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, 1996 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 . . . . . . . . . . . . . 11
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 28
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 28
Item 11. Executive Compensation . . . . . . . . . . . 31
Item 12. Security Ownership of
Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . 32
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 33
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 33
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 35
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Financial Statements contained in this annual report. Capitalized terms
used herein, but not defined, have the same meanings as used in the Notes.
The registrant, JMB Mortgage Partners, Ltd. - II (the "Partnership"),
was a limited partnership formed in 1983 and governed by the Revised
Uniform Limited Partnership Act of the State of Illinois to make first
mortgage loans and senior land purchase-leasebacks/leasehold mortgage loans
and, to a lesser extent, wrap-around and junior mortgage loans and land
purchase-leaseback arrangements on a subordinated basis. On 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
made any additional capital contribution after such date. The Limited
Partners of the Partnership shared in their portion of the benefits of
ownership of the Partnership's mortgage investments according to the number
of Interests held.
The Partnership was engaged solely in the business of investing in
real estate, such as residential garden apartment complexes and smaller
commercial properties, through participating first mortgage loans and
certain other mortgage investments. The Partnership's investments were
located throughout the nation and it had no investments located outside the
United States. A presentation of information about industry segments,
geographic regions, raw materials or seasonality was not applicable and
would not have been material to an understanding of the Partnership's
business taken as a whole. The Partnership made a final liquidating
distribution to its holders of Interests and terminated its operations and
dissolved effective December 31, 1996. At repayment or maturity of a
particular mortgage investment or at sale of a particular property acquired
as a result of a non-performing loan, the net proceeds, if any, were
generally distributed or reinvested in existing properties rather than
invested in acquiring additional properties. (Reference is also made to
Item 7.)
The Partnership made real estate investments set forth in the
following table:
<TABLE>
<CAPTION>
NAME, TYPE OF PROPERTY DATE OF SALE OR
AND LOCATION SIZE PURCHASE DISPOSITION DATE TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1. 1550 Spring Road
Office Building
DuPage County,
Illinois . . . . . . 24,000 7-27-84 6-2-92 Participating first
sq.ft. mortgage loan
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 (a)
3. Valley Lo Towers
apartment complex
Glenview,
Illinois. . . . . . 118 units 4-15-86 7-2-93 Participating first
mortgage loan (b)
4. Spring Hill
Fashion Corner
shopping center
West Dundee,
Illinois . . . . . . 125,000 2-18-86 11-13-96 Participating first
sq.ft. mortgage loan (c)
<FN>
- ---------------
(a) Reference is made to the Notes for a description of the prepayment of this loan in 1995.
(b) Reference is made to the Notes for a description of the prepayment of this loan in 1993.
(c) Reference is made to the Notes for a description of the events resulting in the Partnership obtaining
legal title to this property in May 1995 and the sale of such property in November 1996.
</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 the Notes. 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 the Notes. 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 the Notes. The Partnership's funding of a participating
first mortgage loan secured by the Spring Hill Fashion Corner shopping
center in West Dundee, Illinois and the subsequent acquisition of title and
disposition of this property in November 1996 by the Partnership and its
participating affiliated lenders is described in the Notes.
The properties securing the Partnership's former mortgage investments
were subject to competition from similar types of properties (including in
certain areas, properties owned by affiliates of the General Partners) in
the respective vicinities in which they are located. Such competition was
generally for the retention of existing tenants and for securing new
tenants due to significant vacancies which were present in the local
market. Approximate occupancy levels for the property owned in 1996 are
set forth in the table in Item 2 below to which reference is hereby made.
On November 13, 1996, the Partnership through JMB/Spring Hill
Associates, sold the Spring Hill Fashion Corner which was the last
remaining investment property of the Partnership. Reference is made to
Item 7 below and to the Notes for a further description of such
transaction.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is made for a description of such terms and transactions.
<TABLE>
ITEM 2. PROPERTIES
The Partnership had made real estate investments in the four properties referred to under Item 1. Reference
is made to Item 1 and to the Notes for a description of such investments.
The following is a listing of the principal business or occupation carried on in and approximate occupancy
levels by quarter during fiscal years 1996 and 1995 for the Partnership's owned or reflected as owned investment
property during 1996:
<CAPTION>
1995 1996
------------------------- -------------------------
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 Corner
shopping center
West Dundee,
Illinois. . . . . . . . . . Retail 94%* 94% 92% 75% 67% 93% 95% N/A
<FN>
- ----------
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
* Reference is made to the Notes for a discussion of the presentation of this property as owned at March 31,
1995 although title did not transfer to a venture jointly owned by 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
1996 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
Immediately prior to the dissolution of the Partnership, there were
4,604 record holders of Interests in the Partnership. On December 31,
1996, the Partnership made a liquidating distribution and subsequently
terminated its operations and dissolved effective December 31, 1996. There
had been no public market for Interests and it had not been anticipated
that a public market for Interests would develop. Upon request, the
Corporate General Partner provided information relating to a prospective
transfer of Interests to an investor desiring to transfer his Interests.
The price paid for the Interests, as well as any other economic aspects of
the transaction, was subject to negotiation by the investor.
Reference is made to Item 6 below for a discussion of cash
distributions made to the Limited Partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION),
AND YEARS ENDED DECEMBER 31, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 108,546 552,394 1,069,773 5,199,090 2,496,001
============ ============ =========== =========== ===========
Operating earnings
(loss) . . . . . . . . . $ (185,850) 340,943 515,749 4,966,275 2,248,372
Partnership's share
of operations of
unconsolidated
venture. . . . . . . . . (10,519) 46,056 -- -- --
------------ ------------ ----------- ----------- -----------
Net operating
earnings (loss). . . . . (196,369) 386,999 515,749 4,966,275 2,248,372
Gain on sale or
Partnership's share
of gain on sale
of property. . . . . . . 206 -- -- -- 358,035
------------ ------------ ----------- ----------- -----------
Net earnings
(loss). . . . . . . $ (196,163) 386,999 515,749 4,966,275 2,606,407
============ ============ =========== =========== ===========
Net earnings (loss)
per limited partner-
ship interest (b):
Net operating
earnings (loss). . . . $ 9.64 4.18 -- 183.03 93.97
Gain on sale or
Partnership's share
of gain on sale of
property . . . . . . . .01 -- -- -- 15.69
------------ ------------ ----------- ----------- -----------
Net earnings
(loss) per
interest. . . . . . $ 9.65 4.18 -- 183.03 109.66
============ ============ =========== =========== ===========
Total assets. . . . . . . $ 1,551,967 2,077,801 10,972,574 12,140,622 20,207,152
============ ============ =========== =========== ===========
Cash distributions
per Interest (c). . . . $ 35.00 398.00 41.00 541.50 125.00
============ ============ =========== =========== ===========
<FN>
- ----------
(a) The above selected financial data should be read in
conjunction with the financial statements and the related notes appearing
elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the
number of Interests outstanding at the end of each period (22,590.5) and
the specified profit and loss allocations (as discussed in the Notes)
between the Limited and General Partners.
(c) Cash distributions from the Partnership were generally not
equal to Partnership's income for financial reporting or (loss) Federal
income tax purposes. Each partner's taxable income (loss) from the
Partnership in each year was 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 (loss) 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
As a result of the public offering of Interests as described in Item
1, the Partnership had approximately $19,300,000 (after deducting selling
expenses and other offering costs) with which to make investments in real
estate primarily through participating first mortgage loans, to pay for
legal fees and other costs related to such investments and for working
capital. A portion of such proceeds was utilized to make the mortgage
investments described in Item 1 above.
During the second quarter of 1996, some of the Limited Partners in the
Partnership received from an unaffiliated third party an unsolicited tender
offer to purchase up to 1,006 Interests in the Partnership at $35 per
Interest. The Partnership recommended against acceptance of this offer on
the basis that, among other things, the offer price was inadequate. In
June such offer expired with approximately 56 Interests being purchased by
such unaffiliated third party pursuant to such offer. The board of
directors of JMB Realty Corporation ("JMB"), the corporate general partner
of the Partnership, had established a special committee (the "Special
Committee") consisting of certain directors of JMB to deal with all matters
relating to tender offers for Interests in the Partnership, including any
and all responses to such tender offers. The Special Committee had
retained independent counsel to advise it in connection with any potential
tender offers for Interests and had retained Lehman Brothers Inc. as
financial advisor to assist the Special Committee in evaluating and
responding to any additional potential tender offers for Interests.
In connection with the liquidation and termination of the Partnership,
the Corporate General Partner intended to cause the formation of a
liquidating trust on or before December 31, 1996, in which all of the
Partnership's remaining assets, subject to liabilities, would have been
transferred. The initial trustees of the liquidating trust were expected
to be individuals who are officers of the Corporate General Partner. The
formation of a liquidating trust was determined to be unnecessary.
In October 1996, JMB/Spring Hill Associates (the "venture") finalized
a contract for the sale of the Spring Hill Fashion Corner. On November 13,
1996, the venture sold the property to an unaffiliated third party for
$9,200,000, all of which was received (less closing costs) in cash at
closing. As a result of the sale, the venture recognized a loss for
Federal income tax reporting purposes of approximately $1,030,000. As the
sale per the contract was estimated to result in a loss of approximately
$775,000 for financial reporting purposes, as a matter of prudent
accounting practice, the venture recognized a $775,000 provision for value
impairment at September 30, 1996, of which $54,250 was allocated to the
Partnership. When the sale of the property was completed in November 1996,
the venture, after the effect of the September 1996 provision for value
impairment, recognized a gain of approximately $3,000 for financial
reporting purposes, of which approximately $200 was allocated to the
Partnership.
The Spring Hill Fashion Corner was the remaining investment property
of the Partnership. The Partnership made the final liquidating
distribution of $1,551,967 to the Holders of Interests and terminated its
affairs as of December 31, 1996.
RESULTS OF OPERATIONS
Reference is made to the Notes for a description of the participating
first mortgage loans funded by the Partnership.
The increase in cash and cash equivalents at December 31, 1996 as
compared to December 31, 1995 is attributable primarily to the
Partnership's retention of its share of the net proceeds from the sale of
the Spring Hill Fashion Corner for the final liquidating distribution to
the Holders of Interests as discussed above.
The decrease in investment in unconsolidated venture, at equity and
Partnership's share of operations of unconsolidated venture and the
increase in the Partnership's share of gain on sale of property at December
31, 1996 as compared to December 31, 1995 and for the year ended December
31, 1996 as compared to the years ended December 31, 1995 and 1994,
respectively, is attributable to the Partnership's sale, through its
unconsolidated joint venture, of the Spring Hill Fashion Corner in November
1996. An additional decrease in the Partnership's share of operations of
unconsolidated venture for 1996 is due to the Partnership's share of
JMB/Spring Hill Associates' $775,000 provision for value impairment in
September 1996 due to the contract for the November 1996 sale of the
property.
Interest income decreased approximately $445,000 for the year ended
December 31, 1996 as compared to December 31, 1995 primarily as a result of
the April 1995 prepayment of the loan secured by the Plaza at Shelter Cove
shopping center. 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. Interest income decreased
approximately $75,000 for 1995 as compared to 1994 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
Corner. 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 resulted in a
decrease of approximately $50,000 in interest income for 1995 as compared
to 1994.
Mortgage investment servicing fees decreased in 1996 and 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 increase in general and administrative expenses for 1996 as
compared to 1995 is primarily attributable to the timing of recognition of
costs for certain outsourcing services and printing costs in 1996 and to
costs incidental to the termination of the Partnership. The increase in
general and administrative expenses in 1995 as compared to 1994 is
attributable primarily to an increase in reimbursable costs to affiliates
of the General Partners in 1995 and the recognition of certain additional
prior year reimbursable costs to such affiliates.
Reference is made to the Notes regarding the provision for loan loss
made in 1994 on the loan secured by the Spring Hill Fashion Corner.
