UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number 0-19198
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3591517
(State of organization) (IRS Employer Identification No.)
154 West Hubbard Street, Suite 250, Chicago, IL 60610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 464-0100
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 ____
Units outstanding as of September 30, 1997: 10,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 1997 and December 31, 1996
(Unaudited)
Assets
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents 849,697 592,001
Rents and other receivables 308,401 305,044
Due from affiliates 4,986 4,936
Prepaid expense 27,019 31,502
Total current assets 1,190,103 933,483
Investment property, at cost (note 1):
Land 1,201,880 1,201,880
Building 8,350,456 8,350,456
9,552,336 9,552,336
Less accumulated depreciation (1,957,689) (1,739,051)
7,594,647 7,813,285
Investment in unconsolidated venture 198,062 338,911
Deferred leasing and loan costs 51,883 59,273
Total assets 9,034,695 9,144,952
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 1997 and December 31, 1996
(Unaudited)
Liabilities and Partners' Capital Accounts
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 503,420 412,980
Due to affiliates (note 3) 3,500 7,160
Accrued interest 31,245 32,018
Current portion of long-term debt 157,500 153,932
Total current liabilities 695,665 606,090
Long-term debt 4,457,095 4,574,933
Venture partners' equity
in consolidated venture 1,538,728 1,541,880
Tenant security deposits 5,433 5,439
Total long-term liabilities 6,001,256 6,122,252
Total liabilities 6,696,921 6,728,342
Partners' capital accounts (deficits)
General partners:
Capital contributions 1,000 1,000
Cumulative net losses (3,484) (3,315)
(2,484) (2,315)
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net losses (345,007) (328,243)
Cumulative cash distributions (1,373,698) (1,311,795)
2,340,258 2,418,925
Total partners' capital accounts 2,337,774 2,416,610
Total Liabilities and Partners' Capital 9,034,695 9,144,952
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Three months ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Revenues:
Rental income 302,937 326,452
Tenant charges 137,467 151,157
Interest income 5,894 11,038
Total revenues 446,298 488,647
Expenses:
Property operating expenses 190,267 220,128
Interest 93,999 97,041
Depreciation 72,879 57,210
Amortization 2,394 2,650
General and administrative expenses 7,957 9,015
Total expenses 367,496 386,044
Operating income (loss) 78,802 102,603
Partnership's share of operations
of unconsolidated ventures (24,231) (52,261)
Venture partner's share of consolidated
venture's operations (note 1) (38,654) (47,779)
Net income (loss) 15,917 2,563
Net income (loss)
per limited partnership unit (note 1) 1.58 0.25
Cash distribution
per limited partnership unit 2.06 2.06
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Nine months ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Revenues:
Rental income 937,944 989,699
Tenant charges 422,912 449,376
Interest income 15,587 11,038
Total revenues 1,376,443 1,450,113
Expenses:
Property operating expenses 671,288 636,438
Interest 284,331 293,281
Depreciation 218,638 200,431
Amortization 7,390 7,649
General and administrative expenses 70,578 73,659
Total expenses 1,252,226 1,211,458
Operating income (loss) 124,216 238,655
Partnership's share of operations
of unconsolidated ventures (56,845) (42,990)
Venture partner's share of consolidated
venture's operations (note 1) (84,304) (141,818)
Net income (loss) (16,933) 53,847
Net income (loss)
per limited partnership unit (1.68) 5.33
Cash distribution
per limited partnership unit 6.19 27.24
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (16,933) 53,847
Items not requiring (providing
cash or cash equivalents:
Depreciation 218,638 200,431
Amortization 7,390 7,649
Partnership's share of operations of
unconsolidated ventures 140,849 389,112
Venture partners' share of
consolidated venture's operations (3,152) 81,243
Changes in:
Rents and other receivables (3,357) 21,324
Prepaid expenses 4,483 20,351
Accounts payable and accrued expenses 90,440 (81,953)
Due to affiliates (3,710) (3,603)
Tenant deposits (6) (900)
Net cash provided by (used in)
operating activities 434,642 687,501
Cash flow from investment activities:
Additions to building and deferred costs - (13,538)
Net cash provided by (used in)
investment activities - (13,538)
Cash flows from financing activities:
Distributions to limited partners (61,903) (272,445)
Principal payments on long-term debt (114,270) (176,097)
Net cash used in financing activities (176,173) (448,542)
Net increase (decrease) in
cash and cash equivalents 257,696 225,424
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
September 30, 1997 and 1996
(Unaudited)
Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year ended
December 31, 1996, which are included in the Partnership's 1996 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
For the three and nine month periods ended September 30, 1997 and
September 30, 1996 the accompanying consolidated financial statements
include the accounts of the Partnership and its consolidated venture -
Sycamore Mall Associates (the "Venture"). The effect of all
transactions between the Partnership and the Venture has been
eliminated.
