SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1995 Commission file no. 0-15966
JMB INCOME PROPERTIES, LTD. - XI
(Exact name of registrant as specified in its charter)
Illinois 36-3254043
(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 non-affiliates
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 Proceedings. . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . 6
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . . . 6
Item 6. Selected Financial Data. . . . . . . . . . . . . 7
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 13
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . 19
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . 62
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . 62
Item 11. Executive Compensation . . . . . . . . . . . . . 65
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . 66
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 67
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . 67
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 69
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Financial Statements
contained in this report.
The registrant, JMB Income Properties, Ltd. - XI (the "Partnership"),
is a limited partnership formed in 1983 and currently governed under the
Revised Uniform Limited Partnership Act of the State of Illinois to invest
in improved income-producing commercial and residential real property. The
Partnership sold $173,406,000 in limited partnership interests (the
"Interests") commencing on July 11, 1984, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933 (Registration No.
2-90503). A total of 173,406 Interests were sold to the public at $1,000
per Interest and the holders of 173,406 Interests were admitted to the
Partnership in fiscal 1985. The offering closed on November 30, 1984. No
Investor has made any additional capital contribution after such date. The
Investors in the Partnership share in the benefits of ownership of the
Partnership's real property investments according to the number of
Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title and/or through joint venture
partnership interests. The Partnership's real estate investments are
located throughout the nation and it has no real estate investments located
outside the United States. A presentation of information about industry
segments, geographic regions, raw materials or seasonality is not
applicable and would not be material to an understanding of the
Partnership's business taken as a whole. Pursuant to the Partnership
agreement, the Partnership is required to terminate no later than October
31, 2034. The Partnership is self-liquidating in nature. At sale of a
particular property, the net proceeds, if any, are generally distributed or
reinvested in existing properties rather than invested in acquiring
additional properties. As discussed further in Item 7, the marketplaces in
which the portfolio operates and real estate markets in general are in a
recovery mode. The Partnership currently expects to conduct an orderly
liquidation of its remaining investment portfolio as quickly as practicable
and to wind up its affairs not later than December 31, 1999, barring any
unforeseen economic developments. (Reference is also made to Note 1.)
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1995,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (d) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Riverside Square
Mall
Hackensack,
New Jersey . . . . . 341,000 10-19-83 15% fee ownership of land
sq.ft. and improvements (b)(d)(e)
g.l.a.
2. Bank of Delaware
Office Building
Wilmington,
Delaware . . . . . . 314,000 12-14-84 11-15-94 fee ownership of land
sq.ft. and improvements (f)
n.r.a.
3. Genesee Valley
Center
Flint, Michigan. . . 358,000 12-21-84 6-29-90 fee ownership of land
sq.ft. and improvements
g.l.a.
4. Park Center
Financial Plaza
San Jose,
California . . . . . 432,000 06-20-85 26% fee ownership of land
sq.ft. and improvements
n.r.a. (through a joint
venture partnership)
(c)
5. Royal Executive
Park-II
Rye Brook,
New York . . . . . . 270,000 02-12-87 20% fee ownership of land
sq.ft. and improvements
n.r.a. (through a joint
venture partnership)
(c)(e)
<FN>
- -----------------------
(a) The computation of this percentage for properties held at December
31, 1995 does not include amounts invested from sources other than the
original net proceeds of the public offering as described above and in Item
7.
(b) Reference is made to Note 4 and Schedule III for the current
outstanding principal balance and a description of the long-term mortgage
indebtedness secured by the Partnership's real property investments.
(c) Reference is made to Note 3 for a description of the joint venture
partnership through which the Partnership has made this real property
investment.
(d) Reference is made to Item 8 - Schedule III filed with this annual
report for further information concerning real estate taxes and
depreciation.
(e) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.
(f) Reference is made to Note 2(c) for a description of the
disposition of this investment property.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including, in certain areas, properties
owned or advised by affiliates of the General Partners) in the respective
vicinities in which they are located. Such competition is generally for the
retention of existing tenants. Additionally, the Partnership is in
competition for new tenants in markets where significant vacancies are
present. Reference is made to Item 7 below for a discussion of competitive
conditions and future renovation and capital improvement plans of the
Partnership and certain of its significant investment properties.
Approximate occupancy levels for the properties are set forth in the table
in Item 2 below to which reference is hereby made. The Partnership
maintains the suitability and competitiveness of its properties in its
markets primarily on the basis of effective rents, tenant allowances and
service provided to tenants. In the opinion of the Managing General Partner
of the Partnership, all of the investment properties held at December 31,
1995 are adequately insured. Although there is earthquake insurance
coverage for a portion of the value of the Partnership's investment
properties, the Managing General Partner does not believe that such coverage
for the entire replacement cost of the investment properties is available on
economic terms.
Reference is made to Note 7 for a schedule of minimum lease payments to
be received in each of the next five years, and in the aggregate thereafter,
under leases in effect at the Partnership's properties as of December 31,
1995.
The Partnership has no employees other than personnel performing on-
site duties at certain of the Partnership's properties, none of whom are
officers or directors of the Managing General Partner of the Partnership.
The terms of transactions between the Partnership, the General Partners
and their affiliates of the Partnership are set forth in Item 11 below to
which reference is hereby made for a description of such terms and
transactions.
ITEM 2. PROPERTIES
The Partnership owns directly or through joint venture partnerships the
properties or interests in the properties referred to under Item 1 above to
which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1995 and 1994 for the Partnership's investment properties owned during
1995:
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------------
At At At At At At At At
Principal 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>
1. Park Center
Financial Plaza
San Jose,
California . . . . . . . . . Accounting/
Legal 83% 83% 83% 84% 74% 77% 76% 77%
2. Riverside Square Mall
Hackensack,
New Jersey . . . . . . . . . Retail 86% 76% 73% 81% 81% 80% 80% 80%
3. Royal Executive
Park II
Rye Brook,
New York . . . . . . . . . . Communications 92% 93% 89% 97% 97% 97% 97% 97%
<FN>
- --------------
Reference is made to Item 6, Item 7 and Note 7 for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending 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
1995 or 1994.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were 14,484 record holders of Interests
of the Partnership. There is no public market for Interests and it is not
anticipated that a public market for Interests will develop. Upon request,
the Managing General Partner may provide information relating to a
prospective transfer of Interests to an investor desiring to transfer his
Interests. The price to be paid for the Interests, as well as any other
economic aspects of the transaction, will be subject to negotiation by the
investor. There are certain conditions and restrictions on the transfer of
Interests, including, among other things, the requirement that the
substitution of a transferee of Interests as a Limited Partner of the
Partnership be subject to the written consent of the Managing General
Partner. The rights of a transferee of Interests who does not become a
substituted Limited Partner will be limited to the rights to receive his
share of profits or losses and cash distributions from the Partnership, and
such transferee will not be entitled to vote such Interests. No transfer
will be effective until the first day of the next succeeding calendar
quarter after the requisite transfer form satisfactory to the Managing
General Partner has been received by the Managing General Partner. The
transferee consequently will not be entitled to receive any cash
distributions or any allocable share of profits or losses for tax purposes
until such succeeding calendar quarter. Profits or losses from operations
of the Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the holder of
Interests, without regard to the results of Partnership's operations during
particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
holder of the Interests as of the last day of the quarterly period with
respect to which distribution is made.
Reference is made to Item 6 below for a discussion of cash distribu-
tions made to the Investors.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1995 1994 1993 1992 1991
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . $ 12,915,285 14,048,836 14,618,038 15,185,097 15,309,347
============ =========== =========== =========== ===========
Operating earnings (loss). . $ (1,017,411) 35,393 1,677,866 (9,097,353) 2,122,059
Partnership's share of
operations of uncon-
solidated ventures . . . . 2,873,705 2,617,210 (4,262,005) (1,779,563) (9,667,835)
------------ ----------- ----------- ----------- -----------
Net operating earnings
(loss) . . . . . . . . . . 1,856,294 2,652,603 (2,584,139) (10,876,916) (7,545,776)
Gain on disposition of
investment properties. . . -- 447,650 -- -- --
------------ ----------- ----------- ----------- -----------
Earnings (loss) before
extraordinary item . . . . 1,856,294 3,100,253 (2,584,139) (10,876,916) (7,545,776)
Extraordinary item . . . . . -- (2,206,791) -- -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . . $ 1,856,294 893,462 (2,584,139) (10,876,916) (7,545,776)
============ ============ =========== =========== ===========
Net earnings (loss)
per Interest (b):
Operating earnings
(loss) . . . . . . . . $ 10.28 14.60 (15.65) (62.90) (43.60)
Gain on disposition
of investment
properties . . . . . . -- 2.56 -- -- --
Extraordinary item . . . -- (12.22) -- -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss). . . . . $ 10.28 4.94 (15.65) (62.90) (43.60)
============ ============ =========== =========== ===========
Total assets . . . . . . . . $106,800,004 106,201,665 88,391,802 93,648,467 107,443,394
Long-term debt . . . . . . . $ 34,942,100 35,436,797 11,297,315 21,104,127 21,403,495
Cash distributions
per Interest (c) . . . . . $ 12.00 12.00 12.00 12.00 33.75
============ ============ =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction
with the financial statements and the related notes appearing elsewhere in
this annual report.
(b) The net earnings (loss) per Interest is based upon the number of
Interests outstanding at the end of the period (173,411).
(c) Cash distributions from the Partnership are generally not equal
to Partnership income (loss) for financial reporting or Federal income tax
purposes. Each Partner's taxable income (or loss) from the Partnership in
each year is equal to his allocable share of the taxable income (loss) of
the Partnership, without regard to the cash generated or distributed by the
Partnership. Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to
such Limited Partners and have therefore represented a return of capital.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1995
<CAPTION>
Property
- --------
Riverside Square
Mall a) The gross leasable area ("GLA") occupancy rate and average base rent per square foot as
of December 31 for each of the last five years were as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991. . . . . . . 89% $ 24.48
1992. . . . . . . 84% 26.90
1993. . . . . . . 81% 31.26
1994. . . . . . . 81% 18.10 (2)
1995. . . . . . . 80% 18.69
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
(2) Average base rent per square foot decreased in 1994 due to the Saks Fifth Avenue
space (acquired in 1994) being included in the gross leasable area beginning in 1994.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Saks Fifth Avenue 107,000 $90,000 6/2012 N/A
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Riverside Square Mall:
Annualized Percent of
Number of Approx. Total Base Rent Total 1995
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 2 6,100 $ 145,000 2.8%
1997 2 4,200 116,600 2.3%
1998 5 13,900 525,900 10.2%
1999 5 13,500 446,600 8.6%
2000 5 12,200 412,700 8.0%
2001 4 14,600 386,800 7.5%
2002 2 5,400 161,300 3.1%
2003 7 25,700 823,400 15.9%
2004 17 30,500 1,067,200 20.7%
2005 8 22,800 758,700 14.7%
<FN>
(1) Excludes leases that expire in 1996 for which renewal leases or leases with
replacement tenants have been executed as of March 25, 1996.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1995
<CAPTION>
Property
- --------
Royal Executive
Park II
Office Complex a) The net rentable area ("NRA") rate and average base rent per square foot as of December
31 for each of the last five years were as follows:
NRA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1991. . . . . . . 57% $23.07
1992. . . . . . . 92% 17.35
1993. . . . . . . 92% 20.73
1994. . . . . . . 97% 19.92
1995. . . . . . . 97% 19.28
<FN>
(1) Average base rent per square foot is based on NRA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
MCI 90,000 $2,416,500 1/2001 N/A
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Royal Executive Park II Office Complex:
Annualized Percent of
Number of Approx. Total Base Rent Total 1995
Year Ending Expiring NRA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 1 12,100 $ 212,100 4.1%
1997 1 2,500 56,300 1.1%
1998 2 12,400 296,000 5.8%
1999 4 39,000 875,200 17.1%
2000 3 22,200 507,700 9.9%
2001 1 90,000 2,416,500 47.2%
2002 3 77,100 1,172,200 22.9%
2003 -- -- -- --
2004 1 8,700 156,900 3.1%
2005 -- -- -- --
<FN>
(1) Excludes leases that expire in 1996 for which renewal leases or leases with
replacement tenants have been executed as of March 25, 1996.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On July 11, 1984, the Partnership commenced an offering to the public
of $60,000,000, subject to increase up to $200,000,000, pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933. On
November 30, 1984, the initial and final closing of the offering was
consummated with the dealer manager of the public offering (an affiliate of
which is a limited partner of the Associate General Partner of the Partner-
ship), and 173,406 Interests were issued by the Partnership.
