SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1995 Commission file number 000-19496
JMB INCOME PROPERTIES, LTD. - XIII
(Exact name of registrant as specified in its charter)
Illinois 36-3426137
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . 16
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K. . . . . . 21
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . $ 612,739 5,011,101
Short-term investments (note 1). . . . . . . . . . . . . . . 14,357,797 9,214,950
Interest, rents and other receivables (net of allowance
for doubtful accounts of $26,203 in 1995 and
$113,018 in 1994). . . . . . . . . . . . . . . . . . . . . 575,733 830,693
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 37,794 65,928
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . 250,246 99,877
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . 15,834,309 15,222,549
Investment properties, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,566,702 23,566,702
Buildings and improvements . . . . . . . . . . . . . . . . . 75,166,541 75,093,333
------------ ------------
98,733,243 98,660,035
Less accumulated depreciation. . . . . . . . . . . . . . . . 15,359,652 14,115,282
------------ ------------
Total investment properties, net of
accumulated depreciation . . . . . . . . . . . . . . 83,373,591 84,544,753
Investment in unconsolidated ventures,
at equity (notes 3(b), 3(c) and 7) . . . . . . . . . . . . . 6,444,711 7,072,275
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . 839,055 894,654
Accrued rents receivable . . . . . . . . . . . . . . . . . . . 1,544,202 1,437,721
------------ ------------
$108,035,868 109,171,952
============ ============
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1995 1994
------------ -----------
Current liabilities:
Current portion of long-term debt (note 4) . . . . . . . . . $ 282,341 272,721
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 446,017 202,356
Accrued interest . . . . . . . . . . . . . . . . . . . . . . 197,571 198,382
Accrued real estate taxes. . . . . . . . . . . . . . . . . . 1,342,292 1,231,227
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . 2,268,221 1,904,686
Tenant security deposits . . . . . . . . . . . . . . . . . . . 329,540 340,213
Long-term debt, less current portion . . . . . . . . . . . . . 26,293,932 26,436,573
------------ ------------
Commitments and contingencies (notes 1, 3 and 5)
Total liabilities. . . . . . . . . . . . . . . . . . . 28,891,693 28,681,472
------------ ------------
Partners' capital accounts (deficits):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings. . . . . . . . . . . . . . . . . 688,400 626,763
Cumulative cash distributions. . . . . . . . . . . . . . (1,311,809) (1,233,777)
------------ ------------
(603,409) (587,014)
------------ ------------
Limited partners (126,414 interests):
Capital contributions, net of offering costs . . . . . . 113,741,315 113,741,315
Cumulative net earnings. . . . . . . . . . . . . . . . . 21,780,349 20,301,059
Cumulative cash distributions. . . . . . . . . . . . . . (55,774,080) (52,964,880)
------------ ------------
79,747,584 81,077,494
------------ ------------
Total partners' capital accounts (deficits). . . . . . 79,144,175 80,490,480
------------ ------------
$108,035,868 109,171,952
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------------------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . $ 2,569,806 2,841,881 5,335,285 5,482,213
Interest income. . . . . . . . . . . . . 224,411 108,933 418,355 211,239
----------- ---------- ----------- ----------
2,794,217 2,950,814 5,753,640 5,693,452
----------- ---------- ----------- ----------
Expenses:
Mortgage and other interest. . . . . . . 593,165 597,877 1,187,510 1,205,423
Depreciation . . . . . . . . . . . . . . 622,185 622,174 1,244,370 1,244,348
Property operating expenses. . . . . . . 776,022 822,744 1,669,915 1,711,107
Professional services. . . . . . . . . . 50,282 52,476 137,416 133,123
Amortization of deferred
expenses . . . . . . . . . . . . . . . 52,081 51,215 102,679 98,942
General and administrative . . . . . . . 83,086 36,552 137,009 110,840
----------- ---------- ----------- ----------
2,176,821 2,183,038 4,478,899 4,503,783
----------- ---------- ----------- ----------
Operating earnings . . . . . . . . 617,396 767,776 1,274,741 1,189,669
Partnership's share of operations
from unconsolidated ventures
(notes 3(b), 3(c) and 7) . . . . . . . . 106,393 97,118 266,186 223,322
----------- ---------- ----------- ----------
Net earnings . . . . . . . . . . . $ 723,789 864,894 1,540,927 1,412,991
=========== ========== =========== ==========
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------------------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
Net earnings per limited
partnership interest
(note 1) . . . . . . . . . . . . $ 5.49 6.57 11.70 10.73
=========== ========== =========== ==========
Cash distributions per
limited partnership
interest (note 1). . . . . . . . $ 11.00 10.00 22.00 20.00
=========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,540,927 1,412,991
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 1,244,370 1,244,348
Amortization of deferred expenses. . . . . . . . . . . . . . . 102,679 98,942