The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to the
Partnership's interest in Evanston Galleria Limited Partnership and
Country Isle Associates for the three and nine months ended September
30, 1997 and September 30, 1996.
The Partnership 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 present 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 adjustments for the nine months ended September 30, 1997 and
1996 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
GAAP Tax GAAP Tax
Basis Basis Basis Basis
<S> <C> <C> <C> <C>
Net income (loss) (14,696) (29,301) 53,847 50,000
Net income (loss)
per limited partnership unit (1.45) (2.90) 5.33 4.95
</TABLE>
The net loss per limited partnership unit presented is based on
the weighted limited partnership units outstanding at the end of each
period (10,000).
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
Partnership distributions from unconsolidated ventures are
considered cash flow from operating activities to the extent of the
Partnership's cumulative share of net operating earnings before
depreciation and non-cash items. In addition, the Partnership records
amounts held in U.S. Government obligations, commercial paper and
certificates of deposit at cost which approximates market. For the
purposes of these statements, the Partnership's policy is to consider
all such investments with an original maturity of three months or less
($454,452 and $466,049 at September 30, 1997 and December 31, 1996,
respectively) as cash equivalents.
Deferred offering costs were charged to the partners' capital
accounts upon consummation of the offering. Deferred loan costs are
amortized over the terms of the related agreements using the straight-
line method. Depreciation on the investment properties acquired has
been provided over the estimated useful lives of 5 to 30 years using
the straight-line method.
No provision for Federal income taxes has been made as any
liability for such taxes would be that of the partners rather than the
Partnership.
(2) Venture Agreements
The Partnership has entered into three joint venture agreements
with partnerships sponsored by affiliates of the General Partners.
Pursuant to such agreements, the Partnership has made capital
contributions aggregating $3,652,066 through September 30, 1997. The
Partnership has acquired, through these ventures, interests in a mixed
use retail/residential property and two shopping centers.
(3) Transactions with Affiliates
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the nine months
ended September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Unpaid at
September 30,
1997 1996 1997
<S> <C> <C> <C>
Reimbursement (at cost)
for administrative services 15,000 15,000 3,500
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(4) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria
Limited Partnership and Country Isle Plaza for the nine months ended
September 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Total revenue 2,264,085 2,391,634
Operating income (loss) (218,310) (160,100)
Partnership's share of income (loss) (56,845) (43,990)
</TABLE>
(5) 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 consolidated
financial statements as of September 30, 1997 and 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At September 30, 1997, the Partnership had cash and cash
equivalents of $849,697 which will be utilized for working capital
requirements and for future distributions to Partners. This is
$257,696 more than the $592,001 balance at December 31, 1996. The
Partnership made a special distribution to Limited Partners during the
second quarter of 1996. The Partnership received a special
distribution in the amount of $210,650 from Country Isles Associates,
which it then distributed to the Limited Partners, as more fully
described below. During the three and nine month periods ended
September 30, 1996, the Partnership distributed $20,600 ($2.06 per
unit) and $272,445 ($27.24 per unit), respectively, to Limited
Partners. This compares to $20,600 ( $2.06 per unit) and $61,903 (
$6.19 per unit) during the three and nine month periods ended
September 30, 1997. The Partnership has continued to build additional
cash reserves for Sycamore Mall's anticipated releasing program.
