SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
June 30, 2000 Commission file #0-15966
JMB INCOME PROPERTIES, LTD. - XI
(Exact name of registrant as specified in its charter)
Illinois 36-3254043
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
ASSETS
------
JUNE 30, DECEMBER 31,
2000 1999
------------ -----------
Current assets:
Cash and cash equivalents. . . . . . . $ 1,569,727 3,778,146
Restricted funds . . . . . . . . . . . 1,000,000 1,000,000
Other receivables. . . . . . . . . . . 129,715 37,444
------------ ------------
Total assets . . . . . . . . . . $ 2,699,442 4,815,590
============ ============
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Accounts payable and other
current liabilities. . . . . . . . . $ 20,423 62,112
------------ ------------
Total current liabilities. . . . 20,423 62,112
------------ ------------
Commitments and contingencies
Total liabilities. . . . . . . . 20,423 62,112
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . 1,000 1,000
Cumulative net earnings (losses) . . 5,776,915 5,780,516
Cumulative cash distributions. . . . (8,037,985) (7,787,502)
------------ ------------
(2,260,070) (2,005,986)
------------ ------------
Limited partners (173,411 interests):
Capital contributions,
net of offering costs. . . . . . . 156,493,238 156,493,238
Cumulative net earnings (losses) . . 63,630,169 63,716,584
Cumulative cash distributions. . . . (215,184,318) (213,450,358)
------------ ------------
4,939,089 6,759,464
------------ ------------
Total partners' capital
accounts (deficits). . . . . . 2,679,019 4,753,478
------------ ------------
$ 2,699,442 4,815,590
============ ============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . $ -- 3,040,019 -- 6,231,763
Interest income. . . . . . . . . . . . . . . . . . 39,190 167,905 94,378 333,999
Other income . . . . . . . . . . . . . . . . . . . 100,000 -- 102,869 --
----------- ---------- ---------- ----------
139,190 3,207,924 197,247 6,565,762
----------- ---------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . -- 535,146 -- 1,131,395
Property operating expenses. . . . . . . . . . . . -- 1,613,600 50,116 3,381,575
Professional services. . . . . . . . . . . . . . . 47,981 42,133 68,144 105,344
Amortization of deferred expenses. . . . . . . . . -- 169,585 -- 338,468
General and administrative . . . . . . . . . . . . 114,331 93,856 169,003 211,520
Provision for value impairment . . . . . . . . . . -- 9,800,000 -- 9,800,000
----------- ---------- ---------- ----------
162,312 12,254,320 287,263 14,968,302
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . . . $ (23,122) (9,046,396) (90,016) (8,402,540)
=========== ========== ========== ==========
Net earnings (loss) per
limited partnership
interest. . . . . . . . . . . . . . . . . . $ (.13) (50.08) (.50) (46.52)
=========== ========== ========== ==========
Cash distributions per
limited partnership
interest . . . . . . . . . . . . . . . . . $ -- 4.00 10.00 4.00
=========== ========== ========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . $ (90,016) (8,402,540)
Items not requiring (providing) cash
or cash equivalents:
Amortization of deferred expenses. . . . -- 338,468
Provision for value impairment . . . . . -- 9,800,000
Changes in:
Rents and other receivables. . . . . . . (92,271) 17,579
Prepaid expenses . . . . . . . . . . . . -- 79,159
Accounts payable and other current
liabilities. . . . . . . . . . . . . . (41,689) (164,059)
Accrued interest payable . . . . . . . . -- (4,394)
Tenant security deposits . . . . . . . . -- (5,716)
----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . (223,976) 1,658,497
----------- -----------
Cash flows from investing activities:
Additions to investment properties . . . . -- (973,090)
Payment of deferred expenses . . . . . . . -- (3,413)
----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . -- (976,503)
----------- -----------
Cash flows from financing activities:
Distributions to limited partners. . . . . (1,733,960) (693,644)
Distributions to general partners. . . . . (250,483) --
----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . (1,984,443) (693,644)
----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . (2,208,419) (11,650)
Cash and cash equivalents,
beginning of year. . . . . . . . . 3,778,146 15,863,283
----------- -----------
Cash and cash equivalents,
end of period. . . . . . . . . . . $ 1,569,727 15,851,633
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage and other
interest . . . . . . . . . . . . . . . . $ -- 1,135,789
=========== ===========
See accompanying notes to financial statements.