Partnership's share of operations of unconsolidated
ventures, net of distributions . . . . . . . . . . . . . . . (266,186) (223,322)
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . 254,960 81,960
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 28,134 52,389
Accrued rents receivable . . . . . . . . . . . . . . . . . . . (106,481) (112,368)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 243,661 21,515
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . (811) (13,003)
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . -- (24,367)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . 111,065 268,852
Tenant security deposits . . . . . . . . . . . . . . . . . . . (10,673) (29,493)
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . (150,369) (180,761)
------------ -----------
Net cash provided by operating activities. . . . . . . . 2,991,276 2,597,683
------------ -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term
investments. . . . . . . . . . . . . . . . . . . . . . . . . . (5,142,847) 5,143,553
Additions to investment properties . . . . . . . . . . . . . . . (73,208) (44,663)
Partnership's distributions from unconsolidated ventures
and proceeds from sale of investment property. . . . . . . . . 893,750 950,000
Partnership's contributions to unconsolidated ventures . . . . . -- (24,630)
Payment of deferred expenses . . . . . . . . . . . . . . . . . . (47,080) (99,720)
------------ -----------
Net cash provided by (used in) investing activities. . . (4,369,385) 5,924,540
------------ -----------
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1995 1994
------------ -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . . . . . . (133,021) (62,412)
Distributions to limited partners. . . . . . . . . . . . . . . . (2,809,200) (2,553,818)
Distributions to general partners. . . . . . . . . . . . . . . . (78,032) (70,940)
------------ -----------
Net cash used in financing activities. . . . . . . . . . (3,020,253) (2,687,170)
------------ -----------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . (4,398,362) 5,835,053
Cash and cash equivalents, beginning of year . . . . . . 5,011,101 1,301,466
------------ -----------
Cash and cash equivalents, end of period . . . . . . . .$ 612,739 7,136,519
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . .$ 1,188,321 1,218,426
============ ===========
Non-cash investing and financing activities:
Refinancing of long-term debt (note 4):
Proceeds of new debt . . . . . . . . . . . . . . . . . . . .$ -- 11,200,000
Retirement of old debt . . . . . . . . . . . . . . . . . . . -- (11,000,000)
Deferred mortgage costs. . . . . . . . . . . . . . . . . . . -- (69,531)
Funding of escrow. . . . . . . . . . . . . . . . . . . . . . -- (130,469)
------------ -----------
Net proceeds from refinancing of
long-term debt . . . . . . . . . . . . . . . . . . . .$ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1994
which are included in the Partnership's 1994 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the
accounts of the Partnership and one of its ventures, Adams/Wabash Limited
Partnership ("Adams/Wabash"). The effect of all transactions between the
Partnership and Adams/Wabash have been eliminated in the consolidated
financial statements. The equity method of accounting has been applied in
the accompanying financial statements with respect to the Partnership's
interests in JMB First Financial Associates ("First Financial") and
JMB/Miami International Associates ("JMB/Miami"). Accordingly, the
accompanying financial statements do not include the accounts of First
Financial and JMB/Miami.
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 where applicable to reflect
the Partnership's accounts in accordance with generally accepted accounting
principles ("GAAP"). Such adjustments are not recorded on the records of
the Partnership.
The net effect of these items is summarized as follows for the six
months ended June 30:
1995 1994
----------------------- --------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
Net earnings . .$1,540,927 1,656,550 1,412,991 1,660,187
Net earnings
per limited
partnership
interest. . . .$ 11.70 12.58 10.73 12.61
========== ========= ========= =========
The net earnings per limited partnership interest is based upon the
limited partnership interests outstanding at the end of the period
(126,414). Deficit capital accounts will result, through the duration of
the Partnership, in net gain for financial reporting and income tax
purposes.
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 only to the extent of the Partnership's
cumulative share of net earnings. The Partnership records amounts held in
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
U.S. Government obligations at cost, which approximates market. For the
purposes of these statements, the Partnership's policy is to consider all
such amounts held with original maturities of three months or less ($98,775
and $5,024,751 at June 30, 1995 and December 31, 1994, respectively) as
cash equivalents with any remaining amounts (generally with original
maturities of one year or less) reflected as short-term investments being
held to maturity.