Reference is made to the Notes 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
repayment proceeds. 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. Distributions to the Limited and General
Partners in 1996 (prior to the final liquidating distribution) represent
the Limited and General Partner's share of certain previously undistributed
cash flow from operations and the Limited Partners' share of a portion of
the general reserve of the Partnership which was deemed not necessary to be
retained for future operations. The General Partners were required to
contribute $587,378 to the Partnership upon dissolution and termination of
the Partnership, such amount representing repayment of excess distributions
of sale and repayment proceeds received by the General Partners over
amounts to which they were entitled. In addition, the General Partners
contributed $65,712 of interest to the Partnership as a result of such
excess distributions.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1996 (Immediately prior to
final liquidating distribution) and 1995
Statements of Operations, year ended December 31, 1996
(Immediately prior to final liquidating distribution)
and years ended December 31, 1995 and 1994
Statements of Partners' Capital Accounts (Deficits),
year ended December 31, 1996 (Immediately prior to
final liquidating distribution) and years ended
December 31, 1995 and 1994
Statements of Cash Flows, year ended December 31, 1996
(Immediately prior to final liquidating distribution)
and years ended December 31, 1995 and 1994
Notes to 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.
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, 1996 (Immediately prior to the final
liquidating distribution) and 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in the Notes to the financial statements, in 1996, the
Partnership and its unconsolidated venture changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 17, 1997
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND DECEMBER 31, 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 1,551,967 1,391,904
Interest and other receivables. . . . . . . . . . . . . . . . . . . -- 6,421
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . 1,551,967 1,398,325
------------ -----------
Investment in unconsolidated venture,
at equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 679,476
------------ -----------
$ 1,551,967 2,077,801
============ ===========
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . $ -- 11,144
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . -- 11,144
------------ -----------
Commitments and contingencies
Partners' capital accounts (deficits)
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 588,378 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . 1,459,678 1,873,934
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (2,048,056) (1,932,819)
------------ -----------
-- (57,885)
------------ -----------
Limited partners (22,590.5 interests):
Capital contributions, net of offering costs. . . . . . . . . . . 19,272,546 19,272,546
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . 20,224,926 20,006,833
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (37,945,505) (37,154,837)
------------ -----------
1,551,967 2,124,542
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . . 1,551,967 2,066,657
------------ -----------
$ 1,551,967 2,077,801
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Interest income . . . . . . . . . . . . . . . . . $ 108,546 552,394 1,069,773
----------- ----------- -----------
108,546 552,394 1,069,773
----------- ----------- -----------
Expenses:
Mortgage investment servicing fees. . . . . . . . -- 6,680 21,899
Professional services . . . . . . . . . . . . . . 72,940 55,540 53,260
Amortization of deferred costs. . . . . . . . . . -- 9,909 11,603
General and administrative. . . . . . . . . . . . 221,456 139,322 91,262
Provisions for loan losses. . . . . . . . . . . . -- -- 376,000
----------- ----------- -----------
294,396 211,451 554,024
----------- ----------- -----------
Operating earnings (loss) . . . . . . . . (185,850) 340,943 515,749
Partnership's share of operations of
unconsolidated venture. . . . . . . . . . . . . . (10,519) 46,056 --
----------- ----------- -----------
Net operating earnings (loss) . . . . . . (196,369) 386,999 515,749
----------- ----------- -----------
Partnership's share of gain on sale of
property by unconsolidated venture. . . . . . . . 206 -- --
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . $ (196,163) 386,999 515,749
=========== =========== ===========
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss) . . . . . . . . . $ 9.64 4.18 --
Partnership's share of gain on sale of
property by unconsolidated venture. . . . . . .01 -- --
----------- ----------- -----------
Net earnings (loss) $ 9.65 4.18 --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (22,590.5 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- --------- ------------- --------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
at Decem-
ber 31,
1993 . . . $1,000 1,065,621 (924,670) 141,951 19,272,546 19,912,398 (27,237,609) 11,947,335
Net earnings
(loss) . . -- 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
(loss) . . -- 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)
------ --------- ----------- -------- ---------- ---------- ----------- ----------
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS (22,590.5 INTERESTS)
------------------------------------------------- ----------------------------------------------------
CONTRI-
BUTIONS,
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- --------- ------------- --------- ----------- ---------- ------------- ----------
Balance
at Decem-
ber 31,
1995 . . . 1,000 1,873,934 (1,932,819) (57,885) 19,272,546 20,006,833 (37,154,837) 2,124,542
Capital con-
tributions 587,378 -- -- 587,378 -- -- -- --
Net earnings
(loss) . . -- (414,256) -- (414,256) -- 218,093 -- 218,093
Cash distri-
butions
($35.00
per limited
partnership
interest). -- -- (115,237) (115,237) -- -- (790,668) (790,668)
-------- --------- ----------- -------- ---------- ---------- ----------- ----------
Balance
at Decem-
ber 31,
1996 . . . $588,378 1,459,678 (2,048,056) -- 19,272,546 20,224,926 (37,945,505) 1,551,967
======== ========= =========== ======== ========== ========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $ (196,163) 386,999 515,749
Items not requiring (providing) cash
or cash equivalents:
Amortization of deferred costs. . . . . . . . . -- 9,909 11,603
Provisions for loan losses. . . . . . . . . . . -- -- 376,000
Partnership's share of operations and gain
on sale of unconsolidated venture,
net of distributions . . . . . . . . . . . . . 10,313 (7,556) --
Changes in:
Interest and other receivables . . . . . . . . . 6,421 92,210 63,457
Amount due from affiliate. . . . . . . . . . . . -- 35,000 (35,000)
Deferred interest receivable . . . . . . . . . . -- 1,481,618 (74,545)
Accounts payable . . . . . . . . . . . . . . . . (11,144) 1,810 (42,002)
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . (190,573) 1,999,990 815,262
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities
of short-term investments . . . . . . . . . . . -- -- 1,321,102
Prepayments of first mortgage loans . . . . . . . -- 6,643,000 --
Distributions from unconsolidated venture . . . . 669,163 -- --
Collection of principal on promissory
note received in connection with
mortgage loan prepayment. . . . . . . . . . . . -- 963,454 281,370
Costs in conjunction with investment in
unconsolidated venture. . . . . . . . . . . . . -- (776) --
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . 669,163 7,605,678 1,602,472
----------- ----------- -----------
Cash flows from financing activities:
Contributions from general partners . . . . . . . 587,378 -- --
Distributions to limited partners . . . . . . . . (790,668) (8,991,018) (926,210)
Distributions to general partners . . . . . . . . (115,237) (292,564) (715,585)
----------- ----------- -----------
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . (318,527) (9,283,582) (1,641,795)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . 160,063 322,086 775,939
Cash and equivalents,
beginning of year . . . . . . . . . . . 1,391,904 1,069,818 293,879
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $ 1,551,967 1,391,904 1,069,818
=========== =========== ===========
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. . . . . . . . . . . $ -- 671,920 --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
JMB MORTGAGE PARTNERS, LTD. - II
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
(IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
AND YEARS ENDED DECEMBER 31, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership held (through a joint venture) an equity investment in
commercial real estate in the state of Illinois. Business activities
consisted of rentals to a variety of commercial and retail companies, and
the ultimate sale or disposition of such real estate.
For financial reporting purposes, effective January 1, 1995, the
mortgage loan secured by the Spring Hill Fashion Corner was determined to
have been in-substance foreclosed and was reclassified as an investment in
a joint venture on the equity method at its estimated fair value. In early
May 1995, the lenders (including the Partnership) obtained legal title to
the property. Accordingly, the accompanying financial statements for the
years ended December 31, 1996 (immediately prior to final liquidating
distribution) and 1995 do not include the accounts of the JMB/Spring Hill
Associates ("Spring Hill") venture.
The Partnership's records were 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 were not recorded on the records of the Partnership. The
effect of these items for the years ended December 31, 1996 (Immediately
prior to final liquidating distribution) and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 1,551,967 1,551,967 2,077,801 5,407,915
Partners' capital
accounts (deficits):
General Partners. . . . . . . . . -- -- (57,885) --
Limited Partners. . . . . . . . . 1,551,967 1,551,967 2,124,542 5,398,345
Net earnings (loss):
General Partners. . . . . . . . . (414,256) (23,818) 292,564 292,564
Limited Partners. . . . . . . . . 218,093 (199,124) 94,435 (503,278)
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . 9.65 (8.81) 4.18 (22.28)
============ =========== =========== ===========
</TABLE>
The net earnings (loss) per limited partnership interest ("Interest")
was based upon the number of Interests outstanding at the end of each
period (22,590.5). Net profits of the Partnership were 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 that had been
previously deferred. For financial reporting purposes, distributions to
the General Partners 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 distributions from
repayment proceeds of approximately $273,000 during 1995, with the Limited
Partners being allocated the remainder of net profits for 1995. During
1996, primarily due to the contributions totaling $653,090 by the General
Partners to the Partnership as discussed below, the General Partners were
allocated a loss for financial reporting purposes of $414,256. Such
allocations in 1996, 1995 and 1994 had no effect on total Partnership
assets or net profits. Also, because net earnings were computed
immediately prior to dissolution, Holders of Interests may have, on
dissolution, an additional capital gain or loss depending on the Holders'
basis for Federal income tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may have differed from these
estimates.
Certain amounts in the 1994 and 1995 financial statements have been
reclassified to conform to the 1996 presentation.
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 were considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership recorded
amounts held in U.S. Government obligations at cost, which approximated
market. For the purposes of these statements, the Partnership's policy was
to consider all such amounts held with original maturities of three months
or less (none and $1,291,904 at December 31, 1996 and 1995, respectively)
as cash equivalents, with any remaining amounts (generally with original
maturities of one year or less) reflected as short-term investments being
held to maturity.
Deferred costs consisted 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.
No provision for state or Federal income taxes had been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the taxing authorities
amounts representing withholding from distributions paid to partners.
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.
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 secured 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,
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). 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.
SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS
In February 1986, the Partnership committed to participate in the
funding of a participating first mortgage loan in the maximum amount of
$11,000,000, secured by the Spring Hill Fashion Corner shopping center
located in West Dundee, Illinois. The total amount funded under this loan
was $10,030,000 (of which the Partnership's share was $702,100 (7.0%)).
The other two participating lenders were JMB Mortgage Partners, Ltd. and
JMB Mortgage Partners, Ltd. - III, both of which were or are affiliates of
the General Partners of the Partnership. As additional security for the
first mortgage loan, the borrower delivered to the lenders, in January
1988, two $250,000 irrevocable and unconditional letters of credit (which
were to expire December 31, 1994 and January 15, 1995, respectively), upon
which the lenders could draw in the event a default occurred under the
loan. The aforementioned letters of credit had been subject to yearly
renewal if certain specified net operating income levels at the property
were not achieved by the borrower.
Due to the uncertainty of the realization of the simple accrued
interest recognized through November 30, 1991 (approximately $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 was reflected in the accompanying
financial statements for December 31, 1994.
The borrower defaulted in its scheduled basic interest payments due
under this loan during the fourth quarter of 1994. Consequently, the
lenders (including the Partnership) drew on the above-mentioned letters of
credit totaling $500,000 in late December 1994. An affiliate of the
lenders took control of the property's funds in January 1995 and was
managing the property under an agreement which provided for a maximum fee
equal to 6% of the property's gross receipts (such fee including
compensation for leasing activity). In early May 1995, the lenders
obtained legal title to the property pursuant to a deed in lieu of
foreclosure. Effective as of the management takeover date (January 1,
1995), the Partnership considered the mortgage loan to be in-substance
foreclosed and 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 the property provided a current
return which was significantly less than the scheduled interest payments
due under the original mortgage loan.
The terms of Spring Hill's partnership agreement provided 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).
In October 1996, Spring Hill finalized a contract for the sale of this
property. On November 13, 1996, the venture sold the Spring Hill Fashion
Corner to an unaffiliated third party for $9,200,000, all of which was
received (less closing costs) in cash at closing. As a result of the sale,
the venture recognized a loss for Federal income tax reporting purposes of
approximately $1,030,000. As the sale per the contract was estimated to
result in a loss of approximately $775,000 for financial reporting
purposes, as a matter of prudent accounting practice, the venture
recognized a $775,000 provision for value impairment at September 30, 1996,
of which $54,250 has been allocated to the Partnership. When the sale of
the property was completed in November 1996, the venture, after the effect
of the September 1996 provision for value impairment, recognized a gain of
approximately $3,000 for financial reporting purposes, of which
approximately $200 was allocated to the Partnership.