After deducting selling expenses and other offering costs, the
Partnership had approximately $156,493,000 with which to make investments
in commercial real property, to pay legal fees and other costs (including
acquisition fees) related to such investments and for working capital. A
portion of such proceeds was utilized to acquire the properties described
in Item 1 above.
At December 31, 1995, the Partnership had cash and cash equivalents of
approximately $5,524,000. Such funds may be utilized for distributions to
partners and for working capital requirements including operating deficits,
re-leasing costs of vacant space, and certain capital improvements
currently being incurred at Riverside Square Mall. Bank overdrafts of
approximately $415,000 as of December 31, 1994 were subsequently repaid in
January 1995. Additionally, funds may be utilized to fund the
Partnership's share of re-leasing costs and capital improvements at certain
portions of the Park Center Financial Plaza. The Partnership and its
property have currently budgeted in 1996 approximately $6,861,000 for
tenant improvements and other capital expenditures at Riverside Square Mall
excluding amounts budgeted for the renovation as discussed below. The
Partnership's share of such items and its share of such similar items for
its unconsolidated ventures for 1996 is currently budgeted to be
approximately $8,200,000. Actual amounts expended in 1996 may vary
depending on a number of factors including actual leasing activity, results
of property operations, liquidity considerations and other market
conditions over the course of the year. The source of capital for such
items and for both short-term and long-term future liquidity and
distributions is expected to be through net cash generated by the
Partnership's investment properties and through the sale and/or refinancing
of such investments. In such regard, reference is made to the
Partnership's property specific discussions below and also to the
Partnership's disclosure of certain property lease expirations in Item 6.
The General Partners have been deferring receipt of distributions in
accordance with the subordination requirement of the Partnership Agreement
as discussed in Notes 5 and 8. The Partnership's and its ventures'
mortgage obligations are separate non-recourse loans secured individually
by the investment properties and are not obligations of the entire
investment portfolio. The Partnership and its ventures are not personally
liable for the payment of the mortgage indebtedness.
During August 1994, JMB/San Jose Associates ("San Jose") received
notification from the Redevelopment Agency of the City of San Jose of its
offer to purchase one of the parking garage structures in the office
building complex, for an approved Agency project for $4,090,000. The price
offered was deemed by the Agency to be just compensation in compliance with
applicable State and Federal laws. During 1995, the Agency filed a
condemnation action in court to secure its position in obtaining the garage
pursuant to the laws of eminent domain. In late 1995, San Jose and the
Agency reached a mutually acceptable agreement on the transfer of the
garage.
In March 1996, the sale was consummated. Under the transfer
agreement, San Jose will receive replacement parking spaces for its tenants
in a near-by city-owned parking structure for a term of fifty-five years in
addition to the aforementioned purchase price of $4,090,000. San Jose will
recognize a gain of approximately $2,000,000 and $1,800,000, respectively,
for financial reporting and Federal income tax purposes in 1996, of which
approximately $1,000,000 and $900,000,respectively, will be allocable to
the Partnership. Any distribution of such sale proceeds will be based upon
the working capital needs of the Partnership.
In October 1995, San Jose elected to repay its mortgage obligations
(originally scheduled to mature in September 2000) securing the portion of
the complex on which the 100-130 Buildings are located as well as a portion
of the garage. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
Reference is made to Note 3(b). After reviewing and analyzing San Jose's
potential options with regard to its investment in the 100-130 Park Center
Plaza portion of the complex, San Jose determined that it was in the best
interest of the venture to repay the mortgage obligations secured by this
portion of the complex. Tenants occupying approximately 49,000 square feet
(approximately 11% of the buildings) of the Park Center Plaza investment
property have leases that expire in 1996, for which there can be no
assurance of renewals. In addition, new leases will likely require
expenditures for lease commissions and tenant improvements prior to tenant
occupancy. These anticipated costs upon re-leasing will result in a
decrease in cash flow from operations over the near term. San Jose
notified the tenants in and invitees to the complex that some of the
buildings, particularly the 100-130 Park Center Plaza Buildings and the
garage below them, could pose a life safety hazard under certain unusually
intense earthquake conditions. While the buildings and the garage were
designed to comply with the applicable codes for the period in which they
were constructed, and there is no legal requirement to upgrade the
buildings for seismic purposes, San Jose has worked with consultants to
analyze ways in which such a potential life safety hazard could be reduced.
In order to reduce any potential life safety hazard that may occur during
unusually intense earthquake conditions, San Jose is undergoing a voluntary
upgrade to the 130 Park Center Plaza building and the parking garage below
the 100-130 buildings for seismic purposes. San Jose estimates the cost of
the structural upgrade to be $1,200,000 (included in the budgeted totals
above) of which the Partnership's share is $600,000. Such work began in
December 1995 and should be completed by mid 1996.
San Jose made provisions for value impairment on the 100-130 Park
Center Plaza buildings and certain parking areas and the 170 Almaden
building of $944,335 in the aggregate. Such provisions at September 30,
1994 were recorded to reduce the net carrying values of these buildings to
the then outstanding balances of the related non-recourse financing.
Additionally, at September 30, 1993, San Jose recorded a provision for
value impairment on the 150 Almaden and 185 Park Avenue buildings and
certain parking areas of $15,549,935 to reduce the net carrying value of
these buildings to the then outstanding balance of related non-recourse
financing. See Note 3(b) for further discussion of this investment
property.
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership. Any distribution of such sale proceeds will
be based upon the working capital needs of the Partnership.
Riverside Square Mall had been experiencing decreasing sales levels as
well as increasing competition for new tenants since a competing regional
retail center expanded its operations in 1990. In an effort to improve the
property's competitive position, the Partnership is completing a renovation
of the mall, with an estimated cost of approximately $13,500,000, which has
been substantially completed as of December 31, 1995. Furthermore, the
Partnership has completed a $7,000,000 restoration of the parking deck.
The renovation of the mall should be fully completed by the end of March
1996. In addition, the Partnership is continuing to remerchandise the
center. In connection with the renovation, the Partnership, in early 1994,
signed 15-year operating covenant extensions with both Saks and
Bloomingdale's, the latter of which owns its own store. In return for the
additional 15-year commitment to the center, the Partnership reimbursed
Saks in 1994 for its recent store renovation in the amount of $6,100,000;
and in August 1995, the Partnership escrowed $5,000,000 (approximately
$565,000 of which has been released as of December 31, 1995) for
Bloomingdale's store renovation, which has commenced and will be
substantially underway in early 1996. Interest earned on the escrowed
funds will be remitted to the Partnership upon termination of the escrow
account. In connection with the payment to Saks, the Partnership also
acquired title to the Saks building which had previously been owned by
Saks. During the third quarter of 1994, the Partnership finalized a
refinancing of the existing mortgage loan with a new loan in the amount of
$36,000,000. The new loan has an initial interest rate of 8.35% per annum,
requires monthly principal and interest payments of $286,252 beginning
September 1, 1994, and matures December 1, 2006, when the unpaid principal
and interest balance is due. The refinancing resulted in net proceeds of
approximately $22,300,000 (after retirement of the previous mortgage loan
with an outstanding balance of approximately $13,000,000, and payment of a
prepayment penalty of approximately $650,000 as discussed in Note 2(b)).
Of such proceeds, approximately $11,200,000 was escrowed by the lender
pursuant to the loan agreement and is being released as required
(approximately $6,658,000 released as of December 31, 1995), including
interest earned, to fund certain costs of the renovation, restoration and
remerchandising as discussed above. The remaining $11,100,000 of loan
proceeds were used to replenish the Partnership's working capital for
amounts paid to or escrowed on behalf of Saks and Bloomingdale's for their
store renovations as discussed above.
The Partnership is continuing to attempt to lease the vacant space in
the mall, but the competitive nature of the surrounding retail area and the
fact that the mall was in need of a renovation has extended the time
period required to re-lease space in the mall as tenant leases expire and
are not renewed. On January 7, 1994, Conran's, a tenant occupying
approximately 28,000 square feet or 12% of the building, filed for
protection pursuant to a Chapter 11 bankruptcy petition. The Partnership
bought the rights to the Conran's lease for $475,000 through the bankruptcy
auction. During the first quarter of 1996, the Partnership executed a new
lease agreement with a replacement tenant for the space previously occupied
by Conran's. This new lease, with a term of 15 years, will require
expenditures for tenant allowances of approximately $2,700,000 (included in
the budgeted totals above).
The Royal Executive Park II property produced sufficient cash flow to
fund the Partnership's preferred level of return for 1995 and in addition,
recovered a portion of the cumulative shortfall in this return since 1989.
In early 1994, JWP (a tenant who had leased 78,000 square feet) filed for
protection pursuant to a Chapter 11 bankruptcy petition and formally
rejected its lease and vacated the remainder of its space in January 1995.
However, all of this space has been re-leased to JWP's subtenants who have
become direct tenants. As a result, the Partnership expects to receive its
preferred level of return for 1996 in addition to a partial recovery of its
cumulative shortfall in this return since 1989.
Due to uncertainty about the ability to recover the net carrying value
of the property through future operations and sale, Royal Executive made a
provision for value impairment of $25,378,894 at September 30, 1994 to
reduce the net carrying value of the property to the then estimated
valuation. The provision for value impairment has been allocated fully to
the venture partner to reflect their subordination to the Partnership in
distributions with regard to future operation and sale or financing
proceeds as discussed in Note 3(c).
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. In an effort to reduce partnership operating expenses, the
Partnership expects to make semi-annual rather than quarterly distributions
of available operating cash flow commencing with the 1996 distributions.
The Partnership has also sought or may seek additional loan modifications
where appropriate. By conserving working capital, the Partnership will be
in a better position to meet the future needs of its properties since the
availability of satisfactory outside sources of capital may be limited
given the portfolio's current debt levels. Due to these factors, the
Partnership has held its remaining investment properties longer than
originally anticipated in an effort to maximize the return to the Limited
Partners. However, after reviewing the remaining properties and the
marketplaces in which they operate, the General Partners of the Partnership
expect to be able to conduct an orderly liquidation of its remaining
investment portfolio as quickly as practicable. Therefore, the affairs of
the Partnership are expected to be wound up no later than December 31, 1999
(sooner if the properties are sold in the near-term), barring unforeseen
economic developments.
RESULTS OF OPERATIONS
The aggregate decrease in cash and cash equivalents and short-term
investments at December 31, 1995 as compared to December 31, 1994 is
primarily due to approximately $5,200,000 (net of the related lender
escrows) utilized for renovation and remerchandising work, and $5,000,000
escrowed for Bloomingdale's renovation at Riverside Square Mall as
described above and in Note 2(b). The decrease in short-term investments
at December 31, 1995 as compared to December 31, 1994 is primarily due to
all of the Partnership's investments in U.S. Government obligations being
classified as cash equivalents at December 31, 1995. Reference is made to
Note 1.
