SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K405/A
AMENDMENT NO. 1
Filed pursuant to Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934
JMB INCOME PROPERTIES, LTD. - XII
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
IRS Employer Identification
Commission File No. 0-16108 No. 36-3337796
The undersigned registrant hereby amends the following sections of its
Report for the year ended December 31, 1996 on Form 10-K405 as set forth in
the pages attached hereto:
PART II
Item 6. Selected Financial Data. Pages 7-10
Item 8. Financial Statements and Supplementary Data. Pages 17 to 44.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XII
By: JMB Realty Corporation
Managing General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Dated: March 20, 1998
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income, including
gain on sale or dis-
position of investment
property in 1996 . . . . . $ 32,521,866 33,940,506 31,152,216 30,055,775 31,061,115
============ ============ =========== =========== ===========
Net operating earnings
(loss) before extra-
ordinary item. . . . . . . $ 5,928,741 (1,635,175) (2,235,341) (6,037,978) (9,627,877)
Extraordinary item
(net of venture
partners' share) . . . . . -- -- (2,300,838) -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss) . . . . $ 5,928,741 (1,635,175) (4,536,179) (6,037,978) (9,627,877)
============ ============ =========== =========== ===========
7
<PAGE>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
Net earnings (loss)
per Interest (b):
Earnings (loss) before
gains on sales of
investment properties
and extraordinary
item. . . . . . . . . . $ 14.70 (9.15) (12.41) (31.79) (80.48)
Net gain on sale
or disposition of
investment property . . 15.78 -- -- -- 29.52
Extraordinary item, net . -- -- (11.65) -- --
------------ ------------ ----------- ----------- -----------
Net earnings (loss)
per Interest (b). . . . $ 30.48 (9.15) (24.06) (31.79) (50.96)
============ ============ =========== =========== ===========
Total assets. . . . . . . . $138,673,945 178,508,742 189,322,387 195,051,570 201,746,282
Long-term debt. . . . . . . $ 63,630,727 88,670,160 64,470,886 87,612,869 69,869,294
Cash distributions
per Interest (c). . . . . $ 79.50 15.00 10.00 12.50 50.00
============ ============ =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of
each period (189,684).
(c) Cash distributions from the Partnership are generally not equal to Partnership's 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>
8
<PAGE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1996
<CAPTION>
Property
- --------
Topanga Plaza
Shopping Center 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>
1992 . . . . . 87% $25.11
1993 . . . . . 94% 21.13
1994 . . . . . 95% 24.84
1995 . . . . . 98% 24.93
1996 . . . . . 98% 28.03
<FN>
(1) Average base rent per square foot is based on GLA 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)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
None - no single tenant
represents more than 10%
of the total gross leasable
area at the property.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Topanga Plaza Shopping Center:
Annualized Percent of
Number of Approx. Total Base Rent Total 1996
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997 1 1,550 $ 45,000 0.5%
1998 6 17,106 394,024 4.0%
1999 8 15,822 385,950 3.9%
2000 9 16,107 450,636 4.6%
2001 8 8,663 422,632 4.3%
2002 14 22,513 796,807 8.1%
2003 13 36,495 787,766 8.0%
2004 15 36,181 992,656 10.0%
2005 22 63,067 1,828,898 18.5%
2006 27 86,397 2,179,446 22.0%
<FN>
(1) Excludes leases that expire in 1997 for which renewal leases or leases with
replacement tenants have been executed as of February 28, 1997.
</TABLE>
10
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Partners' Capital Accounts, years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
Schedule
--------
Consolidated 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 consolidated financial statements or related notes.
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report
Balance Sheets, December 31, 1996 and 1995
Statements of Operations, years ended December 31, 1996, 1995 and 1994
Statements of Partners' Capital Accounts, years ended December 31, 1996,
1995 and 1994
Statements of Cash Flows, years ended December 31, 1996, 1995 and 1994
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 consolidated financial statements or related notes.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB INCOME PROPERTIES, LTD. - XII:
We have audited the consolidated financial statements of JMB Income
Properties, Ltd. - XII (a limited partnership) and consolidated ventures as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
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 consolidated 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB Income Properties, Ltd. - XII and consolidated ventures at December 31,
1996 and 1995, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 25, 1997
18
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 22,821,808 21,456,552
Rents and other receivables, net of allowance for
doubtful accounts of $255,866 in 1996 and
$784,652 in 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650,108 2,542,548
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,111 260,164
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,053,916 900,561
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 25,807,943 25,159,825
------------ -----------
Investment properties, at cost - Schedule III:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,194 20,494,992
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . 22,602,302 168,635,413
------------ -----------
24,367,496 189,130,405
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . 14,873,703 52,390,756
------------ -----------
Total properties held for investment,
net of accumulated depreciation . . . . . . . . . . . . . . . 9,493,793 136,739,649
Properties held for sale or disposition . . . . . . . . . . . . . . . . 90,811,933 --
------------ -----------
Total investment properties . . . . . . . . . . . . . . . . . . 100,305,726 136,739,649
Investment in unconsolidated ventures, at equity. . . . . . . . . . . . . 4,848,158 6,412,066
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,491,467 7,639,146
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . . 1,220,651 2,558,056
------------ -----------
$138,673,945 178,508,742
============ ===========
19
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1996 1995
------------ -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 458,557 746,306
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601,488 2,038,017
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,951 510,622
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,723 23,320
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 3,159,719 3,318,265
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 200,990 492,214
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 63,630,727 88,670,160
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 66,991,436 92,480,639
Venture partners' subordinated equity in ventures . . . . . . . . . . . . 16,922,369 22,041,429
Partners' capital accounts:
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 11,123 11,123
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . 915,607 769,195
------------ -----------
926,730 780,318
------------ -----------
Limited partners (189,684 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . 171,306,452 171,306,452
Cumulative net loss . . . . . . . . . . . . . . . . . . . . . . . . (24,300,420) (30,082,749)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (93,172,622) (78,017,347)
------------ -----------
53,833,410 63,206,356
------------ -----------
Total partners' capital accounts. . . . . . . . . . . . . . . . 54,760,140 63,986,674
------------ -----------
$138,673,945 178,508,742
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $28,415,164 32,608,714 30,166,883
Interest income . . . . . . . . . . . . . . . . . . 1,224,129 1,331,792 985,333
Gain on sale of investment property . . . . . . . . 2,882,573 -- --
----------- ----------- -----------
32,521,866 33,940,506 31,152,216
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . 7,665,413 8,991,027 9,075,692
Depreciation. . . . . . . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425
Property operating expenses . . . . . . . . . . . . 12,174,612 12,602,194 13,695,140