Spring Hill adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121") as required in the first quarter of
1996. SFAS 121 requires that Spring Hill record an impairment loss on its
properties to be held for investment whenever their carrying value cannot
be fully recovered through estimated undiscounted future cash flows from
their operations and sale. The amount of the impairment loss to be
recognized would be the difference between the property's carrying value
and the property's estimated fair value. Spring Hill's policy was to
consider a property to be held for sale or disposition when Spring Hill had
committed to a plan to sell such property and active marketing activity had
commenced or was expected to commence in the near term. In accordance with
SFAS 121, any properties identified as "held for sale or disposition" were
no longer depreciated. Adjustments for impairment loss for such properties
(subsequent to the date of adoption of SFAS 121) were made in each period
as necessary to report these properties at the lower of carrying value or
fair value less costs to sell. The adoption of SFAS 121 did not have any
significant effect on Spring Hill's financial position, results of
operations or liquidity.
As Spring Hill had committed to a plan to sell the property, the
property was classified as held for sale as of July 1, 1996 and therefore
was not subject to continued depreciation. The accompanying financial
statements include a loss of $10,519 and earnings of $46,056, respectively,
representing the Partnership's share of total property operating loss of
$150,275 and operating earnings of $657,936 for the years ended December
31, 1996 and 1995. The property was not reflected as owned by the
Partnership and its affiliated lenders prior to January 1, 1995 as
described above.
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits of the
Partnership from operations were 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
were allocated 90% to the Limited Partners and 10% to the General Partners.
However, during 1996, a reallocation of prior years' operating losses was
made among the partners for financial reporting purposes. Such
reallocation did not have an effect on total assets, total partners'
capital or net earnings. Profits from the repayment or other disposition
of mortgage investments were allocated first to the General Partners in an
amount equal to the greater of 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 were allocated to
the Limited Partners. Net losses from any disposition of mortgage
investments were to be allocated 97% to the Limited Partners and 3% to the
General Partners.
The General Partners were required to contribute $587,378 to the
Partnership upon dissolution and termination of the Partnership, such
amount representing repayment of excess distributions of sale and repayment
proceeds received by the General Partners as of termination over amounts
which they were entitled to, as discussed below. In addition, the General
Partners contributed $65,712 of interest to the Partnership as a result of
such excess distributions. Distributions of "net cash flow" of the
Partnership were 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. Such stipulated return was not received by the Limited Partners,
therefore, the General Partners received one-half of such net cash flow
distributed, with the remaining amounts being deferred, as described below.
Distributions of "repayment proceeds" were 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 were to be distributed to the
General Partners, subject to certain limitations. Of the cumulative
distributions of $37,945,505 paid to the Limited Partners (immediately
prior to the final liquidating distribution), $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, $14,732,948 represents distributions of net cash flow for periods
subsequent to April 30, 1985 and $22,364,593 represents distributions of
proceeds from the sale of the 1550 Spring Road Office Building, the
prepayment of the loan secured by the Valley Lo Towers and the prepayment
of the loan secured by the Plaza at Shelter Cove shopping center. Proceeds
from the sale of the Spring Hill Fashion Corner were included in the final
liquidating distribution paid to the Holders of Interest on December 31,
1996. The General Partners' cumulative net distributions of $1,460,678
represented distributions of net cash flow of $1,356,368 and distributions
of sale and repayment proceeds of $104,310.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses incurred and paid by the Partnership to the General Partners and
their affiliates for the year ended December 31, 1996 (immediately prior to
final liquidating distribution) and the years ending December 31, 1995 and
1994 were as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- ------------
Reimbursement (at cost)
for accounting services. $ 5,439 29,015 35,793 --
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 12,651 17,553 13,083 --
Reimbursement (at cost)
for legal services . . . 6,061 1,165 1,863 --
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket expenses . 15,320 53,009 389 --
------- ------- ------- -------
$39,471 100,742 51,128 --
======= ======= ======= =======
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.
The Partnership was obligated to pay (not more often than monthly)
mortgage investment servicing fees to the General Partners at an annual
rate of 1/4 of 1% of the maximum amount funded or to be funded by the
Partnership on mortgage investments. The servicing fee was calculated from
the date the Partnership first signed a letter of commitment for such
mortgage investment, but was 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, 1996.
Payment of approximately $308,000 of distributions from Partnership
operations to the General Partners had previously been deferred, as
discussed above. Due to the terms of the Partnership Agreement, the
General Partners are not entitled to these amounts upon liquidation and
termination of the Partnership. All amounts previously deferred by the
General Partners or their affiliates did not bear interest.
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary financial information for Spring Hill as of and for the years
ended December 31, 1996 (through the date of sale) and 1995 is as follows:
1996 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. . . . . . . . . . . $1,077,873 1,451,866
========== ==========
Expenses applicable to
operating income. . . . . . . . $1,228,148 793,930
========== ==========
Net operating earnings (loss) . . $ (150,275) 657,936
========== ==========
Net earnings (loss) . . . . . . . $ (147,327) 657,936
========== ==========
Reference is made to the footnote discussion of this investment
property for a description of the in-substance foreclosure and subsequent
acquisition of title to this property by the Partnership and its
participating lenders in 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in, or disagreements with, accountants during
1995 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership was JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which was owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB had responsibility for all aspects of the Partnership's operations,
subject to the requirement that all mortgage investments and all voluntary
dispositions thereof (including by sale or exchange) were required to be
approved by the Associate General Partner of the Partnership, AGPP
Associates, L.P. AGPP Associates, L.P., an Illinois limited partnership
with JMB as its sole general partner, was directed by a majority in
interest of its limited partners (who were directors and affiliates of JMB
or its affiliates) as to whether to provide its approval of any mortgage
investment of the Partnership or the disposition thereof.
The Partnership was subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services were provided to
the Partnership or its investment properties by affiliates of the General
Partners, including property management services and insurance brokerage
services. In general, such services were provided on terms no less
favorable to the Partnership than could be obtained from independent third
parties and are otherwise subject to conditions and restrictions contained
in the Partnership Agreement. The Partnership Agreement permitted the
General Partners and their affiliates to provide services to, and otherwise
deal and do business with, persons who may be engaged in transactions with
the Partnership, and permitted the Partnership to borrow from, purchase
goods and services from, and otherwise to do business with, persons doing
business with the General Partners or their affiliates. The General
Partners and their affiliates were in competition with the Partnership
under certain circumstances, including, in certain geographical markets,
for tenants for properties and/or for the sale of properties. Because the
timing and amount of cash distributions and profits and losses of the
Partnership could be affected by various determinations by the General
Partners under the Partnership Agreement, including whether and when to
sell or refinance a property, the establishment and maintenance of
reasonable reserves, the timing of expenditures and the allocation of
certain tax items under the Partnership Agreement, the General Partners may
have had a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 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 7, 1997. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1997. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"),
Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real
Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate
Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited
Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI
("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-
XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III") JMB
Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus,
Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle
Income Plus-II") and the managing general partner of JMB Income Properties,
Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"),
JMB Income Properties,("JMB Income-VI"), JMB Income Properties, Ltd.-VII
("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB
Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties,
Ltd.-XII ("JMB Income-XII") and JMB Income Properties Ltd.-XIII ("JMB
Income-XIII"). JMB is also the sole general partner of the associate
general partner of most of the foregoing partnerships. Most of the
foregoing directors and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB
Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II
("Arvida-II")), and Income Growth Managers, Inc. (the corporate general
partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such
directors and officers are also partners of certain partnerships which are
associate general partners in the following real estate limited p-
artnerships: Carlyle-VII, Carlyle-IX, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB
Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income
Plus, Carlyle Income Plus-II and IDS/BIG.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.
("USC, Inc."), an affiliate of JMB that is a real estate investment trust
in the business of owning, managing and developing shopping centers. He is
a Certified Public Accountant.
Neil G. Bluhm (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August 1970. Mr. Bluhm is a director of USC, Inc. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 58) has been associated with JMB since June
1971, and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 55) has been associated with JMB since July
1972. Mr. Nathan is also a director of Sportmart, Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December 1972.
John G. Schreiber (age 50) has been associated with JMB since December
1970, and served as an Executive Vice President of JMB until December 1990.
Mr. Schreiber is a director of USC, Inc. Mr. Schreiber is President of
Schreiber Investments, Inc., a company which is engaged in the real estate
investing business. He is also a senior advisor and partner of Blackstone
Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since
1994, Mr. Schreiber has also served as a Trustee of Amli Residential
Property Trust, a publicly-traded real estate investment trust that invests
in multi-family properties. He is also a director of a number of
investment companies advised or managed by T. Rowe Price associates and its
affiliates. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business.
H. Rigel Barber (age 47) has been associated with JMB since March
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 49) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 44) has been associated with JMB since February
1984. He holds a 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 48) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 61) has been associated with JMB since March 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership had no officers or directors. The General Partners of
the Partnership were entitled to receive a share of cash distributions,
when and as cash distributions were made to the Limited Partners, and a
share of profits or losses. The General Partners were required to
contribute $587,378 to the Partnership in 1996, such amount representing
repayment of excess distributions of sale and repayment proceeds received
by the General Partners as of termination over amounts to which they were
entitled. In addition, the General Partners contributed $65,712 of
interest to the Partnership as a result of such excess distributions. The
General Partners were allocated taxable loss of $23,818 in 1996.
The Partnership, pursuant to the Partnership Agreement, was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
The Corporate General Partner and its affiliates were due
reimbursement (at cost) in 1996 for accounting services, portfolio
management services, legal services and for administrative charges and
other out-of-pocket expenses of $5,439, $12,651, $6,061 and $15,320,
respectively, all of which was paid at December 31, 1996.
The Partnership was obligated to pay (not more often than monthly)
mortgage investment servicing fees to the General Partners at an annual
rate of 1/4 of 1% of the maximum amount funded or to be funded by the
Partnership on mortgage investments. The servicing fee was calculated from
the date the Partnership first signed a letter of commitment for such
mortgage investment, but was 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, 1996.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group was known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership immediately prior to the liquidation of the Partnership.
(b) The Corporate General Partner, its officers and directors and the Associate General Partner owned as a
group the following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty 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 possessed a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There existed no arrangement, known to the Partnership, the operation of which would have resulted in a
change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the 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.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between AGPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is hereby incorporated herein by reference to the
Partnership's report for September 30, 1996, as amended, on Form 10-Q/A
(File No. 0-16252) dated November 8, 1996.
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 Corner are incorporated herein by reference to the
Partnership's report for December 31, 1995 on Form 10-K (File No. 0-16252)
dated March 25, 1996.
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
incorporated herein by reference to the Partnership's report for December
31, 1995 on Form 10-K (File No. 0-16252) dated March 25, 1996.
10-C.Real Property Purchase Agreement between JMB/Spring
Hill Associates and Inland Real Estate Corporation, dated October 14, 1996,
as amended October 29, 1996 is filed herewith.
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 1996 has been sent
to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JMB MORTGAGE PARTNERS, LTD. - II
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 21, 1997
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 21, 1997
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 21, 1997
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 21, 1997
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 21, 1997
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 21, 1997
STUART C. NATHAN*
By: Stuart C. Nathan
Executive Vice President and Director
Date: March 21, 1997
*By: GAILEN J. HULL
Pursuant to a Power of Attorney
GAILEN J. HULL
By: GAILEN J. HULL, Attorney-in-Fact
Date: March 21, 1997
JMB MORTGAGE PARTNERS, LTD. - 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
3-C. Acknowledgement of rights and
duties of General Partners of the
Partnership Yes
10-A. Agreement for Deed in Lieu of
Foreclosure, dated April 4,
1995 Yes
10-B. General Partnership Agreement
for JMB/Spring Hill
Associates, dated
May 1, 1995 Yes
10-C. Real Property Purchase Agreement
for Spring Hill Fashion Corner,
dated October 14, 1996 as amended
October 29, 1996 No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 10-C
- -------------
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II PURCHASE AND SALE 3
2.1 Purchase and Sale 3
ARTICLE III PURCHASE PRICE 3
3.1 Purchase Price 3
ARTICLE IV CLOSING MATTERS 4
4.1 Survey 4
4.2 Title 4
4.3 Possession, Prorations and Expenses 5
4.4 Escrow 9
4.5 Closing 9
ARTICLE V BROKERAGE 11
5.1 Brokerage 11
ARTICLE VI DESTRUCTION, DAMAGE OR CONDEMNATION 12
6.1 Destruction or Damage 12
6.2 Condemnation 12
6.3 Casualty and Rent Loss Insurance 13
ARTICLE VIICOVENANTS, REPRESENTATIONS, WARRANTIES 13
7.1 Affirmative Covenants of Seller 13
7.2 Representations and Warranties of Seller 15
7.3 Representations and Warranties
of Purchaser 16
7.4 Covenants of Purchaser 17
ARTICLE VIII DEFAULT, CONDITIONS PRECEDENT
AND TERMINATION 18
8.1 Conditions to Purchaser's Obligations
and Default by Seller 18
8.2 Conditions to Seller's Obligations
and Default by Purchaser 19
ARTICLE IX NOTICES 19
9.1 Notices 19
ARTICLE X ADDITIONAL COVENANTS 21
10.1 Entire Agreement, Amendments and Waivers 21
10.2 Further Assurances 21
10.3 Survival and Benefit 21
10.4 No Third Party Benefits 22
10.5 No Recording 22
10.6 Interpretation 22
10.7 Seller's Exculpation 23
10.8 Effective Date 24
EXHIBITS
--------
A - Legal Description of Real Property
B - Permitted Title Exceptions
C - List of Personal Property
D - List of Leases
E - List of Service Contracts
F - Form of Tenant Estoppel Letter
G - List of Pending Litigation
H - Criterion for New Leases
AGREEMENT TO PURCHASE
---------------------
THIS AGREEMENT is made this 14th day of October, 1996, by and
between JMB/Spring Hill Associates, an Illinois general partnership
("Seller") and Inland Real Estate Corporation, a Maryland corporation
("Purchaser").