The increase in rents and other receivables at December 31, 1995 as
compared to December 31, 1994 is primarily due to the timing of the payment
of rents collected from a certain department store at the Riverside Square
Mall property.
The decrease in escrow deposits as of December 31, 1995 as compared to
December 31, 1994 is primarily due to approximately $6,658,000 of
previously escrowed deposits utilized in 1995 to fund renovation costs,
partially offset by $5,000,000 being escrowed for Bloomingdales' renovation
and interest earned on escrowed funds at Riverside Square Mall. Reference
is made to Note 2(b).
The increase in building and improvements as of December 31, 1995 as
compared to December 31, 1994 is primarily due to tenant improvements and
renovation work of approximately $9,000,000 incurred in 1995 at Riverside
Square Mall, as discussed above.
The increase in the Partnership's investment in unconsolidated
ventures and the Partnership's share of operations of unconsolidated
ventures increased for the year ended December 31, 1995 as compared to the
year ended December 31, 1994 primarily due to a provision for value
impairment recorded at the San Jose investment property at September 30,
1994 of approximately $944,000, of which the Partnership's share was
approximately $472,000.
The increase in deferred expenses at December 31, 1995 as compared to
December 31, 1994 is primarily due to the classification of the $5,000,000
Bloomingdales' renovation payment at the Riverside Square Mall property as
a deferred leasing cost as discussed above and in Note 2(b).
The decrease in bank overdraft at December 31, 1995 as compared to
December 31, 1994 is due to the repayment of such overdraft in 1995.
The decrease in construction costs payable as of December 31, 1995 as
compared to December 31, 1994, is primarily due to the renovation being
substantially completed at the Riverside Square Mall property as discussed
above and in Note 2(b).
The increase in other liabilities at December 31, 1995 as compared to
December 31, 1994 is due to the accrual of $5,000,000 (less amounts
released as of December 31, 1995) to be paid to Bloomingdales related to
its renovation at the Riverside Square Mall property as discussed above and
in Note 2(b).
The decrease in rental income and property operating expenses for the
year ended December 31, 1995 as compared to the year ended December 31,
1994 is primarily due to the lender taking title to the Bank of Delaware
building via a deed in lieu of foreclosure in November 1994. The decrease
in rental income for the year ended December 31, 1995 as compared to the
year ended December 31, 1994 is partially offset by the receipt of a lease
termination fee of approximately $300,000 in April 1995 at Riverside Square
Mall. The decrease in rental income for the year ended December 31, 1994
as compared to the year ended December 31, 1993 is primarily due to
receiving two months less of rent at the Bank of Delaware building due to
the lender taking title to the property via a deed in lieu of foreclosure
in November 1994 and also due to lower average occupancy in 1994 at the
Bank of Delaware building and the Riverside Square Mall property.
The increase in interest income for the year ended December 31, 1995
as compared to the year ended December 31, 1994 is primarily due to
investments in U.S. Government obligations earning a higher effective yield
in 1995. The increase in interest income for the year ended December 31,
1994 as compared to the year ended December 31, 1993 is primarily due to
approximately $203,000 of interest earned on escrowed funds and net loan
proceeds related to the refinancing at Riverside Square Mall received
September 1, 1994 as more fully discussed in Note 2(b).
The increase in depreciation expense for the year ended December 31,
1995 as compared to the year ended December 31, 1994 is primarily due to
the increase in fixed assets due to the renovation at Riverside Square Mall
as discussed above and in Note 2(b). The increase in depreciation expense
for the year ended December 31, 1994 as compared to the year ended December
31, 1993 is primarily due to the depreciation taken in 1994 on the Saks
Fifth Avenue building acquired in 1994 at the Riverside Square Mall
property.
The increase in property operating expenses for the year ended
December 31, 1994 as compared to the year ended December 31, 1993 is
primarily due to an increase in real estate taxes (partially recoverable
from tenants) of approximately $140,000 and an increase in the provision
for doubtful accounts of approximately $276,000 at the Riverside Square
Mall property.
The increase in amortization expense for the year ended December 31,
1995 as compared to the years ended December 31, 1994 and December 31, 1993
is primarily due to the commencement in late 1994 of the amortization of
certain capitalized expenses relating to the third quarter 1994 refinancing
of the debt at Riverside Square Mall as more fully discussed in Note 2(b).
The increase in general and administrative expenses for the year ended
December 31, 1995 as compared to the years ended December 31, 1994 and
December 31, 1993 is primarily due 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. See Note 8.
The Partnership's share of operations of unconsolidated ventures
increased for the year ended December 31, 1994 as compared to the year
ended December 31, 1993 primarily due to a provision for value impairment
of approximately $15,550,000 recorded at the San Jose investment property
at September 30, 1993 (of which the Partnership's share was approximately
$7,775,000), partially offset by the provision for value impairment
recorded at the San Jose investment property at September 30, 1994. See
Note 3(b).
The gain on disposition of investment property for the year ended
December 31, 1994 is due to the lender taking title to the Bank of Delaware
building via a deed in lieu of foreclosure in November 1994. See Note
2(c).
The $2,206,781 extraordinary item for the year ended December 31, 1994
is due to the refinancing of long-term debt at Riverside Square Mall. See
Note 2(b).
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the properties remain substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investment contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1995 and 1994
Statements of Operations, years ended December 31,
1995, 1994 and 1993
Statements of Partners' Capital Accounts (Deficit),
years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows, years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements
SCHEDULE
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1995 and 1994
Statements of Operations, years ended December 31,
1995, 1994 and 1993
Statements of Partners' Capital Accounts, years ended
December 31, 1995, 1994 and 1993
Statements of Cash Flows, years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements
SCHEDULE
--------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
JMB INCOME PROPERTIES, LTD. - XI:
We have audited the financial statements of JMB Income Properties,
Ltd. - XI (a limited partnership) as listed in the accompanying index. In
connection with our audits of the financial statements, we also have
audited the financial statement schedule as listed in the accompanying
index. These financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our 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 Income
Properties, Ltd. - XI at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . $ 5,523,514 7,200,333
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . -- 7,530,660
Rents and other receivables, net of allowance for
doubtful accounts of $511,404 in 1995 and
$364,343 in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,319,003 1,984,395
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,621 79,621
Escrow deposits (note 2(b)). . . . . . . . . . . . . . . . . . . . . . . 10,105,790 11,508,793
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 18,027,928 28,303,802
------------ -----------
Investment properties, at cost (note 2, 4 and 7) - Schedule III:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,796,561 3,796,561
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . 70,665,239 61,610,179
------------ -----------
74,461,800 65,406,740
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . 14,927,070 12,951,168
------------ -----------
Investment properties, net of accumulated depreciation . . . . . . 59,534,730 52,455,572
Investment in unconsolidated ventures, at equity
(notes 1, 3 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,487,628 24,512,608
Deferred expenses (note 2(b)). . . . . . . . . . . . . . . . . . . . . . . 5,749,718 929,683
------------ -----------
$106,800,004 106,201,665
============ ===========
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
----------------------------------------------------
1995 1994
------------ -----------
Current liabilities:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- 415,003
Current portion of long-term debt (note 4) . . . . . . . . . . . . . . . 494,697 455,199
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,970 485,464
Construction costs payable . . . . . . . . . . . . . . . . . . . . . . . 673,008 3,431,926
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,581 249,748
------------ -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . 1,916,256 5,037,340
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . 84,131 79,882
Other liabilities (note 2(b)). . . . . . . . . . . . . . . . . . . . . . . 4,434,509 --
Long-term debt, less current portion (note 4). . . . . . . . . . . . . . . 34,942,100 35,436,797
------------ -----------
Commitments and contingencies (notes 2, 3 and 7)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 41,376,996 40,554,019
Partners' capital accounts (deficit) (notes 1 and 5):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 5,344,614 5,270,362
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (6,631,429) (6,631,429)
------------ -----------
(1,285,815) (1,360,067)
------------ -----------
Limited partners (173,411 interests):
Capital contributions, net of offering costs . . . . . . . . . . . . 156,493,238 156,493,238
Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 27,422,838 25,640,796
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (117,207,253) (115,126,321)
------------ -----------
66,708,823 67,007,713
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . . . . . 65,423,008 65,647,646
------------ -----------
$106,800,004 106,201,665
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . $11,822,997 13,022,234 13,836,131
Interest income. . . . . . . . . . . . . . . . . . . . 1,092,288 1,026,602 781,907
----------- ----------- -----------
12,915,285 14,048,836 14,618,038
----------- ----------- -----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . 2,976,655 2,803,351 2,428,737
Depreciation . . . . . . . . . . . . . . . . . . . . . 1,975,902 1,726,612 1,574,625
Property operating expenses. . . . . . . . . . . . . . 8,110,731 8,778,556 8,300,029
Professional services. . . . . . . . . . . . . . . . . 277,837 343,023 285,158
Amortization of deferred expenses. . . . . . . . . . . 191,592 86,376 105,130
General and administrative . . . . . . . . . . . . . . 399,979 275,525 246,493
----------- ----------- -----------
13,932,696 14,013,443 12,940,172
----------- ----------- -----------
Operating earnings (loss). . . . . . . . . . . . (1,017,411) 35,393 1,677,866
Partnership's share of operations of
unconsolidated ventures (notes 1 and 3). . . . . . . . 2,873,705 2,617,210 (4,262,005)
----------- ----------- -----------
Net operating earnings (loss). . . . . . . . . . 1,856,294 2,652,603 (2,584,139)
Gain on disposition of investment
property (note 2(c)) . . . . . . . . . . . . . . . . . -- 447,650 --
----------- ----------- -----------
Net operating earnings (loss) before
extraordinary item . . . . . . . . . . . . . . 1,856,294 3,100,253 (2,584,139)
Extraordinary item (note 2(b)) . . . . . . . . . . . . . -- (2,206,791) --
----------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . . . $ 1,856,294 893,462 (2,584,139)
=========== =========== ===========
Net earnings (loss) per limited
partnership interest (note 1):
Net operating earnings (loss). . . . . . . . . $ 10.28 14.60 (15.65)
Gain on disposition of investment
property . . . . . . . . . . . . . . . . . . -- 2.56 --
Extraordinary item . . . . . . . . . . . . . . -- (12.22) --
----------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . $ 10.28 4.94 (15.65)
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (NOTE 1)
--------------------------------------------------- --------------------------------------------------
CONTRI-
BUTIONS
NET OF NET
CONTRI- NET CASH OFFERING EARNINGS CASH
BUTIONS EARNINGS DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit)
at Decem-
ber 31,
1992. . . . . $1,000 5,104,004 (6,631,429) (1,526,425) 156,493,238 27,497,831 (110,964,457) 73,026,612
Cash distri-
butions
($12 per
limited
partnership
interest) . . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(loss)
(note 5). . . -- 129,884 -- 129,884 -- (2,714,023) -- (2,714,023)
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance
(deficit)
at Decem-
ber 31,
1993. . . . . 1,000 5,233,888 (6,631,429) (1,396,541) 156,493,238 24,783,808 (113,045,389) 68,231,657
Cash distri-
butions
($12 per
limited
partnership
interest) . . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(note 5). . . -- 36,474 -- 36,474 -- 856,988 -- 856,988
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Cash distri-
butions
($12 per
limited
partnership
interest) . . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(note 5). . . -- 36,474 -- 36,474 -- 856,988 -- 856,988
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance
(deficit)
at Decem-
ber 31,
1994. . . . . 1,000 5,270,362 (6,631,429) (1,360,067) 156,493,238 25,640,796 (115,126,321) 67,007,713
Cash distri-
butions
($12 per
limited
partnership
interest) . . -- -- -- -- -- -- (2,080,932) (2,080,932)
Net earnings
(note 5). . . -- 74,252 -- 74,252 -- 1,782,042 -- 1,782,042
------ ---------- ---------- ---------- ----------- ----------- ------------ -----------
Balance
(deficit)
at Decem-
ber 31,
1995. . . . . $1,000 5,344,614 (6,631,429) (1,285,815) 156,493,238 27,422,838 (117,207,253) 66,708,823
====== ========== ========== ========== =========== =========== ============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 1,856,294 893,462 (2,584,139)
Items not requiring (providing) cash
or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . 1,975,902 1,726,612 1,574,625
Amortization of deferred expenses. . . . . . . . . . 191,592 86,376 105,130
Amortization of discounts on long-term debt. . . . . -- 101,110 161,195
Partnership's share of operations of uncon-
solidated ventures, net of distributions . . . . . 1,008,416 (827,598) 7,609,901
Non-cash gain on disposition of investment
property (note 2(c)) . . . . . . . . . . . . . . . -- (1,128,591) --
Extraordinary item (note 2(b)) . . . . . . . . . . . -- 2,206,791 --
Changes in:
Rents and other receivables. . . . . . . . . . . . . (334,608) (511,436) (60,907)
Prepaid expenses . . . . . . . . . . . . . . . . . . -- 205,931 (28,888)
Escrow deposits. . . . . . . . . . . . . . . . . . . (820,114) (330,151) --
Accounts payable . . . . . . . . . . . . . . . . . . 16,506 229,990 (226,193)
Accrued interest payable . . . . . . . . . . . . . . (3,167) 1,006,931 (85,540)
Tenant security deposits . . . . . . . . . . . . . . 4,249 18,578 (11,035)
----------- ----------- -----------
Net cash provided by
operating activities . . . . . . . . . . . . 3,895,070 3,678,005 6,454,149
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments . . . . . . . . . . . . . . . 7,530,660 16,150,680 (6,254,572)
Net escrow for construction
related costs (note 2(b)). . . . . . . . . . . . . . 2,223,117 -- --
Additions to investment properties,
including construction related payables. . . . . . . (11,813,978) (19,596,334) (1,568,908)
Partnership's distributions from
unconsolidated ventures. . . . . . . . . . . . . . . 1,250,000 -- 1,350,425
Partnership's contributions to
unconsolidated ventures. . . . . . . . . . . . . . . (1,233,436) (1,557,469) --
Payment of deferred expenses (note 2(b)) . . . . . . . (577,118) (760,391) (17,094)
----------- ----------- -----------
Net cash used in investing
activities . . . . . . . . . . . . . . . . . (2,620,755) (5,763,514) (6,490,149)
----------- ----------- -----------
Cash flows from financing activities:
Cash proceeds from refinancing of
long-term debt (note 2(b)) . . . . . . . . . . . . . -- 11,102,785 --
Bank overdraft . . . . . . . . . . . . . . . . . . . . (415,003) 415,003 --
Principal payments on long-term debt . . . . . . . . . (455,199) (418,141) (430,021)
Distributions to limited partners. . . . . . . . . . . (2,080,932) (2,080,932) (2,080,932)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . (2,951,134) 9,018,715 (2,510,953)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . (1,676,819) 6,933,206 (2,546,953)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . 7,200,333 267,127 2,814,080
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . . $ 5,523,514 7,200,333 267,127
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . $ 2,979,823 1,695,310 2,353,082
=========== =========== ===========
Non-cash investing and financing activities:
Disposition of investment property note 2(c):
Balance due on long-term debt cancelled . . . . . . $ -- 9,500,000 --
Accrued interest expense on accelerated
long-term debt. . . . . . . . . . . . . . . . . . -- 862,422 --
Reduction of investment property. . . . . . . . . . -- (8,955,641) --
Reduction of deferred expenses. . . . . . . . . . . -- (29,099) --
Reduction of other assets . . . . . . . . . . . . . -- (249,091) --
----------- ----------- ----------
Non-cash gain recognized due to
lender realizing upon security . . . . . . . $ -- 1,128,591 --
=========== =========== ==========
Increase in deferred costs due to escrow
of funds for payment of inducement . . . . . . . . $ 5,000,000 -- --
Net increase in other liabilities . . . . . . . . . (4,434,509) -- --
----------- ----------- ----------
Payments of inducement from
escrowed funds (Note 2(b)) . . . . . . . . . $ 565,491 -- --
=========== =========== ==========
Refinancing of long-term debt, note 2(b):
Proceeds of refinancing, net of
refinancing costs. . . . . . . . . . . . . . . . . $ -- 35,913,859 --
Retirement of debt, net of discount. . . . . . . . . -- (12,983,269) --
Proceeds escrowed. . . . . . . . . . . . . . . . . . -- (11,178,642) --
Prepayment penalty . . . . . . . . . . . . . . . . . -- (649,163) --
----------- ----------- -----------
Cash proceeds from refinancing of
long-term debt . . . . . . . . . . . . . . . $ -- 11,102,785 --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a wide variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate. The
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio and wind up its affairs not later than
December 31, 1999.
The equity method of accounting has been applied in the accompanying
financial statements with respect to the Partnership's interest in Royal
Executive Park II ("Royal Executive") and JMB/San Jose Associates ("San
Jose") (note 3). Accordingly, the accompanying financial statements do not
include the accounts of Royal Executive and San Jose.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to present the Partnership's accounts
in accordance with generally accepted accounting principles ("GAAP"). Such
GAAP adjustments are not recorded on the records of the Partnership. The
net effect of these items for the years ended December 31, 1995 and 1994 is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $106,800,004 129,176,609 106,201,665 128,698,902
Partners' capital accounts
(deficit) (note 5):
General partners . . . . . . . . . (1,285,815) (1,478,591) (1,360,067) (1,524,886)
Limited partners . . . . . . . . . 66,708,823 89,438,466 67,007,713 90,408,334
Net earnings (loss) (note 5):
General partners . . . . . . . . . 74,252 46,294 36,474 (45,180)
Limited partners . . . . . . . . . 1,782,042 1,111,065 856,988 (4,652,014)
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . . 10.28 6.41 4.94 (26.83)
=========== ============ =========== ===========
</TABLE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of the
period (173,411). Deficit capital accounts will result, through the
duration of the Partnership, in net gain for financial reporting and income
tax purposes.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from unconsolidated ventures are considered cash
flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings. The Partnership records amounts held in
U.S. Government obligations at cost, which approximates market. For the
purposes of these statements, the Partnership's policy is to consider all
such amounts held with original maturities of three months or less
($3,987,126 and $7,200,333 at December 31, 1995 and 1994, respectively) as
cash equivalents with any remaining amounts (generally with original
maturities of one year or less) reflected as short-term investments being
held to maturity.
Deferred expenses consist primarily of loan fees and lease commissions
and an inducement which are amortized over the terms stipulated in the
related agreements using the straight-line method.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in the
minimum lease payments over the term of the lease, rental income is accrued
for the full period of occupancy on a straight-line basis.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
(excluding current portion of long-term debt) approximates SFAS 107 value
due to the relatively short maturity of these instruments. There is no
quoted market value available for any of the Partnership's other
instruments. The debt, with a carrying balance of $35,436,797, has been
calculated to have an SFAS 107 value of $37,045,409 by discounting the
scheduled loan payments to maturity. Due to restrictions on
transferability and prepayment and the inability to obtain comparable
financing due to current levels of debt, previously modified debt terms or
other property specific competitive conditions, the Partnership would be
unable to refinance these properties to obtain such calculated debt amounts
reported. (See note 4.) The Partnership has no other significant
financial instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the Partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform to the 1995 presentation.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through joint
ventures, two shopping centers and three office complexes. In June 1990,
the Partnership sold its interest in the Genesee Valley Shopping Center.
In November 1994, the lender realized upon its security interest and took
title to the Bank of Delaware building via a deed in lieu of foreclosure
(note 2(c)). All of the remaining properties were in operation at December
31, 1995. The cost of the investment properties represents the total cost
to the Partnership plus miscellaneous acquisition costs.
Depreciation on the properties has been provided over the estimated
useful lives of the various components as follows:
YEARS
-----
Building and Improvements -- straight-line . . . . . 30
Personal property -- straight-line . . . . . . . . . 5
==
The investment properties are pledged as security for the long-term
debt, for which there is no recourse to the Partnership.
Maintenance and repairs are generally charged to operations as
incurred. Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives.
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived asset to be held and used whenever its carrying value cannot be fully
recovered through estimated undiscounted future cash flows from operations
and sale. The amount of the impairment loss to be recognized would be the
difference between the long-lived asset's carrying value and the asset's
estimated fair value. Any long-lived asset identified as "to be disposed
of" would no longer be depreciated. Adjustments for impairment loss would
be made in each period as necessary to report this asset at the lower of
carrying value and fair value less costs to sell. In certain situations,
such estimated fair value could be less than the existing non-recourse debt
which is secured by the property. There would be no assurance that any
estimated fair value of this asset would ultimately be obtained by the
Partnership in any future sale or disposition transaction.
Under the current impairment policy, provisions for value impairment
are recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale are less
than the property's net carrying value. The amount of any such impairment
loss recognized by the Partnership is limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 would be
determined without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a
net gain (comprised of gain on extinguishment of debt and gain or loss on
sale or disposition of property) for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership will adopt SFAS 121 as required in the first quarter
of 1996. Based upon the Partnership's current assessment of the full
impact of adopting SFAS 121, it is not anticipated that any significant
additional provisions for value impairment would be required for the
property owned by the Partnership or by the Partnership's unconsolidated
ventures in the first period of implementation of SFAS 121. In addition,
upon the disposition of an impaired property, the Partnership would
generally recognize more net gain for financial reporting purposes under
SFAS 121 than it would have under the Partnership's current impairment
policy, without regard to the amount, if any, of cash proceeds received by
the Partnership in connection with the disposition. Although
implementation of this new accounting statement could significantly impact
the Partnership's reported earnings, there would be no impact on cash
flows. Further, any such impairment loss would not be recognized for
Federal income tax purposes.
(b) Riverside Square Mall
During October 1983, the Partnership acquired an existing enclosed
regional shopping center in Hackensack, New Jersey. The Partnership's
purchase price for the mall was $36,236,282. The Partnership made a cash
down payment at closing of $20,000,000. The balance of the purchase price
was represented by a first mortgage loan which had a balance at closing of
$16,236,282 prior to unamortized discount, based upon an imputed interest
rate of 12%.
During the third quarter of 1994, the Partnership finalized a
refinancing of the first mortgage loan with a new loan in the amount of
$36,000,000 which resulted in net proceeds of approximately $22,300,000.
Of such proceeds, approximately $11,200,000 was escrowed by the lender
pursuant to the loan agreement and is being released as required, including
interest, to fund certain costs of the renovation and restoration as
discussed below. Approximately $6,658,000 has been released as of December
31, 1995 and an additional $1,367,000 has been released as of the date of
this report. The remaining $11,100,000 of loan proceeds were used to
replenish the Partnership's working capital for amounts paid to or escrowed
on behalf of Saks and Bloomingdale's for their store renovations as
discussed below. Additionally, the Partnership recorded, in 1994, an
extraordinary loss on refinancing of $2,206,791 representing the write-off
of unamortized discount on the original mortgage loan of $1,557,628 and a
$649,163 prepayment penalty.