During 1996, Randall's vacated its leased premises of 19,800
square feet. Occupancy fell to 86%, however, Randall's continued to
pay rent through December, 1996. Sears has given notice that it will
be vacating Sycamore Mall and moving to a new mall which has recently
begun construction. The Sears lease at Sycamore Mall expires in 2002.
The Sears lease comprises 82,605 square feet which is 34% of the
leaseable area of the shopping center. However, the annual rental
income received from Sears is approximately $109,000 or approximately
6% of total revenues. Management is currently attempting to locate
replacement tenants for the Sears space, however there can be no
assurance that such replacement tenants can be found.. If replacement
tenants can not located, the ability of the property to meet its
financial obligations could be impacted.
Net cash provided by operating activities during the nine months
ended September 30, 1997 was $434,642, a decrease of $252,859 from the
$687,501 of cash provided by operating activities during the nine
months ended September 30, 1996. The decrease results primarily from
a $210,650 distribution which was received from Country Isles
Associates during the three month period ended June 30, 1996, which
was not received in 1997.
On April 25,1996, Country Isles Associates completed the
refinancing of Country Isles Plaza in Ft. Lauderdale, Florida. The
new mortgage funded $8,100,000 and the proceeds were used to repay the
outstanding balance of $6,807,669, pay the costs of completing the new
loan (approximately $98,700), and provide for property tax escrow and
working capital. The Partnership received a distribution of $210,650
from Country Isles Associates. The Partnership made a special
distribution to the Limited Partners after receiving the distribution
from Country Isles Associates. No significant impact to the property
is anticipated as a result of the increased mortgage indebtedness. As
a result of a reduction in the interest rate from 9.75% to 7.00%, the
monthly payments have decreased from $60,141 to $57,250. The mortgage
matures on May 1, 2001.
On August 22, 1997, Country Isles Associates entered into an
agreement for the sale of Country Isles Plaza. The sale price is
$13,270,000 and the mortgage indebtedness is approximately $8,000,000.
The Partnership owns 21% of Country Isles and the anticipated cash
distribution to the Partnership is $900,000. Closing is scheduled to
occur prior to the end of November, 1997. Assuming that the sale is
consummated, the Partnership anticipates making a special distribution
to the limited partners of approximately $200,000 or $20 per unit.
The Partnership intends to reserve the remaining sale proceeds in case
it is needed for the Sycamore Mall releasing efforts. If the reserve
is not utilized, it will be distributed to the Limited Partners.
<PAGE>
In October 1997, The Evanston Galleria entered into two new
leases for approximately 12,213 square feet of retail space, which is
approximately 15% of the total rentable space in the building. One of
the leases is for 2,213 square feet, with monthly base rent of $3,320
commencing March 1, 1998. In addition to base rent, the tenant will
pay its pro rata portion of property taxes and operating expenses.
The lease expires December 31, 2002. The other lease is for the lower
level space which has been very difficult to lease in the past. This
lease is for 10,000 square feet with monthly rent of $2,790,
commencing February 1, 1998. Beginning August 1, 1998 monthly rent
will increase to $5,580, and on October 1, 1998, monthly rent will
increase to $5,747. The lease expires September 30, 2002.
As the Partnership intends to distribute all "net cash receipts"
and "sales proceeds" in accordance with the terms of the Partnership
Agreement, and does not intend to reinvest any such proceeds, the
Partnership is intended to be self-liquidating in nature. The
Partnership's future source of liquidity and distributions is expected
to be through cash generated by the Partnership's investment
properties and from the sale and refinancing of such properties. To
the extent that additional payments are required under a purchase
agreement or a property does not generate an adequate cash flow to
meet its requirements, the Partnership may withdraw funds from the
working capital reserve which it maintains.
Results of Operations - 1997 compared to 1996
For the three and nine month periods ended September 30, 1997 and
September 30, 1996, the accompanying consolidated financial statements
include the accounts of the Partnership and its consolidated venture -
Sycamore Mall Associates. The effect of all transactions between the
Partnership and the Venture has been eliminated. The equity method of
accounting has been applied in the accompanying consolidated financial
statements with respect to the Partnership's interest in Evanston
Galleria Associates and Country Isles Associates.