R E C I T A L S:
----------------
A. Seller is the fee owner of that certain Shopping Center
("Improvements") commonly known as Spring Hill Fashion Corner - Phase I,
located at the intersection of Route 72 and Route 31, West Dundee,
Illinois, and legally described in Exhibit "A" attached hereto (the
"Real Property").
B. Seller desires to sell and Purchaser desires to purchase,
the "Property" (as hereinafter defined) upon and subject to the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. When used herein, the following terms shall
have the respective meanings set forth opposite each such term:
AGREEMENT: This Agreement to Purchase including the Exhibits
attached hereto which are by this reference
incorporated herein and made a part hereof.
CLOSING DATE: October 30, 1996 subject to extension to December 2,
1996 pursuant to Section 4.5(b)(viii) hereof, or
pursuant to Section 4.2 hereof.
CLOSING: The consummation of this Agreement.
DEED: That certain recordable Limited Warranty Deed to be
executed by Seller and delivered by Seller to
Purchaser at the Closing, conveying the Real Property
to Purchaser (or to Purchaser's designee) subject only
to the Permitted Title Exceptions.
DEPOSIT: The sum of $150,000.00 which shall be deposited by
Purchaser with Title Insurer within one business day
after Seller's acceptance hereof, at Title Insurer's
office in Chicago, Illinois, to be held in an interest
bearing account as earnest money subject to the terms
of this Agreement. All interest earned thereon shall
be included in this definition.
LEASES: Those leases for rental of retail space in the
Improvements listed on Exhibit D and those leases
executed hereafter and which are in existence as of
the Closing Date.
LEGAL
REQUIREMENTS: All laws, statutes, codes, acts, ordinances,
judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and
requirements of all governments and governmental
authorities having jurisdiction over the Real Property
and the operation of the Improvements thereon.
NOTICE TO
CANCEL: That written notice which may be given by Purchaser to
Seller pursuant to Section 8.1(a).
PERMITTED TITLE
EXCEPTIONS: The Leases, those matters set forth in Exhibit "B"
attached hereto, and any other matters which Purchaser
shall approve in writing or be deemed to have approved
pursuant to the terms of this Agreement.
PERSONAL
PROPERTY: Those items of personalty, which are listed on Exhibit
"C" attached hereto and which will be conveyed to
Purchaser at Closing by a Bill of Sale (the "Bill of
Sale") containing no warranties, whether express or
implied, except a warranty of title free of any lien
or encumbrance.
PROPERTY: The Real Property, Personal Property, Service
Contracts, and the Leases.
PURCHASE PRICE: The consideration payable by Purchaser to Seller for
the Property, as provided in Article III.
PURCHASER: Inland Real Estate Corporation or its designee.
RENT ROLL: The list of Leases in existence as of the date of said
list, which list is attached hereto as Exhibit "D."
SELLER: JMB/Spring Hill Associates
SERVICE
CONTRACTS: Those contracts, agreements, and leases of equipment
relating to the servicing, operation, management and
maintenance of the Property which are listed on
Exhibit "E" attached hereto.
SURVEY: Current as-built survey of the Real Property prepared
by a surveyor licensed by the State of Illinois and
certified to Purchaser, Purchaser's designee, and the
Title Insurer, to be prepared in accordance with
minimum standards for an ALTA survey.
TITLE
COMMITMENT: A commitment for an Owner's Title Insurance Policy for
the Real Property issued by the Title Insurer in the
full amount of the Purchase Price, covering title to
the Real Property, dated on or after the date hereof,
showing Seller as owner of the Real Property in fee
simple, subject only to the Permitted Title Exceptions
and other exceptions pertaining to liens or
encumbrances of a definite or ascertainable amount
(which, in the aggregate do not exceed the Purchase
Price) which may be removed by the payment of money at
Closing and which Seller shall so remove at Closing.
The Title Commitment will have attached thereto the
following endorsements ("Endorsements"): Extended
Coverage, 3.1 Zoning with Parking Contiguity and
Restrictions.
TITLE INSURER: Near North National Title Corporation, as agent for
First American Title Insurance Company.
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE. Subject to the conditions and on the
terms contained in this Agreement, Purchaser agrees to purchase and
acquire from Seller, and Seller agrees to sell and transfer to
Purchaser, the Real Property by the Deed, the Leases and Service
Contracts by assignment, and the Personal Property by the Bill of Sale.
ARTICLE III
PURCHASE PRICE
3.1 PURCHASE PRICE. The purchase price shall be TEN MILLION ONE
HUNDRED TWENTY FIVE THOUSAND AND NO/100 ($10,125,000.00) DOLLARS payable
as hereinafter provided. Purchaser agrees to pay to Seller, and Seller
agrees to accept payment of the Purchase Price as follows:
(a) The Deposit shall be applied against the Purchase
Price at Closing.
(b) Purchaser shall pay to Seller at Closing the balance
of the Purchase Price, plus or minus adjustments and prorations as
hereinafter provided, by certified, cashier's or escrowee check or bank
wire transfer of collected federal funds, as Seller requests.
ARTICLE IV
CLOSING MATTERS
4.1 SURVEY. No later than ten (10) days following the date
hereof, Seller shall deliver the Survey to Purchaser, at Seller's sole
cost and expense. The Survey shall be dated not more than thirty (30)
days prior to date of delivery, shall show no encroachments by or from
the Real Property onto any adjacent property and no violation of or
encroachments upon any recorded building lines, restrictions, zoning
set-backs, or easements affecting the Real Property. If the Survey
discloses any such unpermitted encroachment or violation or any
exceptions to title or matters indicating possible rights of third
parties other than the Permitted Title Exceptions and the same are not
acceptable to Purchaser, or if Purchaser desires to have the surveyor's
certification revised in a reasonable manner, then, within five (5) days
from Purchaser's receipt of the Survey, Purchaser must so notify Seller.
If Purchaser fails to so notify Seller within said five (5) day period,
the Survey will be conclusively deemed to be approved by Purchaser. If,
within said five (5) day period Purchaser notifies Seller that the
Survey does not comply with the terms of this Agreement (which
notification must specify in what respects the Survey does not so
comply), Seller shall have ten (10) days from the date of delivery of
Purchaser's notice to have the Title Insurer issue its endorsements
insuring against damage caused by such encroachments, violations or
unpermitted exceptions and provide evidence thereof to Purchaser, or to
have the surveyor's certification revised, as applicable, and if Seller
fails to do so, and provide evidence thereof to Purchaser, within said
ten (10) day period, Purchaser may elect within ten (10) days after the
expiration of Seller's ten (10) day cure period, to (i) terminate this
Agreement and thereafter there shall be no further liability of either
party hereunder (in which event the Deposit shall promptly be returned
to Purchaser) or (ii) accept the Real Property subject to such
encroachments, violations and unpermitted exceptions or the unrevised
surveyor's certification, as applicable, without any diminution of the
Purchase Price. Purchaser's failure to make any election within said
ten (10) day period shall be conclusively deemed to mean that Purchaser
has elected the option contained in subsection (i) of this Section 4.1.
4.2 TITLE. No later than ten (10) days following the date
hereof, Seller shall deliver the Title Commitment to Purchaser, at
Seller's sole cost and expense. If the Title Commitment discloses
exceptions to title other than the Permitted Title Exceptions
("Unpermitted Title Exceptions") and such Unpermitted Title Exceptions
are not acceptable to Purchaser, then, within five (5) days from
Purchaser's receipt of the Title Commitment, Purchaser must so notify
Seller. If Purchaser fails to so notify Seller within said five (5) day
period, the Unpermitted Title Exceptions will be conclusively deemed to
be approved by Purchaser. If, within said five (5) day period,
Purchaser shall notify Seller that all or certain of the Unpermitted
Title Exceptions are not acceptable to Purchaser (which notification
must specify which Unpermitted Title Exceptions are so unacceptable),
Seller shall have ten (10) days from the date of Purchaser's notice to
have such exceptions removed from the Title Commitment or cause the
Title Insurer to insure Purchaser against same and provide evidence
thereof to Purchaser, and if Seller fails to have such exceptions
removed, or insured over, Purchaser may elect, within ten (10) days
after the expiration of Seller's ten (10) day cure period to
(i) terminate this Agreement without liability on the part of any party
thereafter (in which event the Deposit shall be promptly returned to
Purchaser), or (ii) accept title subject to such Unpermitted Title
Exceptions without any diminution of the Purchase Price. Purchaser's
failure to make any election within said ten (10) day period shall be
conclusively deemed to mean that Purchaser has elected the option
contained in subsection (i) of this Section 4.2. On the Closing Date,
at the expense of Seller as set forth in Section 4.3(c) hereof, Seller
shall cause the Title Insurer to issue an owner's title insurance policy
or prepaid commitment therefor pursuant to and in accordance with the
Title Commitment insuring fee simple title to the Real Property in
Purchaser or its designee as of the Closing Date, subject only to the
Permitted Title Exceptions and such other exceptions as Purchaser may
approve. If Seller is unable to cause the Title Insurer to issue any of
the Endorsements and Purchaser refuses to waive the requirement
therefor, then this Agreement shall become null and void and of no
further force or effect, and the Deposit will be returned to Purchaser.
Additionally, Seller will have no obligation to obtain any of the
Endorsements if the Title Insurer charges other than standard rates for
the coverage or if the Title Insurer requires security or an indemnity
from Seller in order to issue any of the Endorsements.
If Purchaser shall make objection to the Survey (as described in
Section 4.1) or the Title Commitment (as described in this Section 4.2)
and the Closing Date was to occur prior to the time each party was able
to exercise its rights under Section 4.1 or Section 4.2, as applicable,
then the Closing Date will be extended to a date which is three (3)
business days subsequent to the latest date for notice, objection and
remedy permitted by either Section 4.1 or 4.2, as applicable.
4.3 POSSESSION, PRORATIONS AND EXPENSES, AND NEW LEASES.
(a) Sole and exclusive possession of the Property, subject
only to the rights of the tenants under the Leases, shall be delivered
to Purchaser on the Closing Date. Any vacant space will be placed into
Rent Ready Condition which is defined to be that all walls are patched
and freshly painted, each space to be demised has a fully-fixtured and
operable bathroom, and all doors have locks and are operable, the
ceiling is completed with acoustical tile and standard fluorescent
lighting and the floor is in broom-clean condition.
(b) If the balance of the Purchase Price is deposited in
immediately available funds with the Title Insurer by 12:00 noon on the
Closing Date, as required by Section 4.5(d) hereof, all prorations will
be computed as of the end of the day immediately prior to the Closing
Date ("Proration Date"). If Purchaser fails to deposit the balance of
the Purchase Price by 12:00 noon on the Closing Date, as aforesaid, and
if Seller does not terminate this Contract for such default of Purchaser
and the Closing occurs, the Proration Date shall be concurrent with the
Closing Date and all prorations will be calculated as of the end of the
day on the Closing Date.