During March 1995, Statement of Financial Accounting Standards No. 121
("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective,
will require that the Partnership record an impairment loss on its long-
lived assets (primarily its consolidated investments in land, buildings and
improvements) whenever their carrying value cannot be fully recovered
through estimated undiscounted future cash flows from operations and sale.
The amount of the impairment loss to be recognized would be the difference
between the long-lived asset's carrying value and the asset's estimated
fair value less costs to sell.
The amount of any impairment loss recognized by the Partnership under
its current accounting policy has been limited to the excess, if any, of
the property's carrying value over the outstanding balance of the
property's non-recourse indebtedness. An impairment loss under SFAS 121
would be determined without regard to the nature or the balance of such
non-recourse indebtedness. Upon the disposition of a property for which an
impairment loss has been recognized under SFAS 121, the Partnership would
recognize, at a minimum, a net gain for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.
The Partnership expects to adopt SFAS 121 no later than the first
quarter of 1996. Although the Partnership has not currently assessed the
full impact of adopting SFAS 121, the amount of any such required
impairment loss could be materially higher than the amounts that have been
recorded in the past or may be recorded in 1995 under the Partnership's
current impairment policy. In addition, upon the disposition of an
impaired property, the Partnership would generally recognize more net gain
for financial reporting purposes under SFAS 121 than it would have under
the Partnership's current impairment policy, without regard to the amount,
if any, of cash proceeds received by the Partnership in connection with the
disposition. Although implementation of this new accounting statement
could significantly impact the Partnership's reported earnings, there would
be no impact on cash flows. Further, any such impairment loss would not be
recognized for Federal income tax purposes.
(2) INVESTMENT PROPERTIES
The Partnership has acquired, either directly or through joint
ventures (note 3), three shopping centers, two multi-tenant industrial
properties, an office complex and a parking/retail structure. All of the
properties owned at June 30, 1995 were operating.
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) VENTURE AGREEMENTS
(a) General
The Partnership at June 30, 1995 is a party to three operating joint
venture agreements. Pursuant to such agreements, the Partnership has made
capital contributions of approximately $56,821,000 through June 30, 1995.
Under certain circumstances, either pursuant to the venture agreements or
due to the Partnership's obligations as general partner, the Partnership
may be required to make additional cash contributions to the ventures.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
(b) First Financial
On May 20, 1987, the Partnership, through First Financial, a joint
venture with another partnership sponsored by an affiliate of the General
Partner of the Partnership, acquired an interest in a general partnership
("Encino") with an affiliate of the developer ("Encino Venture Partner").
Encino owns an office building in Encino (Los Angeles), California. First
Financial was obligated to make an initial investment in the aggregate
amount of $49,850,000 of which approximately $49,812,000 of such
contributions have been made to Encino. The Partnership's share of the
remaining amount, approximately $14,000, will be contributed when the
Encino Venture Partner complies with certain requirements.
The first mortgage loan on the property matures November 1, 1995.
First Financial, on Encino's behalf, continues to discuss the terms of a
possible extension or renegotiation of the mortgage loan with the existing
lender upon such maturity. Encino has entered into a commitment letter
with the existing lender to extend substantially all of the mortgage loan
upon such maturity for a two year period. There can be no assurance that
the loan will be extended on these or any other terms. Based upon such
uncertainty, Encino may not be able to recover the net carrying value of
the investment property through future operations or sale. Accordingly,
the Encino venture, as a matter of prudent accounting practice, has made a
provision for value impairment of approximately $6,475,000, (approximately
$2,428,000 is allocable to the Partnership), all of which is allocable to
First Financial. Such provision was recorded at December 31, 1994 to
reduce the net carrying value of the property based upon a then estimated
sales price should the Encino venture be unable to extend or refinance the
mortgage loan at maturity.
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
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 indicate that some of the building's
joint weldings have suffered damage which, in accordance with the recently
enacted ordinance, must be repaired. Encino's structural engineer informed
Encino that the damage detected does not pose a life safety risk for the
building's tenants. While a complete determination of the requirements to
comply with such ordinance is not as yet completed, it is currently
estimated that the cost of such repairs will be approximately $1,000,000
(of which the Partnership's share is approximately $375,000). Encino
expects to complete testing and commence such repairs in August 1995 and it
expects them to be completed by the end of 1995.
All of Encino's operating profits and losses before depreciation have
been allocated to First Financial in 1995 and 1994.