Net loss for the nine months ended September 30, 1997 was
$16,933 as compared to income of $53,847 during the nine months ended
September 30, 1996. The decrease in operating results are a result of
decreased profitability at Sycamore Mall. This is a result of
increased vacancy and higher maintenance expenses at Sycamore Mall.
In addition, cash flow from operations decreased by $252,859, from the
prior year. The decrease in cash flow is largely impacted by the
receipt, in 1996, of the special distribution in the amount of
$210,650 from Country Isles Associates. The special distribution
resulted from a refinancing of the mortgage indebtedness at Country
Isles. The Evanston Galleria lost additional tenants during the
quarter ended September 30, 1997 lowering occupancy to 77%. However,
two new leases have been signed in October 1997 which have increased
occupancy to 91%.
The $51,755 (5%) decrease in rental income and the $26,464 (6%)
decrease in tenant charges for the nine months ended September 30,
1997 as compared to the nine months ended September 30, 1996 is
attributed to an increase in vacancy at Sycamore Mall. The
Partnership has undertaken additional maintenance efforts to improve
the property's appearance. The improved appearance is anticipated to
help in the leasing efforts for the vacant space.
The $34,850 (5%) increase in property operating expenses for the
nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996 is attributed to an increase in property
maintenance expenses at Sycamore Mall.
<PAGE>
The Partnership's share of operations of unconsolidated
subsidiaries resulted in a loss allocation of $56,845 during the nine
months ended September 30, 1997, as compared to a loss allocation of
$42,990 during the nine months ended September 30, 1996. Evanston
Galleria experienced increased vacancy which increased the property's
operating losses. During October 1997, two new leases were signed
which will increase occupancy and are expected to improve future
operating results.
The Partnership's allocation of consolidated venture's operations
to the venture partners was an allocation of $84,304 during the nine
months ended September 30, 1997 as compared to an allocation of
$141,818 during the nine months ended September 30, 1996. As a result
of increased operating losses at Sycamore Mall, the Partnership has
decreased the amount of the income which is then allocated to the
venture's partners. Occupancy at Sycamore Mall, the consolidated
venture, decreased from 95% to 86% during the three month period ended
June 30, 1996. Randall's a drug store operation vacated its leased
space at Sycamore Mall, which totaled approximately 19,800 square
feet. Its lease term expired January 10, 1997.
OCCUPANCY
The following is a list of approximate occupancy levels by
quarter for the Partnership's investment properties:
<TABLE>
<CAPTION>
at at at at at at at
03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
Evanston Galleria
Evanston, IL 86% 86% 86% 84% 86% 86% 77%
Country Isles
Ft. Lauderdale, FL 99% 98% 98% 99% 100% 99% 100%
Sycamore Mall
Iowa City, Iowa 95% 86% 87% 87% 88% 89% 89%
<PAGE>
Part II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 of Part II are omitted because of the absence
of conditions under which they are required.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
No reports on Form 8-K were filed for the period covered by this
report.
<PAGE>
SIGNATURES
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.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Registrant)
By: FDIP, Inc.
(Managing General Partner)
November 14, 1997 By: Robert S. Ross
President
(Principal Executive Officer)
November 14, 1997 By: Bruce H. Block
Vice President
(Principal Financial Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<PERIOD-TYPE> 9-mos
<CASH> 849,697
<SECURITIES> 0
<RECEIVABLES> 308,401
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,190,103
<PP&E> 9,552,336
<DEPRECIATION> 1,957,689
<TOTAL-ASSETS> 9,034,695
<CURRENT-LIABILITIES> 695,665
<BONDS> 4,457,095
0
0
<COMMON> 0
<OTHER-SE> 2,337,774
<TOTAL-LIABILITY-AND-EQUITY> 9,034,695
<SALES> 1,360,856
<TOTAL-REVENUES> 1,376,443
<CGS> 0
<TOTAL-COSTS> 671,288
<OTHER-EXPENSES> 296,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284,331
<INCOME-PRETAX> (16,933)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,933)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