<PAGE>
JMB INCOME PROPERTIES, LTD. - XI
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1999
which are included in the Partnership's 1999 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
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.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121") as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell such property and active marketing activity has commenced or is
expected to commence in the near term. In accordance with SFAS 121, any
properties identified as "held for sale or disposition" are no longer
depreciated. The results of operations for properties sold or disposed of
in the past two years were $0 and ($8,433,434), respectively, for the six
months ended June 30, 2000 and 1999.
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 June 30, 2000 and for the six months ended June 30,
2000 and 1999 were as follows:
Unpaid at
June 30,
2000 1999 2000
------- ------- ----------
Property management and leasing
fees . . . . . . . . . . . . . . . . . $ -- 121,333 --
Insurance commissions. . . . . . . . . . 872 30,209 --
Reimbursement (at cost) for out-of-
pocket salary and salary-related
expenses and other costs for the
Partnership and its investment
properties. . . . . . . . . . . . . . . 16,396 48,032 --
------- ------- ----
$17,268 199,574 --
======= ======= ====
<PAGE>
The General Partners have deferred receipt of certain of their
distributions of net cash flow of the Partnership. The amount of such
deferred distributions aggregated $2,229,000 as of June 30, 2000. The
amount was being deferred in accordance with the subordination requirements
of the Partnership Agreement and has not been reflected in the accompanying
consolidated financial statements. As a result of the distribution of
sales proceeds to the Limited Partners in 1999, the subordination
requirements of the Partnership Agreement were satisfied to permit payment
to the General Partners their share of distributions of cash flow from
operations effective with the third quarter of 1999. The General Partners
received a cash distribution of previously undistributed cash flow from
operations and reserves of $250,483 in February 2000, $57,804 of which
represented a correction of the November 1999 cash distribution to the
General Partners. However, pursuant to additional subordination
requirements, including an additional return to the Limited Partners on the
Limited Partners' average adjusted capital contribution and the return of
the Limited Partners original capital contribution, the Partnership does
not expect that such additional subordination requirements will be
satisfied to permit payment of the $2,229,000 of previously deferred
distributions of net cash flow.
An affiliate of the General Partners of the Partnership managed the
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. Such fees and commissions were subject to deferral to the
extent they were in excess of an aggregate annual maximum amount of 6% of
the gross receipts of the property. As such property has been sold, no
further fees are expected to be paid to such affiliate.
RIVERSIDE SQUARE MALL
The Partnership has filed, in recent years, real estate tax appeals on
behalf of the Riverside Square Mall property for the tax years 1994 through
1998. The Partnership had been in negotiations to resolve this matter with
the taxing authority. In June 2000, the Tax Court approved the settlement
between the Partnership and the taxing authority. In late July 2000, the
Partnership received approximately $518,000 from the taxing authority in
full settlement of all prior real estate tax appeals. The Partnership
expects to realize approximately $100,000 after issuing refunds to tenants
at the mall and payment of expenses associated with the litigation.
On August 5, 1999, the Partnership sold the Riverside Square Mall to
an unaffiliated third party for a sale price of $59,500,000 (before selling
expenses and prorations). In connection with the sale of the property, as
is customary in such transactions, the Partnership agreed to certain
representations, warranties and covenants with a stipulated survival period
that expired July 31, 2000 with no liability to the Partnership. In
accordance with the purchase and sale agreement, the Partnership was
required to establish reserves of at least $1,000,000 in cash or reasonably
liquid investments as of the closing date for the purpose of paying any
specified liabilities (as defined) during the survival period that expired
July 31, 2000.
As the Partnership had committed to a plan to sell the property, the
property was classified as held for sale or disposition as of September 30,
1997, and therefore, has not been subject to continued depreciation beyond
such date.
ADJUSTMENTS
In the opinion of the Managing General Partner, all adjustments (con-
sisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 2000
and for the three and six months ended June 30, 2000 and 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All references to Notes are to Notes to the accompanying financial
statements. Reference is made to the Notes for additional information
concerning certain of the Partnership's investments.
