTD.II, an
Illinois limited partnership
By: JMB Realty Corporation, a
Delaware corporation
Corporate General Partner
By: JULIE WALAER
Its: Vice President
JMB MORTGAGE PARTNERS, LTD.-III, an
Illinois limited partnership
By: JMB Realty Corporation, a
Delaware corporation
Corporate General Partner
By: JULIE WALAER
Its: Vice President
7
EXHIBIT A
PARTNERSHIP
PARTNER SHARES
JMB Mortgage Partners, Ltd. 60.45%
900 North Michigan Ave.
Chicago, IL 60611
JMB Mortgage Partners, Ltd.-II 7.00%
900 North Michigan Ave.
Chicago, IL 60611
JMB Mortgage Partners, Ltd.-III 32.55%
900 North Michigan Ave.
Chicago, IL 60611
Total ---------------
100.00%
8