Professional services . . . . . . . . . . . . . . . 307,504 333,970 244,951
Amortization of deferred expenses . . . . . . . . . 1,205,175 1,263,041 1,117,672
General and administrative. . . . . . . . . . . . . 357,395 427,735 280,016
Provisions for value impairment . . . . . . . . . . -- 5,500,000 6,475,138
----------- ----------- -----------
26,335,754 34,716,613 36,529,034
----------- ----------- -----------
3,303,539 (776,107) (5,376,818)
Partnership's share of earnings (loss) from
operations of unconsolidated ventures . . . . . . . 611,483 709,164 441,700
Partnership's share of gain on sale of investment
properties of unconsolidated venture. . . . . . . . 1,412,610 -- --
Venture partners' share of consolidated ventures'
operations before extraordinary item. . . . . . . . (1,010,868) (1,568,232) 2,699,777
Venture partner's share of gain on sale of
investment property . . . . . . . . . . . . . . . . (1,270,596) -- --
----------- ----------- -----------
Earnings (loss) before extraordinary item . 5,928,741 (1,635,175) (2,235,341)
Extraordinary item (net of venture partners'
share of $1,588,537). . . . . . . . . . . . . . . . -- -- (2,300,838)
----------- ----------- -----------
Net earnings (loss) . . . . . . . . . . . . $ 5,928,741 (1,635,175) (4,536,179)
=========== =========== ===========
21
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1996 1995 1994
------------ ------------ ------------
Net earnings (loss) per limited partnership
interest:
Earnings (loss) before gain on sale of
investment property and extraordinary
item . . . . . . . . . . . . . . . . . . . . . . $ 14.70 (9.15) (12.41)
Gain on sale of investment property. . . . . . . . 15.78 -- --
Extraordinary item, net. . . . . . . . . . . . . . -- -- (11.65)
----------- ----------- -----------
Net earnings (loss) per limited
partnership interest. . . . . . . . . . . $ 30.48 (9.15) (24.06)
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
22
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS (189,684 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 . . . . . $11,123 642,630 -- 653,753 171,306,452 (23,784,830) (73,251,535) 74,270,087
Cash distri-
butions
($10 per
limited
partnership
interest). . . -- -- -- -- -- -- (1,906,325) (1,906,325)
Net earnings
(loss) . . . . -- 26,972 -- 26,972 -- (4,563,151) -- (4,563,151)
------- ------- ------- ------- ----------- ----------- ----------- ----------
Balance at
December 31,
1994 . . . . . 11,123 669,602 -- 680,725 171,306,452 (28,347,981) (75,157,860) 67,800,611
Cash distri-
butions
($15 per
limited
partnership
interest). . . -- -- -- -- -- -- (2,859,487) (2,859,487)
Net earnings
(loss) . . . . -- 99,593 -- 99,593 -- (1,734,768) -- (1,734,768)
------- ------- ------- ------- ----------- ----------- ----------- ----------
23
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS (189,684 INTERESTS)
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
Balance at
December 31,
1995 . . . . . 11,123 769,195 -- 780,318 171,306,452 (30,082,749) (78,017,347) 63,206,356
Cash distri-
butions
($79.50 per
limited
partnership
interest). . . -- -- -- -- -- -- (15,155,275)(15,155,275)
Net earnings
(loss) . . . . -- 146,412 -- 146,412 -- 5,782,329 -- 5,782,329
------- ------- ------- ------- ----------- ----------- ----------- ----------
Balance at
December 31,
1996 . . . . . $11,123 915,607 -- 926,730 171,306,452 (24,300,420) (93,172,622) 53,833,410
======= ======= ======= ======= =========== =========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
24
<PAGE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . $ 5,928,741 (1,635,175) (4,536,179)
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425
Amortization of deferred expenses . . . . . . . . . 1,205,175 1,263,041 1,117,672
Partnership's share of operations of
unconsolidated venture. . . . . . . . . . . . . . (611,483) (709,164) (441,700)
Partnership's share of gain on sale of
investment properties of unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . (1,412,610) -- --
Venture partners' share of
ventures' operations, gain on sale and
extraordinary item. . . . . . . . . . . . . . . . 2,281,464 1,568,232 (4,288,314)
Total gain on sale of investment property . . . . . (2,882,574) -- --
Provision for value impairment. . . . . . . . . . . -- 5,500,000 6,475,138
Write-off of assets . . . . . . . . . . . . . . . . -- -- 1,174,125
Extraordinary item, net of insurance
recoveries of $1,174,125. . . . . . . . . . . . . -- -- 3,889,375
Changes in:
Rents and other receivables . . . . . . . . . . . . 794,648 (380,342) (836,355)
Prepaid expenses. . . . . . . . . . . . . . . . . . (21,947) (33,566) 41,120
Escrow deposits . . . . . . . . . . . . . . . . . . (153,355) (192,229) 685,195
Casualty insurance receivable . . . . . . . . . . . -- 853,000 (853,000)
Accrued rents receivable. . . . . . . . . . . . . . 585,975 (151,292) (757,729)
Accounts payable. . . . . . . . . . . . . . . . . . (436,529) (1,802,619) (318,280)
Accrued interest . . . . . . . . . . . . . . . . . (6,671) 488,126 22,496
Unearned rents. . . . . . . . . . . . . . . . . . . 572,414 (41,486) 47,003
Tenant security deposits. . . . . . . . . . . . . . (291,224) (17,279) 99,261
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . 10,177,679 10,307,893 7,160,253
----------- ----------- -----------
25
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments . . . . . . . . . . . . . -- 14,176,812 7,789,504
Cash proceeds on sale of investment property. . . . . 12,985,931 -- --
Additions to investment properties,
net of related payables and, in 1994,
net of insurance recoveries of $6,647,000 . . . . . (1,583,556) (1,658,644) (2,908,722)
Partnership's distributions from
unconsolidated ventures . . . . . . . . . . . . . . 3,588,000 1,250,000 --
Partnership's contributions to
unconsolidated ventures . . . . . . . . . . . . . . -- (1,233,437) (1,557,469)
Payment of deferred expenses. . . . . . . . . . . . . (624,372) (577,311) (1,480,284)
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . . 14,366,003 11,957,420 1,843,029
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . (622,627) (4,593,543) (575,431)
Advances from venture partners. . . . . . . . . . . . -- (435,000) (300,000)
Venture partners' contributions to venture. . . . . . 161,356 1,580,310 604,973
Distributions to venture partners . . . . . . . . . . (7,561,880) (2,723,400) (75,000)
Distributions to limited partners . . . . . . . . . . (15,155,275) (2,859,487) (1,906,325)
----------- ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . . . (23,178,426) (9,031,120) (2,251,783)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . 1,365,256 13,234,193 6,751,499
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . 21,456,552 8,222,359 1,470,860
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . . $22,821,808 21,456,552 8,222,359
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . $ 7,672,084 8,502,901 9,053,196
=========== =========== ===========
26
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Non-cash investing and financing activities:
Change in accounts payable . . . . . . . . . . . . . $ -- -- 3,189,483
Change in accounts receivable. . . . . . . . . . . . -- -- 699,892
----------- ----------- -----------
Total extraordinary item-earthquake damage at
Topanga Mall and First Financial Plaza . . . . . $ -- -- 3,889,375
=========== =========== ===========
Total sales proceeds from sale of investment
property, net of selling expenses. . . . . . . . $37,690,486 -- --
Principal balance due on mortgage payable. . . . . (24,704,555) -- --
----------- ----------- -----------
Cash proceeds from sale of investment
property, net of selling expenses . . . . . $12,985,931 -- --
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
27
<PAGE>
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
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 accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned ventures, Topanga Plaza
Partnership ("Topanga"), JMB-40 Broad Street Associates ("Broad Street"),
JMB First Financial Associates ("First Financial", prior to its sale in
September 1996) and First Financial's venture (prior to its sale in
September 1996), JMB Encino Partnership, ("Encino"). The effect of all
transactions between the Partnership and its consolidated ventures have
been eliminated. The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to the
Partnership's venture interest in JMB/San Jose Associates ("San Jose").