(c) JMB/Miami
On January 26, 1988, the Partnership, through JMB/Miami, a general
partnership with JMB/Miami Investors L.P., a partnership sponsored by an
affiliate of the General Partners of the Partnership, acquired an interest
in an existing partnership ("West Dade" in which JMB/Miami is a general
partner), with an affiliate of the developer (the "Miami Venture Partner"),
which owns an enclosed regional shopping center in Miami, Florida known as
the Miami International Mall. During February 1989, IDS/JMB Balanced
Income Growth, Ltd., a partnership sponsored by an affiliate of the General
Partners of the Partnership, made a capital contribution to the JMB/Miami
to acquire an interest therein. During October 1993, JMB/Miami Investors
L.P. transferred its interest in JMB/Miami to Urban Shopping Centers, L.P.,
a partnership controlled by Urban Shopping Centers, Inc. (a public
corporation organized by an affiliate of the General Partners of the
Partnership). The Partnership's investment in JMB/Miami is $10,402,500.
The terms of the JMB/Miami partnership agreement provide that annual cash
flow, net sale or refinancing proceeds, and tax items will be distributed
or allocated, as the case may be, to the Partnership in proportion to its
50% share of capital contributions.
West Dade sold a 4 acre outparcel of land at Miami International Mall
in December 1994 for a net sales price of approximately $1,466,000 after
certain selling costs, of which the Partnership's share was approximately
$367,000. For financial reporting purposes, West Dade has recognized a
gain in 1994 of approximately $1,195,000, of which the Partnership's share
is approximately $299,000. For income tax purposes, West Dade has
recognized a gain in 1994 of approximately $985,000, of which the
Partnership's share is a gain of approximately $274,000.
The shopping center is managed by an affiliate of the Miami Venture
Partner. The manager is paid an annual fee equal to 4-1/2% of the net
operating income of the shopping center.
(d) Adams/Wabash
On April 19, 1988, an affiliate of the Partnership entered into a
forward commitment on behalf of the Partnership to make a total cash
investment to a maximum of $25,750,000 in the Adams/Wabash Limited
Partnership ("Adams/Wabash"), which constructed a parking garage and retail
structure (the "Project") in Chicago, Illinois. The Project contains 671
parking spaces and approximately 28,800 square feet of leasable retail
area. The Partnership has funded approximately $24,994,000 of its total
cash commitment and does not anticipate further increasing its cash
investment.
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership owns a 74.9% interest in the Adams/Wabash Limited
Partnership. The Managing General Partner of the Partnership has a .1%
interest with the remaining 25% held by the developers. The Partnership is
entitled to a cumulative annual preferred return, payable from operating
cash flow, of 10% of its capital contributions to the existing partnership.
Any distributable cash flow in excess of the Partnership's preferred return
will be distributed to the partners in accordance with their respective
ownership percentage interests in Adams/Wabash. The Partnership also has a
preferred position with respect to distributions of sales and financing
proceeds. Items of profit and loss are, in general, allocated in
accordance with distributions of cash flow. The Partnership is expected to
receive slightly below its preferred return for 1995.
(4) LONG-TERM DEBT REFINANCING
In February 1994, the Partnership extended and increased the first
mortgage loan, which is secured by the Fountain Valley and Cerritos
Industrial Parks, to the principal amount of $11,200,000. The extended
loan bears interest at a rate of 7.32% per annum, provides for monthly
payments of principal and interest based on a twenty-year amortization
schedule and matures March 1, 2001. After payment of costs and fees
related to the refinancing, there were no distributable proceeds from the
loan extension. The Partnership continued to pay interest only at an
annual rate of 8.83% on the original $11,000,000 principal balance through
the effective date of the refinancing.
(5) PARTNERSHIP AGREEMENT
The General Partners have made capital contributions to the
Partnership aggregating $20,000. The General Partners are not required to
make any additional capital contributions except under certain limited
circumstances upon dissolution and termination of the Partnership.
Disbursable cash from operations, as defined in the Partnership Agreement,
will be distributed 90% to the Limited Partners and 10% to the General
Partners, subject to certain limitations. Sale or refinancing proceeds
will be distributed 100% to the Limited Partners until the Limited Partners
have received their contributed capital plus a stipulated return thereon.
The General Partners will then receive 100% of the sale or refinancing
proceeds until they receive amounts equal to the sum of (i) the cumulative
deferral of their 10% distribution of disbursable cash and (ii) 2% of the
selling prices of all properties which have been sold, subject to certain
limitations. Any remaining sale or refinancing proceeds will then be
distributed 85% to the Limited Partners and 15% to the General Partners.
Accordingly, approximately $3,935,000 of disbursable cash and approximately
$618,000 of sale proceeds have been deferred by the General Partners.