The Partnership has substantially completed its renovation of
Riverside Square Mall as well as its restoration of the parking deck (at
approximately final costs of $13,500,000 and $7,000,000, respectively) and
is continuing to remerchandise the center. The Partnership expects the
renovation to be fully complete by the end of March 1996. In connection
with the renovation, the Partnership, in early 1994, signed 15-year
operating covenant extensions with both Saks and Bloomingdale's, the latter
of which owns its own store. In return for the additional 15-year
commitment to the center, the Partnership reimbursed Saks for its store
renovation in the amount of $6,100,000; and in August 1995, the Partnership
escrowed $5,000,000, reflected as a deferred leasing cost, (approximately
$565,000 of which has been released as of December 31, 1995) for
Bloomingdale's store renovation, which has commenced and will be
substantially underway in early 1996. The Partnership has accrued the
unfunded amount payable to Bloomingdale's as of December 31, 1995 and
recorded such amounts as a deferred expense in the accompanying balance
sheet. An additional $227,000 has been released in 1996 as fundings to
Bloomingdales will be made as their construction progresses. Interest
earned on the escrowed funds will be remitted to the Partnership upon
termination of the escrow account. In connection with the payment to Saks,
the Partnership also acquired title to the Saks building which had
previously been owned by Saks.
An affiliate of the General Partners of the Partnership manages the
shopping center for a fee equal to 4% of the fixed and percentage rents of
the shopping center plus leasing commissions, subject to an aggregate
annual maximum amount of 6% of the gross receipts of the property.
(c) Bank of Delaware - office building
In December 1984, the Partnership acquired an interest in an existing
office building in Wilmington, Delaware. The Partnership's purchase price
for the building was $20,900,000, of which approximately $5,945,000, was
represented by an existing first mortgage loan. In February 1989, the
Partnership refinanced the existing first mortgage loan and received net
refinancing proceeds of approximately $4,696,000 which were utilized
primarily to pay for the substantially completed renovation program and
other capital improvements.
The Partnership assigned title to the property in November 1994 to the
mortgage lender as described below.
Due to the competitive nature of this marketplace, the property had
been operating at a cash deficit and as a result, the Partnership had
commenced discussions with the building's first mortgage lender in order to
seek a loan modification. In connection with these discussions, effective
January 1994, the Partnership had suspended payment of debt service to the
lender. Under the terms of a mortgage and security agreement, the
Partnership, in its capacity as mortgagor of the building, agreed to
indemnify the mortgage lender, under certain circumstances, against
damages, claims, liabilities and expenses incurred by or asserted against
the mortgage lender in relation to asbestos in the building. Asbestos had
been abated or encapsulated in approximately 62% of the building's space.
The Partnership did not believe that any remaining asbestos in the building
presented a hazard and did not believe that such asbestos would have been
required to be removed. The Partnership estimated that the cost of
asbestos abatement in a portion of the building that could be incurred
under certain circumstances in the future would have been approximately
$800,000. In November 1994, due to the Partnership's default in payment of
debt service, the mortgage lender concluded proceedings to realize upon its
mortgage security interest represented by the land, building, and related
improvements of the property via a deed in lieu of foreclosure. As a
result of the disposition of the property, the Partnership recognized a
gain in 1994 for financial reporting purposes of $447,650 and a loss for
Federal income tax purposes of $4,756,937 with no corresponding
distributable proceeds. In conjunction with the transfer of title, the
Partnership paid the mortgage lender a sum of approximately $681,000 which
included the net cash flow of the property since the suspension of debt
service and an indemnification release fee for which the mortgage lender
released the Partnership from all liabilities respecting the property,
including those related to asbestos.
An affiliate of the General Partner of the Partnership managed the
office building through the November 1994 date of property title assignment
for a fee equal to 3% of the gross revenues of the building plus leasing
commissions, subject to an aggregate annual maximum amount of 6% of the
gross receipts of the property.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1995 is a party to two operating
venture agreements (San Jose and Royal Executive) and has made capital
contributions to the respective ventures as discussed below. Under certain
circumstances, either pursuant to the venture agreements or due to the
Partnership's obligations as a general partner, the Partnership may be
required to make additional cash contributions to the ventures.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
(b) San Jose
The Partnership has acquired, through San Jose, an interest in an
existing office building complex in San Jose, California (Park Center
Financial Plaza) consisting of ten office buildings, a parking and retail
building (185 Park Avenue) and two parking structures.
In September 1986, San Jose obtained a mortgage loan in the amount of
$25,000,000 secured by the 150 Almaden and 185 Park Avenue buildings and
certain parking areas. Due to the scheduled maturity of the loan, San
Jose, during the fourth quarter of 1994, finalized a loan extension and
modification. The refinancing resulted in the 1994 partial paydown of the
outstanding principal balance in the amount of $2.5 million.
The property was managed by an affiliate of the General Partners of
the Partnership for a fee calculated as 3% of gross receipts until December
1994 when the affiliated property manager sold substantially all of its
assets and assigned its interests in its management contracts to an
unaffiliated third party.
The partners of San Jose are the Partnership and JMB Income
Properties, Ltd.-XII, another partnership sponsored by the Managing General
Partner of the Partnership ("JMB-XII"). The terms of San Jose's
partnership agreement generally provide that contributions, distributions,
cash flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership in their respective 50%
ownership percentages.
During August 1994, San Jose received notification from the
Redevelopment Agency of the City of San Jose of its offer to purchase one
of the parking garage structures in the office building complex, for an
approved Agency project for $4,090,000. The price offered was deemed by
the Agency to be just compensation in compliance with applicable State and
Federal laws. During 1995, the Agency filed a condemnation action in court
to secure their position in obtaining the garage pursuant to the laws of
eminent domain. In late 1995, San Jose and the Agency reached a mutually
acceptable agreement on the transfer of the garage. In March 1996, the
sale was consummated. Under the transfer agreement, San Jose will receive
replacement parking spaces for its tenants in a near-by city-owned parking
structure for a term of fifty-five years in addition to the aforementioned
purchase price of $4,090,000. San Jose will recognize a gain of
approximately $2,000,000 and $1,800,000, respectively, for financial
reporting and Federal income tax purposes in 1996, of which approximately
$1,000,000 and $900,000, respectively, will be allocable to the
Partnership.
In October 1995, San Jose elected to repay the mortgage obligations
(originally scheduled to mature in September 2000) securing the portion of
the complex on which the 100-130 Buildings are located as well as a portion
of the garage. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
After reviewing and analyzing San Jose's potential options with regard to
its investment in the 100-130 Park Center Plaza portion of the complex, San
Jose determined that it was in the best interest of the venture to repay
the mortgage obligations secured by this portion of the complex. Tenants
occupying approximately 49,000 square feet (approximately 11% of the
buildings) of the Park Center Plaza investment property have leases that
expire in 1996, for which there can be no assurance of renewals. New
leases will likely require expenditures for lease commissions and tenant
improvements prior to tenant occupancy which would result in a decrease in
cash flow from operations over the near-term. San Jose notified the
tenants in and invitees to the Park Center Plaza complex that some of the
buildings, particularly the 100-130 Park Center Plaza Buildings and the
garage below them, could pose a life safety hazard under certain unusually
intense earthquake conditions. While the buildings and the garage were
designed to comply with the applicable codes for the period in which they
were constructed, and there is no legal requirement to upgrade the
buildings for seismic purposes, San Jose has worked with consultants to
analyze ways in which such a potential life safety hazard could be reduced.
In order to reduce any potential life safety hazard that may occur during
unusually intense earthquake conditions, San Jose is undergoing a voluntary
upgrade to the 130 Park Center Plaza building and the parking garage below
the 100-130 buildings for seismic purposes. San Jose estimates the cost of
the structural upgrade to be $1,200,000 (included in the budgeted totals
above) of which the Partnership's share is $600,000. Such work began in
December 1995 and should be completed by mid 1996.
San Jose made provisions for value impairment on the 100-130 Park
Center Plaza buildings and certain parking areas and the 170 Almaden
building of $944,335 in the aggregate. Such provisions at September 30,
1994 were recorded to reduce the net carrying values of these buildings to
the then outstanding balances of the related non-recourse financing.
Additionally, at September 30, 1993, San Jose recorded a provision for
value impairment on the 150 Almaden and 185 Park Avenue buildings and
certain parking areas of $15,549,935 to reduce the net carrying value of
these buildings to the then outstanding balance of related non-recourse
financing.
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership.
(c) Royal Executive
In December 1985, the Partnership entered into a commitment to fund a
$27,000,000 convertible first mortgage note on a three building office park
then under construction in Rye Brook, New York (Royal Executive Park II).
The first mortgage note called for monthly installments of interest only at
a rate of 10% through the period of equity conversion.
During February 1987, the Partnership exercised its option of
converting the $27,000,000 mortgage into an ownership position. Upon the
conversion of the mortgage note, the Partnership entered into a joint
venture (Royal Executive) with the borrower (joint venture partners).
Pursuant to the terms of the venture agreement, until certain rental
achievement levels are attained, the Partnership is entitled to a
cumulative preferred annual return equal to $2,430,000 per year. The next
$2,439,732 of annual cash flow is distributable to the joint venture
partners, on a non-cumulative basis, with any remaining cash flow
distributable 49.9% to the Partnership and 50.1% to the joint venture
partners. Therefore, the Partnership's receipt of cash distributions is
subject to the actual operations of the property. The Partnership is
entitled to any deficiency in its preferred annual return plus interest at
9% on a cumulative basis as an annual priority distribution from future
available operating cash flow before any cash flow distributions are made
to the venture partner. The cumulative deficiency in the preferred annual
return is approximately $4,400,000 at December 31, 1995. The Royal
Executive venture agreement further provides that the Partnership is
entitled to priority level of distribution of sale and refinancing proceeds
of $27,000,000 plus the cumulative deficiency in its preferred annual
return.
Net operating income (as defined) of the joint venture, in general,
will be allocated in proportion to, and to the extent of, distributions and
then based on relative ownership percentages. Operating losses, in
general, will be first allocated to the joint venture partners to the
extent of any additional contributions made to fund operations or the
Partnership's guaranteed return. Remaining losses, if any, will be
allocated based upon relative ownership interests. Depreciation and
amortization will be allocated based upon the relative ownership interests.
Due to uncertainty about the ability to recover the net carrying value
of the property through future operations and sale, Royal Executive made a
provision for value impairment of $25,378,894 at September 30, 1994 to
reduce the net carrying value of the property to the then estimated
valuation. The provision for value impairment has been allocated fully to
the venture partner to reflect their subordination to the Partnership in
distributions with regard to future operation and sale or financing
proceeds as discussed above.
Effective July 1, 1994, management and leasing activities at the
complex were transferred to an affiliate of the General Partners of the
Partnership, who managed the property until December 1994 for a fee
computed as a percentage of certain revenues. In December 1994, this
affiliated property manager sold substantially all of its assets and
assigned its interest in its Management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property is acting as the manager of the
property on the same terms that existed prior to the sale.
(4) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and
1994:
1995 1994
---------- ----------
8.35% mortgage note, secured by Riverside
Square Mall in Hackensack, New Jersey;
payable in monthly installments of
principal and interest of $286,252
through December 1, 2006, the scheduled
maturity date at which time the unpaid
principal and interest is due (note 2(b)) . . . $35,436,797 35,891,996
Less current portion of long-term debt . . . . . 494,697 455,199
----------- ----------
Total long-term debt . . . . . . . . . $34,942,100 35,436,797
=========== ==========
Five year maturities of long-term debt are summarized as follows for
the years ending:
1996 . . . . . . . . . . . . $ 494,697
1997 . . . . . . . . . . . . 537,623
1998 . . . . . . . . . . . . 584,273
1999 . . . . . . . . . . . . 634,971
2000 . . . . . . . . . . . . 690,068
========
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or
refinancing of investment properties will be allocated to the General
Partners: (i) to the greater of 1% of such profits or the amount of cash
distributable to the General Partner from any such sale or refinancing (as
described below); and (ii) in order to reduce deficits, if any, in the
General Partners' capital accounts to a level consistent with the gain
anticipated to be realized from the sale of properties. Losses from the
sale or refinancing of investment properties will be allocated 1% to the
General Partners. The remaining sale or refinancing profits and losses
will be allocated to the Limited Partners.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership. In general, distributions of cash from operations will
be made 90% to the Limited Partners and 10% to the General Partners.