Accordingly, the accompanying consolidated financial statements do not
include the accounts of San Jose.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated 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") and to consolidate the accounts of the ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1996 and 1995 is summarized as follows:
28
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . . $138,673,945 103,781,808 178,508,742 119,118,630
Partners' capital accounts
(deficits):
General partners. . . . . . . . . 926,730 (1,184,427) 780,318 (1,143,498)
Limited partners. . . . . . . . . 53,833,410 98,323,758 63,206,356 113,755,473
Net earnings (loss):
General partners. . . . . . . . . 146,412 (40,931) 99,593 (70,410)
Limited partners. . . . . . . . . 5,782,329 (276,439) (1,734,768) (1,689,836)
Net earnings (loss)
per limited partnership
interest. . . . . . . . . . . . . . 30.48 (1.46) (9.15) (8.91)
=========== =========== =========== ===========
</TABLE>
29
<PAGE>
The net earnings (loss) per limited partnership interest is based upon
the number of limited partnership interests outstanding at the end of each
period (189,684).
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 its unconsolidated ventures are considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership records
amounts held in U.S. Government obligations at cost, which approximates
market. For the purposes of these financial statements, the Partnership's
policy is to consider all such amounts held with original maturities of
three months or less ($21,768,622 and $18,402,684 at December 31, 1996 and
1995, respectively) as cash equivalents, which includes investments in an
institutional mutual fund which holds U.S. Government obligations, 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 commitment fees and loan
related costs which are amortized over the term of the related mortgage
loans, and lease commissions which are amortized over the term of the
related leases, 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" (as amended),
requires certain large 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 $64,089,284, has
been calculated to have an SFAS 107 value of $68,379,542 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. 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 circumstances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.
30
<PAGE>
The Partnership has acquired, either directly or through joint
ventures three shopping centers, two office buildings and an office
complex. The Partnership sold its interest in the Mid Rivers Mall in St.
Louis, Missouri in January 1992. In March 1996, the San Jose venture sold
its interest in the 190 San Fernando Building and one of the parking
structures at the Park Center Financial Plaza investment property. The
Partnership sold its interest in the First Financial Plaza office building
in September 1996. All of the remaining properties were in operation at
December 31, 1996. The cost of the investment properties represents the
total cost to the Partnership or its consolidated ventures 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
==
Maintenance and repairs are generally charged to operations as
incurred. Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives.
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 in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
held for investment whenever their carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's
estimated fair value. 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 or dispose of such property and active marketing activity has
commenced or is expected to commence in the near term or the Partnership
has concluded that it may dispose of the property by no longer funding
operating deficits or debt service requirements of the property thus
allowing the lender to realize upon its security. In accordance with SFAS
121, any properties identified as "held for sale or disposition" are no
longer depreciated. Adjustments for impairment loss for such properties
(subsequent to the date of adoption of SFAS 121) are made in each period as
necessary to report these properties at the lower of carrying value or 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 can be no assurance that any estimated fair value of these
properties would ultimately be realized by the Partnership in any future
sale or disposition transaction.
Under the prior impairment policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's net carrying value. The amount of any such impairment
loss recognized by the Partnership was limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness.
The results of operations for consolidated properties classified as
held for sale or disposition as of December 31, 1996 or sold or disposed of
during the past three years were profits of $2,429,837 and losses of
$2,020,174 and $10,725,252, respectively, for the years ended December 31,
1996, 1995 and 1994. In addition, the accompanying consolidated financial
statements include $611,483, $709,164 and $441,700, respectively, of the
Partnership's share of total unconsolidated property operations of
$1,222,965, $1,418,328 and $883,401 of the properties owned by the San Jose
venture held for sale or disposition as of December 31, 1996 or sold or
disposed of in the past three years.
31
<PAGE>
Certain investment properties are pledged as security for the long-
term debt, for which there is no recourse to the Partnership.
INVESTMENT PROPERTIES
PLAZA HERMOSA SHOPPING CENTER
During September 1986, the Partnership acquired a multi-building
neighborhood shopping center in Hermosa Beach, California. The
Partnership's purchase price for the shopping center was $18,290,000, of
which $11,890,000 was paid in cash at closing. The balance of the purchase
price was represented by bond financing in the amount of $6,400,000.
This financing was secured by a letter of credit facility which was
ultimately secured by a deed of trust on the property. In December 1994,
upon expiration of the letter of credit, the Partnership obtained a long-
term replacement letter of credit with a new lender and simultaneously
retired the original bond financing and issued new bonds to the existing
bondholders in the aggregate amount of $6,400,000. The replacement letter
of credit is scheduled to expire in December 1997. However, in December
1996, the lender agreed in principle to extend the letter of credit for a
two year period.
As a result of reduced projected cash flows, the upcoming maturity of
the letter of credit facility in 1999 as discussed below and the expected
holding period of the property, there is uncertainty as to the
Partnership's ability to recover the net carrying value of the Plaza
Hermosa investment property through future operations or sale over its
revised expected holding period. Therefore, the Partnership made a
provision for value impairment at September 30, 1995 of $5,500,000 to
reflect the then estimated fair value of the property based upon an
analysis of discounted estimated future cash flows over the projected
holding period.
The property is managed by an affiliate of the General Partners of the
Partnership for a fee calculated as 4% of gross receipts of the property.
As the Partnership has committed to a plan to sell the property, the
property has been classified as held for sale as of December 31, 1996 and
therefore will not be subject to continued depreciation.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1996 is a party to three operating
venture agreements 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.
SAN JOSE
The Partnership 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 garage structures.
32
<PAGE>
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 with the mortgage lender. The refinancing resulted in the
1994 partial paydown of the outstanding principal balance in the amount of
$2,500,000.
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 and
did so in October 1995. The outstanding principal balances, at the time of
repayment, were $2,418,722 of which the Partnership's share was $1,209,361.
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.-XI, another partnership sponsored by the Managing General
Partner of the Partnership ("JMB-XI"). 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 and JMB-XI 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 laws
concerning eminent domain. During 1995, the Agency filed a condemnation
action in court to proceed to obtain the garage pursuant to such laws. 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 received replacement parking spaces
for its tenants in a nearby city-owned parking structure for a term of
fifty-five years in addition to the aforementioned purchase price of
$4,090,000. San Jose recognized a gain of approximately $2,036,000 and
$1,857,000, respectively, for financial reporting and Federal income tax
purposes in 1996, of which approximately $1,018,000 and $928,500,
respectively, was allocated to the Partnership.
In March 1996, San Jose sold the 190 San Fernando Building to an
independent third party. The sale price of the building was $1,753,000
(before selling costs), and was paid in cash at closing. San Jose
recognized a gain of approximately $789,000 and $21,000, respectively, for
financial reporting and Federal income tax purposes in 1996, of which
approximately $394,500 and $10,500, respectively, was allocable to the
Partnership.