(6) TRANSACTIONS WITH AFFILIATES
Certain of the Partnership's properties are managed by affiliates of
the General Partners. In December 1994, one of the affiliate property
managers sold substantially all of its assets and assigned its interest in
its management contracts to an unaffiliated third party. In addition,
certain of the management personnel of the property manager became
management personnel of the purchaser and its affiliates. The successor to
such affiliated property manager's assets is acting as the property manager
of the Fountain Valley and Cerritos Industrial Park investment properties
after the sale on the same terms that existed prior to the sale.
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of June 30,
1995 and for the six months ended June 30, 1995 and 1994 are as follows:
Unpaid at
June 30,
1995 1994 1995
------- ------- -------------
Property management
fees. . . . . . . . . . . $54,597 101,473 --
Insurance commissions. . . 4,604 7,811 --
Reimbursement
(at cost) for
out-of-pocket
expenses. . . . . . . . . 1,718 769 106
------- ------- ------
$60,919 110,053 106
======= ======= ======
During 1994, certain officers and directors of the Corporate General
Partner acquired interests in a company which provides certain property
management services to certain of the properties owned by the Partnership.
The fees earned by such company from the Partnership for the six months
ended June 30, 1995 were approximately $54,597, all of which have been
paid.
In accordance with the subordination requirements of the Partnership
Agreement (note 5), the General Partners have deferred payment of certain
of their distributions of net cash flow and sale proceeds from the
Partnership. All amounts deferred or currently payable do not bear
interest.
The Managing General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Managing General Partner and its affiliates relating to the
administration of the Partnership and the operation of Partnership's
investment properties. The amount of such salaries and direct expenses
aggregated $75,792 and $128,794 for the six months ended June 30, 1995 and
the twelve months ended December 31, 1994, respectively, all of which has
been paid as of June 30, 1995.
Subsequent to June 30, 1995, the Managing General Partner of the
Partnership has determined to use an independent third party or parties to
perform certain of these administrative services beginning in late 1995.
Use of a third party, rather than reimbursement to the Managing General
Partner and its affiliates, is not expected to have a material effect on
the operations of the Partnership.
JMB INCOME PROPERTIES, LTD. - XIII
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(7) UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
The summary income statement information for the First Financial and
JMB/Miami ventures for the six months ended June 30, 1995 and 1994 is as
follows:
1995 1994
---------- ----------
Total income . . . . . . . $9,447,691 9,146,251
========== ==========
Operating earnings . . . . $1,387,018 979,791
========== ==========
Net earnings . . . . . . . $1,387,018 979,791
========== ==========
Net earnings to
Partnership . . . . . . . $ 266,186 223,322
========== ==========
(8) ADJUSTMENTS
In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 1995
and for the three and six months ended June 30, 1995 and 1994.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references to "Notes" are to Notes to Financial Statements
contained in this report.
At June 30, 1995, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $613,000. Such funds and short-
term investments of approximately $14,358,000 are available for future
distributions to partners, working capital requirements and to make
additional investments in the venture which owns the First Financial Plaza
Office Building as described below and in Note 3(b). As more fully
described in Note 5, distributions to the General Partners have been
deferred in accordance with the subordination requirements of the
Partnership Agreement. The Partnership and its consolidated venture have
currently budgeted in 1995 approximately $441,000 for tenant improvements
and other capital expenditures. The Partnership's share of such items and
its share of similar items for its unconsolidated ventures in 1995 is
currently budgeted to be approximately $681,000. Actual amounts expended
in 1995 may vary depending on a number of factors including actual leasing
activity, results of property operations, liquidity considerations and
other market conditions over the course of the year. The source of capital
for such items and for both short-term and long-term future liquidity and
distributions is expected to be through cash generated by the Partnership's
investment properties and through the sale of such investments. Due to an
increase in cash flow from operations at certain of the Partnership's
properties, the Partnership increased its quarterly cash flow distribution
to partners effective with the third quarter of 1994 from $10 per limited
partnership interest ("Interest") to $11 per Interest. The Partnership's
and its ventures' mortgage obligations are all non-recourse. Therefore,
the Partnership and its ventures are not obligated to pay mortgage
indebtedness unless the related property produces sufficient net cash flow
from operations or sale.
From 1995 through 1997, leases at the Cerritos Industrial Park
representing 75% of the rentable square footage are scheduled to expire,
not all of which are expected to renew. In February 1994, True Form
(42,750 square feet or 22% of the gross leasable area), filed for
bankruptcy protection under Chapter 11 of the United States Bankruptcy
Code. It is unlikely that the Partnership will fully collect the
approximately $80,000 owed by True Form as of the date of the bankruptcy
filing. The Partnership entered into a new lease with True Form's
successor in bankruptcy, TFI Acquisition, Inc., in May, 1995.