However, a portion of such distributions to the General Partners is
subordinated to the Limited Partners' receipt of a stipulated return on
capital.
The Partnership Agreement provides that the General Partners shall
receive as a distribution from the sale of a real property by the
Partnership amounts equal to the cumulative deferrals of any portion of
their 10% cash distribution and 3% of the selling price, and that the
remaining proceeds (net after expenses and retained working capital) be
distributed 85% to the Limited Partners and 15% to the General Partners.
However, the Limited Partners shall receive 100% of such net sale proceeds
until the Limited Partners (i) have received cash distributions of sale or
refinancing proceeds in an amount equal to the Limited Partners' aggregate
initial capital investment in the Partnership, (ii) have received
cumulative cash distributions from the Partnership's operations which, when
combined with sale or refinancing proceeds previously distributed, equal a
7% annual return on the Limited Partners' average capital investment for
each year (their initial capital investment as reduced by sale or
refinancing proceeds previously distributed) commencing with the first
fiscal quarter of 1985 and (iii) have received cash distributions of sale
and refinancing proceeds and of the Partnership operations, in an amount
equal to the Limited Partners' initial capital investment in the
Partnership plus a 10% annual return on the Limited Partners' average
capital investment.
(6) MANAGEMENT AGREEMENT
An affiliate of the General Partners of the Partnership manages
Riverside Square Mall for a fee equal to 4% of the fixed and percentage
rents of the shopping center plus leasing and operating covenant
commissions, subject to deferral if in excess of an aggregate annual
maximum amount of 6% of the gross receipts of the property.
(7) LEASES
At December 31, 1995, the Partnership's principal asset is one
shopping center. The Partnership has determined that all leases relating
to this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of the properties,
excluding the cost of the land, is depreciated over the estimated useful
lives. Leases with tenants range in term from one to thirty-five years and
provide for fixed minimum rent and partial reimbursement of operating
costs. In addition, leases with shopping center tenants provide for
additional rent based upon percentages of tenants' sales volumes. A
substantial portion of the ability of retail tenants to honor their leases
is dependant upon the retail economic sector.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1996. . . . . . . . . . . . $ 5,140,135
1997. . . . . . . . . . . . 5,335,838
1998. . . . . . . . . . . . 5,039,511
1999. . . . . . . . . . . . 4,661,073
2000. . . . . . . . . . . . 4,181,700
Thereafter. . . . . . . . . 15,615,106
-----------
Total . . . . . . . . . $39,973,363
===========
Contingent rent (based on sales by property tenants) included in
rental income was as follows:
1993 . . . . . . . . $302,809
1994 . . . . . . . . 274,431
1995 . . . . . . . . 210,903
========
(8) TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Managing General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . . . . . $236,845 608,703 325,429 108,000
Insurance commissions. . . . . . . . . . . 44,370 45,765 54,473 --
Reimbursement (at cost) for
accounting services. . . . . . . . . . . 99,195 74,653 74,994 --
Reimbursement (at cost) for
portfolio management
services . . . . . . . . . . . . . . . . 19,685 30,506 -- --
Reimbursement (at cost) for
legal services . . . . . . . . . . . . . 4,942 33,071 12,099 --
Reimbursement (at cost) for
administrative charges and
other out-of-pocket expenses . . . . . . 124,906 6,002 23,572 59,577
-------- -------- -------- -------
$529,943 798,700 490,567 167,577
======== ======== ======== =======
<FN>
The above table reflects that during 1995, the Partnership recognized and paid certain 1994 administrative
charges of approximately $50,480 that had not previously been reimbursed.
</TABLE>
The General Partners have deferred receipt of certain of their
distributions (see note 5) of net cash flow of the Partnership. The amount
of such deferred distributions aggregated $1,554,921 as of December 31,
1995. The amount is being deferred in accordance with the subordination
requirements of the Partnership Agreement. In addition, in 1994, an
affiliate of the General Partner deferred $300,000 in leasing fees at
Riverside Square Mall pursuant to the management agreement (note 6). Of
this amount, $192,000 was paid during 1995. The remaining amount or
amounts currently payable do not bear interest and may be paid in future
periods.
Effective October 1, 1995, the Managing General Partner of the
Partnership engaged independent third parties to perform certain
administrative services for the Partnership which were previously performed
by, and partially reimbursed to, affiliates of the General Partners. Use
of such third parties is not expected to have a material effect on the
operations of the Partnership.
(9) INVESTMENT IN UNCONSOLIDATED VENTURES
Summary of combined financial information for San Jose and Royal
Executive (note 3) as of and for the years ended December 31, 1995 and 1994
are as follows:
1995 1994
------------ -----------
Current assets . . . . . . . . . . $ 6,893,093 8,388,581
Current liabilities. . . . . . . . (579,280) (1,409,508)
------------ -----------
Working capital. . . . . . . . 6,313,813 6,979,073
------------ -----------
Investment property, net . . . . . 52,505,109 54,189,046
Other assets, net. . . . . . . . . 1,287,438 1,585,304
Long-term debt . . . . . . . . . . (23,431,863) (25,880,881)
Other liabilities. . . . . . . . . (216,518) (239,741)
Venture partners' equity . . . . . (12,970,351) (12,120,193)
------------ -----------
Partnership's capital. . . . . $ 23,487,628 24,512,608
============ ===========
Represented by:
Invested capital . . . . . . . . $ 77,738,617 76,505,181
Cumulative distributions . . . . (41,365,645) (36,233,524)
Cumulative losses. . . . . . . . (12,885,344) (15,759,050)
------------ -----------
$ 23,487,628 24,512,607
============ ===========
Total income . . . . . . . . . . . $ 15,525,621 15,799,775
============ ===========
Expenses applicable to
operating loss . . . . . . . . . $ 12,090,055 38,119,456
============ ===========
Net earnings (loss). . . . . . . . $ 3,435,566 (22,319,680)
============ ===========
Reference is made to note 3(b) regarding the provision for value
impairment of $944,335 which was recorded in 1994 by San Jose and to 3(c)
regarding the provision for value impairment of $25,378,894 which was
recorded in 1994 by Royal Executive.
The total income, expenses related to operating loss and net loss for
the above-mentioned ventures for the year ended December 31, 1993 were
$16,499,948, $28,375,860 and $11,875,912, respectively.
(10) SUBSEQUENT EVENTS
(a) Distribution to Partners
In February 1996, the Partnership paid a distribution of $520,233
($3.00 per Interest) to the Limited Partners.
(b) San Jose
During December 1995, San Jose entered into a non-binding letter of
intent for the sale of the 190 San Fernando Building to an independent
third party. In March 1996, the sale was consummated. The sale price of
the building was $1,753,000, paid in cash at closing. San Jose will
recognize a gain of approximately $772,000 for financial reporting purposes
in 1996, of which approximately $386,000 will be allocable to the
Partnership. San Jose will recognize a loss of approximately $12,000 for
Federal income tax purposes in 1996 of which approximately $6,000 will be
allocable to the Partnership.
In March 1996, the Redevelopment Agency of the City of San Jose,
pursuant to the laws of eminent domain, purchased one of the parking garage
structures in the San Jose office complex for $4,090,000. San Jose will
recognize a gain of approximately $2,000,000 and $1,800,000, respectively,
for financial reporting and Federal income tax purposes in 1996, of which
approximately $1,000,000 and $900,000, respectively, will be allocable to
the Partnership (see Note 3(b)).
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) ACQUISITION(B) AT CLOSE OF PERIOD
----------------------- -------------- -------------------------------------
BUILDINGS BUILDINGS BUILDINGS
AND AND AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL (C)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Hackensack,
New Jersey . . . $35,436,797 3,796,561 30,880,649 39,784,590 3,796,561 70,665,239 74,461,800
=========== ========= ========== ========== ========= ========== ==========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(D) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTER:
Hackensack,
New Jersey . . . . . . . . . . . . . $14,927,070 1977 10-19-83 5-30 years 1,671,550
=========== =========
- -------------
<FN>
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the
properties (net of unamortized discount based upon an imputed interest rate), including amounts
incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax
purposes was $77,246,208.
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(C) Reconciliation of real estate owned:
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . . $65,406,740 57,782,585 56,213,677
Additions during period. . . . . . . . . . . . . . . . 9,055,060 23,028,260 1,568,908
Dispositions during period . . . . . . . . . . . . . . -- (15,404,105) --
----------- ----------- ----------
Balance at end of period . . . . . . . . . . . . . . . $74,461,800 65,406,740 57,782,585
=========== =========== ==========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . . . $12,951,168 17,673,020 16,098,395
Depreciation expense . . . . . . . . . . . . . . . . . 1,975,902 1,726,612 1,574,625
Accumulated depreciation written-off at
Bank of Delaware . . . . . . . . . . . . . . . . . . -- (6,448,464) --
----------- ----------- ----------
Balance at end of period . . . . . . . . . . . . . . . $14,927,070 12,951,168 17,673,020
=========== =========== ==========
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Partners
Royal Executive Park II:
We have audited the financial statements of Royal Executive Park II (a
general partnership) as listed in the accompanying index. In connection
with our audits of the financial statements, we also have audited the
financial statement schedule 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 and financial statement schedule 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 Royal Executive
Park II at December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1996
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . $ 707,938 728,964
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . -- 98,281
Rents and other receivables, net of allowance for
doubtful accounts of $59,660 in 1995 and
$193,379 in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018,348 1,579,627
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,316 15,686
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 1,737,602 2,422,558
----------- -----------
Investment property, at cost (notes 1 and 2) - Schedule III:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569,125 2,569,125
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . 32,937,958 32,751,062
----------- -----------
35,507,083 35,320,187
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . 13,957,866 13,044,923
----------- -----------
Total investment property,
net of accumulated depreciation. . . . . . . . . . . . . . . . 21,549,217 22,275,264
----------- -----------
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413,431 719,047
----------- -----------
$23,700,250 25,416,869
=========== ===========
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1995 1994
------------ ------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 256,235 412,831
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 256,235 412,831
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . 167,648 167,648
----------- -----------
Commitments and contingencies (note 2)
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 423,883 580,479
Partners' capital accounts (notes 1 and 2) . . . . . . . . . . . . . . . . 23,276,367 24,836,390
----------- -----------
$23,700,250 25,416,869
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . $ 6,281,703 6,517,638 6,129,400
Interest income. . . . . . . . . . . . . . . . . . . . 61,472 11,318 1,213
----------- ----------- -----------
6,343,175 6,528,956 6,130,613
----------- ----------- -----------
Expenses:
Depreciation . . . . . . . . . . . . . . . . . . . . . 912,943 897,428 1,825,448
Property operating expenses. . . . . . . . . . . . . . 3,041,478 3,355,481 2,782,717
Amortization of deferred expenses. . . . . . . . . . . 371,516 100,234 177,822
Provision for value impairment (note 1). . . . . . . . -- 25,378,894 --
----------- ----------- -----------
4,325,937 29,732,037 4,785,987
----------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . . $ 2,017,238 (23,203,081) 1,344,626
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
UNAFFILIATED
VENTURE JMB-XI TOTAL
------------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1992 . . . . . . . . . . . . . . . . . $32,113,852 19,399,821 51,513,673
Capital contributions. . . . . . . . . . . . . . . . . . . . . 209,967 -- 209,967
Cash distributions . . . . . . . . . . . . . . . . . . . . . . -- (3,698,321) (3,698,321)
Net earnings (loss) (note 2) . . . . . . . . . . . . . . . . . (1,003,638) 2,348,264 1,344,626
----------- ----------- -----------
Balance at December 31, 1993 . . . . . . . . . . . . . . . . . 31,320,181 18,049,764 49,369,945
Capital contributions. . . . . . . . . . . . . . . . . . . . . 459,138 -- 459,138
Cash distributions . . . . . . . . . . . . . . . . . . . . . . -- (1,789,612) (1,789,612)
Net earnings (loss) (note 2) . . . . . . . . . . . . . . . . . (25,378,591) 2,175,510 (23,203,081)
----------- ----------- -----------
Balance at December 31, 1994 . . . . . . . . . . . . . . . . . 6,400,728 18,435,662 24,836,390
Capital contributions. . . . . . . . . . . . . . . . . . . . . 304,860 -- 304,860
Cash distributions . . . . . . . . . . . . . . . . . . . . . . -- (3,882,121) (3,882,121)
Net earnings (loss) (note 2) . . . . . . . . . . . . . . . . . (147,303) 2,164,541 2,017,238
----------- ----------- -----------
Balance at December 31, 1995 . . . . . . . . . . . . . . . . . $ 6,558,285 16,718,082 23,276,367
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $ 2,017,238 (23,203,081) 1,344,626
Items not requiring (providing) cash:
Depreciation . . . . . . . . . . . . . . . . . . . . 912,943 897,428 1,825,448
Amortization of deferred expenses. . . . . . . . . . 371,516 100,234 177,822
Provision for value impairment . . . . . . . . . . . -- 25,378,894 --
Changes in:
Rents and other receivables. . . . . . . . . . . . . 561,279 (607,899) 72
Prepaid expenses . . . . . . . . . . . . . . . . . . 4,370 (1,110) (946)
Accounts payable . . . . . . . . . . . . . . . . . . (156,596) (145,199) 430,787
Tenant security deposits . . . . . . . . . . . . . . -- 47,111 1,817
----------- ----------- -----------
Net cash provided by
operating activities . . . . . . . . . . . . . 3,710,750 2,466,378 3,779,626
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments. . . . . . . . . . . . . . 98,281 (98,281) --
Additions to investment property . . . . . . . . . . . (186,896) (525,677) (124,624)
Payment of deferred expenses . . . . . . . . . . . . . (65,900) (231,425) (31,960)
----------- ----------- -----------
Net cash used in
investing activities . . . . . . . . . . . . . (154,515) (855,383) (156,584)
----------- ----------- -----------
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994 1993
----------- ----------- -----------
Cash flows from financing activities:
Capital contributed to venture . . . . . . . . . . . . 304,860 459,138 209,966
Distributions to partners. . . . . . . . . . . . . . . (3,882,121) (1,789,612) (3,698,321)
----------- ----------- -----------
Net cash used in financing activities. . . . . . (3,577,261) (1,330,474) (3,488,355)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . (21,026) 280,521 134,687
Cash and cash equivalents,
at beginning of year . . . . . . . . . . . . . 728,964 448,443 313,756
----------- ----------- -----------
Cash and cash equivalents,
at end of year . . . . . . . . . . . . . . . . $ 707,938 728,964 448,443
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . $ -- -- --
=========== =========== ===========
Non-cash investing and financing activity. . . . . . . $ -- -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) OPERATIONS AND BASIS OF ACCOUNTING
The accompanying financial statements have been prepared for the
purpose of complying with Rule 3.09 of Regulation S-X of the Securities and
Exchange Commission. They include the accounts of the unconsolidated joint
venture, Royal Executive Park II venture ("Venture"), in which JMB Income
Properties, Ltd.-XI ("JMB Income-XI") and an unaffiliated venture are the
partners.