At September 30, 1994, 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
were recorded to reduce the net carrying values of these buildings to the
then outstanding balances of the related non-recourse financing.
As San Jose had committed to a plan to sell the properties, the 190
San Fernando Building and the parking structures were classified as held
for sale or disposition as of January 1, 1996 and therefore were not
subject to continued depreciation. The San Jose venture has subsequently
committed to a plan to sell the balance of the complex, and has classified
the remaining assets as held for sale as of December 31, 1996 and these
assets will, therefore, no longer be subject to continued depreciation.
33
<PAGE>
TOPANGA
In December 1985, the Partnership acquired a 58% interest in the
Topanga Plaza Shopping Center in the Woodland Hills area of Los Angeles,
California. The aggregate purchase price for the Partnership's interest in
the venture was approximately $25,263,000, which was paid in cash at
closing. Under the terms of the joint venture agreement, the Partnership
generally will be allocated or distributed 58% of profits and losses, cash
flow from operations and sale or refinancing proceeds.
On January 17, 1994, an earthquake occurred in Los Angeles, California
with its epicenter in the town of Northridge, approximately six miles from
Topanga Plaza Shopping Center. Consequently, significant portions of the
mall, including the four major department stores who own their own
buildings, suffered some casualty damage. However, the approximate 360,000
square feet of mall shops owned by the Topanga Partnership did not suffer
major structural damage. The estimated costs at Topanga for which the
joint venture was responsible was approximately $11.9 million (which did
not include costs associated with the space taken back by Robinson-May as
discussed below). The majority of these costs were subject to recovery
under the joint venture's earthquake insurance policy. The deductible on
the earthquake casualty and business interruption coverages was
approximately $2.1 million which was funded by Topanga from operations in
1995 and/or offset by other insurance recoveries as discussed below. The
$11.9 million of total costs has been reimbursed through insurance
proceeds. Approximately $3.2 million of additional insurance proceeds were
collected as a final settlement during the third quarter of 1995. Such
amount represented recoveries under the joint venture's business
interruption policy and was reflected as rental income in the accompanying
consolidated financial statements.
All of the mall's 114 shops and the four major department stores
reopened within several months of the earthquake. Subsequent to the
earthquake, sales at the mall shops increased due to the greater extent of
damage at a nearby competing mall. However, in August 1995, the competing
mall was re-opened, which has had an adverse effect on Topanga's sales.
One department store at Topanga, Robinson-May, had a portion of their store
condemned by city inspectors in 1994. One consequence of this partial
condemnation is that Robinson-May took back in 1994 the approximately
25,000 square feet of that store which had been leased to the joint venture
in 1990, pursuant to the terms of its lease. Topanga has lost
approximately $150,000 in annual net income from subleases of the eight
tenants which had previously subleased this space. Topanga was insured in
case of such event and received, in July 1994, insurance proceeds in the
amount of $2,500,000 (net of the related deductible) for the cost of the
unamortized tenant improvements and the loss of rents related to this
space. As a result of the take back of space by Robinson-May, Topanga
wrote off, in 1994, approximately $1.2 million of unamortized leasehold
improvements discussed above. Topanga recorded in 1994, an extraordinary
loss of $2,889,000 (of which the Partnership's share was approximately
$1,676,000) which included Topanga's share of repair costs of approximately
$2.1 million, and approximately $789,000 of other costs. The earthquake did
result in some adverse effect on the operations of the center in early
1994. In the second quarter of 1996, Topanga received, in the aggregate,
approximately $513,000 from Robinson-May and Montgomery Ward, relating to
their prorata share of expenses and costs for repairs and restorations to
the Topanga Plaza Shopping Center following the earthquake.
The joint venture partner advanced funds to the joint venture for
expenses incurred for certain development costs related to a potential
future expansion of Topanga Plaza. The balance of these advances was
$435,000 at December 31, 1994. Although such an expansion of the Shopping
Center is still an option, such advances were repaid to the joint venture
partner in early 1995 from available cash at the venture.
34
<PAGE>
The shopping center is subject to fire, life and safety code and
ordinance requirements, which have changed since the property's original
construction. Accordingly, the Partnership intends to comply with such
revised regulations and fund certain retrofit costs. In conjunction with
the renovation, a substantial portion of certain retrofit costs have been
completed. The Partnership currently expects to fund any remaining costs
from operations, as tenant leases expire, until the entire building
conforms to such requirements.
The shopping center was subject to a long-term management agreement
with an affiliate of the joint venture partner. Under the terms of the
management agreement, the manager was entitled to receive a management fee
based on a formula which relates to direct and general overhead costs and
expenses incurred in the operation of the property. During 1994, the
manager of the Topanga Plaza Shopping Center, an affiliate of the joint
venture partner, was sold to an unaffiliated third party, who assumed
management at the property on the same terms which existed prior to the
sale.
As previously reported, Sears had agreed to acquire the Broadway store
site at the Shopping Center. Broadway closed in February 1996 and Sears
completed its remodeling of the store and opened in October 1996.
The Topanga venture has committed to a plan to sell the property and
therefore has classified the property as held for sale as of December 31,
1996. The property will no longer be subject to continuing depreciation
beyond such date.
40 BROAD STREET
During December 1985, the Partnership acquired, through Broad Street,
a joint venture with JMB Income Properties, Ltd.-X, a partnership sponsored
by an affiliate of the Managing General Partner, a 68.56% interest in the
40 Broad Street office building in New York, New York. Broad Street's
purchase price for the building, which was paid in cash at closing, was
approximately $65,100,000 of which the Partnership provided approximately
$44,630,000.
The Partnership will be allocated or distributed profits and losses,
cash flow from operations and sale or refinancing proceeds in the ratio of
its capital contributions to Broad Street which is 68.56%.
The property was managed by an affiliate of the General Partners of
the Partnership for a fee calculated as 2% 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.
FIRST FINANCIAL
On May 20, 1987, the Partnership, through First Financial, a joint
venture with JMB-XIII, acquired an interest in a general partnership
("Encino") with an affiliate of the developer ("Encino Venture Partner").
Encino owned an office building in Encino (Los Angeles), California. First
Financial made an initial investment in the aggregate amount of
approximately $49,812,000 to Encino.
In November 1987, First Financial caused Encino to obtain a third
party first mortgage loan in the amount of $30,000,000. The proceeds of
such loan were distributed to First Financial to reduce its contribution
and to the Encino Venture Partner who subsequently repaid a $15,500,000
loan from First Financial. Thus, the total cash investment of First
Financial for its interest in the office building, after consideration of
the funding of the $30,000,000 permanent financing, was approximately
$20,000,000, of which the Partnership's share was approximately
$12,500,000.
35
<PAGE>
The first mortgage loan on the property matured November 1, 1995.
Effective November 1, 1995, Encino and the existing lender amended and
restated the existing mortgage loan. The new principal balance of the
amended note at November 1, 1995 was $24,970,148. This amount was
comprised of the then outstanding principal portion of $28,970,148 on the
original $30,000,000 note less a required $4,000,000 principal paydown by
Encino, all of which was advanced by First Financial at closing of which
the Partnership's share of such paydown was $2,500,000. The amended loan
had an interest rate of 8.67% and a term of two years resulting in a
maturity date of November 1, 1997.