The Fountain Valley Industrial Park currently operates in a sub-market
with industrial vacancy rates of approximately 10%. Fountain Valley is
currently 92% leased (including temporary tenants) and occupied. In 1995
and 1996, leases representing 23% and 11%, respectively, of the leasable
square footage at Fountain Valley are scheduled to expire, not all of which
are expected to be renewed. The Partnership is examining the possible
redevelopment of the park to retail use (including the possible use of
Partnership funds and/or alternative financing sources) as a result of the
City of Fountain Valley designating a redevelopment zone which includes the
property. The Partnership has commenced discussions with several large
national retail tenants who have expressed interest in the Fountain Valley
property.
Currently, as industrial leases at the Fountain Valley and Cerritos
Industrial Parks expire, lease renewals and new leases are likely be at
rental rates less than the rates on existing leases entered into prior to
1993. Although the previous decline in rental rates stabilized in 1994 and
vacancy rates have declined, the supply of industrial space continues to
cause significant competition for tenants, although there is generally a
decrease in time required to re-lease tenant space in these markets. In
addition, new leases continue to require expenditures for lease commissions
and tenant improvements prior to tenant occupancy. As pre-1993 leases
expire, the expected decline in rental rates and the costs incurred upon
releasing will result in a decrease in cash flow from operations from these
properties over the near term. Fountain Valley incurred minimal damage and
Cerritos incurred no damage as a result of the earthquake in southern
California on January 17, 1994.
In February 1994, the Partnership extended to March 1, 2001 and
increased the first mortgage loan in the principal amount to $11,200,000,
which is secured by the Fountain Valley and Cerritos Industrial Parks.
After payment of costs and fees related to the re-financing, there were no
distributable proceeds from the loan extension.
The Rivertree Court Shopping Center operates in a market which is
experiencing significant growth in the commercial and residential sectors.
The growth in the area is expected to continue in the next several years.
In August 1994, Office Depot reopened the approximately 26,000 square foot
store previously occupied by Filene's Basement which had closed in January
1994. Under the terms of the assignment of the Filene's lease, Office
Depot has continued to pay rent on the space pursuant to the terms of the
lease. In August 1992, Phar-Mor (which occupied approximately 14% of the
center) filed for protection under Chapter 11 of the United States
Bankruptcy Code. The Phar-Mor store continued to operate and pay rent
under its lease obligation until it closed the store in October 1994.
Phar-Mor assigned its lease in bankruptcy to Home Goods, which opened in
April 1995. Under the terms of the assignment of the Phar-Mor lease, Home
Goods continues to pay rent on the space pursuant to the terms of the
lease. In conjunction with the assignment, the Partnership received
approximately $125,000 of pre-petition indebtedness owed by Phar-Mor.
West Dade joint venture, which owns the Miami International Mall, sold
a 4 acre outparcel of land in December 1994 for a net sales price of
approximately $1,466,000 after certain selling costs, of which the
Partnership's share was approximately $367,000. For financial reporting
purposes, West Dade has recognized a gain in 1994 of approximately
$1,195,000, of which the Partnership's share is approximately $299,000.
For income tax purposes, West Dade has recognized a gain in 1994 of
approximately $985,000, of which the Partnership's share is a gain of
approximately $274,000. During the third quarter of 1992, the Miami
International Mall experienced storm damage caused by Hurricane Andrew.
All repairs necessary to continue operations and replacement of the
landscaping have been completed and West Dade was fully reimbursed (subject
to deductibles) in 1994 by insurance proceeds for such repairs.
At June 30, 1995, the First Financial Plaza office building is
approximately 86% occupied. In July 1993, Mitsubishi vacated its
approximate 8,100 square feet prior to its lease expiration of January 1997
and continues to pay rent pursuant to its lease obligation. Including the
Mitsubishi lease, the building is 92% leased as of the date of this report.
The Los Angeles office market in general and the Encino submarket in
particular are showing signs of strengthening as vacancy rates decrease and
rental rates stabilize.
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 indicate that some of the building's
joint weldings have suffered damage which, in accordance with the recently
enacted ordinance, must be repaired. Encino's structural engineer informed
Encino that the damage detected does not pose a life safety risk for the
building's tenants. While a complete determination of the requirements to
comply with such ordinance is not as yet completed, it is currently
estimated that the cost of such repairs, will be approximately $1,000,000
(of which the Partnership's share is approximately $375,000). Encino
expects to complete testing and commence such repairs in August 1995 and
expects them to be completed by the end of 1995.