Royal Executive Park II holds an equity investment in commercial real
estate property in the City of Rye Brook, New York. Business activities
consist of rentals to a wide variety of commercial companies, and the
ultimate sale or disposition of such real estate.
The Venture's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying financial statements have been prepared from such records
after making appropriate adjustments to present the Venture's accounts in
accordance with generally accepted accounting principles ("GAAP"). Such
adjustments are not recorded on the records of the Venture. The net effect
of these items for the years ended December 31, 1995 and 1994 is summarized
as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- -----------------------------
TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . $23,700,250 21,262,818 25,416,869 23,202,375
Partners' capital accounts . . . . . . 23,276,367 20,838,960 24,836,390 22,632,417
Net earnings (loss). . . . . . . . . . 2,017,238 1,783,804 (23,203,081) 1,350,121
=========== =========== ========== ==========
</TABLE>
Statement of Financial Accounting Standards No. 95 requires the
Venture to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. In
addition, the Venture records amounts held in U.S. Government obligations
at cost, which approximates market. For purposes of these statements, the
Venture's policy is to consider all such amounts held with original
maturities of three months or less ($0 at December 31, 1995 and $692,065 at
December 31, 1994) as cash equivalents with any remaining amounts
(generally with original maturities of one year or less) reflected as
short-term investments being held to maturity.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Depreciation on buildings and improvements has been provided over the
estimated useful lives of the assets (5 to 30 years) using the straight-
line method.
Deferred expenses consist primarily of lease commissions which are
amortized over the terms stipulated in the related leases using the
straight-line method.
Although certain leases of the Venture provide for tenant occupancy
during periods for which no rent is due and/or increases in the minimum
lease payments over the term of the lease, rental income is accrued for the
full period of occupancy on a straight-line basis.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Under the Partnership's impairment policy, provisions for value
impairment are recorded with respect to investment properties pursuant to
Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". Therefore, the Partnership does not anticipate
any effect on its financial statements upon full adoption of SFAS 121 as
required in the first quarter of 1996.
In 1994, the Venture recorded a provision for value impairment of
$25,378,894.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments", requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in
the Statement as the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes the carrying amount of its
financial instruments classified as current assets and liabilities
approximates SFAS 107 value due to the relatively short maturity of these
instruments.
No provision for State or Federal income taxes has been made as the
liability for such taxes is that of the venture partners rather than the
Venture.
(2) VENTURE AGREEMENT
A description of the acquisition of the property and the venture
agreement is contained in Note 3(c) of the financial statements of JMB
Income - XI. Such note is incorporated herein by reference.
(3) MANAGEMENT AGREEMENT
Effective July 1, 1994, management and leasing activities at the
complex were transferred to an affiliate of the General Partners of the
Partnership, who managed the property until December 1994. In December
1994, this affiliated property manager sold substantially all of its assets
and assigned its interest in its Management contracts to an unaffiliated
third party. In addition, certain of the management personnel of the
property manager became management personnel of the purchaser and its
affiliates.
(4) LEASES
At December 31, 1995, the Venture's principal asset is an office
building complex. The Venture has determined that all leases relating to
this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of the property,
excluding the cost of the land, is depreciated over the estimated useful
life. Leases with tenants range in term from one to twenty-five years and
provide for fixed minimum rent and partial reimbursement of operating
costs.
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
1996. . . . . . . . . . . . . . . $ 5,469,395
1997. . . . . . . . . . . . . . . 5,461,085
1998. . . . . . . . . . . . . . . 5,333,915
1999. . . . . . . . . . . . . . . 4,808,559
2000. . . . . . . . . . . . . . . 4,017,559
Thereafter. . . . . . . . . . . . 2,711,855
-----------
$27,802,368
===========
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Venture to the General Partners and their affiliates as of December 31,
1995 and for the years ended December 31, 1995, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management and
leasing fees . . . . . . . . . . . . . . $ -- 14,268 -- --
------- ------- ------- -----
$ -- 14,268 -- --
======= ======= ======= =====
</TABLE>
<TABLE>
SCHEDULE III
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) AT CLOSE OF PERIOD (B)
----------------------- COSTS -------------------------------------
BUILDINGS CAPITALIZED BUILDINGS
AND SUBSEQUENT TO AND
ENCUMBRANCE LAND IMPROVEMENTS ACQUISITION(C) LAND IMPROVEMENTS TOTAL (D)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
Rye Brook,
New York . . . . $ -- 5,568,277 50,554,899 (20,616,093) 2,569,125 32,937,958 35,507,083
=========== ========== ========== =========== ========== ========== ==========
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1995
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
Rye Brook,
New York. . . . . . . . . . . . . . $13,957,866 1986 2/12/87 5-30 years 756,999
=========== =======
<FN>
- --------------
Notes:
(A) The initial cost to the Venture represents the original purchase price of the
property, including amounts incurred subsequent to acquisition which were contemplated at
the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1995 for Federal income
tax purposes was approximately $33,688,419.
(C) In 1994, the venture recorded a provision for value impairment totalling $25,378,894, see Note 1.
</TABLE>
<TABLE>
SCHEDULE III - CONTINUED
ROYAL EXECUTIVE PARK II
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(D) Reconciliation of real estate owned:
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . $35,320,187 59,642,842 59,518,218
Additions during period. . . . . . . . . . . . . . . 186,896 525,677 124,624
Provision for value impairment (C) . . . . . . . . . -- (24,848,332) --
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . . . $35,507,083 35,320,187 59,642,842
=========== =========== ===========
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . . . $13,044,923 12,147,495 10,322,047
Depreciation expense . . . . . . . . . . . . . . . . 912,943 897,428 1,825,448
----------- ----------- -----------
Balance at end of period . . . . . . . . . . . . . . $13,957,866 13,044,923 12,147,495
=========== =========== ===========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during 1994
and 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. JMB has responsibility for
all aspects of the Partnership's operations, subject to the requirement
that sales of real property must be approved by the Associate General
Partner of the Partnership, Income Associates-XI, L.P. The Associate
General Partner shall be directed by a majority in interest of its limited
partners (who are generally officers, directors and affiliates of JMB or
its affiliates) as to whether to provide its approval of any sale of real
property (or any interest therein) of the Partnership. The Partnership is
subject to certain conflicts of interest arising out of its relationships
with the General Partners and their affiliates as well as the fact that the
General Partners and their affiliates are engaged in a range of real estate
activities. Certain services have been and may in the future be provided
to the Partnership or its investment properties by affiliates of the
General Partners, including property management services and insurance
brokerage services. In general, such services are to be provided on terms
no less favorable to the Partnership than could be obtained from
independent third parties and are otherwise subject to conditions and
restrictions contained in the Partnership Agreement. The Partnership
Agreement permits the General Partners and their affiliates to provide
services to, and otherwise deal and do business with, persons who may be
engaged in transactions with the Partnership, and permits the Partnership
to borrow from, purchase goods and services from, and otherwise to do
business with, persons doing business with the General Partners or their
affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of each
director and the executive and certain other officers of the Managing
General Partner of the Partnership 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 8/01/93
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 Managing General Partner to be held on
June 5, 1996. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Managing General Partner to be held on June 5,
1996. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners,
Ltd.-II ("Mortgage Partners-II"), 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, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-IX"), JMB Income Properties, Ltd.-X ("JMB
Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income
Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-
XIII ("JMB Income-XIII"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing directors and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers, Inc.
(the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB
Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II
("Arvida-II")) and Income Growth Managers, Inc. (the corporate general
partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such
directors and officers are also partners of certain partnerships which are
associate general partners in the following real estate limited partner-
ships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII,
Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-IX, JMB Income-X, JMB Income-XII, JMB
Income-XIII, Mortgage Partners, Mortgage Partners-II, 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 Managing General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.,
an affiliate of JMB that is a real estate investment trust in the business
of owning, managing and developing shopping centers. He is a Certified
Public Accountant.
Neil G. Bluhm (age 58) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an
affiliate of JMB that is a real estate investment trust in the business of
owning, managing and developing shopping centers. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 57) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 54) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 62) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 49) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is 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. Mr.
Schreiber is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers. He is also a director of a
number of investment companies advised or managed by T. Rowe Price
Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 46) has been associated with JMB since March,
1982. He holds a J.D. degree from Northwestern Law School and is a member
of the Bar of the State of Illinois.
Glenn E. Emig (age 48) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters Degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 43) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 47) has been associated with JMB since March 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.