In order to finalize the loan extension described above, the
Partnership and its affiliated partner advanced approximately $4.0 million
(approximately $2.5 million by the Partnership) to the joint venture to
fund the required principal paydown and related loan fees. A capital call
had been made on the unaffiliated joint venture partner for its share of
the total required amount; however, the unaffiliated joint venture partner
indicated that it did not intend to fund its required share. The
Partnership and its affiliated partner reached an agreement with the
unaffiliated partner to modify the joint venture agreement. In April 1996,
the unaffiliated partner became a limited partner as a result of this
modification.
Due to the uncertainty of Encino's ability to recover the net carrying
value of the First Financial office building investment property through
future operations and sale during the estimated holding period, Encino
recorded, as a matter of prudent accounting practice, a provision for value
impairment of such investment of approximately $6,475,000, all of which was
allocated to First Financial. The Partnership's share of such provision to
First Financial was approximately $4,047,000. Such provision was recorded
at December 31, 1994 to reduce the net carrying value of the investment
property to its then estimated fair value based upon an analysis of
discounted estimated future cash flows over the projected holding period.
As previously reported, the First Financial office building appeared
to have experienced only minor cosmetic damage as a result of the January
17, 1994 Northridge earthquake in southern California. On February 22,
1995, the city council of the city of Los Angeles passed an ordinance
requiring certain buildings (identified by building type and location) to
perform testing on the welded steel moment connections to determine if the
earthquake had weakened such joint weldings and to repair such joint
weldings if weakness is detected. This property qualified for the testing
under the ordinance and therefore Encino retained a structural engineer to
perform the testing. Results of the testing by the structural engineer
indicated that some of the building's joint weldings suffered damage which,
in accordance with the ordinance, were required to be repaired. Encino's
structural engineer informed Encino that the damage detected did not pose a
life safety risk for the building's tenants. All testing and repairs
necessary to comply with such ordinance were completed as of October 1995.
The total cost of such testing and repairs was approximately $826,000 (of
which the Partnership's share was approximately $516,250).
The First Financial office building was classified as held for sale as
of April 1, 1996 and therefore was not subject to continued depreciation
since that time.
On September 11, 1996, the joint venture sold the First Financial
office building to an unaffiliated third-party for a sale price of
$37,900,000 (before selling expenses and prorations). The joint venture
received approximately $13,000,000 of net sale proceeds at closing (which
reflected the assumption by the buyer of the mortgage loan with a current
balance of approximately $24,700,000 and closing costs), substantially all
of which were allocable to JMB/First Financial pursuant to the Encino
venture agreement. The sale resulted in approximately $2,880,000 and
$18,800,000 of gain for financial reporting purposes and Federal income tax
purposes in 1996, respectively, of which approximately $1,612,000 and
$2,000 of gain was allocated to the Partnership, respectively. The
Partnership made a cash distribution of $42 per Interest from the sales
proceeds in November 1996.
36
<PAGE>
The Encino partnership agreement generally provided that First
Financial was entitled to receive (after any participating amounts due to
Pepperdine University pursuant to its tenant lease) from cash flow from
operations (as defined) an annual cumulative preferred return equal to
9.05% through April 30, 1995 (and 8.9% thereafter) of its capital contri-
butions. Any remaining cash flow was to be split equally between First
Financial and the Encino Venture Partner. Pepperdine University, under its
tenant lease, was entitled to an amount based on 6.6% of the Venture
Partner's share of the office building's net operating profit and net sale
profit (as defined).
All of Encino's operating profits and losses before depreciation were
allocated to First Financial in 1994, 1995 and 1996.
The Encino partnership agreement also generally provided that net sale
proceeds and net refinancing proceeds (as defined), after any amounts due
to Pepperdine University pursuant to its tenant lease, were to be
distributed: first, to First Financial in an amount equal to the
deficiency, if any, in its cumulative preferred return as described above;
next, to First Financial in the amount of its capital contributions; next,
to the Encino Venture Partner in an amount equal to $600,000; any remaining
proceeds were to be split equally between First Financial and the Encino
Venture Partner.
The terms of the First Financial partnership agreement provided that
annual cash flow, net sale or refinancing proceeds, and tax items were to
be distributed or allocated, as the case may be, to the Partnership in
proportion to its 62.5% share of capital contributions.
The office building was managed by an affiliate of the Encino Venture
Partner for a fee based upon a percentage of rental receipts (as defined)
of the property.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996 and
1995:
1996 1995
----------- -----------
10-1/8% mortgage note secured by
the Topanga Plaza shopping center
in Los Angeles, California; payable
in monthly installments of principal
and interest of $523,225 through
January 2002 when the remaining
balance is due and payable . . . . $57,689,284 58,103,860
Floating rate bond financing
(certificates), secured by the
Plaza Hermosa Shopping Center
in Hermosa Beach, California;
the certificates bear interest
based on a floating rate
which is adjustable weekly
(as defined), with a maximum
interest rate of 13.5%, interest
only is payable monthly through
December 2023 when the entire
outstanding balance is due and
payable. . . . . . . . . . . . . . 6,400,000 6,400,000
37
<PAGE>
1996 1995
----------- -----------
8.67% mortgage note, secured
by the First Financial Plaza
Office Building; principal and
interest payments of $209,077
were due monthly; retired in
September 1996 at sale . . . . . . -- 24,912,606
----------- -----------
Total debt. . . . . . . . 64,089,284 89,416,466
Less current portion
of long-term debt . . . 458,557 746,306
----------- -----------
Total long-term debt. . . $63,630,727 88,670,160
=========== ===========
Five year maturities of long-term debt are summarized as follows:
1997. . . . . . . . . . . $458,557
1998. . . . . . . . . . . 507,202
1999. . . . . . . . . . . 561,008
2000. . . . . . . . . . . 620,521
2001. . . . . . . . . . . 686,348
========
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) in an amount equal to the greater of 1% of such profits or
the amount of cash distributable to the General Partners 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 capital contri-
butions 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 2-1/2% 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, notwithstanding such allocations, 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 6% 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 second fiscal quarter of 1986 and (iii)
have received cash distributions of sale and refinancing proceeds and of
the Partnership's operations, in an amount equal to the Limited Partners'
initial capital investment in the Partnership plus a 10% annual return on
38
<PAGE>
the Limited Partners' average capital investment. As the above levels of
return are not expected to be achieved, approximately $773,000 of sale
proceeds from the sale of the Partnership's interest in Mid Rivers Mall has
been deferred by the General Partners. In such regard, the general
partners waived their right to receive the allocation of sale proceeds from
the sale of the First Financial Plaza in 1996.
LEASES
At December 31, 1996, the Partnership and its consolidated ventures'
principal assets are two shopping centers and one office building. The
Partnership has determined that all leases relating to these properties 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 month-to-month to twenty-five years and provide
for fixed minimum rent and partial reimbursement of operating costs. In
addition, substantially all of the leases with shopping center tenants
provide for additional rent based upon percentages of tenants' sales
volumes. With respect to the Partnership's shopping center investments, a
substantial portion of the ability of retail tenants to honor their leases
is dependent on the retail economic sector.