The mortgage note secured by the First Financial Plaza office building
is scheduled to mature in November 1995. The venture continues to hold
discussions with the lender regarding an extension and modification of this
loan. The lender has indicated a willingness to extend the mortgage loan
two years and reduce the interest rate provided that the joint venture
agrees to pay down the loan in the amount of $4 million. However, there
can be no assurance that such an extension or any alternative financing for
all or substantially all of the mortgage loan can be obtained at maturity.
The venture is examining a possible sale of the property should a loan
extension not take place. There can be no assurance that a sale of the
property will occur. Based upon such uncertainty, Encino may not be able
to recover the net carrying value of the investment property through future
operations or sale. Accordingly, Encino, as a matter of prudent accounting
practice, has made a provision for value impairment of approximately
$6,475,000, (of which approximately $2,428,000 is allocated to the
Partnership), all of which is allocable to First Financial joint venture.
Such provision was recorded at December 31, 1994 to reduce the net carrying
value of the property based upon an estimated sales price should the Encino
Venture be unable to extend or refinance the mortgage loan at maturity.
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 interest or goals that
are inconsistent with those of the Partnership.
In accordance with the subordination requirements of the Partnership
Agreement (Note 5), the General Partners have deferred payment of certain
of their distributions of net cash flow and sale proceeds from the
Partnership. The cumulative amount of such deferred distributions are
approximately $4,553,000 at June 30, 1995. All amounts deferred or
currently payable do not bear interest.
While the real estate markets are recuperating, highly competitive
market conditions continue to exist in most locations. The Partnership's
approach has been to aggressively and creatively manage the Partnership's
real estate assets to attract and retain tenants. Net effective rents to
the landlord from renewal tenants are much more favorable than lease terms
which can be negotiated with new tenants. However, the Partnership's
capital resources must also be preserved and allocated in such a manner as
to maximize the total value of the portfolio. As a result of the real
estate market conditions discussed above, the Partnership continues to
conserve its working capital. All expenditures are carefully analyzed and
certain capital projects are deferred when appropriate. The Partnership
has also sought or is seeking additional loan modifications where
appropriate. By conserving working capital, the Partnership will be in a
better position to meet the future needs of its properties since outside
sources of capital may be limited.
Due to these factors, the Partnership has held its remaining
investment properties longer than originally anticipated in an effort to
maximize the return to the Limited Partners.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents and the increase in short-
term investments at June 30, 1995 as compared to December 31, 1994 is
primarily due to all of the Partnership's investments in U.S. Government
obligations being classified as short-term investments at June 30, 1995 and
a portion of the Partnership's investments in U.S. Government obligations
classified as cash equivalents at December 31, 1994. Reference is made to
Note 1.
The decrease in interest, rents and other receivables, at June 30,
1995 as compared to December 31, 1994, is primarily due to the timing of
rental collections at certain of the Partnership's investment properties.
The decrease in prepaid expenses at June 30, 1995 as compared to
December 31, 1994 is primarily due to the timing of payment of insurance
premiums at certain of the Partnership's investment properties.
The increase in escrow deposits and the corresponding increase in
accrued real estate taxes at June 30, 1995 as compared to December 31, 1994
is primarily due to the timing of payment of real estate taxes from escrow
at the Fountain Valley and Cerritos Industrial Parks.
The decrease in investment in unconsolidated ventures as of June 30,
1995 as compared to December 31, 1994 is primarily due to the receipt by
the Partnership of distributions from West Dade.
The increase in accounts payable, at June 30, 1995 as compared to
December 31, 1994, is primarily due to the timing of payment of operating
expenses at certain of the Partnership's properties.
The decrease in rental income for the three and six months ended June
30, 1995 as compared to the three and six months ended June 30, 1994 is due
to lower effective tenant rents upon renewal at certain of the
Partnership's investment properties, as discussed above.
The increase in interest income for the three and six months ended
June 30, 1995 as compared to the three and six months ended June 30, 1994
is due to the increase in the Partnership's average balance in U.S.
Government obligations and higher rates earned in 1995.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Partnership's
investment properties.