(c) Fixed Rent, Percentage Rent and tenant common area
maintenance and other expense contributions to be made by tenants shall
be prorated as follows:
(i) Fixed Rent - prepaid Fixed Rent will be prorated
as of the Proration Date. All other Fixed Rent which is delinquent on
the Proration Date will not be prorated. All such arrearages of Fixed
Rent unpaid on the Proration Date will remain the sole and exclusive
property of Seller after Closing, provided, however, if, after Closing,
Seller shall receive any such delinquent Fixed Rent, Seller will remit
to Purchaser that portion of such delinquent Fixed Rent that is
attributable to the period after the Proration Date, if any. Seller
shall retain all right, title, power and authority to enforce payment
thereof after Closing, except that Seller will not have the right to
terminate the Lease of a delinquent tenant after Closing due to such
delinquency. If, after Closing, Purchaser or its designee shall receive
any delinquent Fixed Rents (this provision shall not relate to
percentage rents) Purchaser may first apply such payments to rent
delinquencies which relate to any period after the Proration Date, and
Purchaser agrees, on its behalf and on behalf of its designee, to
immediately remit the balance to Seller.
(ii) Percentage Rent - Percentage Rent which is due
but unpaid at Closing and accrued Percentage Rent not yet payable at
Closing will not be prorated. If, after Closing, however, Purchaser
receives any payment of percentage rent which relates in any part to
sales made prior to the Proration Date, Purchaser shall immediately
remit Seller's share thereof to Seller and may not apply any portion of
such percentage rent to any post Proration Date rent delinquencies
whether delinquent Fixed Rent or tenants' delinquent obligations to pay
their prorata share of taxes or "Expenses" (as hereinafter defined).
(iii)Tenant CAM and Other Expense Contributions. For
purposes hereof, the term "Expenses" shall mean all common area
maintenance costs and other operating expenses of the Property,
excluding real estate taxes and other items expressly covered in other
provisions of this Section 4.3. All payments by the tenant to the
landlord under the Leases for Expenses ("Tenant Expense Contributions")
shall be prorated between Seller and Purchaser as follows:
(aa) Seller and Purchaser shall each be
entitled to receive and retain a percentage of the total Tenant Expense
Contributions paid by the tenants in the calendar year of Closing (the
"Applicable Year") equal to the percentage of the actual Expenses for
the Applicable Year paid by said party. As an example, if the total
Expenses for the year of Closing (i.e., 1996) are $200,000, of which
Seller pays $150,000 and Purchaser pays $50,000, and the total Tenant
Expense Contributions for such year are $160,000, then Seller shall be
entitled to $120,000 (75% of $160,000) of said Tenant Expense
Contributions and Purchaser shall be entitled to $40,000 (25% of
$160,000) thereof.
(bb) At Closing, Seller shall give Purchaser a
credit for a prorated portion of the Tenant Expense Contributions paid
in advance for the month of Closing determined by multiplying the total
such Tenant Expense Contributions paid for such month by a fraction, the
numerator of which is the number of days from and including the date of
Closing to and including the last day of such month and the denominator
of which is the total number of days in such month.
(cc) At the time of final calculation from the
tenants of the Tenant Expense Contributions for the Applicable Year,
whether in the nature of year-end reconciliations or payments in
arrears, Seller and Purchaser shall reprorate said Tenant Expense
Contributions based on the total amount thereof and the total actual
Expenses as contemplated under Paragraph (aa) above. If, as a result of
said reproration, the parties determine that either Seller or Purchaser
received from the tenants (as adjusted for the proration made at Closing
pursuant to Paragraph (bb) above) an amount of Tenant Expense
Contributions in excess of the amount to which such party is entitled
pursuant to Paragraph (aa) above, such party shall pay such excess to
the other party within fifteen (15) days after the reproration is
determined. In connection with the foregoing, Purchaser and Seller
agree to cooperate with each other concerning the calculation of the
reproration, including, without limitation, the delivery by each party
to the other of true and correct information concerning the actual
Expenses paid and the Tenant Expense Contributions collected by said
party, and Purchaser agrees to use its good faith efforts in collecting
Tenant Expense Contributions after Closing, including the prompt
preparation and delivery to the tenants of all required year-end
reconciliation statements. Seller shall deliver to Purchaser at Closing
information concerning the Expenses paid and Tenant Expense
Contributions collected by Seller prior to the Closing to the extent
reasonably available to Seller at that time.
(dd) The foregoing terms of this Section 4.3(c)(iii)
to the contrary notwithstanding, the parties hereto agree that they will
make best efforts to effectuate a final reproration of Tenant Expense
Contributions within twenty (20) days after Closing. If they are unable
to so agree, then the reprorations obligation set forth in subparagraph
(cc) above will be complied with.
In addition, security deposits, general and special real estate
and other ad valorem taxes and assessments and other state or city
taxes, fees, charges and assessments affecting the Property, prepaid
expenses, utility charges and deposits, if any, and all other
customarily proratable items shall be prorated as of the Proration Date
on the basis of the most recent ascertainable amounts of or other
reliable information in respect to each such item of income and expense
and the net credit to Purchaser or Seller shall be paid in cash or as a
credit or debit against the Purchase Price. In no event shall Seller be
charged or responsible for any increase in real estate taxes on the
Property resulting from any improvements made to the Property after the
Proration Date. In the event that any Lease requires the tenant
thereunder to pay any portion of the real estate taxes (upon presentment
of the actual tax bill) the credit in favor of Purchaser for accrued
real estate and other ad valorem taxes ("Purchaser's Tax Credit") will
be reduced by an amount equal to the aggregate of all such tenants'
obligations to pay any portion of Purchaser's Tax Credit under all such
Leases. If any general or special assessment (as contrasted to ad
valorem taxes) is payable in installments, only the current installment
will be prorated and all subsequent installments will be the obligation
of Purchaser. Real estate taxes will be reprorated (and such
reproration will be a final reproration) within thirty (30) days after
Closing, but in any event not later than December 18, 1996 ("Reproration
Date") as follows:
(i) if the assessment for 1996 has been promulgated by the
Assessor for Kane County, Illinois by the Reproration Date, then the
amount of such assessment for 1996, as well as the equalization factor
and tax rate for the 1995 real estate taxes will be used in calculating
such reproration; or
(ii) if the assessment for 1996 is not available by the
Reproration Date, then the real estate taxes will be reprorated based
upon 120% of the real estate tax bill for 1995.
In either of the foregoing instances Seller, at the time of
reproration, will be entitled to a credit equal to the aggregate of all
tenants' obligations to pay any portion of such reprorated amount of
real estate taxes under the provisions of the Leases.
(d) Seller shall pay all title charges required to fulfill
the obligations under Section 4.2, one-half (1/2) of the escrow charges,
all survey charges, and the cost of the State and County Transfer Tax on
the Deed. Purchaser shall pay for one-half (1/2) of the escrow charges,
the charges to record the Deed and the cost of the municipalities'
Transfer Tax on the Deed. The parties shall each be solely responsible
for the fees and disbursements of their respective counsel and other
professional advisers.
(e) (i) Seller, until the earlier of the Closing Date or
termination of this Agreement, shall not enter into any new Leases ("New
Leases") without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld. Purchaser will not be
deemed to have unreasonably withheld its consent to a proposed New Lease
if the terms thereof do not meet the Criterion for New Leases described
on Exhibit H attached hereto.
(ii) In the event Seller enters into a New Lease
after the date of this Agreement, and such New Lease requires
improvements or the payment of brokerage commissions (collectively the
"New Leasing Costs") at the expense of Seller, as landlord, Purchaser by
approving the execution of the New Lease shall, at Closing, assume the
obligation to pay for all unpaid New Leasing Costs. Any New Leasing
Costs paid by Seller prior to Closing, will be reimbursed to Seller by
Purchaser at Closing.
(iii) Failure of the Purchaser to consent or express
its objections with specificity in writing within three (3) business
days after a written request for such consent to the execution of a New
Lease by Seller, shall be deemed to constitute consent.
(iv) Purchaser at Closing will indemnify and forever
defend and hold Seller, its partners, agents, and employees harmless
from any loss, liability, suit, action, judgment or claim as a result of
Purchaser's non-payment of any New Leasing Costs assumed by Purchaser at
Closing.
4.4 ESCROW. Concurrently herewith, the parties, through their
respective attorneys, shall establish a Strict Joint Order Escrow in the
form customarily used by Title Insurer under which the Deposit will be
held. If Purchaser shall not give the Notice to Cancel, then not later
than seven (7) days prior to the Closing Date, but subject in any event
to Section 4.5(g), the Strict Joint Order Escrow will be terminated, and
a new escrow will be created by the parties through their respective
attorneys with the Title Insurer at Title Insurer's office in Chicago,
Illinois through which the Deposit will be held and invested and the
transaction shall be Closed. The escrow instructions shall be in the
form customarily used by the escrowee with such special provisions added
thereto as may be required to conform to the provisions of this
Agreement. Said escrow shall be auxiliary to this Agreement and this
Agreement shall not be merged into nor in any manner superseded by said
escrow.
4.5 CLOSING.
(a) The Closing of the transaction contemplated hereby
shall commence at 10:00 a.m. (CST) on the Closing Date at the offices of
the Title Insurer in Chicago, Illinois or on such other date, time and
place as the parties may mutually agree.
(b) Not later than the Proration Date, Seller shall
deposit in the escrow the following:
(i) The Deed;
(ii) An assignment of all of Seller's right, title
and interest in and under the Leases and Service Contracts;
(iii)The Bill of Sale;
(iv) Originals of the Leases and Service Contracts;
(v) Letters to tenants under the Leases advising
that the Property has been sold to Purchaser and directing payment of
rental under the Leases in accordance with the directions of Purchaser;
(vi) An ALTA statement in form required by the Title
Insurer;
(vii)An executed FIRPTA Affidavit in customary form;
(viii) Estoppel Letters in the form prescribed in
the Lease or if no form is prescribed in the Lease then substantially in
the form of Exhibit F attached hereto from T. J. Maxx, Pier One, Famous
Footwear, Michael's, Cosmetic Center and from such other tenants under
the Leases which, when added to the gross leasable area in the
Improvements occupied by the foregoing five named tenants, aggregate not
less than 80% of the total occupied gross leasable area in the
Improvements. If Seller is unable to procure such Estoppel Letters by
the Proration Date such failure shall not constitute a default by Seller
hereunder and Purchaser's sole rights hereunder (unless Seller shall
have elected to postpone the Closing Date pursuant to the following
sentence) will be to terminate this Agreement and obtain a return of the
Deposit or to waive this condition and Close this Agreement without
diminution of the Purchase Price or any liability to Seller. Seller may
elect by written notice to Purchaser given not later than two (2) days
prior to the Closing Date, to postpone the Closing Date (and thereby
extend the Proration Date) by up to thirty (30) days, in order to
attempt to obtain the minimum required Estoppel Letters from said
tenants. If by the extended Proration Date Seller is not able to
fulfill this condition, Purchaser shall have the right to select either
of the two foregoing elections.
(ix) Such other documents, instruments,
certifications and confirmations as may be reasonably required to fully
effect and consummate the transaction contemplated hereby.
(c) Not later than the Proration Date, Purchaser shall
deposit in the escrow the following:
(i) An ALTA statement in form required by the Title
Insurer;
(ii) An assumption of the Leases (including the
obligation to return or apply the tenants' security deposits under the
Leases, but only to the extent that Purchaser has received a proration
credit at Closing from Seller for said tenant security deposit or
unapplied portion thereof) and Service Contracts; and
(iii)Such other documents, instruments,
certifications and confirmations as may be reasonably required and to
fully effect and consummate the transaction contemplated hereby.
(d) No later than 12:00 noon (EST) on the Closing Date,
Purchaser shall deposit the balance of the Purchase Price as provided in
Section 3.1(b) with the Title Insurer.
(e) Not later than the Proration Date, Seller and
Purchaser shall jointly deposit in the escrow an agreed proration
statement and certificates complying with the provisions of state,
county and local law applicable to the determination of documentary and
transfer taxes.