Cost and accumulated depreciation of the leased assets are summarized
as follows at December 31, 1996:
Office Building:
Cost . . . . . . . . . . . . . . . . . $ 24,367,496
Accumulated depreciation . . . . . . . (14,873,703)
------------
9,493,793
------------
Shopping Centers:
Cost . . . . . . . . . . . . . . . . . 121,714,657
Accumulated depreciation . . . . . . . (30,902,724)
------------
90,811,933
------------
$100,305,726
============
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:
1997 . . . . . . . . . . . . . . . . . . $ 15,517,979
1998 . . . . . . . . . . . . . . . . . . 15,516,993
1999 . . . . . . . . . . . . . . . . . . 15,228,538
2000 . . . . . . . . . . . . . . . . . . 13,728,271
2001 . . . . . . . . . . . . . . . . . . 13,011,952
Thereafter . . . . . . . . . . . . . . . 43,092,812
------------
Total. . . . . . . . . . . . . . . . $116,096,545
============
Contingent rent (based on sales by property tenants) included in
rental income was as follows:
1994 . . . . . . . . . . . . . . . . . . $662,271
1995 . . . . . . . . . . . . . . . . . . 438,733
1996 . . . . . . . . . . . . . . . . . . 301,919
========
39
<PAGE>
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, 1996, 1995 and 1994 are as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- ------------
Property management
and leasing fees . . . . $ 70,792 67,422 184,881 --
Insurance
commissions. . . . . . . 34,632 75,330 74,228 --
Reimbursement (at cost)
for accounting
services . . . . . . . . 9,642 90,577 70,947 988
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 25,996 38,217 31,466 6,015
Reimbursement (at cost)
for legal services . . . 8,683 4,222 11,445 1,232
Reimbursement (at cost)
for administrative
charges and other
out-of-pocket expenses . 1,026 170,348 6,516 --
-------- -------- -------- ------
$150,771 446,116 379,483 8,235
======== ======== ======== ======
Certain of the Partnership's properties are managed by affiliates of
the General Partners or their assignees for fees computed as a percentage
of certain rents received by the properties.
During 1994, certain officers and directors of the Managing General
Partner acquired interests in a company which provides certain property
management services to a property owned by the Partnership. The fees
earned by such company from the Partnership for the years ended December
31, 1996 and 1995 were approximately $39,000 and $30,000, respectively, all
of which has been paid at December 31, 1996.
In accordance with the subordination requirements of the Partnership
Agreement, the General Partners have deferred receipt of their distri-
butions of net cash flow from the Partnership. The cumulative amount of
such deferred distributions aggregated $8,049,064 at December 31, 1996.
The amount is being deferred in accordance with the subordination
requirements of the Partnership Agreement as discussed above. The
Partnership does not expect that the subordination requirements of the
Partnership Agreement will be satisfied to permit payment of the majority
of these amounts. These amounts or amounts currently payable do not bear
interest.
40
<PAGE>
INVESTMENT IN UNCONSOLIDATED VENTURE
Summary of financial information for San Jose as of and for the years
ended December 31, 1996 and 1995 is as follows:
1996 1995
------------ ------------
Current assets. . . . . . . . . . . $ 4,538,120 5,155,489
Current liabilities . . . . . . . . (456,506) (323,044)
------------ ------------
Working capital . . . . . . . 4,081,614 4,832,445
Investment property, net. . . . . . 28,430,666 30,955,893
Other assets, net . . . . . . . . . 959,991 874,007
Long-term debt. . . . . . . . . . . (23,338,875) (23,431,863)
Other liabilities . . . . . . . . . (79,599) (48,870)
Venture partners' equity. . . . . . (5,205,639) (6,769,546)
------------ ------------
Partnership's capital . . . . $ 4,848,158 6,412,066
============ ============
Represented by:
Invested capital. . . . . . . . . $ 48,767,680 48,767,680
Cumulative distributions. . . . . (25,490,500) (21,902,500)
Cumulative loss . . . . . . . . . (18,429,022) (20,453,114)
------------ ------------
$ 4,848,158 6,412,066
============ ============
Total income. . . . . . . . . . . . $ 9,238,168 9,182,446
============ ============
Expenses. . . . . . . . . . . . . . $ 8,015,203 7,764,118
============ ============
Gain on disposition of
investment property . . . . . . . $ 2,825,220 --
============ ============
Net earnings. . . . . . . . . . . . $ 4,048,185 1,418,328
============ ============
Reference is made to the San Jose investment property discussion above
regarding the provision for value impairment of $944,335 which was recorded
in 1994 by the San Jose joint venture.
Total income, expenses related to earnings before gain on sale of
investment property, and net earnings for the above-mentioned venture for
the year ended December 31, 1994 were $9,270,819, $8,387,418 and $883,401,
respectively.
41
<PAGE>
<TABLE>
SCHEDULE III
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
COSTS
CAPITALIZED
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
------------------------- -------------- ------------------------------------
BUILDINGS BUILDINGS BUILDINGS
AND AND AND
ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS(D) LAND IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING
CENTERS:
Los Angeles,
California
(C). . . . . $57,689,284 8,506,014 54,714,281 45,287,841 8,506,014 100,002,122 108,508,136
Hermosa
Beach,
California . 6,400,000 5,106,570 13,131,181 (5,031,230) 3,176,525 10,029,996 13,206,521
OFFICE
BUILDING:
New York,
New York
(C). . . . . -- 13,201,780 55,095,008 (43,929,292) 1,765,194 22,602,302 24,367,496
----------- ---------- ----------- ----------- ---------- ----------- -----------
Total . . $64,089,284 26,814,364 122,940,470 (3,672,681) 13,447,733 132,634,420 146,082,153
=========== ========== =========== =========== ========== =========== ===========
</TABLE>
42
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1996
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1996
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS:
Los Angeles,
California (C). . . . . . . . . . . $ 26,570,333 1964 12/31/85 5-30 years 716,161
Hermosa Beach,
California . . . . . . . . . . . . 4,332,391 1985 09/03/86 5-30 years 165,213
OFFICE BUILDING:
New York,
New York (C). . . . . . . . . . . . 14,873,703 1983 12/31/85 5-30 years 1,560,954
----------- ----------
Total . . . . . . . . . . . . . . $45,776,427 2,442,328
=========== ==========
<FN>
- ------------------
Notes:
(A) The initial cost to the Partnership represents the original purchase price of the properties, 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, 1996 for Federal income tax purposes was
$184,654,977.
(C) Properties owned and operated by joint venture.
(D) In 1992 and 1991, the affiliated joint ventures recorded provisions for value impairment totaling
$22,908,606 and $28,870,198, respectively (which included a reduction in deferred costs of approximately $30,000)
at the 40 Broad Street investment property. In 1994, the affiliated joint venture recorded provisions for value
impairment totaling $6,475,138 (which included a reduction in deferred costs of $37,299) at First Financial Plaza.
In 1995, the Partnership recorded a provision for value impairment totaling $5,500,000 (which included a reduction
in deferred costs of $15,671) at the Plaza Hermosa Shopping Center.