The board of directors of JMB Realty Corporation ("JMB") the managing
general partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers.
During 1999, some of the Limited Partners in the Partnership received
from unaffiliated third parties unsolicited tender offers to purchase up to
4.9% of the Interests in the Partnership for $150 per Interest. Such
offers have expired. As of the date of this report, the Partnership is
aware that 7.92% of the Interests have been purchased by various
unaffiliated third parties either pursuant to tender offers or through
negotiated purchases. It is possible that other offers for Interests may
be made by unaffiliated third parties in the future, although there is no
assurance that any other third party will commence an offer for Interests,
the terms of any such offer or whether any such offer, if made, will be
consummated, amended or withdrawn.
At June 30, 2000, the Partnership had cash and cash equivalents of
approximately $1,570,000. Such funds will be utilized for distributions to
partners and for working capital requirements of the Partnership. In
addition, in accordance with the Riverside Square purchase and sale
agreement, $1,000,000 was being held in reserve for the purpose of paying
any specified liabilities (as defined) relating to the representations,
warranties and covenants agreed to in the sale and arising during the
survival period that ended on July 31, 2000 with no liability to the
Partnership. Reference is made to the Notes for a further description of
such sale.
In February 2000, the Partnership made a cash distribution of
previously undistributed cash flow from operations and reserves of
$1,733,960 ($10 per interest) to the Limited Partners and $250,483 to the
General Partners, of which $57,804 represented a correction of the November
1999 distribution to the General Partners. As a result of the expiration
of the representations, warranties and covenants relating to the sale of
Riverside Square, the Partnership made a determination to distribute
previously undistributed cash flow from operations and reserves of
approximately $867,000 ($5 per interest) to the Limited Partners and
approximately $96,000 to the General Partners in August 2000. No further
distributions of cash flow are anticipated to be made until the final
liquidation of the Partnership.
The Partnership has filed, in recent years, real estate tax appeals on
behalf of the Riverside Square Mall property for the tax years 1994 through
1998. The Partnership had been in negotiations to resolve this matter with
the taxing authority. In June 2000, the Tax Court approved the settlement
between the Partnership and the taxing authority. In late July 2000, the
Partnership received approximately $518,000 from the taxing authority in
full settlement of all prior real estate tax appeals. The Partnership
expects to realize approximately $100,000 after issuing refunds to tenants
at the mall and payment of expenses associated with the litigation.
The Partnership currently expects to conduct an orderly liquidation as
quickly as practicable upon expiration of the representations and
warranties to the purchaser that were required in connection with the sale
of the Riverside Square Mall. Consequently, the Partnership currently
expects to wind up its affairs in 2000. However, this will depend upon the
Partnership's ability to resolve the pending litigation relating to the
Riverside Square Mall. Reference is made to Item 1. Legal Proceedings of
<PAGE>
Part II Other Information in this report for a discussion of the pending
litigation.
RESULTS OF OPERATIONS
Significant variances between periods reflected in the accompanying
consolidated financial statements not otherwise reported are primarily the
result of the sale of the Riverside Square Mall in August 1999.
The restricted funds at June 30, 2000 and December 31, 1999 represent
the funds held in reserve in accordance with the Riverside Square Mall
purchase and sale agreement.
The increase in rents and other receivables at June 30, 2000 as
compared to December 31, 1999 and the increase in other income for the
three and six months ended June 30, 2000 as compared to the three and six
months ended June 30, 1999 is primarily due to the accrual of the real
estate tax refund relating to the Riverside Square Mall which was received
by the Partnership in late July 2000.
The decrease in interest income for the three and six months ended
June 30, 2000 as compared to the three and six months ended June 30, 1999
is primarily due to a higher average cash balance available for temporary
investment in 1999 prior to the distribution of previously undistributed
cash flow from operations to the Limited Partners and General Partners in
November 1999 and February 2000.
The property operating expenses for the six months ended June 30, 2000
represents final prorations in conjunction with the sale of the Riverside
Square Mall in August 1999.