(f) All documents or other deliveries required to be made
by Purchaser or Seller on or prior to the Proration Date and all
deposits and transactions required to be consummated concurrently with
Closing, shall be deemed to have been delivered and to have been
consummated simultaneously with all other transactions and all other
deliveries, and no delivery shall be deemed to have been made, and no
transaction shall be deemed to have been consummated, until all
deliveries required by Purchaser, or its designee, and Seller shall have
been made, and all concurrent or other transactions shall have been
consummated.
(g) At the request of either party, the transaction shall
be closed by means of a so-called "New York Style Closing," with the
concurrent delivery of the documents of title, transfer of interests,
delivery of the title policy described in Section 4.2 and the payment of
the Purchase Price. The Seller shall provide and pay for any necessary
undertaking (the "Gap Undertaking") to the Title Insurer and the charges
of the Title Insurer for such New York Style Closing shall be paid
equally by the parties hereto.
(h) In any event, whether the Closing occurs through
escrow or by way of a New York style closing, the parties and their
respective attorneys shall meet with the Title Insurer on or before the
Proration Date (as they shall mutually agree) to make their respective
deposits (except for the balance of the Purchase Price which will be
deposited by Purchaser on the Closing Date, as aforesaid) and approve
the proration statement, all as described in this Section 4.5, to enable
the Closing to occur in a prompt fashion on the Closing Date.
ARTICLE V
BROKERAGE
5.1 BROKERAGE. Seller hereby represents and warrants to
Purchaser that Seller has not dealt with any broker or finder with
respect to the transaction contemplated hereby except for Richard Ellis,
L.L.C. ("Brokers") whose commission shall be paid by Seller at Closing;
and Seller hereby agrees to indemnify Purchaser for any claim for
brokerage commission or finder's fee asserted by Brokers or any other
person, firm or corporation claiming to have been engaged by Seller.
Purchaser hereby represents and warrants to Seller that Purchaser has
not dealt with any broker or finder in respect to the transaction
contemplated hereby except for the Brokers and Purchaser hereby agrees
to indemnify Seller for any claim for brokerage commission or finder's
fee asserted by a person, firm or corporation other than the Brokers
claiming to have been engaged by Purchaser.
ARTICLE VI
DESTRUCTION, DAMAGE OR CONDEMNATION
6.1 DESTRUCTION OR DAMAGE. In the event that prior to the
Closing Date any portion of the Improvements shall be damaged or
destroyed by fire or other casualty, Seller shall immediately give
Purchaser notice of such occurrence. If the amount of damage caused by
such fire or casualty shall exceed $350,000.00 (as determined by an
insurance adjuster selected by Seller) Purchaser may, within fifteen
(15) days after receipt of such notice, elect to (a) terminate this
Agreement, in which event the Deposit shall be returned promptly to
Purchaser, all obligations of the parties hereunder shall cease and this
Agreement shall have no further force and effect, or (b) Close the
transaction contemplated hereby as scheduled (except that if the Closing
Date is less than fifteen (15) days following Purchaser's receipt of
such notice, Closing shall be delayed until after Purchaser makes such
election), and Seller shall assign to Purchaser at Closing all rights
under Seller's insurance policy to collect insurance proceeds for such
destruction or damage and loss of rents, and Purchaser shall receive a
credit against the Purchase Price equal to the amount of any deductible
under such policy. Failure to give such notice within such time shall
be conclusive evidence that Purchaser has elected the option contained
in subsection (b) of this Section 6.1.
In the event that the amount of damage caused by such fire or
casualty is less than $350,000.00 (as determined by an insurance
adjuster selected by Seller), Purchaser may not elect to terminate this
Agreement and shall Close the transaction contemplated hereby as
scheduled, and Seller shall assign to Purchaser at Closing all rights
under Seller's insurance policy to collect insurance proceeds for such
destruction or damage and loss of rents, and Purchaser shall receive a
credit against the Purchase Price equal to the amount of any deductible
under such policy.
6.2 CONDEMNATION. If, subsequent to the date hereof and prior
to the Closing Date, any proceeding, which shall relate to the proposed
taking of any "material" portion of the Real Property or Improvements by
condemnation or eminent domain or any action in the nature of eminent
domain, is instituted or commenced, Purchaser shall have the right and
option to terminate this Agreement by giving Seller written notice to
such effect within fifteen (15) days after actual receipt of written
notification of any such occurrence. Failure to give such notice within
such time shall be conclusive evidence that Purchaser has waived the
option to terminate by reason of the occurrence of which it has received
notice. If any such action is instituted or commenced, and Purchaser
elects or is deemed to elect not to terminate this Agreement, at
Closing, Purchaser shall be assigned all Seller's right to any proceeds
therefrom. Seller agrees to furnish Purchaser written notification with
respect to any such proceedings within forty-eight hours of Seller's
receipt of any such notification or learning of the institution of such
proceedings. Should Purchaser elect to so terminate this Agreement, the
Deposit shall be returned promptly to Purchaser and thereupon the
parties hereto shall be released from any and all further obligations
hereunder. If the Closing Date is less than fifteen (15) days following
the last day on which Purchaser is entitled to elect to terminate this
Agreement, the closing shall be delayed until after Purchaser makes such
election.
The term "material" for purposes of this Section 6.2 shall mean
any taking of any portion of the Improvements or any taking of more than
ten (10%) percent of the land area of the Real Estate.
6.3 CASUALTY AND RENT LOSS INSURANCE. If, under the terms of
Section 6.1, Seller is obligated at Closing, to assign to Purchaser all
rights under Seller's insurance policy to collect insurance proceeds for
the repair of any pre-Closing destruction or damage, Seller shall, at
Closing, make Purchaser a loss payee under such insurance policy in
order to effectuate such assignment obligation of Seller and in addition
shall make Purchaser a loss payee for any Loss of Rents insurance
coverage relating to any rental loss arising from said destruction or
damage, but relating solely to the period commencing on the Proration
Date and thereafter while such coverage may be in effect and the rent is
abated under any of the Leases as a result of such destruction or
damage.
In the event Seller is obligated to make Purchaser a loss payee
for any Loss of Rents insurance coverage pursuant to the preceding
paragraph and Seller's insurance to cover such Loss of Rents for a
period of twelve (12) months from the date of any fire or casualty is
not in effect at the time of Closing, Purchaser, at its election (to be
exercised at or prior to Closing by written notice to Seller) may
terminate this Agreement, obtain a return of its Deposit and thereupon
the parties hereto shall be released from any and all further
obligations hereunder.
ARTICLE VII
COVENANTS, REPRESENTATIONS, WARRANTIES
7.1 AFFIRMATIVE COVENANTS OF SELLER.
(a) Seller, at Seller's sole cost and expense, shall until
the earlier of, the Closing Date or termination of this Agreement, keep
and perform or cause to be performed in all material respects: (i) all
obligations of the lessor under the Leases, and (ii) all obligations of
Seller under the Legal Requirements if Seller's failure to perform any
of such Legal Requirements would adversely affect Seller's ability to
consummate this Agreement.
(b) From the date of Seller's acceptance hereof to the
earlier of, the Closing Date or termination of this Agreement, Seller
shall not do, suffer or permit or agree to do any of the following:
(i) Enter into any transaction in respect to or
affecting the Property out of the ordinary course of business;
(ii) Except for Seller's execution of new Leases, as
provided in Section 4.3(e), sell, encumber, or grant any interest in the
Property in any form or manner whatsoever, or otherwise perform or
permit any act which will diminish or otherwise affect Purchaser's
interest under this Agreement or in the Property, or which will prevent
Seller's full performance of its obligations hereunder.
(c) From the date of Seller's acceptance hereof to the
earlier of the Closing Date or termination of this Agreement, upon
reasonable advance notice from Purchaser (which notice shall be not less
than one business day in advance and shall be two (2) business days in
advance if Purchaser desires to inspect any occupied portions of the
Improvements) Seller shall permit representatives, accountants, agents,
employees, lenders, contractors, appraisers, architects and engineers
designated by Purchaser (collectively "Permittees") access to and entry
upon the Property to examine, inspect, measure and test the Property and
access to the office of Seller to review Seller's books and records
relating to the operation thereof. Seller shall have the right to
require that a representative of Seller may accompany any or all of the
Permittees.
If Purchaser desires to conduct any environmental sampling
or testing at the Property (other than a customary Phase 1 Environmental
Report which involves no intrusive testing or sampling), Purchaser shall
first provide Seller with the proposed study plan therefor ("Plan").
The Plan is subject to the approval of Seller and no environmental
sampling or testing shall be performed until the Plan therefor has been
approved by Seller. Purchaser agrees that Seller may have a
representative present at any inspection, sampling or testing,
including, but not limited to, an environmental engineer or consultant
designated by Seller (in connection with any environmental sampling or
testing conducted by Purchaser in accordance with this Section 7(c). At
Seller's request, any sampling or testing by Purchaser's environmental
consultant shall be conducted in a manner so as to provide "split"
samples or data to Seller's environmental consultant.
Purchaser does hereby indemnify and forever defend and hold
Seller, its partners, agents, and employees harmless from any loss,
liability, suit, action judgment, or claim (including, without
limitation, any mechanics' liens which may be filed against the
Property) which any of the indemnified parties may suffer or sustain as
a result of the exercise by Purchaser of its rights (and that of its
Permittees) to enter upon the Property or the office of Seller pursuant
to this Section 7.1(c). Prior to any such entry, Purchaser (or its
Permittees) will deliver to Seller a certificate of Commercial General
Liability insurance naming Seller and its partners as additional insured
thereunder in coverage amounts of not less than $1,000,000.00 per
occurrence. If the Closing does not occur for any reason, Purchaser
will restore (or cause to be restored), the Property to its former
condition to the extent Purchaser or its Permittees have altered or
damaged the Property in any manner.
(d) Seller shall notify Purchaser promptly if Seller
becomes aware of any transactions or occurrence prior to the Closing
Date which would make any of the representations or warranties of Seller
contained in Section 7.2 hereof not true in any material respect.
(e) Any vacant rentable space in the Real Property will be
placed into Rent Ready Condition which is defined to be that all walls
are patched and freshly painted, each space to be demised has a fully-
fixtured and operable bathroom, and all doors have locks and are
operable, the ceiling is completed with acoustical tile and standard
fluorescent lighting and the floor is in broom-clean condition.
(f) Seller agrees to cooperate with Purchaser's
accountants (at no cost or expense to Seller) relative to the
performance by said accountants of an audit of Seller's books and
records relating to the Property. If Purchaser's auditors shall request
Seller to execute a representation letter addressed to the auditors and
Seller and the auditors cannot agree on the content thereof, Purchaser
may terminate this Agreement at any time prior to the Closing Date by
written notice to Seller whereupon Purchaser shall obtain a return of
the Deposit and Seller shall reimburse Purchaser for the actual costs of
Purchaser's appraisal and environmental study to a maximum amount of
$8,500.00 and this Agreement shall become null and void and of no
further force or effect.
7.2 REPRESENTATIONS AND WARRANTIES OF SELLER. To induce
Purchaser to execute, deliver and perform this Agreement, Seller hereby
represents and warrants to Purchaser on and as of the date hereof and on
and as of the Closing Date (except as set forth in any written
communication from Seller to Purchaser given on or prior to the Closing
Date and setting forth any changes in such representations or
warranties) as follows:
(a) Seller owns fee simple title to the Real Property.
(b) Exhibit D hereto attached contains a list of all
Leases presently in existence and lists all modifications or amendments
to the Leases known to Seller. The interest of Seller in the Leases and
Service Agreements is free and clear of all liens and encumbrances and
has not been assigned to any other person.
(c) Except for Seller and tenants under the Leases, to
Seller's actual knowledge, there are no persons in possession or
occupancy of the Real Property or Improvements or any part hereof, nor
are there any persons who have possessory rights in respect to the Real
Property or Improvements or any part thereof. Except as may be set
forth in the Leases, there are no rights of first refusal to purchase or
options to purchase the Property in favor of any tenant under the
Leases.
(d) Seller has full capacity, right, power and authority
to execute, deliver and perform this Agreement and all documents to be
executed by Seller pursuant hereto, and all required action and
approvals therefor have been duly taken and obtained. This Agreement
and all documents to be executed pursuant hereto by Seller are, and
shall be, binding upon Seller.
(e) To Seller's actual knowledge, there are no causes of
action or other litigation pending in respect to the ownership of the
Property or any part thereof or the ownership, enforcement or validity
of the Leases except matters covered by insurance and except for any
matters listed on Exhibit G hereto attached.