</TABLE>
43
<PAGE>
<TABLE> SCHEDULE III - CONTINUED
JMB INCOME PROPERTIES, LTD. - XII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1996
(E) Reconciliation of real estate owned:
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . . . . . . $189,130,405 193,298,414 199,493,970
Additions during period . . . . . . . . . . . . . 1,583,556 1,316,320 2,401,281
Sale or disposal during period. . . . . . . . . . (44,631,808) -- (4,401,376)
Provision for value impairment. . . . . . . . . . -- (5,484,329) (4,195,461)
------------ ----------- -----------
Balance at end of period. . . . . . . . . . . . . $146,082,153 189,130,405 193,298,414
============ =========== ===========
(F) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . . . . . . $ 52,390,756 46,792,110 41,724,753
Depreciation expense. . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425
Sale or disposal during period. . . . . . . . . . (11,239,984) -- (313,240)
Provision for value impairment. . . . . . . . . . -- -- (259,828)
------------ ----------- -----------
Balance at end of period. . . . . . . . . . . . . $ 45,776,427 52,390,756 46,792,110
============ =========== ===========
</TABLE>
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
JMB/SAN JOSE ASSOCIATES:
We have audited the financial statements of JMB/San Jose Associates (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 JMB/San Jose
Associates at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in the Notes to the financial statements, in 1996 the
Partnership changed its method of accounting for long-lived assets and
long-lived assets to be disposed of to conform with Statement of Financial
Accounting Standards No. 121.
KPMG PEAT MARWICK
Chicago, Illinois
March 21, 1997
44-a
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 2,260,010 2,266,686
Rents and other receivables, net of allowance for
doubtful accounts of $1,648,319 in 1996 and
$1,058,859 in 1995. . . . . . . . . . . . . . . . . . . . . . . . . . 2,111,845 2,510,594
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,041 71,409
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,223 306,800
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 4,538,119 5,155,489
----------- -----------
Investment property - Schedule III:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6,848,918
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . -- 42,681,189
----------- -----------
-- 49,530,107
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . -- 18,574,214
----------- -----------
Total property held for investment,
net of accumulated depreciation . . . . . . . . . . . . . . . -- 30,955,893
----------- -----------
Property held for sale or disposition . . . . . . . . . . . . . . . . . . 28,430,666 --
----------- -----------
Total investment property . . . . . . . . . . . . . . . . . . . 28,430,666 30,955,893
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959,992 874,007
----------- -----------
$33,928,777 36,985,389
=========== ===========
44-b
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
1996 1995
----------- -----------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 92,988 85,989
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,955 72,930
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . . . 163,563 164,125
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 456,506 323,044
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 79,599 48,870
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 23,338,875 23,431,863
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 23,874,980 23,803,777
Partners' capital accounts. . . . . . . . . . . . . . . . . . . . . . . . 10,053,797 13,181,612
----------- -----------
$33,928,777 36,985,389
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
44-c
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . $ 9,125,251 9,071,667 9,220,659
Interest income . . . . . . . . . . . . . . . . . . 112,917 110,779 50,160
Gain on sale of investment property . . . . . . . . 2,825,220 -- --
----------- ----------- -----------
12,063,388 9,182,446 9,270,819
----------- ----------- -----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . 1,965,892 2,202,191 2,709,905
Depreciation. . . . . . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974
Property operating expenses . . . . . . . . . . . . 4,728,651 4,237,476 3,419,198
Amortization of deferred expenses . . . . . . . . . 276,364 210,308 214,006
Provision for value impairment. . . . . . . . . . . -- -- 944,335
----------- ----------- -----------
8,015,203 7,764,118 8,387,418
----------- ----------- -----------
Net earnings. . . . . . . . . . . . . . . . $ 4,048,185 1,418,328 883,401
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
44-d
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
AFFILIATED
PARTNER JMB-XII TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31, 1993. . . . . $ 4,077,776 3,720,296 7,798,072
Capital contributions . . . . . . . . 1,557,468 1,557,469 3,114,937
Net earnings. . . . . . . . . . . . . 441,701 441,700 883,401
----------- ----------- -----------
Balance at December 31, 1994. . . . . 6,076,945 5,719,465 11,796,410
Capital contributions . . . . . . . . 1,233,436 1,233,437 2,466,873
Cash distributions. . . . . . . . . . (1,250,000) (1,250,000) (2,500,000)
Net earnings. . . . . . . . . . . . . 709,165 709,164 1,418,329
----------- ----------- -----------
Balance at December 31, 1995. . . . . 6,769,546 6,412,066 13,181,612
Cash distributions. . . . . . . . . . (3,588,000) (3,588,000) (7,176,000)
Net earnings. . . . . . . . . . . . . 2,024,093 2,024,092 4,048,185
----------- ----------- -----------
Balance at December 31, 1996. . . . . $ 5,205,639 4,848,158 10,053,797
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
44-e
<PAGE>
<TABLE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . $ 4,048,185 1,418,328 883,401
Items not requiring (providing) cash:
Depreciation. . . . . . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974
Amortization of deferred expenses . . . . . . . . . 276,364 210,308 214,006
Provision for value impairment. . . . . . . . . . . -- -- 944,335
Gain on sale of investment property . . . . . . . . (2,825,220) -- --
Changes in:
Rents and other receivables . . . . . . . . . . . . 398,749 (19,820) (17,750)
Prepaid expenses. . . . . . . . . . . . . . . . . . (20,632) -- 4,561
Escrow deposits . . . . . . . . . . . . . . . . . . 232,577 (268,535) 18,703
Accounts payable. . . . . . . . . . . . . . . . . . 134,662 (323,557) 166,650
Accrued interest payable. . . . . . . . . . . . . . (562) (32,398) (42,928)
Tenant security deposits. . . . . . . . . . . . . . 30,729 (23,223) 1,796
----------- ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . 3,319,148 2,075,246 3,272,748
Cash flows from investing activities:
Additions to investment property. . . . . . . . . . . (1,485,395) (156,254) (739,275)
Payment of deferred expenses. . . . . . . . . . . . . (402,481) (218,059) (259,242)
Proceeds from sale of investment property . . . . . . 5,824,041 -- --
Notes receivable. . . . . . . . . . . . . . . . . . . -- -- 5,836
----------- ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . . . . 3,936,165 (374,313) (992,681)
----------- ----------- -----------
44-f
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . (85,989) (374,973) (372,045)
Paydowns on long-term debt. . . . . . . . . . . . . . -- (2,418,722) (2,500,000)
Capital contributed to venture. . . . . . . . . . . . -- 2,466,873 3,114,938
Distributions to partners . . . . . . . . . . . . . . (7,176,000) (2,500,000) --
----------- ----------- -----------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . . . (7,261,989) (2,799,822) 242,893
----------- ----------- -----------
Net increase (decrease) increase
in cash and cash equivalents. . . . . . . . . (6,676) (1,098,889) 2,522,960
----------- ----------- -----------
Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . . 2,266,686 3,365,575 842,615
----------- ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . . . . $ 2,260,010 2,266,686 3,365,575
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . $ 1,966,455 2,234,589 2,752,833
Non-cash investing and financing activities:
Cash sale proceeds, net of selling expenses . . . . $ 5,824,041 -- --
Reduction in investment property, net . . . . . . . (2,966,325) -- --
Reduction in other assets and liabilities . . . . . (32,496) -- --
----------- ----------- -----------
Gain recognized on sale of property . . . . . $ 2,825,220 -- --
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
44-g
<PAGE>
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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, JMB/San Jose Associates ("San Jose"), in which JMB Income
Properties, Ltd.-XII ("JMB Income-XII" or "Partnership") and JMB Income
Properties, Ltd.-XI ("JMB Income-XI" or "Affiliated Partner") are the
partners.