The decrease in general and administrative expenses for the six months
ended June 30, 2000 as compared to the six months ended June 30, 1999 is
primarily due to cost savings resulting from the sale of the Partnership's
remaining investment property in 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 23, 1996, plaintiff Eric Von Butler filed a complaint
against the Partnership, and others, entitled Eric Von Butler v.
SpectaGuard Inc. "SpectaGuard", JMB Income Properties, Ltd. and Urban
Retail Properties Co. (the "Property Manager") in the Superior Court of New
Jersey Law Division, Bergen County, Case No. BER-L-12161-96. In the three
count complaint, plaintiff alleges that his employment as a security guard
at the Riverside Square Mall was wrongfully terminated in September 1995 as
a result of his race and that the Partnership allegedly participated in
various acts and practices which discriminated against plaintiff on the
basis of his race. At the time of the events complained of, plaintiff was
employed by SpectaGuard, a contractor hired to provide security services to
the mall. Plaintiff seeks, among other things, compensatory damages,
punitive damages, reasonable attorneys' fees and costs. The Partnership
believes it has meritorious defenses and has filed an answer denying the
substantive allegations of the complaint and raising various affirmative
defenses, including the affirmative defense that plaintiff was not an
employee of the Partnership, but was employed and terminated by
SpectaGuard. In addition, the Partnership has filed cross-claims for
indemnity and contribution from SpectaGuard. In June 2000, the Partnership
and the Property Manager reached an agreement in principle with SpectaGuard
whereby SpectaGuard will assume the defense of the Von Butler litigation
and indemnify the Partnership and the Property Manager for any judgment
entered against either of them and any future costs or legal fees incurred
by the Partnership and/or the Property Manager. As such agreement is
subject to final documentation, there can be no assurance that any
agreement will be reached.
<PAGE>
In separate litigation, on April 6, 1999, plaintiffs filed a suit
entitled Bertha Atkinson, individually and as guardian ad litem for the
infant plaintiff Cortney Atkinson and Tiffany Atkinson v. Riverside Square
Mall et al., in the Superior Court of New Jersey Law Division, Bergen
County, Case No. L-2203-99. The complaint is filed against the "Riverside
Square Mall", as owner and operator of the mall, Federated Department
Stores, Inc. d/b/a/ Bloomingdale's, Inc., SpectaGuard, Inc., and others.
In the five count complaint, plaintiffs allege that on July 18, 1998, they
were stopped outside the mall by several Hackensack Police Department
officers based on a complaint from Bloomingdale store personnel that one or
more of the plaintiffs had stolen merchandise from the store. Plaintiffs
allege that the police, mall security or employees of SpectaGuard Inc., a
security firm, further detained them while an attempt was made to contact
security at the Bloomingdale store. Plaintiffs claim that they were
detained for approximately thirty minutes and allowed to proceed when no
one from the Bloomingdale store appeared. Plaintiffs allege that there was
no rational basis to believe that any one of them had stolen any property.
Plaintiffs sue for false imprisonment, invasion of their rights of privacy,
slander, a violation of the New Jersey Law Against Discrimination, and
defendants' alleged failure to properly hire, train and supervise its
security personnel. Plaintiffs seek compensatory damages, punitive
damages, reasonable attorney's fees, costs, and such other relief as the
court may deem proper. The Partnership believes that it has meritorious
defenses.
The Partnership has filed, in recent years, real estate tax appeals on
behalf of the Riverside Square Mall property for the tax years 1994 through
1998. The Partnership had been in negotiations to resolve this matter with
the taxing authority. In June 2000, the tax court approved the settlement
between the Partnership and the taxing authority. In late July 2000, the
Partnership received approximately $518,000 from the taxing authority in
full settlement of all prior real estate tax appeals. The Partnership
expects to realize approximately $100,000 after issuing refunds to tenants
at the mall and payment of expenses associated with the litigation.
The Partnership may be required to delay a final distribution of its
remaining funds and the winding up of the Partnership until its involvement
in the lawsuits discussed above has been resolved.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. 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 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.
27. Financial Data Schedule
--------------
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company 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)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
By: GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: August 14, 2000