Howard Kogen (age 60) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of
the Partnership are entitled to receive a share of cash distributions, when
and as cash distributions are made to the Investors, and a share of profits
or losses. Reference is also made to Notes 5 and 7 for a description of
such transactions, distributions and allocations. In 1995, 1994 and 1993,
no cash distributions were paid to the General Partners.
Affiliates of the Managing General Partner provided property
management services to the Partnership for 1995 for the Riverside Square
Mall in Hackensack, New Jersey at a fee not to exceed 4% of the fixed and
percentage rent of property, plus leasing commissions. In 1995, such
affiliates earned property management and leasing fees amounting to
$236,845, of which $108,000 was unpaid as of December 31, 1995. As set
forth in the Prospectus of the Partnership, the Managing General Partner
must negotiate such agreements on terms no less favorable to the
Partnership than those customarily charged for similar services in the
relevant geographical area (but in no event at rates greater than 6% of the
gross receipts from a property), and such agreements must be terminable by
either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Managing General
Partner, earned and received insurance brokerage commissions in 1995 aggre-
gating $44,370 in connection with the provision of insurance coverage for
certain of the real property investments of the Partnership and its
venture. Such commissions are at rates set by insurance companies for the
classes of coverage provided.
The General Partners of the Partnership may be reimbursed for their
salaries, salary-related and direct expenses relating to the administration
of the Partnership and the operation of the Partnership's real property
investments. In 1995, an affiliate of the General Partners earned
reimbursement for such expenses in the amount of $248,728 of which $59,577
was unpaid at December 31, 1995.
The Partnership is permitted to engage in various transactions
involving affiliates of the Managing General Partner of the Partnership.
The relationship of the Managing General Partner (and its directors and
officers) to its affiliates is set forth above in Item 10 above and Exhibit
21 hereto.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Managing General Partner, its officers and directors and the Associate General Partner own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership JMB Realty Corporation 5 Interests (1) Less than 1%
Interests indirectly
Limited Partnership Managing General 5 Interests (1) Less than 1%
Interests Partner, its indirectly
officers and
directors and
the Associate
General Partner
as a group
<FN>
- --------------
(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB Realty
Corporation, as its indirect majority shareholder. is deemed to have sole voting and investment power.
No officer or director of the Managing General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Managing General Partner, 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 annual report).
2. Exhibits.
3-A. The Prospectus of the Partnership dated July 11,
1984 as supplemented July 24, 1984 and November 26, 1984, as filed with the
Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated
herein by reference. Copies of pages 8-12, 56-58 and A-8 to A-12 are
hereby incorporated herein by reference to Exhibit 3-A to the Partnership's
Report on Form 10-K for December 31, 1992 (File No. 0-15966) dated March
19, 1993.
3-B. Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, which agreement is
hereby incorporated herein by reference to Exhibit 3-B to the Partnership's
Report on Form 10-K for December 31, 1992 (File No. 0-15966) dated March
19, 1993.
4-A. Mortgage loan agreement, Mortgage and Security
Agreement, Secured Promissory Note B, Secured Promissory Note A and
Assignment of Leases and Rents relating to Riverside Square Mall between
the Partnership and Principal Mutual Life Insurance Company dated August
30, 1994 are hereby incorporated herein by reference to the Partnership's
Report on Form 10-K for December 31, 1994 (File No. 0-15966) dated March
27, 1995.
4-B. Mortgage loan agreement between San Jose and
Connecticut General Life Insurance Co. dated June 20, 1985 relating to Park
Center Plaza are hereby incorporated by reference to the Partnership's
Report on Form 8-K (File No. 0-15966) dated June 20, 1985.
4-C. Mortgage loan agreement, Amended and Restated
Deed of Trust, Security Agreement with assignment of Rents and Fixture
Filing and Real Estate tax escrow and Security Agreement between San Jose
and Connecticut General Life Insurance Co. dated November 30, 1994 is
hereby incorporated herein by reference to the Partnership's Report of Form
10-K for December 31, 1994 (File No. 0-15966) dated March 27, 1995.
10-A. Acquisition documents relating to the purchase by
the Partnership of Riverside Square in Hackensack, New Jersey are hereby
incorporated by reference to the Partnership's prospectus on Form S-11
(File No. 2-90503) dated July 11, 1984.
10-B. Acquisition documents including the venture
agreement relating to the purchase by the Partnership of Park Center Plaza
in San Jose, California are hereby incorporated by reference to the
Partnership's Report on Form 8-K (File No. 0-15966) dated June 20, 1985.
10-C. Deed in Lieu of Foreclosure Agreement and
Memorandum of Mutual Releases dated November 15, 1994 between Three Hundred
Delaware Avenue Associates, L.P. and EML Associates are hereby incorporated
by reference to the Partnership's Report on Form 8-K (File No. 0-15966)
dated November 15, 1994.
10-D. Request for Full Reconveyance relating to the
repayment of the mortgage indebtedness by San Jose to Connecticut General
Life Insurance Company dated October 31, 1995 is filed herewith.
21. List of Subsidiaries
24. Powers of Attorney
27. Financial Data Schedule
--------------
Although certain additional long-term debt instruments
of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commissions upon request.
(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.
No annual report or proxy material for the year 1995 has been sent to
the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XI
By: JMB Realty Corporation
Managing General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Managing General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1996
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1996
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1996
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1996
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1996
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1996
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1996
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1996
JMB INCOME PROPERTIES, LTD. - XI
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE Page
------------ ----
3-A. Pages 8-12, 56-58 and A-8 to
A-12 of the Prospectus dated
July 11, 1984 Yes --
3-B. Amended and Restated Agreement
of Limited Partnership Yes --
4-A. Mortgage loan agreement
related to Riverside Square Yes --
4-B. Mortgage loan agreement
related to Park Center
Financial Center Yes --
4-C. Mortgage loan agreement
related to Park Center Plaza Yes --
10-A. Acquisition documents
related to Riverside Square Yes --
10-B. Acquisition documents
related to Park Center Plaza Yes --
10-C. Disposition documents related
to Bank of Delaware Yes --
10-D. Request for Full Reconveyance
related San Jose No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a general partner in JMB/San Jose Associates, an
Illinois general partnership which holds title to Park Center Financial
Plaza. The Partnership is a general partner in Royal Executive Park-II, a
New York general partnership which holds title to Royal Executive Park II.
Reference is made to Note 3 of the Notes to Financial Statements filed with
this annual report for a summary description of the terms of such
partnership agreements. The Partnership's interest in the foregoing joint
venture partnerships, and the results of their operations are included in
the financial statements of the Partnership filed with this annual report.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - XI, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the managing general partner of JMB INCOME PROPERTIES,
LTD. - VII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN
J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the
undersigned with full power of authority to sign in the name and on behalf
of the undersigned officers a Report on Form 10-K of said partnership for
the fiscal year ended December 31, 1995, and any and all amendments
thereto, hereby ratifying and confirming all that said attorneys and agents
and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 5th day of February, 1996.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
A. Lee Sacks
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1995,
and any and all amendments thereto, the 5th day of February, 1996.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<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, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,523,514
<SECURITIES> 0
<RECEIVABLES> 12,504,414
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,027,928
<PP&E> 74,461,800
<DEPRECIATION> 14,927,070
<TOTAL-ASSETS> 106,800,004
<CURRENT-LIABILITIES> 1,916,256
<BONDS> 34,942,100
<COMMON> 0
0
0
<OTHER-SE> 65,423,008
<TOTAL-LIABILITY-AND-EQUITY> 106,800,004
<SALES> 11,822,997
<TOTAL-REVENUES> 12,915,285
<CGS> 0
<TOTAL-COSTS> 10,278,225
<OTHER-EXPENSES> 677,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,976,655
<INCOME-PRETAX> (1,017,411)
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,856,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,856,294
<EPS-PRIMARY> 10.28
<EPS-DILUTED> 10.28
</TABLE>
JMB INCOME PROPERTIES, LTD. - XI
EXHIBIT 10-D
TO: TITLE INSURANCE AND TRUST COMPANY
REQUEST FOR FULL RECONVEYANCE
DATE: OCTOBER 31, 1995
The undersigned owns and holds ONE (1) NOTE for the sum of FIVE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($5,500,000.00), and all other
indebtedness secured by a DEED OF TRUST WITH ASSIGNMENT OF RENTS, dated
NOVEMBER 22, 1968, made by PARK CENTER PLAZA, A CO-PARTNERSHIP, TRUSTOR,
RECORDED DECEMBER 3, 1968, as INSTRUMENT NO. 3529766 in BOOK 8354, PAGE 98,
OFFICIAL RECORDS of SANTA CLARA COUNTY, CALIFORNIA, which DEED OF TRUST was
MODIFIED by that certain SUPPLEMENTAL & MODIFICATION OF DEED OF TRUST,
dated SEPTEMBER 29, 1970, recorded SEPTEMBER 30, 1970, as FILE NO. 3880810,
in BOOK 9071, PAGE 741, OFFICIAL RECORDS of SANTA CLARA COUNTY, CALIFORNIA,
and assigned by that certain CORPORATION ASSIGNMENT OF DEED OF TRUST dated
SEPTEMBER 29, 1970, made by WELLS FARGO BANK, NATIONAL ASSOCIATION,
BENEFICIARY, recorded SEPTEMBER 30, 1970, FILE NO. 3880811 in BOOK 9071,
PAGE 746, OFFICIAL RECORDS of SANTA CLARA COUNTY, CALIFORNIA and as further
MODIFIED by that certain SUPPLEMENTAL DEED OF TRUST dated NOVEMBER 20,
1970, made by PARK CENTER PLAZA, A LIMITED PARTNERSHIP, TRUSTOR, recorded
JANUARY 12, 1971 as INSTRUMENT NO. 3936349 in BOOK 9184, PAGE 13, OFFICIAL
RECORDS of SANTA CLARA COUNTY, CALIFORNIA.
You are notified that all indebtedness secured by said DEEDS OF TRUST
has been fully paid; and you are directed upon surrender to you for
cancellation of said DEEDS OF TRUST and NOTE or NOTES, and upon payment to
you of any sums owing to you under the terms of said DEEDS OF TRUST, to
reconvey without warranty to "the person or persons legally entitled
thereto" the estate now held by you and acquired through said DEEDS OF
TRUST.
Connecticut General Life Insurance Company
By: CIGNA Investments, Inc.
FRANK SATALINE
Frank Sataline, Vice President
<PAGE>
TO: LAWYERS TITLE INSURANCE CORPORATION
REQUEST FOR FULL RECONVEYANCE
DATE: OCTOBER 31, 1995
The undersigned owns and holds ONE (1) PROMISSORY NOTE for the sum of
ONE MILLION ONE HUNDRED THOUSAND DOLLARS ($1,100,000.00), and all other
indebtedness secured by a DEED OF TRUST AND ASSIGNMENT OF RENTS, dated
NOVEMBER 16, 1978 made by PARK CENTER PLAZA, A CALIFORNIA GENERAL
PARTNERSHIP, TRUSTOR, recorded NOVEMBER 16, 1978, as FILE NO. 6202486 in
BOOK E 100, PAGE 169, OFFICIAL RECORDS of SANTA CLARA COUNTY, CALIFORNIA.
You are notified that all indebtedness secured by said DEED OF TRUST
has been fully paid; and you are directed upon surrender to you for
cancellation of said DEED OF TRUST and NOTE or NOTES, and upon payment to
you of any sums owing to you under the terms of said DEED OF TRUST, to
reconvey without warranty to "the person or persons legally entitled
thereto" the estate now held by you and acquired through said DEED OF
TRUST.
Connecticut General Life Insurance Company
By: CIGNA Investments, Inc.
FRANK SATALINE
Frank Sataline, Vice President