San Jose holds an equity investment in a commercial office complex in
San Jose, California. Business activities consist of rentals to a wide
variety of commercial companies and governmental entities, and the ultimate
sale or disposition of such real estate.
As San Jose has determined to sell the complex, all portions of the
office complex have been classified as held for sale or disposition as of
or during the period ended December 31, 1996. Therefore, the complex is
not subject to continued depreciation. Certain portions of the office
complex were sold during 1996. The results of operations of the property
included in the accompanying financial statements were earnings of
$1,110,048, $1,307,549, and $833,241 for the years ended December 31, 1996,
1995 and 1994, respectively.
As more fully described in the Notes to the Consolidated Financial
Statements of JMB Income - XII which description is hereby incorporated
herein by reference, San Jose recorded in 1994, as a matter of prudent
accounting practice, a provision for value impairment of $944,335 on the
170 Almaden and on the 100-130 Park Center Plaza buildings and certain
parking areas.
The preparation of financial statements in accordance with GAAP
requires San Jose 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 amounts could differ from those
estimates.
The Partnership uses the allowance method of accounting for doubtful
accounts. Provisions for uncollectible tenant receivables in the amounts
of $588,052, $783,417 and $236,397 were recorded in 1996, 1995 and 1994,
respectively. Bad debt expense is included in Property Operating Expenses.
The accounting policies of San Jose are the same as those of the
Partnership. Accordingly, reference is made to the Notes to the
Partnership's consolidated financial statements filed with this annual
report. Such notes are incorporated herein by reference.
VENTURE AGREEMENT
A description of the venture agreement and the management agreement
is contained in the Notes to Consolidated Financial Statements of JMB
Income - XII. Such note is incorporated herein by reference.
MANAGEMENT AGREEMENT
In December 1994, the property manager, an affiliate of the General
Partners of the Partnership, sold substantially all of its assets and
assigned its interest in the management contracts to an unaffiliated third
party who continues to manage the complex. In addition, certain of the
management personnel of the property manager became management personnel of
the purchaser and its affiliates.
44-h
<PAGE>
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996 and
1995:
1996 1995
---------- ----------
7.85% mortgage note; secured by
the 170 Almaden Building in
San Jose, California; principal
and interest payments of $13,537
are due monthly through
September 2003 when the remaining
principal of approximately
$169,000 is due. . . . . . . . . . $ 931,863 1,017,852
8.4% mortgage note; secured by
the 150 Almaden and 185 Park
Avenue buildings, and certain
related parking improvements
in San Jose, California;
interest only payments of
$157,500 are due monthly
through December 1997; principal
and interest payments of
$179,663 are due monthly
through November 2001 when
the entire principal of
approximately $21,421,000
is due . . . . . . . . . . . . . . 22,500,000 22,500,000
----------- ----------
Total debt. . . . . . . . . 23,431,863 23,517,852
Less current portion
of long-term debt. . . . . 92,988 85,989
----------- ----------
Total long-term debt. . . . $23,338,875 23,431,863
=========== ==========
Five year maturities of long-term debt are as follows:
1997. . . . . . . . . . . $ 92,988
1998. . . . . . . . . . . 376,986
1999. . . . . . . . . . . 409,305
2000. . . . . . . . . . . 444,398
2001. . . . . . . . . . . 21,723,357
===========
LEASES
At December 31, 1996, San Jose's principal asset is an office building
complex. San Jose 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, was depreciated over the estimated useful lives of the properties
prior to their being classified as held for sale or disposition as
described above. Leases with tenants range in term from one to twenty-five
years and provide for fixed minimum rent and partial reimbursement of
operating costs.
44-i
<PAGE>
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:
1997 . . . . . . . . . . . . . . $ 6,434,687
1998 . . . . . . . . . . . . . . 6,270,264
1999 . . . . . . . . . . . . . . 5,640,920
2000 . . . . . . . . . . . . . . 4,232,298
2001 . . . . . . . . . . . . . . 3,884,020
Thereafter . . . . . . . . . . . 12,589,967
-----------
$39,052,156
===========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by San Jose
to the General Partners and their affiliates as of December 31, 1996 and
for the years ended December 31, 1996, 1995 and 1994 were as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- ------------
Property management
and leasing fees. . . $ 77,870 60,000 281,748 --
Insurance commissions . 25,768 30,140 25,176 --
-------- ------- ------- ------
$103,638 90,140 306,924 --
======== ======= ======= ======
44-j
<PAGE>
<TABLE>
SCHEDULE III
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) COSTS AT CLOSE OF PERIOD (B)
------------------------------ CAPITALIZED ------------------------------------------
BUILDINGS SUBSEQUENT TO BUILDINGS
AND ACQUISITION AND
ENCUMBRANCE LAND IMPROVEMENTS (C) (D) LAND IMPROVEMENTS TOTAL (D)
----------- ----------- ------------ -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BLDS:
San Jose,
California . $23,431,863 21,078,745 62,309,815 (37,204,551) 5,867,750 40,316,259 46,184,009
=========== ========== ========== =========== ========== ========== ===========
</TABLE>
44-k
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1996
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
San Jose, 6/20/85
California . . . . . . . . $17,753,343 1970 and 5/2/86 5-30 years 553,747
=========== =======
<FN>
- --------------
Notes:
(A) The initial cost to San Jose 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, 1996 for Federal income tax purposes was approximately
$41,350,548.
(C) Through December 31, 1996, San Jose has recorded provisions for value impairment totaling $45,811,547.
(D) During 1996, San Jose sold the 190 San Fernando Building and one of the parking garage structures
in the complex in two separate transactions as described more fully in the Notes to Consolidated Financial
Statements of the Partnership.
</TABLE>
44-l
<PAGE>
<TABLE>
SCHEDULE III - CONTINUED
JMB/SAN JOSE ASSOCIATES
(A GENERAL PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(D) Reconciliation of real estate owned:
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period. . . . . . . . . . . $49,530,107 49,373,853 49,578,913
Additions during period . . . . . . . . . . . . . . 1,485,395 156,254 739,275
Provision for value impairment (C). . . . . . . . . -- -- (944,335)
Sales of investment property. . . . . . . . . . . . (4,831,493) -- --
----------- ----------- -----------
Balance at end of period. . . . . . . . . . . . . . $46,184,009 49,530,107 49,373,853
=========== =========== ===========
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period. . . . . . . . . . . $18,574,214 17,460,071 16,360,097
Sales of investment property. . . . . . . . . . . . (1,865,167) -- --
Depreciation expense. . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974
----------- ----------- -----------
Balance at end of period. . . . . . . . . . . . . . $17,753,343 18,574,214 17,460,071
=========== =========== ===========
</TABLE>
44-m