(f) To Seller's actual knowledge, there are no existing
condemnation proceedings of any part of the Real Property, and Seller
has not received written notice from a condemning authority of its
intent to condemn any portion of the Real Property.
(g) To Seller's actual knowledge, Seller has not received
written notice from any Governmental Authority that: the Property is in
violation of any Legal Requirements which have not previously been
corrected; or, any special assessment lien has been, or will be, spread
of record.
(h) To Seller's actual knowledge, the Financial Statements
provided by Seller to Purchaser entitled (i) "Springhill Fashion Corner-
Phase I Historical Operating Results" and covering calendar years 1993,
1994 and 1995, and (ii) "Operating Expenses through July 1996", are each
true, accurate and complete in all material respects.
For purposes of this Agreement, the expression "Seller's actual
knowledge" shall mean the actual knowledge of Neil Davidson, the
property manager of the Property, and Julie Walner, the portfolio
manager (collectively the "Managers") and no knowledge of any employee,
agent, or independent contractor of Seller or Managers shall be imputed
to the Managers, nor shall the Managers be bound to, or obligated to,
make or cause to be made any independent inquiry or investigation
relating to the subject matter of any representation or warranty made to
"Seller's actual knowledge."
7.3 REPRESENTATIONS AND WARRANTIES OF PURCHASER. To induce
Seller to execute, deliver and perform this Agreement, Purchaser hereby
represents and warrants to Seller on and as of the date hereof and on
and as of the Closing Date as follows:
(a) All representations and warranties of Purchaser
appearing in other Sections of this Agreement are true and correct.
(b) Purchaser has full capacity, right, power and
authority to execute and deliver this Agreement. At Closing,
Purchaser's designee, if any, will have full capacity, right, power, and
authority to perform this Agreement and all documents to be executed by
Purchaser pursuant hereto. This Agreement and all documents to be
executed pursuant hereto by Purchaser are and shall be binding upon
Purchaser in accordance with their respective terms.
(c) Purchaser certifies and warrants to Seller that the
purchase of the Property by Purchaser or its designee will not result in
a prohibited transaction under Section 406 of the Employee Retirement
Income Security Act of 1974, Section 4975 of the Internal Revenue Code
of 1986, or any similar state law applicable to governmental plans.
Purchaser shall indemnify and hold Seller harmless from all loss
(including reasonable attorneys' fees and costs) arising out of a breach
of the foregoing certification and warranty. The terms of this Section
7.3(c) shall survive the Closing.
7.4 COVENANTS OF PURCHASER.
(a) Purchaser shall notify Seller promptly if Purchaser
becomes aware of any transactions or occurrence prior to the Closing
Date which would make any of the representations or warranties of Seller
contained in this Agreement untrue in any material respect.
Purchaser's failure to so notify Seller shall constitute a
waiver by Purchaser of any liability of Seller to Purchaser or its
designee arising from the untruth of any such representations or
warranties of Seller known to Purchaser prior to Closing, it being
agreed by the parties hereto that such representations and warranties
known by Purchaser to be untrue at or prior to Closing, shall not
survive Closing.
(b) Purchaser acknowledges and agrees that the sale of the
Property is made on an "AS IS, WHERE-IS WITH ALL FAULTS" basis and,
except as specifically set forth in Section 7.2, without representations
or warranties of any kind or nature, express, implied or otherwise,
including, but not limited to, any representation or warranty made by
the Brokers or any representation or warranty concerning zoning,
financial, environmental, or physical condition of the Property, or any
income, expenses, charges, liens, encumbrances, rights, claims on or
affecting or pertaining to the Property. Purchaser acknowledges that if
it elects to purchase the Property, it will be doing so predicated upon
its own independent investigations, the investigations of its Permittees
and the representations and warranties of the Sellers expressly made
herein or in any other document executed and delivered by Seller to
Purchaser at Closing as described in Section 4.5(b). Purchaser hereby
waives any and all claims which may currently exist or which may arise
in the future, by contract, common law or statute currently in effect,
as amended or subsequently enacted, and which relate to the Property or
environmental conditions on, under, or near the Property and are not the
direct result of a default of this Agreement by Seller, in which latter
event Purchaser's remedies shall be limited for any such default prior
to Closing to the provisions of Section 8.1(b) and for any default
discovered after Closing to the provisions of Section 10.3.
(c) Purchaser acknowledges and agrees that except as
provided in Section 4.3(d), nothing in this Agreement shall be deemed to
preclude or prohibit Seller from operating, managing, leasing (including
terminating any Lease for breach by the tenant) and repairing the
Property in the same manner as the same was operated, managed, leased,
and repaired prior to execution hereof. Seller will not voluntarily
terminate any of the Leases prior to their expiration date without
Purchaser's written approval which will not be unreasonably withheld or
unduly delayed.
(d) Purchaser agrees that it will not attempt to contact
any of the tenants of the Property (whether by telephone,
correspondence, or in person) until such time, if ever, as the
Inspection Period shall have expired and Purchaser has not given Seller
a Notice to Cancel. Thereafter, Purchaser may contact any of the
tenants so long as it shall first notify Seller and give Seller the
opportunity to review any written communication with any of the tenants
or to be present at any personal meeting with the tenants, as
applicable.
ARTICLE VIII
DEFAULT, CONDITIONS PRECEDENT AND TERMINATION
8.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AND DEFAULT BY SELLER.
(a) The obligation of Purchaser to close the transaction
contemplated hereby is, at Purchaser's option, subject to Purchaser's
review and approval of: the Leases, Service Contracts, the
environmental and structural condition of the Property, the Title
Commitment, and such market research, inspection of the Property,
determinations as to the Property's compliance with the Legal
Requirements and review of financial statements relating to the
Property, as Purchaser deems necessary to make its final determination
to acquire the Property. Purchaser shall have until 5:00 p.m. (CST)
October 18, 1996 ("Inspection Period") within which to make such reviews
and approve the same. If, by the conclusion of the Inspection Period,
Purchaser has not given Seller written notice ("Notice to Cancel") that
it intends to cancel this Agreement it will be conclusively presumed
that Purchaser has approved the matters described in this
paragraph 8.1(a) and has determined to acquire the Property. Purchaser
will then have a period of seven (7) days after the expiration of the
Inspection Period within which to obtain the approval by its Board of
Directors of the acquisition of the Property pursuant to the terms
hereof. If on or before the conclusion of the Inspection Period
Purchaser has given the Notice To Cancel, or if it has not given the
Notice to Cancel but notifies Seller within seven (7) days after the
expiration of the Inspection Period that it did not obtain Board of
Directors' approval, the Deposit will be paid to Purchaser and this
Agreement will be terminated and become null and void except for
Purchaser's obligations under paragraph 7.1(c) which will survive such
termination.
If Purchaser shall not have given a Notice to Cancel within the
time aforesaid, the Deposit shall be non-refundable except as set forth
in Sections 8.1(b), 6.1 and 6.2.
(b) The obligation of Purchaser to Close the transaction
contemplated hereby is, at Purchaser's option, further subject to all
material representations and warranties of Seller contained in this
Agreement being true and correct in every material respect at and as of
the Closing Date and all material obligations of Seller to have been
performed on or before the Closing Date having been timely and duly
performed. If the condition precedents to Purchaser's obligation to
Close as described in Sections 4.1, 4.2, and 4.5(b)(viii) have not
occurred on or prior to the times required therein (subject to Seller's
extension rights under Section 4.5(b)(viii)), Purchaser shall have only
the following options to be exercised by written notice to Seller prior
to the Closing Date: (i) to terminate this Agreement, obtain a return of
the Deposit and thereafter this Agreement shall be null and void, or
(ii) to waive such conditions and Close this Agreement on the Closing
Date without diminution of the Purchase Price. If Seller shall be in
default of its obligation under this Agreement (in contrast to Seller's
inability to perform any of the conditions precedent described above and
elsewhere in this Agreement which shall not constitute a default),
Purchaser shall have only the following options as its sole and
exclusive remedy for said default to be exercised by written notice to
Seller on or prior to Closing Date: (aa) to terminate this Agreement and
obtain a return of the Deposit, whereupon this Agreement shall become
null and void and of no further force or effect, except that if the
default of Seller shall be of such a nature as to be willful and wanton
in conduct, then Purchaser also shall be entitled to receive from Seller
the sum of $75,000 as and for full, final and agreed upon liquidated
damages (the parties hereto hereby acknowledge that the amount of such
damages are otherwise incapable of ascertainment) or (bb) to obtain a
return of the Deposit and seek specific performance of this Agreement.
If Purchaser does not file suit for Specific Performance within six (6)
months of Seller's alleged default, it will be conclusively presumed
that Purchaser has elected the option set forth in Section 8.1(b)(aa).
Purchaser's failure to give such written notice on or prior to the time
described above, shall be conclusive evidence that all such conditions
precedent to Purchaser's obligations to Close have been satisfied. If
this Agreement is terminated pursuant to this Section 8.1(b), the
Deposit shall promptly be returned to Purchaser, and all other funds and
documents theretofore delivered hereunder or deposited in escrow by
either party shall be promptly returned to such party. The rights and
remedies granted to the Purchaser in this Section 8.1(b) are the sole
rights and remedies available to the Purchaser in the event of Seller's
default of its obligations under this Agreement and Purchaser hereby
waives any other rights it may have at law (including claims for any
tortious conduct it may allege against Seller) or in equity.
8.2 CONDITIONS TO SELLER'S OBLIGATIONS AND DEFAULT BY PURCHASER.
The obligation of Seller to Close the transaction contemplated hereby
is, at Seller's option, conditioned upon Purchaser's representations and
warranties contained in this Agreement being true and correct in every
material respect at and as of the Closing Date, and upon fulfillment by
Purchaser of all obligations of Purchaser which were to have been
performed on or before the Closing Date having been timely and duly
performed. If any condition precedent to Closing of Seller as set forth
in this Section 8.2 has not been fulfilled and satisfied on or before
the Closing Date, Seller may, by notice to Purchaser, elect at any time
thereafter to terminate this Agreement, and if such termination is due
to Purchaser's fault, Seller shall be entitled to retain the Deposit as
full and complete liquidated damages (and not as a penalty or
forfeiture) in lieu of any and all other legal and equitable rights
which Seller may have hereunder, and all other funds and documents
theretofore delivered hereunder or deposited in escrow by either party
shall be promptly returned to such party. Upon such termination and
retention of the Deposit by Seller, except as set forth in the last
sentence of the first grammatical paragraph of Section 10.3 hereof, this
Agreement shall become null and void and of no further force or effect.
ARTICLE IX
NOTICES
9.1 NOTICES. Any notice, request, demand, instrument or other
document to be given or served hereunder shall be in writing and shall
be delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid, or by overnight express courier, or
by facsimile transmission and addressed to the parties at their
respective addresses set forth below, and the same shall be effective
upon receipt if delivered personally or two (2) business days after
deposit in the mails, if mailed, or upon receipt if deposited with an
overnight express courier or sent by facsimile transmission. A party
may change its address or facsimile transmission number for receipt of
notices by service of a notice of such change in accordance herewith.
If to Seller:
c/o JMB Realty Corporation
900 North Michigan Avenue
Chicago, Illinois 60611-1575
Attention: Julie Walner
Facsimile Number: (312) 915-2310
with copies to:
Richard Ellis, L.L.C.
Attention: Stanley Warnick
Three First National Plaza
Chicago, Illinois 60602
Facsimile Number: (312) 899-0923
and to:
Robert W. Newman, Esq.
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606-1229
Facsimile Number: (312) 201-2555
If to Purchaser:
Inland Real Estate Corporation
2901 Butterfield Road
Oak Brook, Illinois 60521
Attention: Robert D. Parks, President
Facsimile Number: (630) 218-4935
with a copy to:
The Inland Group, Inc.
2901 Butterfield Road
Oak Brook, Illinois 60521
Attention: Sam Orticelli, Esq.
Facsimile Number: (630) 218-4900
ARTICLE X
ADDITIONAL COVENANTS
10.1 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement
contains the entire agreement and understanding of the parties with
respect to the subject matter hereof, and the same may not be amended,
modified or discharged nor may any of its terms be waived except by an
instrument in writing signed by the party to be bound thereby.