<CAPTION>
1994 1995
-------------------------------------------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. First Financial Plaza
Encino (Los Angeles),
California . . . . . . . 84%(1) 91%(1) 89%(1) 89%(1) 89%(1) 86%(1)
2. Miami International Mall
Miami, Florida . . . . . 98% 96% 97% 93% 89% 91%
3. Rivertree Court
Shopping Center
Vernon Hills (Chicago),
Illinois . . . . . . . . 88%(2) 89%(2) 98% 85%(3) 85%(3) 96%
4. Fountain Valley
Industrial Park
Fountain Valley
(Los Angeles),
California . . . . . . . 85% 85% 91% 100% 92% 92%
5. Cerritos Industrial Park
Cerritos (Los Angeles),
California . . . . . . . 100% 100% 100% 100% 100% 100%
6. Adams/Wabash Self Park
Chicago, Illinois. . . . * * * * * *
<FN>
---------------
An asterisk indicates that the property is a parking garage and occupancy information is not applicable.
However, the approximate occupancy level for the retail portion of the structure as of March 31, 1995 is 45%.
(1) The percentage represents physical occupancy. Mitsubishi (8,109 square feet) vacated its space in July
1993 prior to its lease expiration of January 1997 and continues to pay rent pursuant to its lease obligation.
(2) The percentage represents physical occupancy. Filene's Basement (26,555 square feet) vacated its space
in January 1994, prior to its lease expiration of January 31, 2007 and continued to pay rent pursuant to its lease
obligation until the assignment of its lease to Office Depot in April 1994. Office Depot reopened the store
August 26, 1994.
(3) The percentage represents physical occupancy. Phar-Mor (40,560 square feet) vacated its space in
October 1994. However, its lease has been assigned to Home Goods, Inc. which opened its store April 27, 1995.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4-A. Copy of documents relating to the mortgage loan secured
by the Rivertree Court Shopping Center, Vernon Hills (Chicago), Illinois
dated December 30, 1988 is hereby incorporated by reference to Exhibit 4-A
to the Partnership's report for December 31, 1992 on Form 10-K (File No.
000-19496) dated March 18, 1993.
4-B. Copy of documents relating to the mortgage loan secured
by a first mortgage on West Dade's interest in Miami International Mall,
Miami, Florida dated December 21, 1993 is hereby incorporated by reference
to Exhibit 4-B to the Partnership's report for December 31, 1993 on Form
10-K (File No. 000-19496) dated March 25, 1994.
10-A. Acquisition documents relating to the purchase by the
Partnership of Rivertree Court Shopping Center in Vernon Hills (Chicago),
Illinois, are hereby incorporated by reference to Exhibit 1 to the
Partnership's Form 8-K (File No. 000-19496) dated November 4, 1988.
10-B. Acquisition documents relating to the purchase by the
Partnership of Fountain Valley Industrial Buildings in Fountain Valley,
California and Cerritos Industrial Buildings in Cerritos, California, are
hereby incorporated by reference to Exhibits 1 and 2 to the Partnership's
Form 8-K (File No. 000-19496) dated November 15, 1988.
10-C. Acquisition documents relating to the acquisition by the
Partnership of an interest in the Adams/Wabash Parking Garage in Chicago,
Illinois are hereby incorporated by reference to Exhibit 3 to the
Partnership's Form 8-K (File No. 000-19496) dated October 15, 1990.
27. Financial Data Schedule
Although certain long-term debt instruments of the Registrant have been
excluded from Exhibit 4 above, pursuant to Rule (b)(4)(iii), the
Registrants commits to provide copies of such agreements to the Securities
and Exchange Commission upon request.
(b) No reports on Form 8-K were required to be filed during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XIII
BY: JMB Realty Corporation
(Managing General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date:August 9, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date:August 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE
30, 1995 AND 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH
REPORT.
</LEGEND>
<CIK> 0000790603
<NAME> JMB INCOME PROPERTIES, LTD. - XIII
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 612,739
<SECURITIES> 14,357,797
<RECEIVABLES> 863,773
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,834,309
<PP&E> 98,733,243
<DEPRECIATION> 15,359,652
<TOTAL-ASSETS> 108,035,868
<CURRENT-LIABILITIES> 2,268,221
<BONDS> 26,293,932
<COMMON> 0
0
0
<OTHER-SE> 79,144,175
<TOTAL-LIABILITY-AND-EQUITY> 108,035,868
<SALES> 5,335,285
<TOTAL-REVENUES> 5,753,640
<CGS> 0
<TOTAL-COSTS> 3,016,964
<OTHER-EXPENSES> 274,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,187,510
<INCOME-PRETAX> 1,274,741
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,540,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,540,927
<EPS-PRIMARY> 11.70
<EPS-DILUTED> 11.70
</TABLE>