10.2 FURTHER ASSURANCES. The parties each agree to do, execute,
acknowledge and deliver all such further acts, instruments and
assurances and to take all such further action before or after the
Closing as shall be necessary or desirable to fully carry out this
Agreement and to fully consummate and effect the transaction
contemplated hereby.
10.3 SURVIVAL AND BENEFIT. Only those agreements, covenants,
indemnifications, and obligations of the parties hereunder set forth in
Sections 4.3(b), 5.1, 7.1(c), 7.1(d), 7.4(b), and the representations
and warranties of Purchaser set forth in Section 7.3 shall survive the
Closing and inure to the benefit of and be binding upon the respective
successors and assigns of the parties. The indemnifications set forth
in Sections 5.1 and 7.1(c) shall survive termination of this Agreement
prior to Closing.
Subject to the provisions of the second paragraph of Section
7.4(a): (i) the representations and warranties of Seller, as contained
in this Agreement shall survive the Closing only as hereinafter set
forth and (ii) any liability of Seller to Purchaser based upon any
inaccuracy of Seller's representations and warranties contained in this
Agreement shall expire without notice from or to any party hereto
(including Purchaser's designee) unless:
(a) Purchaser (or its designee) shall give written notice
to Seller within three (3) months after the Closing Date that any of
such representations and warranties were inaccurate in any material
respect, specifying in detail the nature of any such inaccuracy and
certifying to Seller that Purchaser and its designee and Permittees were
not aware of such inaccuracy at the time of the Closing; and
(b) Purchaser (or its designee) shall commence legal
proceedings against Seller for damages suffered as a result of the
inaccuracy specified in such notice given to Seller (pursuant to (a)
above) within six (6) months after the Closing Date.
Notwithstanding anything herein to the contrary, and subject to
the provisions of Section 10.7 hereof, the maximum amount of liability
of Seller for any agreements, indemnification, obligations,
representations, and warranties which shall survive the Closing shall be
$400,000.00, including any costs of litigation which Purchaser or its
designee may incur to enforce such post-closing obligations or
liabilities of Seller.
10.4 NO THIRD PARTY BENEFITS. This Agreement may not be assigned
by Purchaser. However, not earlier than two (2) days prior to the
Proration Date, Purchaser may nominate in writing a land trust as to
which Purchaser is the sole beneficiary to accept title to the Property.
Such nomination by Purchaser will not absolve or release Purchaser
from liability under this Agreement whether prior to or subsequent to
Closing. This Agreement is for the sole and exclusive benefit of the
parties hereto and the designee of Purchaser and no third party is
intended to or shall have any rights hereunder.
10.5 NO RECORDING. The Purchaser agrees not to record this
Agreement or any short form, memorandum, or notice thereof in any public
or governmental office.
10.6 INTERPRETATION.
(a) The headings and captions herein are inserted for
convenient reference only and the same shall not limit or construe the
paragraphs or Sections to which they apply or otherwise affect the
interpretation hereof.
(b) The terms "hereby," "hereof," "hereto, "herein,"
"hereunder" and any similar terms shall refer to this Agreement, and the
term "hereafter" shall mean after and the term "heretofore" shall mean
before, the date of this Agreement.
(c) Words of the masculine, feminine or neuter gender
shall mean and include the correlative words of other genders and words
importing the singular number shall mean and include the plural number
and vice versa.
(d) Words importing persons shall include firms,
associations, partnerships (including limited partnerships), trusts,
corporations and other legal entities, including public bodies, as well
as natural persons.
(e) The terms "include," "including" and similar terms
shall be construed as if followed by the phrase "without being limited
to."
(f) Whenever under the terms of this Agreement the time
for performance of a covenant or condition or the last day to give
notice falls upon a Saturday, Sunday or holiday (whether in the United
States or Canada), such time for performance shall be extended to the
next business day. Otherwise all references herein to "day" shall mean
calendar days.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
(h) In any action to enforce any of the terms of this
Agreement, the prevailing party shall be entitled to recover its
expenses, including reasonable attorneys fees and costs of litigation,
including those in any appellate proceedings.
(i) Time is of the essence of this Agreement.
(j) This Agreement and any document or instrument executed
pursuant hereto may be executed in any number of counterparts each of
which shall be deemed an original, but all of which together shall
constitute the same instrument.
10.7 SELLER'S EXCULPATION. Notwithstanding anything herein to
the contrary, in the event of a default hereunder by Seller prior to or
at Closing, neither Seller nor any direct or indirect partner (whether
general or limited) of Seller, nor any shareholder of any partner, nor
any director, officer, employee, agent, shareholder, trustee or
beneficiary of any of them shall have any liability hereunder or in
connection therewith, and Purchaser's sole and exclusive remedies are as
set forth in Section 8.1(b) hereof. In the event that Purchaser (or its
designee) discovers, after Closing, that Seller has breached any of the
representations and warranties made by Seller in this Agreement, they
shall be limited to resort against the assets of Seller only, under
Section 10.3 hereof and no direct or indirect partner (whether general
or limited) of Seller, nor any shareholder of any partner, nor any
director, officer, employee, agent, shareholder, trustee, or beneficiary
of any of them shall be liable to Purchaser or its designee in
connection with such claimed breach of representation or warranty. For
purposes of the foregoing, neither the negative capital account of any
partner of Seller nor any obligation of any partner of Seller to restore
a negative capital account or to contribute capital to Seller or to any
partner of Seller, shall at any time be deemed to be the property or an
asset of Seller or any partner of Seller (and neither Purchaser nor any
of its successors or assigns shall have any right to collect, enforce or
proceed against or with respect to any such negative account or a
partner's obligation to restore the same or contribute capital to Seller
or a partner of Seller).
10.8 EFFECTIVE DATE. Wherever herein contained the expression
"date hereof" is used it shall be deemed to mean the date that Seller
has accepted this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by Seller and Purchaser on the respective dates set forth
beneath each of their signatures and is intended to be effective as of
the latest such date.
PURCHASER:
INLAND REAL ESTATE CORPORATION
By:_________________________
Its:____________________
Dated: October _____, 1996.
SELLER:
JMB/SPRING HILL ASSOCIATES, an Illinois
general partnership
By: JMB Mortgage Partners, Ltd.-III,
an Illinois limited partnership,
general partner
By: JMB REALTY CORPORATION,
an Illinois corporation,
corporate general partner
By:_________________________
Its:____________________
Date of Seller's Acceptance:
October _____, 1996.
EXHIBIT A
---------
LEGAL DESCRIPTION OF REAL PROPERTY
EXHIBIT B
---------
PERMITTED TITLE EXCEPTIONS
[TO BE APPROVED BY PURCHASER'S COUNSEL ON OR BEFORE OCTOBER 18, 1996 AT
THE TIME OF THE EXPIRATION OF THE INSPECTION PERIOD]
EXHIBIT C
---------
LIST OF PERSONAL PROPERTY
NONE
EXHIBIT E
---------
LIST OF SERVICE CONTRACTS
1. Browning-Ferris Industries of Illinois, Inc.
Dated May 17, 1995
Commencing June 1, 1995 and ending May 31, 1996
2. Williams Awning Co.
Dated January 15, 1996
3. Mike Cork Plumbing & Engineering
Dated April 1996
4. Tecza Brothers, Inc.
Dated July 26, 1995
5. Climate Service, Inc.
Dated July 30, 1996
EXHIBIT F
---------
TENANT ESTOPPEL LETTER
EXHIBIT G
--------
List of Pending Litigation
NONE
FIRST AMENDMENT TO AGREEMENT TO PURCHASE
----------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT TO PURCHASE ("Amendment") is
made as of this ____ day of October, 1996, by and between JMB/Spring
Hill Associates, an Illinois general partnership ("Seller") and Inland
Real Estate Corporation, a Maryland corporation, ("Purchaser").
RECITALS:
--------
A. Seller and Purchaser have previously executed that
certain Agreement to Purchase dated October 14, 1996
("Agreement");
B. On October 18, 1996, Purchaser gave its "Notice to
Cancel" pursuant to the terms of Paragraph 8.1(a) of the Agreement;
C. In consideration of a reduction in the Purchase Price
by Seller and for other consideration set forth in this Amendment, the
parties do hereby desire to vitiate the Notice to Cancel and to
reinstate the terms of the Agreement in full, except to the extent
modified by this Amendment;
D. All terms defined in the Agreement shall have the same
meanings when used in this Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:
1. The Notice to Cancel dated October 18, 1996, from
Purchaser to Seller is hereby vitiated, and the Agreement is hereby
reinstated in full except to the extent amended hereby;
2. A new definitional term is hereby added to Article I
of the Agreement and shall real as follows:
"PIER 1 LEASE: That certain Lease to be executed by
Seller, as Landlord, and Pier 1 Imports, Inc. as Tenant, and containing
the Fixed Minimum Rent, Percentage Rent and other financial terms set
forth on Exhibit A attached to this Amendment;"
1. The definition of "Closing Date", as set forth in the
Agreement is hereby deleted and in lieu thereof, the following is hereby
substituted:
"Three (3) business days after execution of the Pier 1
Lease and delivery of a copy thereof to Purchaser, subject to extension
to December 23, 1996, pursuant to Section 4.5(b)(viii) hereof, and
pursuant to Section 4.2 hereof."
1. If the Pier 1 Lease is not executed by December 20,
1996, in substantially the same form as used in the existing Lease
between Seller and Pier 1 Imports, Inc., then this Agreement shall be
and become null and void and of no further force or effect, except as
set forth in paragraph 7.1(c) and the Deposit will forthwith be returned
to Purchaser;
2. The Purchase Price set forth in paragraph 3.1 of the
Agreement is hereby changed to "9,200,000.00";
3. Purchaser acknowledges receipt of the Survey and Title
Commitment and Purchaser's comments thereon are contained in that
certain letter dated October 22, 1996, from Samuel A. Orticelli, counsel
to Purchaser, and addressed to Robert W. Newman, counsel to Seller. The
ten (10) day period of time that Seller shall have to attempt to cure
the matters set forth in the October 22, 1996, letter shall commence
from and after the date that this Amendment is executed;
4. Paragraph 4.3(c)(iii)(dd) shall be modified such that
the parties will make best efforts to effect a final reproration of
Tenant Expense Contributions not later than December 27, 1996, or such
earlier date after Closing as Seller shall direct in writing to
Purchaser, provided that such notice from Seller shall be accompanied by
Seller's reproration calculations, and Purchaser shall have not less
than two (2) business days to review and comment upon same;
5. The "Reproration Date", as defined on page 8 of the
Agreement, shall be redefined as follows:
"Real estate taxes will be reprorated (and such reproration will
be a final reproration) not later than December 27, 1996, or
such earlier date after Closing as Seller shall direct in a written
notice to Purchaser ("Reproration Date") as follows:"
1. Purchaser acknowledges that the Inspection Period has
expired and that Purchaser has approved the matters described in
paragraph 8.1(a) of the Agreement and has determined to acquire the
Property. In addition, Purchaser acknowledges that it has obtained the
approval of its Board of Directors to acquire the Property, and that
condition, as contained in paragraph 8.1(a) is acknowledged by Purchaser
to be satisfied.
2. This Amendment and any document or instrument executed
pursuant hereto may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which together shall
constitute the same instrument.
In all other respects, the Agreement remains unmodified and in
full force and effect.
PURCHASER:
INLAND REAL ESTATE CORPORATION
By: _______________________
Its: _________________
SELLER:
JMB/SPRING HILL ASSOCIATES, an Illinois
general partnership
By: JMB Mortgage Partners, Ltd.-III,
an Illinois limited partnership,
general partner
By: JMB REALTY CORPORATION,
an Illinois corporation,
corporate general partner
By:____________________________
Its: _____________________
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, 1996, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of JMB MORTGAGE PARTNERS,
LTD. - 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, 1996, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,551,967
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,551,967
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,551,967
<CURRENT-LIABILITIES> 0
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<COMMON> 0
0
0
<OTHER-SE> 1,551,967
<TOTAL-LIABILITY-AND-EQUITY> 1,551,967
<SALES> 108,546
<TOTAL-REVENUES> 108,546
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 294,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (185,850)
<INCOME-TAX> 0
<INCOME-CONTINUING> (196,369)
<DISCONTINUED> 206
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,163)
<EPS-PRIMARY> 9.65
<EPS-DILUTED> 9.65
</TABLE>
